SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION
14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
LORAL CORPORATION
(NAME OF SUBJECT COMPANY)
LOCKHEED MARTIN CORPORATION
LAC ACQUISITION CORPORATION
(BIDDERS)
COMMON STOCK, PAR VALUE $0.25
(Title of class of securities)
543859 10 2
(CUSIP number of class of securities)
FRANK H. MENAKER, ESQ.
LOCKHEED MARTIN CORPORATION
6801 ROCKLEDGE DRIVE
BETHESDA, MARYLAND 20817
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
with a copy to:
PETER ALLAN ATKINS, ESQ.
LOU R. KLING, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
TELEPHONE: (212) 735-3000
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Transaction valuation*: $6,999,585,294 Amount of filing fee**: $1,399,917
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* For purposes of calculating the filing fee only. This calculation assumes
the purchase of all outstanding shares of Common Stock, par value $0.25 per
share, of Loral Corporation at $38.00 net per share in cash.
** The amount of the filing fee, calculated in accordance with Rule 0-11(d) of
the Securities Exchange Act of 1934, as amended, equals 1/50th of one
percent of the aggregate value of cash offered by LAC Acquisition
Corporation for such shares.
[_]Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
Amount Previously Paid: Not applicable. Filing Party: Not applicable.
Form or Registration No.: Not applicable. Dated Filed: Not applicable.
Page 1 of 9 pages
Exhibit Index is located on page 9.
CUSIP No. 54389 10 2 14D-1
1. NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Lockheed Martin Corporation (52-1893632)
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
[_] (a)_____________________________________________________________
[_] (b)______________________________________________________________
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3. SEC USE ONLY_________________________________________________________
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4. SOURCES OF FUNDS BK,00
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5. [_] CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(e) OR 2(f)
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6. CITIZENSHIP OR PLACE OF ORGANIZATION MARYLAND
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7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
Not applicable.
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8. [_] CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN
SHARES
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9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)____________________
- -------------------------------------------------------------------------------
10. TYPE OF REPORTING PERSON HC
2
CUSIP No. 54389 10 2 14D-1
1. NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
LAC ACQUISITION CORPORATION 13-3866371
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
[_] (a)_____________________________________________________________
[_] (b)______________________________________________________________
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3. SEC USE ONLY_________________________________________________________
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4. SOURCES OF FUNDS AF
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5. [_] CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(e) OR 2(f)
- -------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION NEW YORK
- -------------------------------------------------------------------------------
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON Not
applicable.
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8. [_] CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN
SHARES
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9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)____________________
- -------------------------------------------------------------------------------
10. TYPE OF REPORTING PERSON CO
3
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Loral Corporation, a New York
corporation. The address of the Company's principal executive offices is 600
Third Avenue, New York, New York 10016.
(b) This Statement on Schedule 14D-1 relates to the offer by LAC Acquisition
Corporation (the "Purchaser"), a New York corporation and a wholly owned
subsidiary of Lockheed Martin Corporation, a Maryland corporation ("Parent"),
to purchase all outstanding shares of common stock (the "Common Stock"), par
value $0.25 per share, of Loral Corporation, a New York corporation (the
"Company"), and the associated preferred stock purchase rights (the "Rights";
and together with the Common Stock, the "Shares"), upon the terms and subject
to the conditions set forth in the Offer to Purchase, dated January 12, 1996,
and in the related Letter of Transmittal (which together constitute the
"Offer"), at a purchase price of $38.00 per share, net to the seller in cash.
Parent was incorporated in Maryland in 1994 and the Purchaser was incorporated
in New York in 1995. At December 31, 1995, 173,068,379 Shares of the Common
Stock were outstanding and 11,131,234 Shares were issuable prior to Expiration
Date. The information set forth in the Introduction of the Offer to Purchase
annexed hereto as Exhibit (a) (1) is incorporated herein by reference.
(c) The information set forth in Section 6 ("Price Range of Shares;
Dividends") of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d); (g) This Statement is being filed by the Purchaser and Parent. The
information set forth in Section 8 ("Certain Information Concerning the
Purchaser and Parent") of the Offer to Purchase and Schedule I thereto is
incorporated herein by reference.
(e) and (f) During the last five years, neither the Purchaser, Parent, nor
any persons controlling the Purchaser, nor, to the best knowledge of the
Purchaser or Parent, any of the persons listed on Schedule I to the Offer to
Purchase, (i) has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) was a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction as a result of
which any such person was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting activities subject to, Federal
or State securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Introduction, Section 8 ("Certain
Information Concerning the Purchaser and Parent"), Section 10 ("Background of
the Offer; the Merger Agreement; the Spin-Off; the Rights Agreement") and
Section 11 ("Purpose of the Offer, the Merger and the Spin-Off; Plans for the
Company") of the Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in Section 9 ("Source and Amounts of
Funds") of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the Introduction and Sections 10
("Background of the Offer; the Merger Agreement; the Spin-Off; the Rights
Agreement") and 11 ("Purpose of the Offer, the Merger and the Spin-Off; Plans
for the Company") of the Offer to Purchase is incorporated herein by reference.
4
(f)-(g) The information set forth in Section 12 ("Effect of the Offer on the
Market for the Shares; Stock Exchange Listing; Registration under the Exchange
Act") of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) The information set forth in the Introduction and Section 8 ("Certain
Information Concerning the Purchaser and Parent") of the Offer to Purchase is
incorporated herein by reference.
(b) The information set forth in Section 8 ("Certain Information Concerning
the Purchaser and Parent") of the Offer to Purchase and Schedule II thereto is
incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction and Sections 8 ("Certain
Information Concerning the Purchaser and Parent"), 10 ("Background of the
Offer; the Merger Agreement; the Spin-Off; the Rights Agreement") and 11
("Purpose of the Offer, the Merger and the Spin-Off; Plans for the Company") of
the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and Section 17 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 8 ("Certain Information Concerning the
Purchaser and Parent") of the Offer to Purchase is incorporated herein by
reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in Section 10 ("Background of the Offer; the
Merger Agreement; the Spin-Off; the Rights Agreement") of the Offer to Purchase
is incorporated herein by reference.
(b)-(c) The information set forth in the Introduction and Sections 11
("Purpose of the Offer, the Merger and the Spin-Off; Plans for the Company")
and 16 ("Certain Legal Matters; Regulatory Approvals") of the Offer to Purchase
is incorporated herein by reference.
(d) The information set forth in Sections 12 ("Effect of the Offer on the
Market for Shares; Stock Exchange Listing; Registration under the Exchange
Act") and 16 ("Certain Legal Matters; Regulatory Approvals") of the Offer to
Purchase is incorporated herein by reference.
(e) The information set forth in Section 16 ("Certain Legal Matters;
Regulatory Approvals") of the Offer to Purchase is incorporated herein by
reference.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively, is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a) (1) Offer to Purchase, dated January 12, 1996.
(2) Letter of Transmittal.
(3) Notice of Guaranteed Delivery.
5
(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees.
(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(6) Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
(7) Text of Press Release dated January 8, 1996.
(8) Form of Summary Advertisement dated January 11, 1996.
(b) (1) Commitment Letter between Morgan Guaranty Trust Company of New
York, J.P. Morgan Securities Inc. and Lockheed Martin
Corporation dated January 5, 1996.
(2) Commitment Letter between BA Securities Inc., Bank of America
National Trust and Savings Association and Lockheed Martin
Corporation dated January 5, 1996.
(3) Commitment Letter between Citicorp Securities Inc. and Lockheed
Martin Corporation dated January 5, 1996.
(4) "Highly Confident" letter between J.P. Morgan Securities Inc.
and Lockheed Martin Corporation dated January 7, 1996.
(c) (1) Confidentiality and Standstill Agreement dated December 4, 1995
between Lockheed Martin Corporation and Loral Corporation.
(2) Agreement and Plan of Merger, dated as of January 7, 1996, by
and among Loral Corporation, Lockheed Martin Corporation and LAC
Acquisition Corporation.
(3) Restructuring, Financing and Distribution Agreement, dated as of
January 7, 1996, by and among Loral Corporation, Loral Aerospace
Holdings, Inc., Loral Aerospace Corp., Loral General Partner
Inc., Loral Globalstar, L.P., Loral Globalstar Limited, Loral
Telecommunications Acquisition, Inc. (to be renamed "Loral Space
& Communications Ltd." and Lockheed Martin Corporation.
(4) Form of Stockholders Agreement, to be entered into following the
date hereof, by and among Loral Corporation and Loral Space &
Communications Corporation.
(5) Form of Tax Sharing Agreement, to be entered into following the
date hereof, by and among Loral Corporation, Loral
Telecommunications Acquisition, Inc., Lockheed Martin
Corporation and LAC Acquisition Corporation.
(6) Form of Employment Protection Agreement of Loral Corporation.
(7) Employment Protection Plan of Loral Corporation.
(8) Supplemental Severance Program of Loral Corporation.
(9) Supplemental Bonus Program of Loral Corporation.
(10) Supplemental Executive Retirement Plan of Loral Corporation.
(d) Not applicable.
(e) Not applicable.
(f) None.
6
SIGNATURE
After due 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 , 1996 LOCKHEED MARTIN CORPORATION
By:__________________________________
Name:
Title:
7
SIGNATURE
After due 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 , 1996 LAC ACQUISITION CORPORATION
By:__________________________________
Name:
Title:
8
EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
------- ----------- ------------
(a) (1) Offer to Purchase, dated January 12, 1996.
(2) Letter of Transmittal.
(3) Notice of Guaranteed Delivery.
(4) Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(5) Letter to Clients for use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(7) Text of Press Release dated January 8, 1996.
(8) Form of Summary Advertisement dated January 11, 1996.
(b) (1) Commitment Letter between Morgan Guaranty Trust Company
of New York, J.P. Morgan Securities Inc. and Lockheed
Martin Corporation dated January 5, 1996.
(2) Commitment Letter between BA Securities Inc., Bank of
America National Trust and Savings Association and
Lockheed Martin Corporation dated January 5, 1996.
(3) Commitment Letter between Citicorp Securities Inc. and
Lockheed Martin Corporation dated January 5, 1996.
(4) "Highly Confident" letter between J.P. Morgan
Securities Inc. and Lockheed Martin Corporation dated
January 7, 1996.
(c) (1) Confidentiality and Standstill Agreement dated December
4, 1995 between Lockheed Martin Corporation and Loral
Corporation.
(2) Agreement and Plan of Merger, dated as of January 7,
1996, by and among Loral Corporation, Lockheed Martin
Corporation and LAC Acquisition Corporation.
(3) Restructuring, Financing and Distribution Agreement,
dated as of January 7, 1996, by and among Loral
Corporation, Loral Aerospace Holdings, Inc., Loral
Aerospace Corp., Loral General Partner Inc., Loral
Globalstar, L.P., Loral Globalstar Limited, Loral
Telecommunications Acquisition, Inc. (to be renamed
"Loral Space & Communications Ltd." and Lockheed Martin
Corporation.
(4) Form of Stockholders Agreement, to be entered into
following the date hereof, by and among Loral
Corporation and Loral Space & Communications
Corporation.
(5) Form of Tax Sharing Agreement, to be entered into
following the date hereof by and among Loral
Corporation, Loral Telecommunications Acquisition,
Inc., Lockheed Martin Corporation and LAC Acquisition
Corporation.
(6) Form of Employment Protection Agreement of Loral
Corporation.
(7) Employment Protection Plan of Loral Corporation.
(8) Supplemental Severance Program of Loral Corporation.
(9) Supplemental Bonus Program of Loral Corporation.
(10) Supplemental Executive Retirement Plan of Loral
Corporation.
(d) Not applicable.
(e) Not applicable.
(f) None.
9
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
LORAL CORPORATION
AT
$38.00 NET PER SHARE
BY
LAC ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
LOCKHEED MARTIN CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, FEBRUARY 9, 1996, UNLESS THE OFFER IS EXTENDED. LAC
ACQUISITION CORPORATION HAS AGREED, SUBJECT TO THE TERMS AND CONDITIONS OF
THE OFFER, TO EXTEND THE OFFER UNTIL IMMEDIATELY AFTER THE TIME OF THE SPIN-
OFF RECORD DATE (AS DEFINED BELOW).
THE OFFER IS BEING MADE AS A PART OF A SERIES OF TRANSACTIONS THAT ARE
EXPECTED TO RESULT IN (I) THE DISTRIBUTION TO THE STOCKHOLDERS OF LORAL
CORPORATION (THE "COMPANY") OF SHARES OF STOCK IN LORAL SPACE & COMMUNICATIONS
LTD., A NEWLY-FORMED BERMUDA COMPANY ("LORAL SPACE" OR "SPINCO"), THAT WILL OWN
AND MANAGE SUBSTANTIALLY ALL OF THE COMPANY'S SPACE AND SATELLITE
TELECOMMUNICATIONS INTERESTS, INCLUDING THE COMPANY'S DIRECT AND INDIRECT
INTERESTS IN GLOBALSTAR, L.P. ("GLOBALSTAR") AND SPACE SYSTEMS/LORAL, INC.
("SS/L") AND CERTAIN OTHER ASSETS OF THE COMPANY (THE "SPIN-OFF") AND (II) THE
ACQUISITION OF THE COMPANY'S DEFENSE ELECTRONICS AND SYSTEMS INTEGRATION
BUSINESSES BY LOCKHEED MARTIN CORPORATION ("PARENT") PURSUANT TO THE OFFER AND
MERGER DESCRIBED HEREIN.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER, THE
MERGER AND THE SPIN-OFF, DETERMINED THAT THE OFFER, THE MERGER AND THE SPIN-OFF
ARE FAIR TO THE STOCKHOLDERS OF THE COMPANY AND ARE IN THE BEST INTERESTS OF
THE STOCKHOLDERS OF THE COMPANY, AND RECOMMENDS ACCEPTANCE OF THE OFFER AND
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER BY THE
STOCKHOLDERS OF THE COMPANY.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE A NUMBER OF SHARES OF
COMMON STOCK PAR VALUE $0.25 PER SHARE (INCLUDING THE ASSOCIATED RIGHTS)
(COLLECTIVELY, THE "SHARES"), WHICH, WHEN ADDED TO THE SHARES THEN BENEFICIALLY
OWNED BY PARENT AND ITS AFFILIATES, CONSTITUTES AT LEAST TWO-THIRDS OF THE
TOTAL NUMBER OF SHARES OUTSTANDING AND TWO-THIRDS OF THE VOTING POWER OF THE
SHARES THEN OUTSTANDING ON A FULLY DILUTED BASIS.
--------------
IMPORTANT
Any stockholder desiring to tender Shares should either (1) complete and sign
the Letter of Transmittal (or facsimile thereof) in accordance with the
instructions in the Letter of Transmittal and deliver it to the Depositary with
the certificate(s) representing tendered Shares and all other required
documents or tender such Shares pursuant to the procedures for book-entry
transfer set forth in Section 3 or (2) request his or her broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
him or her. A stockholder having Shares registered in the name of a broker,
dealer, commercial bank, trust company or other nominee must contact such
person if he or she desires to tender such Shares.
Any stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available or who cannot comply
with the procedures for book-entry transfer on a timely basis may tender such
Shares pursuant to the guaranteed delivery procedure set forth in Section 3.
Questions and requests for assistance or additional copies of this Offer to
Purchase and the Letter of Transmittal may be directed to the Information Agent
or the Dealer Manager at their respective addresses and telephone numbers set
forth on the back cover of this Offer to Purchase. Additional copies of this
Offer to Purchase, the Letter of Transmittal and the other tender offer
materials may also be obtained from the Information Agent, the Dealer Manager
or from brokers, dealers, commercial banks or trust companies.
--------------
The Dealer Manager for the Offer is:
BEAR, STEARNS & CO. INC.
January 12, 1996
TABLE OF CONTENTS
SECTION PAGE
------- ----
1. Terms of the Offer; Expiration Date................................. 2
2. Acceptance for Payment and Payment.................................. 3
3. Procedure for Tendering Shares...................................... 4
4. Withdrawal Rights................................................... 6
5. Certain Tax Considerations.......................................... 6
6. Price Range of Shares; Dividends.................................... 8
7. Certain Information Concerning the Company.......................... 9
8. Certain Information Concerning the Purchaser and Parent............. 12
9. Source and Amounts of Funds......................................... 14
10. Background of the Offer; the Merger Agreement; the Spin-Off; the
Rights Agreement................................................... 14
11. Purpose of the Offer, the Merger and the Spin-Off; Plans for the
Company............................................................ 33
12. Effect of the Offer on the Market for the Shares; Stock Exchange
Listing; Registration under the Exchange Act....................... 33
13. Dividends and Distributions......................................... 34
14. Extension of Tender Period; Amendment; Termination.................. 35
15. Certain Conditions to the Offer..................................... 36
16. Certain Legal Matters; Regulatory Approvals......................... 38
17. Fees and Expenses................................................... 41
18. Miscellaneous....................................................... 41
Schedule I--Directors and Executive Officers of Parent and the Purchaser
Schedule II--Certain Information About Parent Required by New York Law
Exhibit A--Agreement and Plan of Merger
i
To the Holders of Common Stock of
LORAL CORPORATION:
INTRODUCTION
LAC Acquisition Corporation (the "Purchaser"), a New York corporation and a
wholly owned subsidiary of Lockheed Martin Corporation, a Maryland corporation
("Parent"), hereby offers to purchase all outstanding shares of common stock
(the "Common Stock"), par value $0.25 per share, of Loral Corporation, a New
York corporation (the "Company"), and the associated preferred stock purchase
rights (the "Rights"; and together with the Common Stock, the "Shares") at
$38.00 per Share, net to the seller in cash, without interest, upon the terms
and subject to the conditions set forth in this Offer to Purchase and in the
related Letter of Transmittal (which together constitute the "Offer"). 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 (the "Rights Agreement"), and will be evidenced by and trade with
certificates evidencing the Common Stock. See Section 10 for a brief
description of the Rights Agreement and its application to the Offer and the
Merger (as hereinafter defined). Tendering stockholders will not be obligated
to pay brokerage fees or commissions or, except as set forth in Instruction 6
of the Letter of Transmittal, stock transfer taxes on the purchase of Shares
by the Purchaser pursuant to the Offer. The Purchaser will pay all charges and
expenses of Bear, Stearns & Co. Inc. ("Bear Stearns"), which is acting as
Dealer Manager for the Offer (in such capacity, the "Dealer Manager"), First
Chicago Trust Company of New York (the "Depositary") and Morrow & Co. (the
"Information Agent") incurred in connection with the Offer. See Section 17.
For purposes of this Offer to Purchase, references to "Section" are references
to a section of this Offer to Purchase, unless the context otherwise requires.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED BELOW) A
NUMBER OF SHARES WHICH WHEN ADDED TO THE SHARES THEN BENEFICIALLY OWNED BY
PARENT REPRESENT AT LEAST TWO-THIRDS OF THE TOTAL NUMBER OF SHARES OUTSTANDING
AND TWO-THIRDS OF THE VOTING POWER OF THE SHARES OUTSTANDING ON A FULLY
DILUTED BASIS (THE "MINIMUM CONDITION"). SEE SECTION 15.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD OF DIRECTORS" OR THE
"BOARD") HAS UNANIMOUSLY APPROVED THE OFFER, THE MERGER AND THE SPIN-OFF,
DETERMINED THAT THE OFFER, THE MERGER AND THE SPIN-OFF ARE FAIR TO THE
STOCKHOLDERS OF THE COMPANY AND ARE IN THE BEST INTERESTS OF THE STOCKHOLDERS
OF THE COMPANY, AND RECOMMENDS ACCEPTANCE OF THE OFFER AND APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE MERGER BY THE STOCKHOLDERS OF THE
COMPANY.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of January 7, 1996 (the "Merger Agreement"), among Parent, the Purchaser
and the Company. The Merger Agreement provides, among other things, that, upon
the terms and subject to the conditions therein, as soon as practicable after
the satisfaction or waiver of certain conditions, including the consummation
of the Offer and the Spin-Off and the approval and adoption of the Merger
Agreement by the stockholders of the Company, if required by applicable law,
the Purchaser will be merged with and into the Company (the "Merger"), with
the Company being the corporation surviving the Merger (the "Surviving
Corporation"). Each issued and outstanding Share (other than Dissenting Shares
(as hereinafter defined)) not owned by Parent, the Purchaser, the Company or
any of their subsidiaries other than a Retained Subsidiary (as defined in
Section 10) will be converted into and represent the right to receive $38.00
in cash or any higher price that may be paid per Share in the Offer, without
interest (the "Merger Price"). See Section 10.
Following the consummation of the Offer, the Company will distribute (the
"Spin-Off") common stock (the "Loral Space Shares" or "Spinco Shares") of
Loral Space & Communications, Ltd. a newly-formed Bermuda company and a wholly
owned subsidiary of the Company ("Loral Space" or "Spinco"), to the holders of
Shares on a record date to be determined by the Board of Directors of the
Company (the "Spin-Off Record
1
Date"), in accordance with the terms of a Restructuring, Financing and
Distribution Agreement, dated as of January 7, 1996, among Parent, the
Company, Loral Space and certain subsidiaries of the Company (the
"Distribution Agreement"). The parties to the Distribution Agreement have
agreed to 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 of
Shares by the Purchaser pursuant to the Offer and have also agreed that in no
event shall 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
pursuant to the Offer. As a result, a record holder of Shares who tenders
Shares pursuant to the Offer (and who does not subsequently withdraw and sell
such Shares) is expected to be the record holder thereof on the Spin-Off
Record Date. Accordingly, in the event that Shares are accepted for payment
pursuant to the Offer, such record holders will be entitled to receive, in
respect of each Share tendered, $38.00 net in cash (without interest) from the
Purchaser and one Loral Space Share from the Company. As a result of the Spin-
Off, Loral Space will own and manage substantially all of the space and
satellite telecommunications interests of the Company and its subsidiaries,
including, without limitation, the Company's interests in Globalstar, L.P.
("Globalstar") and Space Systems/Loral, Inc. ("SS/L") and certain other assets
of the Company. In addition, pursuant to the terms of the Distribution
Agreement, cash which Parent will provide in the amount of $712,400,000,
subject to adjustment under certain circumstances, will be included in the
assets contributed to Loral Space by the Company in connection with the Spin-
Off (the "Spinco Cash Amount"), of which $344,000,000 is being contributed by
the Company to Loral Space in consideration for the acquisition by the Company
of shares of preferred stock of Spinco that is convertible into 20% of Loral
Space's common stock on a fully diluted basis. After the Spin-Off, the Company
will continue to own and operate the defense electronics and systems
integration businesses and other businesses of the Company not transferred to
Loral Space (collectively, the "Retained Business") and the preferred stock
referred to above. Accordingly, upon consummation of the Offer, the Spin-Off
and the Merger, Parent will have acquired the Retained Business and a 20%
fully-diluted equity interest in Loral Space. Consummation of the Offer is
conditioned upon, among other things, the Spin-Off Record Date having been set
(the "Spin-Off Condition"). The Spin-Off Record Date is not expected to occur
until immediately prior to the expiration of the Offer. The Merger is
conditioned upon, among other things, the Spin-Off having been consummated in
all material respects. The distribution of the Loral Space Shares pursuant to
the Spin-Off is conditioned upon the Purchaser having notified the Company
that it is prepared to immediately accept for payment Shares tendered pursuant
to the Offer. In the Merger Agreement, the Purchaser has agreed to extend the
Offer to the first business day following the Spin-Off Record Date. The
Company has advised Parent and the Purchaser that, prior to the time notice of
the Spin-Off Record Date is given and at least ten days prior to the
Expiration Date (as defined below), it expects to distribute to holders of
Shares an information statement or a prospectus with respect to the business,
operations and management of Loral Space (the "Information Statement"). See
Section 10.
Lazard Freres & Co. LLC ("Lazard Freres"), one of the financial advisors to
the Company, has delivered to the Board of Directors of the Company its
written opinion that the aggregate consideration to be received by the holders
of Shares in the Offer, the Merger and the Spin-Off is fair to the holders of
such Shares from a financial point of view. A copy of such opinion is included
with the Company's Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9"), which is being mailed to stockholders concurrently
herewith, and stockholders are urged to read the opinion in its entirety for a
description of the assumptions made, factors considered and procedures
followed by Lazard Freres.
According to the Company, as of December 31, 1995, there were 173,068,379
Shares outstanding and 11,131,234 Shares that may be issued prior to the
Expiration Date upon the exercise of stock options and other rights issued
under the Company's stock option plans. As a result, the Purchaser believes
that the Minimum Condition would be satisfied if at least 122,799,742 Shares
are validly tendered and not withdrawn prior to the Expiration Date.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the
conditions of the Offer, the Purchaser will accept for payment and pay for all
Shares that have been validly tendered prior to the Expiration
2
Date and not withdrawn as permitted by Section 4. The term "Expiration Date"
means 12:00 Midnight, New York City time, on February 9, 1996, unless and
until the Purchaser, as provided below, shall have extended the period of time
for which the Offer is open, in which event the term "Expiration Date" means
the latest time and date at which the Offer, as so extended by the Purchaser,
shall expire. Pursuant to the Merger Agreement, the Purchaser, subject to the
terms and conditions of the Offer, will extend the period of time during which
the Offer is open if the Offer would otherwise expire prior to the Spin-Off
Record Date or the expiration or termination of any applicable waiting period
under the Antitrust Laws (as defined in Section 10 below). The Purchaser will
not otherwise extend the period of time during which the Offer is open unless
any of the conditions described in Section 15 shall not have been satisfied,
or unless Parent reasonably determines that such extension is necessary to
comply with any legal or regulatory requirements relating to the Offer or the
Spin-off. The Purchaser expressly reserves the right to amend the terms and
conditions of the Offer; provided that, without the consent of the Company, no
amendment may be made which (i) decreases the price per Share or changes the
form of consideration payable in the Offer, (ii) decreases the number of
Shares sought, or (iii) imposes additional conditions to the Offer or amends
the terms of the Offer in a manner materially adverse to the holders of
Shares.
The Offer is subject to certain conditions set forth in Section 15,
including satisfaction of the Minimum Condition, the Spin-Off Condition and
the expiration or termination of any waiting period under the Antitrust Laws.
If any such condition is not satisfied prior to the expiration of the Offer,
the Purchaser may, subject to the terms of the Merger Agreement, (i) terminate
the Offer and return all tendered Shares to tendering stockholders, (ii)
extend the Offer and, subject to withdrawal rights as set forth in Section 4,
retain all such Shares until the expiration of the Offer as so extended, (iii)
other than as described in Section 15, waive such condition and, subject to
any requirement to extend the period of time during which the Offer is open,
purchase all Shares validly tendered and not withdrawn by the Expiration Date
or (iv) delay acceptance for payment of (whether or not the Shares have
theretofore been accepted for payment), or payment for, any Shares tendered
and not withdrawn, subject to applicable law, until satisfaction or waiver of
the conditions to the Offer. In the Merger Agreement, the Purchaser has
agreed, subject to the conditions in Section 15 and its rights under the
Offer, to accept for payment Shares as promptly as practicable following the
expiration of the Offer. For a description of the Purchaser's right to extend
the period of time during which the Offer is open, and to amend, delay or
terminate the Offer, see Section 14.
The Company has provided or will provide (upon request of Parent or the
Purchaser) the Purchaser with the Company's stockholder list and security
position listings for the purpose of disseminating the Offer to holders of
Shares. This Offer to Purchase and the related Letter of Transmittal will be
mailed to record holders of Shares and will be furnished to brokers, banks and
similar persons whose names, or the names of whose nominees, appear on the
stockholder list or, if applicable, who are listed as participants in a
clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT. Upon the terms and subject to the
conditions of the Offer, the Purchaser will accept for payment and pay for all
Shares validly tendered and not properly withdrawn by the Expiration Date as
soon as practicable after the later of (i) the Expiration Date and (ii) the
satisfaction or waiver of the conditions set forth in Section 15 (the "Offer
Purchaser Date"). For a description of the Purchaser's right to terminate the
Offer and not accept for payment or pay for Shares or to delay acceptance for
payment or payment for Shares, see Section 14.
For purposes of the Offer, the Purchaser shall be deemed to have accepted
for payment tendered Shares when, as and if the Purchaser gives oral or
written notice to the Depositary of its acceptance of the tender of such
Shares. Payment for Shares accepted for payment pursuant to the Offer will be
made by deposit of the purchase price with the Depositary, which will act as
agent for the tendering stockholders for the purpose of receiving payments
from the Purchaser and transmitting such payments to tendering stockholders.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of certificates for
such Shares (or of a confirmation of a book-entry transfer of such Shares into
the Depositary's account at one of the Book-Entry Transfer Facilities (as
defined in Section 3)), a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) and any other required documents. For a
3
description of the procedure for tendering Shares pursuant to the Offer, see
Section 3. Accordingly, payment may be made to tendering stockholders at
different times if delivery of the Shares and other required documents occur
at different times. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID BY THE
PURCHASER ON THE CONSIDERATION PAID FOR SHARES PURSUANT TO THE OFFER,
REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT.
If the Purchaser increases the consideration to be paid for Shares pursuant
to the Offer, the Purchaser will pay such increased consideration for all
Shares purchased pursuant to the Offer.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to one or more of its affiliates the right to purchase
Shares tendered pursuant to the Offer, but any such transfer or assignment
will not relieve the Purchaser of its obligations under the Offer or prejudice
the rights of tendering stockholders to receive payment for Shares validly
tendered and accepted for payment.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if certificates are submitted for more Shares than are tendered,
certificates for such unpurchased or untendered Shares will be returned (or,
in the case of Shares tendered by book-entry transfer, such Shares will be
credited to an account maintained at one of the Book-Entry Transfer
Facilities), without expense to the tendering stockholder, as promptly as
practicable following the expiration or termination of the Offer.
3. PROCEDURE FOR TENDERING SHARES. To tender Shares pursuant to the Offer,
either (a) a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) and any other documents required by the Letter of
Transmittal must be received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase and either (i) certificates
for the Shares to be tendered must be received by the Depositary at one of
such addresses or (ii) such Shares must be delivered pursuant to the
procedures for book-entry transfer described below (and a confirmation of such
delivery received by the Depositary including an Agent's Message (as defined
below) if the tendering stockholder has not delivered a Letter of
Transmittal), in each case prior to the Expiration Date, or (b) the guaranteed
delivery procedure described below must be complied with. The term "Agent's
Message" means a message transmitted by a Book-Entry Transfer Facility to and
received by the Depositary and forming a part of a book-entry confirmation,
which states that such Book-Entry Transfer Facility has received an express
acknowledgement from the participant in such Book-Entry Transfer Facility
tendering the Shares which are the subject of such book-entry confirmation
that such participant has received and agrees to be bound by the terms of the
Letter of Transmittal and that the Company may enforce such agreement against
such participant.
The Depositary will establish an account with respect to the Shares at each
of The Depository Trust Company, Midwest Securities Trust Company and
Philadelphia Depository Trust Company (collectively referred to as the "Book-
Entry Transfer Facilities") for purposes of the Offer within two business days
after the date of this Offer to Purchase, and any financial institution that
is a participant in the system of any Book-Entry Transfer Facility may make
delivery of Shares by causing such Book-Entry Transfer Facility to transfer
such Shares into the Depositary's account in accordance with the procedures of
such Book-Entry Transfer Facility. However, although delivery of Shares may be
effected through book-entry transfer, the Letter of Transmittal (or facsimile
thereof) properly completed and duly executed together with any required
signature guarantees or an Agent's Message and any other required documents
must, in any case, be received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase prior to the Expiration
Date, or the guaranteed delivery procedure described below must be complied
with. Delivery of the Letter of Transmittal and any other required documents
to a Book-Entry Transfer Facility does not constitute delivery to the
Depositary.
Except as otherwise provided below, all signatures on a Letter of
Transmittal must be guaranteed by a recognized member of a Medallion Signature
Guarantee Program (each, of the foregoing an "Eligible Institution").
Signatures on a Letter of Transmittal need not be guaranteed (a) if the Letter
of Transmittal is signed by the registered holder of the Shares tendered
therewith and such holder has not completed the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (b) if such Shares are tendered
for the account of an Eligible Institution. See Instructions 1 and 5 of the
Letter of Transmittal.
4
If a stockholder desires to tender Shares pursuant to the Offer and such
stockholder's certificates evidencing such Shares are not immediately
available or such stockholder cannot deliver such Shares and all other
required documents to the Depositary by the Expiration Date, or such
stockholder cannot complete the procedure for delivery by book-entry transfer
on a timely basis, such Shares may nevertheless be tendered if all of the
following conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed Delivery
substantially in the form provided by the Purchaser is received by the
Depositary (as provided below) by the Expiration Date; and
(iii) the certificates for such Shares (or a confirmation of a book-entry
transfer of such Shares into the Depositary's account at one of the Book-
Entry Transfer Facilities), together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantee or an Agent's Message and any other documents required
by the Letter of Transmittal, are received by the Depositary within five
New York Stock Exchange, Inc. ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, telex, facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in such
Notice.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING THROUGH BOOK-ENTRY TRANSFER FACILITIES, IS AT THE OPTION
AND RISK OF THE TENDERING STOCKHOLDER AND THE DELIVERY WILL BE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF CERTIFICATES FOR SHARES ARE
SENT BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED,
IS RECOMMENDED.
Under the federal income tax laws, the Depositary will be required to
withhold 31% of the amount of any payments made to certain stockholders
pursuant to the Offer. In order to avoid such backup withholding, each
tendering stockholder must provide the Depositary with such stockholder's
correct taxpayer identification number and certify that such stockholder is
not subject to such backup withholding by completing the Substitute Form W-9
included in the Letter of Transmittal (see Instruction 10 of the Letter of
Transmittal) or by filing a Form W-9 with the Depositary prior to any such
payments. If the stockholder is a nonresident alien or foreign entity not
subject to back-up withholding, the stockholder must give the Depositary a
completed Form W-8 Certificate of Foreign Status prior to receipt of any
payments.
By executing a Letter of Transmittal, a tendering stockholder irrevocably
appoints designees of the Purchaser as such stockholder's proxies in the
manner set forth in the Letter of Transmittal to the full extent of such
stockholder's rights with respect to the Shares tendered by such stockholder
and accepted for payment by the Purchaser (and any and all other Shares or
other securities issued or issuable in respect of such Shares on or after
January 7, 1996, other than any Loral Space Shares distributed in respect of
the Shares in connection with the Spin-Off). All such proxies shall be
irrevocable and coupled with an interest in the tendered Shares. Such
appointment is effective only upon the acceptance for payment of such Shares
by the Purchaser. Upon such acceptance for payment, all prior proxies and
consents granted by such stockholder with respect to such Shares and other
securities will, without further action, be revoked, and no subsequent proxies
may be given nor subsequent written consents executed by such stockholder
(and, if given or executed, will be deemed ineffective). Such designees of the
Purchaser will be empowered to exercise all voting and other rights of such
stockholder as they, in their sole discretion, may deem proper at any annual,
special or adjourned meeting of the Company's stockholders, by written consent
or otherwise. The Purchaser reserves the right to require that, in order for
Shares to be validly tendered, immediately upon the Purchaser's acceptance for
payment of such Shares, the Purchaser is able to exercise full voting rights
with respect to such Shares and other securities (including voting at any
meeting of stockholders then scheduled or acting by written consent without a
meeting).
5
The NYSE has advised Parent and the Purchaser that it expects that
commencing two business days prior to the Spin-Off Record Date and up to the
date Shares are distributed pursuant to the Spin-Off, the Shares will trade on
the NYSE with due bills attached. Such due bills will entitle a purchaser of a
Share during such period to receive one Loral Space Share from the seller of
the Share, when and if such seller receives Spinco Shares in the Distribution.
If Shares are not accepted for purchase pursuant to the Offer and Spinco
Shares are not issued in the Distribution, the due bills will become null and
void. Due bills are separate instruments from the Shares which are the subject
of the Offer; accordingly, due bills should not be tendered to the Purchaser
in the Offer.
A tender of Shares pursuant to any one of the procedures described above
will constitute the tendering stockholder's acceptance of the terms and
conditions of the Offer, as well as the tendering stockholder's representation
and warranty that such stockholder has the full power and authority to tender
and assign the Shares tendered, as specified in the Letter of Transmittal. The
Purchaser's acceptance for payment of Shares tendered pursuant to the Offer
will constitute a binding agreement between the tendering stockholder and the
Purchaser upon the terms and subject to the conditions of the Offer.
All questions as to the form of documents and the validity, eligibility
(including time of receipt) and acceptance for payment of any tender of Shares
will be determined by the Purchaser, in its sole discretion, which
determination shall be final and binding. The Purchaser reserves the absolute
right to reject any or all tenders of Shares determined by it not to be in
proper form or the acceptance for payment of or payment for which may, in the
opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves
the absolute right to waive any defect or irregularity in any tender of
Shares. No tender of Shares will be deemed to have been properly made until
all defects and irregularities relating thereto have been cured or waived. The
Purchaser's interpretation of the terms and conditions of the Offer in this
regard will be final and binding. None of the Purchaser, Parent, the Dealer
Manager, the Depositary, the Information Agent or any other person will be
under any duty to give notification of any defect or irregularity in tenders
or incur any liability for failure to give any such notification.
4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date. Thereafter, such tenders
are irrevocable, except that they may be withdrawn after March 11, 1996 unless
theretofore accepted for payment as provided in this Offer to Purchase.
To be effective, a written, telegraphic, telex or facsimile transmission
notice of withdrawal must be timely received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase and must
specify the name of the person who tendered the Shares to be withdrawn and the
number of Shares to be withdrawn and the name of the registered holder of the
Shares, if different from that of the person who tendered such Shares. If the
Shares to be withdrawn have been delivered to the Depositary, a signed notice
of withdrawal with (except in the case of Shares tendered by an Eligible
Institution) signatures guaranteed by an Eligible Institution must be
submitted prior to the release of such Shares. In addition, such notice must
specify, in the case of Shares tendered by delivery of certificates, the name
of the registered holder (if different from that of the tendering stockholder)
and the serial numbers shown on the particular certificates evidencing the
Shares to be withdrawn. Withdrawals may not be rescinded, and Shares withdrawn
will thereafter be deemed not validly tendered for purposes of the Offer.
However, withdrawn Shares may be retendered by again following one of the
procedures described in Section 3 at any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by the Purchaser, in its sole
discretion, which determination shall be final and binding. None of the
Purchaser, Parent, the Dealer Manager, the Depositary, the Information Agent
or any other person will be under any duty to give notification of any defect
or irregularity in any notice of withdrawal or incur any liability for failure
to give any such notification.
5. CERTAIN TAX CONSIDERATIONS. The following summary addresses the material
federal income tax consequences to holders of Shares who sell their Shares in
the Offer. The summary does not address all aspects of federal income taxation
that may be relevant to particular holders of Shares and thus, for example,
may not be applicable to holders of Shares who are not citizens or residents
of the United States or holders of Shares who are employees and who acquired
their Shares pursuant to the exercise of incentive stock options; nor does
this summary address the effect of any applicable foreign, state, local or
other tax laws. The discussion assumes that
6
each holder of Shares holds such Shares as a capital asset within the meaning
of Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code").
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE PRECISE
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF THE PROPOSED
TRANSACTIONS.
Tax Consequences of Receipt of Cash and Loral Space Shares. Assuming that
the Purchaser accepts Shares pursuant to the Offer, and the Spin-Off and the
Merger are consummated, stockholders who hold their Shares of record on the
Spin-Off Record Date, and who also tender their Shares in the Offer or have
such Shares exchanged for the Merger Price upon consummation of the Merger,
will receive for each such Share consideration consisting of (i) one Loral
Space Share and (ii) $38.00 in cash. Stockholders who hold their Shares of
record on the Spin-Off Record Date, and who sell such Shares after the date as
of which the Spin-Off shall be effected (the "Distribution Date") other than
pursuant to the Offer or the Merger, will receive consideration consisting of
(i) one Loral Space Share for each Share held on the Spin-Off Record Date and
(ii) the proceeds from the sale of their Shares. In each of the above-
mentioned cases, the receipt of such consideration will be a taxable
transaction for federal income tax purposes.
The proper federal income tax characterization of the Spin-Off as either a
dividend or as proceeds from the sale or exchange of Shares is unclear. When
addressing the issue of whether a distribution from a corporation in
connection with a disposition of all of the shares of that corporation is
treated as sale proceeds or as an ordinary income dividend, the courts and the
Internal Revenue Service ("IRS") have each reached inconsistent positions and
have used inconsistent methods of analysis.
Certain authorities support treatment of the Offer, the Spin-Off and the
Merger as a single integrated transaction in which a holder of Shares receives
the cash in an actual exchange for a portion of such holder's Shares and
receives the Loral Space Shares in a constructive redemption of such holder's
remaining Shares. Parent and the Company have agreed to treat the purchase of
Shares in the Offer, the Spin-Off and the Merger in accordance with this
analysis for all tax purposes. If this treatment applies, a holder of Shares
would recognize gain or loss equal to the difference between (i) the sum of
the amount of cash plus the fair market value of the Loral Space Shares
received (which fair market value generally should equal the average trading
value per Loral Space Share on the Distribution Date) and (ii) such holder's
adjusted tax basis for such holder's Shares. Such gain or loss will be capital
gain or loss and will be long-term capital gain or loss if, on the date of the
exchange, the stockholder has held the Shares for more than one year.
Although there are authorities supporting the view that the Loral Space
Shares received in the Spin-Off should be treated as having been received in a
constructive redemption of a portion of the Shares, certain other authorities
support treating the receipt of the Loral Space Shares as taxable in an
independent transaction. If the Spin-Off was treated as an independent
transaction, the fair market value of the Loral Space Shares would be taxable
to the recipient as a distribution from the Company under Section 301 of the
Code. It is also possible that the portion of the value of the Loral Space
Shares equal to a pro rata portion of some or all of the Loral Space Cash
Amount could be treated as received in exchange for such holder's Shares, with
only the remaining portion of the value of the Loral Space Shares treated as a
distribution under Section 301. In either case, the cash received by a holder
of Shares would still be treated as received in exchange for such holder's
Shares and would be subject to tax in the manner described above.
Under Section 301 of the Code, the amount of the distribution would be
taxable as a dividend for federal income tax purposes to the extent of the
Company's current and accumulated earnings and profits. The amount of the
distribution that exceeds such earnings and profits would first be treated as
a non-taxable return of capital to the extent of the stockholder's tax basis
in such stockholder's Shares, and such stockholder's tax basis in such Shares
would be reduced accordingly (but not below zero), and thereafter as capital
gain. The determination of a corporation's earnings and profits requires
complex factual and legal analyses; moreover, the amount of a corporation's
current earnings and profits cannot be determined until the close of its
taxable year. Nonetheless, the Company has informed the Purchaser that the
Company believes, based upon present estimates of its current and accumulated
earnings and profits, that the Company's earnings and profits should exceed
the amount of any such distribution. To the extent, if any, that the receipt
of Loral Space Shares is treated as a dividend under the foregoing rules,
certain corporate stockholders may be eligible for the "dividends received
deduction" ("DRD") with respect to such dividend, subject to certain holding
period and other limitations. Any such dividend received by a corporate
stockholder eligible for the DRD would constitute an "extraordinary dividend"
subject to the
7
provisions of Section 1059 of the Code if, in general, the value of the
distribution, together with any other distributions received by such holder
with respect to its Shares during the 85-day period preceding the Spin-Off,
exceeds 10% of the holder's basis in its Shares. If Section 1059 were to
apply, a corporate stockholder that has not held its Shares for a period of
two years prior to the dividend announcement date would be required to reduce
its basis in (thereby increasing its gain on the disposition of) such Shares
by the portion of the dividend that was excluded from income by reason of the
DRD.
Under current law, the maximum federal tax rate applicable to long-term
capital gains recognized by an individual is 28%, and the maximum federal tax
rate applicable to ordinary income (including dividends) and short-term
capital gains recognized by individuals is 39.6%. The maximum federal tax rate
applicable to all capital gains and ordinary income recognized by a
corporation is 35%. It is possible that legislation may be enacted that would
reduce the maximum federal tax rate applicable to long-term capital gains,
possibly with retroactive effect. It is not possible to predict whether or in
what form any such legislation may be enacted.
Regardless of whether the receipt of the Loral Space Shares is treated as a
constructive redemption or a distribution under Section 301 of the Code, a
holder's tax basis in the Spinco Shares generally will be equal to the fair
market value of the Loral Space Shares on the Distribution Date, and such
holder's holding period for the Loral Space Shares will begin on the day after
the Distribution Date.
Dissenters. A holder of Shares who does not sell Shares in the Offer or the
Merger and who exercises and perfects his rights under the NYBCL to demand
fair value for such Shares (See Section 10) will recognize capital gain or
loss (and may recognize an amount of interest income) attributable to any
payment received pursuant to the exercise of such rights and may recognize
capital gain or loss or dividend income on the receipt of Loral Space Shares
based upon the principles described above.
Withholding. Unless a stockholder complies with certain reporting and/or
certification procedures or is an exempt recipient under applicable provisions
of the Code (and regulations promulgated thereunder), such stockholder may be
subject to a "backup" withholding tax of 31% with respect to any payments
received in the Offer, the Merger or as a result of the exercise of the
holder's dissenters' rights. Stockholders should contact their brokers to
ensure compliance with such procedures. Foreign stockholders should consult
with their tax advisors regarding withholding taxes in general.
THE FOREGOING SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES IS INCLUDED HEREIN
FOR GENERAL INFORMATION PURPOSES ONLY. ACCORDINGLY, EACH HOLDER OF SHARES IS
URGED TO CONSULT HIS OR HER OWN TAX ADVISOR REGARDING THE FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF THE OFFER, THE MERGER AND THE
SPIN-OFF.
6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and traded on the
NYSE under the Symbol "LOR". The following table sets forth, for the calendar
periods indicated, the high and low sales prices and dividends paid per share
for the Shares on the NYSE as adjusted to reflect the two-for-one stock split
distributed on October 7, 1993 and the two-for-one stock split distributed on
September 29, 1995.
HIGH LOW DIVIDEND
--------- --------- --------
1993 Quarterly Summary:
First Quarter.............................. $14 13/32 $11 1/8 $0.063
Second Quarter............................. $15 1/8 $12 23/32 $0.063
Third Quarter.............................. $16 3/8 $14 1/2 $0.070
Fourth Quarter............................. $19 3/8 $14 1/2 $0.070
1994 Quarterly Summary:
First Quarter.............................. $21 3/8 $17 15/16 $0.070
Second Quarter............................. $20 3/8 $16 3/4 $0.070
Third Quarter.............................. $21 3/8 $16 3/4 $0.075
Fourth Quarter............................. $20 7/16 $18 11/16 $0.075
1995 Quarterly Summary:
First Quarter.............................. $22 3/16 $18 3/16 $0.075
Second Quarter............................. $26 7/16 $21 3/16 $0.075
Third Quarter.............................. $29 5/16 $24 7/8 $0.080
Fourth Quarter............................. $36 1/4 $26 7/8 $0.080
8
The Merger Agreement prohibits the Company from declaring or paying any
dividend or distribution on the Shares (other than the Spin-Off), except 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 and payment dates
normally applicable to the Shares.
The closing sales price of the Shares as reported by the NYSE was $36.25 per
share on January 5, 1996 and $44.00 per share on January 11, 1996, the last
full day of trading prior to the first public announcement of the Offer.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
7. CERTAIN INFORMATION CONCERNING THE COMPANY. The Company is a New York
corporation and its principal executive offices are located at 600 Third
Avenue, New York, New York 10016. Through its subsidiaries and divisions, the
Company is a leading supplier of advanced electronic systems, components and
services to U.S. and foreign governments for defense and non-defense
applications, The Company's principal business areas are: electronic combat;
training and simulation; tactical weapons; command, control, communications
and intelligence (C/3/I)/reconnaissance; systems integration; and
telecommunications and space systems. The Company has achieved an incumbent
position on a wide range of existing programs through internal growth and
development and a series of acquisitions focused on its core technologies.
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and is required to file
reports and other information with the Securities and Exchange Commission (the
"Commission") relating to its business, financial condition and other matters.
Information, as of particular dates, concerning the Company's directors and
officers, their remuneration, options granted to them, the principal holders
of the Company's securities and any material interest of such persons in
transactions with the Company is required to be described in periodic
statements distributed to the Company's stockholders and filed with the
Commission. These reports, proxy statements and other information, including
the Company's Annual Report on Form 10-K for the year ended March 31, 1995
(the "Company 10-K") and the Schedule 14D-9, should be available for
inspection and copying at the Commission's office at 450 Fifth Street, N.W.,
Washington D.C. 20549, and at the regional offices of the Commission located
at 75 Park Place, New York, New York 10007 and Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of this
material may also be obtained by mail, upon payment of the Commission's
customary fees, from the Commission's principal office at 450 Fifth Street,
N.W., Washington, D.C. 20549.
The above information concerning the Company and the information contained
herein regarding the Spin-Off have been taken from or based upon the Company
10-K and other publicly available documents on file with the Commission, other
publicly available information and information provided by the Company.
Although neither the Purchaser nor Parent has any knowledge that would
indicate that such information is untrue, neither the Purchaser nor Parent nor
the Dealer Manager takes any responsibility for, or makes any representation
with respect to, the accuracy or completeness of such information or for any
failure by the Company to disclose events that may have occurred and may
affect the significance or accuracy of any such information but which are
unknown to the Purchaser or Parent or the Dealer Manager.
9
Summary Financial Information for the Company. The following table sets
forth certain summary consolidated financial information with respect to the
Company and its subsidiaries excerpted or derived from the audited financial
statements contained in the Company's annual report on Form 10-K and the
unaudited financial information contained in the Company's Quarterly Reports
on Form 10-Q for the six months ended September 30, 1995 and 1994. More
comprehensive financial information is included in such reports and other
documents filed by the Company with the Commission, and the following summary
is qualified in its entirety by reference to such documents (which may be
inspected and obtained as described above), including the financial statements
and related notes contained therein. Neither Parent nor the Purchaser nor the
Dealer Manager assumes any responsibility for the accuracy of the financial
information set forth below.
LORAL CORPORATION
SUMMARY FINANCIAL INFORMATION--(NOTE 1)
(IN MILLIONS)
UNAUDITED
SIX MONTHS ENDED AUDITED FROM 10-K
SEPTEMBER 30, YEARS ENDED MARCH 31,
----------------- --------------------------
1995 1994 1995 1994 1993
-------- -------- -------- -------- --------
OPERATING DATA:
Sales......................... $3,109.1 $2,690.1 $5,484.4 $4,008.7 $3,335.4
Operating Income.............. 318.7 236.7 564.5 401.4 296.3
Income Before Extraordinary
Item and Cumulative Effect of
Changes in Accounting........ 151.3 121.2 288.4 228.3 159.1
Net Income (Loss)............. 151.3 121.2 288.4 228.3 (92.1)
SEPTEMBER 30, MARCH 31,
----------------- --------------------------
1995 1994 1995 1994 1993
-------- -------- -------- -------- --------
BALANCE SHEET DATA:
Total Assets.................. $5,827.6 $5,011.0 $4,810.3 $5,176.2 $3,228.1
Working Capital............... 533.8 686.5 536.6 554.4 610.5
Total Debt.................... 1,833.3 1,559.0 1,316.5 1,798.0 534.0
Shareholders' Equity.......... 1,859.4 1,502.8 1,687.5 1,381.3 1,187.9
- --------
Note 1: The accompanying unaudited, consolidated, summary financial
information consists of the consolidated financial information of the
various businesses of the Company.
10
Summary Financial Information for Retained Business. The summary unaudited
financial data for the Retained Business (the "Retained Business Financial
Data") in the following table has been provided to Parent and the Purchaser by
the Company. The Company has advised Parent and the Purchaser that the
Retained Business Financial Data has been derived from the consolidated
financial statements of the Company. This financial data is presented in
considerably less detail than complete financial statements and does not
include all of the disclosures required by generally accepted accounting
principles. Neither Parent nor the Purchaser nor the Dealer Manager assumes
any responsibility for the accuracy of the Retained Business Financial
Statements.
RETAINED BUSINESS
SUMMARY FINANCIAL INFORMATION--(NOTE 1)
(IN MILLIONS)
(UNAUDITED)
SIX MONTHS ENDED
SEPTEMBER 30, YEAR ENDED MARCH 31,
----------------- -----------------------------------
1995 1994 1995 1994 1993
-------- -------- ----------- ----------- -----------
OPERATING DATA: $ $ $
Sales................... $3,109.1 $2,690.1 $5,484.4 $4,008.7 $3,335.4
Operating Income........ 317.8 235.9 564.5 401.2 295.4
Income Before
Extraordinary Item and
Cumulative Effect of
Changes in Accounting.. 159.9 118.8 296.2 231.9 164.3
Net Income (Loss)....... 159.9 118.8 296.2 231.9 (80.1)
SEPTEMBER 30, MARCH 31,
----------------- -----------------------------------
1995 1994 1995 1994 1993
-------- -------- ----------- ----------- -----------
BALANCE SHEET DATA:
Total Assets............ $5,572.5 $4,852.7 $4,558.3 $5,016.9 $3,091.1
Working Capital......... 511.8 686.7 531.4 551.2 606.7
Total Debt.............. 1,833.3 1,559.0 1,316.5 1,798.0 534.0
Shareholders' Equity.... 1,592.1 1,344.9 1,430.3 1,218.8 1,047.1
- --------
Note 1: The accompanying unaudited, consolidated, summary financial
information consists of the consolidated financial information of the
various businesses of the Company which constitute the Retained Business.
11
Projected Financial Information. In the course of the discussions between
representatives of Parent and the Company (see Section 10), the Company
provided Parent with certain projected financial data for the fiscal years
ending March 31, 1996, March 31, 1997, March 31, 1998 and March 31, 1999. This
data was not prepared with a view to public disclosure or compliance with
published guidelines of the Commission or the guidelines established by the
American Institute of Certified Public Accountants regarding projections, and
is included in this Offer to Purchase only because it was provided to Parent.
The Company's independent auditors have not examined, compiled or applied any
procedures with respect to this data and express no opinion or any kind of
assurance thereon. None of Parent, the Purchaser or the Company, or any of
their respective financial advisors or the Dealer Manager assumes any
responsibility for the validity, reasonableness, accuracy or completeness of
this projected data. While presented with numerical specificity, this
projected data is based upon a variety of assumptions relating to the
businesses of the Company which may not be realized and is subject to
significant uncertainties and contingencies, many of which are beyond the
control of the Company and, therefore, this projected data is inherently
imprecise, and there can be no assurance that projected financial results or
any valuation assumed therein will be realized. It is expected that there will
be a difference between actual and estimated or projected results and actual
results may vary materially from those shown. The Company does not intend to
update or otherwise revise this projected data prior to the consummation of
the Merger. The projected financial data set forth below should be read
together with the Retained Business Financial Data included above.
RETAINED BUSINESS
PROJECTED FINANCIAL INFORMATION
(IN MILLIONS)
(UNAUDITED)
YEAR ENDING MARCH 31,
------------------------------
1996 1997 1998 1999
------ ------ ------ ------
Sales...................................... $6,300 $6,800 $7,300 $8,000
Operating Income........................... $ 703 $ 762 $ 827 $ 922
Margin on Operating Income................. 11.2% 11.2% 11.3% 11.5%
Free Cash Flow*............................ $ 600 $ 610 $ 630 $ 660
- --------
* "Cash Flow" consists of net cash from opeerating activities, less net
capital expenditures, plus proceeds of stock purchases by employee benefit
plans and exercises of stock options, in each case during the year in
question.
8. CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT. The Purchaser is
a newly formed New York corporation and a wholly owned subsidiary of Parent.
To date, Purchaser has not conducted any business other than in connection
with the Offer. Until immediately prior to the time the Purchaser purchases
Shares pursuant to the Offer, it is not anticipated that the Purchaser will
have any significant assets or liabilities or engage in activities other than
those incident to its formation and capitalization and the transactions
contemplated by the Offer. Because the Purchaser is a newly formed corporation
and has minimal assets and capitalization, no meaningful financial information
regarding the Purchaser is available.
Parent is a holding company for the Lockheed Corporation and the Martin
Marietta Corporation and their respective subsidiaries. The businesses of
Parent are organized into five major operating sectors: Aeronautics;
Electronics; Energy and Environment; Information and Technology Services; and
Space and Strategic Missiles. Prior to the Offer, Parent began a process
designed to result in the merger of the five largest direct or indirect
subsidiaries of Parent with and into Parent. These subsidiaries include
Lockheed Corporation and Martin Marietta Corporation. This process is not
related to the Offer and it is presently anticipated that these mergers will
occur effective as of January 28, 1996. The mergers are subject to certain
conditions including the approval of the Boards of Directors of the various
companies involved. The principal executive offices of Parent and Purchaser
are located at 6801 Rockledge Drive, Bethesda, Maryland 20817.
The name, citizenship, business address, principal occupation or employment
and five-year employment history of each of the directors and executive
officers of the Purchaser and Parent are set forth in Schedule I hereto.
12
Set forth below is a summary of certain consolidated financial information
with respect to Parent and its consolidated subsidiaries excerpted or derived
from the information contained in or incorporated by reference into Parent's
Annual Report on Form 10-K for the year ended December 31, 1994 filed with the
Commission pursuant to Rule 15d-2 of the Exchange Act (the "Parent 10-K") and
Parent's Quarterly Report on Form 10-Q for the quarter ended September 30,
1995. More comprehensive financial information is included in or incorporated
by reference into the Parent 10-K and other documents filed by Parent, Martin
Marietta Corporation and Lockheed Corporation with the Commission, and the
financial information summary set forth below is qualified in its entirety by
reference to the Parent 10-K and such other documents and all the financial
information and related notes contained therein.
LOCKHEED MARTIN CORPORATION
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE DATA)
AT OR FOR
NINE MONTHS
ENDED AT OR FOR YEAR
SEPTEMBER 30, ENDED DECEMBER 31,
------------- ------------------------
1995 1994/3/ 1993/2/ 1992/1/
------------- ------- ------- -------
(UNAUDITED)
Income Statement Data:
Net sales............................. $16,801 $22,906 $22,397 $16,030
Earnings before cumulative effect of
changes in accounting................ 371 1,055 829 649
Net earnings (loss)................... 371 1,018 829 (361)
Balance Sheet Data:
Working capital....................... 2,044 2,508 1,770 1,654
Intangible assets related to contracts
and programs acquired................ 1,861 1,971 2,127 42
Cost in excess of net assets acquired. 2,794 2,831 2,697 841
Total assets.......................... 18,366 18,049 17,108 10,827
Long-term debt (including
current maturities).................. 3,607 3,879 4,372 2,130
Stockholders' equity.................. 6,255 6,086 5,201 3,482
Earnings (loss) per common share
Assuming no dilution:
Before cumulative effect of
changes in accounting.............. $ 1.72 $ 5.32 $ 3.99 $ 3.31
Cumulative effect of changes
in accounting...................... -- (.20) -- (5.15)
------- ------- ------- -------
$ 1.72 $ 5.12 $ 3.99 $ (1.84)
======= ======= ======= =======
Assuming full dilution:
Before cumulative effect of
changes in accounting.............. $ 1.67 $ 4.83 $ 3.75 $ 3.31
Cumulative effect of changes
in accounting...................... -- (.17) -- (5.15)
------- ------- ------- -------
$ 1.67 $ 4.66 $ 3.75 $ (1.84)
======= ======= ======= =======
Parent is subject to the informational filing requirements of the Exchange
Act and is required to file reports and other information with the Commission
relating to its business, financial condition and other matters. Information,
as of particular dates, concerning Parent's directors and executive officers,
their remuneration, the
1. Reflects the adoption of Statement of Financial Accounting Standards (SFAS)
No. 106, Employers' Accounting for Postretirement Benefits Other than
Pensions, and SFAS No. 112, Employers' Accounting for Postemployment
Benefits.
2. Reflects the purchase of Lockheed Fort Worth Company effective February 28,
1993 and the GE Aerospace business combination effective April 2, 1993.
3. Reflects the adoption of Statement of Position No. 93-6, Employers'
Accounting for Employee Stock Ownership Plans.
13
principal holders of Parent's securities and any material interest of such
persons in transactions with Parent is required to be described in periodic
statements delivered to Parent's stockholders and filed with the Commission.
Parent has not been a reporting company under the Exchange Act for a full year
and certain of these documents are not yet due to be, and therefore have not
been, filed with the Commission. As described above, Parent is a holding
company for Lockheed Corporation and Martin Marietta Corporation, each of
which was subject to the informational requirements of the Exchange Act with
respect to events through March 15, 1995 (at which time Lockheed Corporation
and Martin Marietta Corporation combined and become subsidiaries of Parent),
and was required to file reports and other information with the Commission
relating to its business, financial condition and other matters. Such reports
and other information, including the Parent 10-K, may be inspected and copies
may be obtained from the offices of the Commission in the same manner as set
forth in Section 7.
For information regarding certain material business relationships during the
previous three fiscal years of the Company between the Company and its
affiliates, on the one hand, and the Parent and its affiliates, on the other
hand, see the information set forth on Schedule III attached hereto.
Except as set forth in the immediately preceding paragraph or elsewhere in
this Offer to Purchase, none of Parent, the Purchaser or any of their
affiliates (collectively the "Purchaser Entities"), or, to the best knowledge
of any of the Purchaser Entities, any of the persons listed on Schedule I, has
any contract, arrangement, understanding or relationship with any other person
with respect to any securities of the Company, including, but not limited to,
any contract, arrangement, understanding or relationship concerning the
transfer or the voting of any securities of the Company, joint ventures, loan
or option arrangements, puts or calls, guaranties of loans, guaranties against
loss or the giving or withholding of proxies. Except as set forth in this
Offer to Purchase, none of the Purchaser Entities, or, to the best knowledge
of any of the Purchaser Entities, any of the persons listed on Schedule I, has
had, since April 1, 1993, any business relationships or transactions with the
Company or any of its executive officers, directors or affiliates that would
require reporting under the rules of the Commission. Except as set forth in
this Offer to Purchase, since April 1, 1993, there have been no contacts,
negotiations or transactions between the Purchaser Entities, or their
respective subsidiaries or, to the best knowledge of any of the Purchaser
Entities, any of the persons listed on Schedule I, and the Company or its
affiliates, concerning a merger, consolidation or acquisition, tender offer or
other acquisition of securities, election of directors or a sale or other
transfer of a material amount of assets. None of the Purchaser Entities or, to
the best knowledge of any of the Purchaser Entities, any of the persons listed
on Schedule I, beneficially owns any Shares or has effected any transactions
in the Shares in the past 60 days.
9. SOURCE AND AMOUNTS OF FUNDS. The total amount of funds required by the
Purchaser to acquire all outstanding Shares pursuant to the Offer and the
Merger, to consummate the transactions contemplated by the Offer, the Merger
Agreement and the Distribution Agreement, to refinance certain indebtedness of
the Company, and to pay fees and expenses relating to the Offer and the Merger
is estimated to be approximately $8.4 billion. These funds will be provided to
the Purchaser by Parent either through an equity investment in, or debt
financing provided to, Purchaser or a combination thereof. Parent intends to
obtain these funds, together with the funds necessary to provide working
capital to support the combined operations of Parent and its subsidiaries,
including the Company and its subsidiaries following the closing of the Offer,
from loans to be provided by Morgan Guaranty Trust Company of New York
(together with its affiliates, "Morgan Guaranty"), Bank of America National
Trust and Savings Association (together with its affiliates, "Bank of
America"; collectively with Morgan Guaranty, the "Co-Arrangers"), Citibank
USA, (together with its affiliates, "Citibank") Inc., as managing agent, and a
syndicate of other commercial banks (the "Banks") to be formed by the Co-
Arrangers. It is anticipated that the loans to be provided by Morgan Guaranty,
Bank of America, Citibank, and the other Banks (which are collectively
referred to as the "Bank Financing") will be fully and unconditionally
guaranteed by Purchaser and certain other subsidiaries of Parent and are
collectively referred to as the "Bank Financing." Alternatively, Parent may
obtain all or a portion of the necessary financing through the issuance of
commercial paper backed by the Bank Financing. The existing revolving credit
facilities of Parent and the Company will be terminated in connection with the
closing of the Offer and the consummation of the Bank Financing.
Set forth below is a summary description of the Bank Financing. Consummation
of the Bank Financing is subject to, among other things, successful
syndication of the Bank Financing and the negotiation and execution
14
of definitive financing agreements on terms satisfactory to Parent, Purchaser
and the Co-Arrangers. The summary description does not purport to be complete,
and there can be no assurance that the terms set forth below will be contained
in such agreements or that such agreements will not contain additional
provisions.
Parent has received commitments from Morgan Guaranty and Bank of America
pursuant to which each of them has agreed to provide up to $1.375 billion of
the Bank Financing, and from Citibank pursuant to which it has agreed to
provide up to $750 million of the Bank Financing. The Co-Arrangers also have
agreed to act as agents for an anticipated commercial bank syndicate
(including the Co-Arrangers and Citibank). Morgan Guaranty has advised Parent
that, based upon its knowledge of, and experience in, the loan syndication
market and subject to certain assumptions, it is highly confident that it will
be able to arrange a syndicate of lenders for an additional $6.5 billion.
Parent has agreed to pay certain fees to Morgan Guaranty, Bank of America
and to Citibank as managing agent, and has agreed to pay Bank of America, as
Administrative Agent under the Credit Facilities, an annual administrative
fee. Parent also has agreed to pay certain of the expenses of the Co-Arrangers
incurred in connection with the Bank Financing and to provide the Co-
Arrangers, Citibank, as the Managing Agent, and their respective directors,
officers, employees, and affiliates with customary indemnification.
The Bank Financing will consist of two facilities which will be entered into
prior to or concurrently with the consummation of the Offer. The credit
facilities will consist of a 364-day unsecured revolving credit facility in
the amount of $5 billion (the "Short-Term Facility") and a five-year unsecured
revolving credit facility in the amount of $5 billion (the "Five-Year
Facility"). The Short-Term Facility and the Five-Year Facility are
collectively referred to as the "Credit Facilities." The Short-Term Facility
will have a final maturity 364 days after the date of execution of the
definitive financing agreement for the Short-Term Facility. There will be no
required prepayments or scheduled reductions of availability of loans under
the Credit Facilities.
Revolving loans under the Credit Facilities will bear interest, at the
option of Parent, at (i) a base rate equal to the higher of the rate announced
from time to time by Bank of America as its reference rate or the daily
Federal Funds rate plus 0.5%; (ii) the London interbank offered rate ("LIBOR")
for one-, two-, three-, six- (or subject to the Banks' consent) twelve-month
periods plus an interest rate margin based on the rating for senior, unsecured
long-term debt of Parent announced from time to time by Standard & Poor's
Corporation ("S&P") and Moody's Investor Services, Inc. ("Moody's"); (iii) a
reserve- and FDIC insurance-adjusted rate for 30-,60-, 90-, or 180-day
certificates of deposit (the "CD Rate") plus an interest rate margin based on
the rating for senior, unsecured long-term debt of Parent announced from time
to time by S&P and Moody's, and D&P; or (iv) a money market bid rate based on
competitive bids solicited of the Banks and accepted by Parent pursuant to an
auction mechanism under the Credit Facilities. The interest rate margins over
LIBOR and the CD Rate range from .165% and .29%, respectively, to .31% and
.435%, respectively, for the Short-Term Facility, and from .145% and .27%,
respectively, to .50% and .625%, respectively, for the Five-Year Facility,
depending on the level of such ratings. Interest will be payable quarterly in
arrears based on a 365/366-day year for the reference rate used in determining
the rate on base rate loans and will be payable semi-annually in arrears or at
the end of the relevant interest period, whichever is sooner, based on a 360-
day year and the actual number of days elapsed for LIBOR and CD Rate loans.
Money market bid rate loans will bear interest at rates established on the
basis of a bidding procedure and interest will be payable at such times as are
determined by such procedures.
Facility fees under the Credit Facilities will be payable to each Bank on
the amount of its commitment, whether used or unused, based on the rating for
senior, unsecured long-term debt of Parent announced from time to time by S&P
and Moody's and D&P. The facility fees for the Short-Term Facility will range
from .06% to .09% and the facility fees for the Five-Year Facility will range
from .08% to .25%, depending on the level of such ratings.
Each Bank's obligation to make loans under the Credit Facilities will be
subject to, among other things, the negotiation, execution, and delivery of
definitive financing agreements (collectively, the "Bank Financing
Agreements"), and the compliance by Parent and Purchaser thereunder. The
covenants in the Bank Financing
15
Agreements will include but not be limited to covenants limiting the ability
of Parent and certain of its subsidiaries to encumber certain of their assets,
and a covenant not to exceed a maximum leverage ratio. It is anticipated that
the Bank Financing Agreements will include terms, conditions, representations,
warranties, covenants, indemnities, events of default, and other provisions
customary in such agreements.
Following closing of the Offer, it is anticipated that Parent will refinance
all or a portion of the borrowings under the Credit Facilities contemplated
herein with funds raised in the public or private securities markets. In the
event the Offer has not been consummated by April 30, 1996 the Offer is
conditioned upon obtaining the financing described herein (the "Financing
Condition"). See Section 15.
10. BACKGROUND OF THE OFFER; THE MERGER AGREEMENT; THE SPIN-OFF; THE RIGHTS
AGREEMENT.
BACKGROUND OF THE OFFER
Reductions in the Federal defense budgets for research, development, test
and evaluation and procurement over the last several years have caused
continued pressures on participants in the aerospace/defense industry to
consolidate in order to maintain critical mass and production economies. Both
Parent and the Company have been active participants in the consolidation of
the industry. In light of the anticipated continuation of the recent
consolidations in the aerospace/defense industry, the management and Board of
Directors of the Company have reviewed periodically the Company's strategic
plans, including but not limited to the possibility of making acquisitions and
potential internal investments and entering into joint ventures and business
combinations with companies engaged in a similar or related business.
Similarly, the management and Board of Directors of Parent have reviewed
periodically Parent's strategic plans, including but not limited to the
possibility of making acquisitions and potential internal investments and
entering into joint ventures and business combinations with companies engaged
in a similar or related business.
On July 31, 1995, representatives of 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 Bear Stearns that the Company
might be willing to consider a possible transaction with Parent if Parent was
similarly interested. On August 11, 1995 and again on August 24, 1995,
representatives of Bear Stearns met with certain members of the senior
management of Parent, including Mr. Daniel M. Tellep, Chairman of the Board
and Chief Executive Officer of Parent, and Mr. Norman R. Augustine, the
President of Parent, in order to also review developments in the defense
industry. At these meetings representatives of Bear Stearns indicated that the
Company might be willing to consider a possible transaction with Parent.
On September 14, 1995, Mr. Augustine and Mr. Schwartz were attending a
meeting at the Pentagon with certain government officials on an unrelated
matter. After this meeting Mr. Augustine and Mr. Schwartz briefly discussed
the general topic of a possible transaction between Parent and the Company and
they agreed to meet at a subsequent date to discuss the matter further.
Thereafter, on September 20, 1995, Mr. Augustine and Mr. Schwartz met to
discuss the broad outlines of a possible transaction between Parent and the
Company. On the following day, September 21, 1995, Mr. Tellep had a telephone
conversation with Mr. Schwartz following up on the matters discussed at the
meeting between Mr. Schwartz and Mr. Augustine the day before. On September
28, during a regularly-scheduled meeting of the Parent Board, Mr. Tellep
informed the Parent Board of the discussions with senior management of the
Company and members of Parent's management.
During the course of discussions over September and October, the parties
discussed various transaction structures, including a structure whereby the
Company would sell its defense and systems integration-related businesses to
Parent and spin-off the Space and telecommunications-related businesses of the
Company to the Company's stockholders. In addition, during this period the
parties initially discussed a possible stock-for-stock
16
merger transaction involving only the defense-related businesses of the
Company in which the Company's stockholders would receive stock consideration
having a value of approximately $32 per share in a stock for stock transaction
in a stock-for-stock transaction (assuming pooling-of-interests accounting
treatment). At a meeting on October 31, 1995, and at a later meeting on
November 8, 1995, representatives of both parties, including Messrs. Tellep,
Augustine and Schwartz, met to further discuss the possibility of a
transaction between Parent and the Company. In particular, the parties
discussed certain management and organizational issues, as well as certain
broad transaction valuation parameters. Messrs. Tellep, Augustine and Schwartz
agreed that representatives of the two companies should meet to explore
various possibilities.
On November 17, 1995, and at subsequent meetings during the remainder of
November (including meetings on November 27-28, 1995), members of the
management of Parent and the Company, together with their respective legal
counsel and representatives of Bear Stearns, met to discuss several different
possible transaction structures and various financial, operational, accounting
and legal issues relating to a transaction between Parent and the Company. 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 with such a transaction structure, the parties
agreed to pursue an all-cash transaction instead. Additionally, the parties
had preliminary discussions regarding the possibility of Parent acquiring a
20% equity interest in Loral Space.
On December 1, 1995, during a special telephonic meeting of the Parent
Board, Mr. Tellep updated the Parent Board with respect to the current
discussions between senior management of the Company and members of Parent's
management and discussed with the Parent Board certain of the business and
other issues which had been raised in the course of those discussions. 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. Tellep, Augustine and Schwartz,
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 certain legal representatives of the two
companies, as well as representatives of Bear Stearns, met to discuss
structure and business issues, and commenced financial due diligence. On
December 7, 1995, during a regularly-scheduled meeting of the Parent Board,
Parent's management provided the members of the Parent Board with an update of
the recent discussions between the senior management of the Company and
members of Parent's management. Representatives of Bear Stearns also reviewed
with the Parent Board various financial and industry-related issues relating
to a possible transaction with the Company.
During this period, meetings also occurred between certain members of the
management of Parent, the Company and representatives of Bear Stearns to
continue negotiating price and to discuss, among other things, various
organizational and operational aspects of a possible transaction. In addition,
during this period the legal representatives of each company met to discuss,
among other things, the possible structure of a transaction and related legal
issues.
At meetings held in early December, Messrs. Tellep, Augustine and Schwartz,
together with representatives of Bear Stearns and certain legal counsel of
both parties, continued their discussions as to specific organizational and
operational issues related to the proposed transaction. Although the parties
had made progress at these meetings, the parties acknowledged that there were
still very significant issues relating to a proposed transaction that were not
yet resolved and that further study by each party of the various issues which
had been raised by the proposed transaction would be beneficial. On December
15, 1995, at a special telephonic meeting of the Parent Board, Parent's
management provided the members of the Parent Board with a further update of
the recent discussions between the senior management of the Company and
members of Parent's management, and the outstanding issues between the parties
relating to price, management structure and various other matters.
16-1
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.
At subsequent meetings on December 21, 1995 and December 22, 1995 involving
Messrs. Tellep, Augustine and Schwartz 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 substantial progress was made at these latter meetings with respect
to certain outstanding issues relating to the proposed transaction, certain
issues remained unresolved.
Commencing on January 2, 1996, members of Parent 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 relating to the
proposed transaction. 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, the Distribution
Agreement and the other transaction documents.
At a special meeting of the Parent Board on January 7, 1996, a presentation
regarding a possible transaction with the Company was made to the Parent Board
by senior management. The presentation to and discussion by the Parent Board
was wide-ranging and included, among other things, a review of (i)
management's current view of the financial condition and prospects of the
Company and Parent; (ii) the strategic value of the proposed transaction and
the possible effects of the transaction on Parent's stockholders, operations,
customers and future growth and its financial condition and prospects; and
(iii) the current state of the industry consolidation and potential
consolidation opportunities and trends in the foreseeable future. A review of
the Company's organization, businesses, management and financials was provided
to the Parent Board, together with a discussion of the potential strategic
benefits of the proposed transaction. A summary of the financial implications
was also provided, as well as a comparison of the transaction to other
strategic alternatives available to Parent. In addition, Bear Stearns
presented its views as to possible market reactions and competitive responses
to the potential transaction. The General Counsel of the Company and one of
the representatives of Parent's outside legal advisors also reviewed with
Parent's Board the duties of the directors in considering such transaction and
various legal issues relating to the proposed transaction. In addition, Bear
Stearns rendered its written opinion to the Parent Board that the Offer, the
Merger and the acquisition of twenty percent (20%) equity interest in Loral
Space, taken as a whole, were fair from a financial point of view to the
stockholders of Parent. After receiving such advice and after reviewing
various additional information relating to the transaction, the Parent Board
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, 1996.
On January 12, 1996, Purchaser commenced the Offer.
THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement. A
copy of the Merger Agreement (with certain Exhibits omitted) is attached
hereto as Exhibit A and is incorporated herein by reference. The following
summary is qualified in its entirety by reference to the Merger Agreement.
16-2
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
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. 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, constitutes two-thirds of the outstanding Shares
and represents 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. 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 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 New York Business Corporation Law (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
16-3
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 Date 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 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" or "Spinco Common
Stock"), which will be held by an escrow agent pending delivery on the
Distribution Date. 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 restated certificate of incorporation
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.
17
Recommendation. In the Merger Agreement, the Company states that the Board
of Directors has unanimously (i) determined that the Offer, the Merger and the
Spin-Off are fair to and in the best interests of the stockholders 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 stockholders 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 of Directors (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 its 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 restated
certificate of incorporation 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 the Disclosure Schedule to the Merger Agreement and except for
arrangements
18
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 of Directors of the Company 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
19
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 Company's Board of Directors 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.
20
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 Company's Board of Directors, 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 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 the 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. In connection therewith, the Company will mail to the
stockholders of the 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 stockholders 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 Company's Board of Directors 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 of Directors,
will, in accordance with applicable law, its restated certificate of
incorporation 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 stockholders
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 stockholders 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 of
Directors 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 stockholders following the consummation of the Offer and (ii)
obtain the necessary approvals of the Merger Agreement by its stockholders.
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. 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
21
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 Spinco 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 stockholders of the Company who would have otherwise received such shares
of Loral Space pursuant to the Distribution Agreement; provided, that the
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 Spinco to be distributed in the
Spin-Off pursuant to 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), 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 Spinco 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 (the "Loral Space Employees")), employed by the Company
or any of its subsidiaries immediately prior to the
22
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.
Spinco 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 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 Spinco 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, Spinco 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 Spinco 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
23
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") 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,
24
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.
24-1
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 Commission or any other
25
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 stockholders
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 stockholders 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
26
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,
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 of Directors of the Company 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 Spinco 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 will have been a breach of any covenant
or agreement on the part of the Company or Spinco 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 will engage in Active Negotiations
(as defined below) with a Third Party with respect to a Third Party
Acquisition (as defined below), (iv) the Board of Directors of the Company
will have 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, will have recommended to the Company's stockholders another offer,
will have 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 will have 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) will have made and not withdrawn a proposal
with respect to a Third Party Acquisition; or (f) by the Company if (i) there
will have 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 will have 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 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.
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
27
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 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 stockholders, 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.
28
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 (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 SPIN-OFF
THE DISTRIBUTION AGREEMENT
The following is a summary of certain provisions of the Distribution
Agreement. A copy of the Distribution Agreement (with certain Exhibits
omitted) is attached hereto as Exhibit (cX3) and is incorporated herein by
reference. The following summary is qualified in its entirety by reference to
the Distribution Agreement.
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 Spinco 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
Spinco 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
29
Common Stock pursuant to the Securities Act of 1933, as amended (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 Company's
Board of Directors (or any duly appointed committee thereof) will in its
reasonable discretion establish the Spin-Off Record Date and the Distribution
Date and any appropriate procedures in connection with the Distribution
(subject in each case to the provisions of applicable law) as soon as
reasonably practicable following the date 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 Spinco 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, (ii) the Spin-Off Record Date will have been
set by the Company's Board of Directors, (iii) the Form 10 (or any
registration statement filed in lieu thereof) will have been declared
effective by the Commission, (iv) the Spinco 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, Spinco or any
of their respective subsidiaries is a party or may be bound, or otherwise
necessary to permit the Company and each of the Retained Subsidiaries to
conduct their business in a manner consistent with its past practices,
(vii) all consents and approvals of, and notices to and filings with, any
governmental entity or any other person or entity arising out of or relating
to the consummation of the transactions contemplated by 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
30
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 Spinco, any Spinco Company or any subsidiary
of Spinco.
30--1
Following the Spin-Off, Spinco will establish a qualified defined benefit
pension plan and trust ("Spinco 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 cash or in kind, as agreed to by the Company and Spinco, to the
trust under the Spinco 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 Spinco Employees and the denominator of which is equal to the
present value of all accrued benefits under such Company Pension Plan less (B)
the payments made by such Company Pension Plan between the Distribution Date
and the date of transfer in respect of Spinco Employees. From the Valuation
Date to the date of transfer, the assets to be transferred will be credited
with interest at the interest rate available on a 30-day treasury note at the
auction date on or immediately preceding the Valuation Date. Following the
Distribution Date, Spinco shall cause SSL to establish a trust intended to
qualify under Section 501(a) of the Code ("Spinco SSL Trust") and intended to
hold the assets of the Retirement Plan of SSL (the "SSL Plan"). 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 Spinco SSL Trust, the assets held by the
Master Trust under the SSL Plan. Upon the transfers described above, Spinco
agrees to indemnify and hold harmless the Company, its officers, directors,
employees, agents and affiliates from and against any and all Indemnifiable
Losses arising out of or related to the Spinco Pension Plan and the SSL Plan,
including all benefits accrued by Spinco Employees prior to the Distribution
Date under the Company Pension Plans and the SSL Plan.
Spinco 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 Spinco 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.
Spinco 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 Spinco Assets (such assets the "Retained Assets") will be bound by or
subject to) any of the Spinco Liabilities or any Spinco indebtedness, (ii)
there are no intercompany agreements between the Company and the Retained
Subsidiaries, on the one hand and Spinco and the Spinco 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 or the
Stockholders Agreement, (iii) there are no Spinco Assets which have been used
within the Retained Business within one year prior to the date of the
Distribution Agreement, other than those Spinco 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 Spinco nor any
Spinco 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 Spinco prior to the Offer Purchase Date,
the executive officers of the Company shall be the executive officers of
Spinco on and after the Distribution Date. Effective as of the
31
Distribution Date, (a) those 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 Spinco Employees, together with those
persons whose primary employment is with the Spinco Business, who are employed
by the Company or any of its subsidiaries immediately prior to the
Distribution Date will become employees of Spinco in the same capacities as
then held by such employees (or in such other capacities as Spinco 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 Spinco Employees, and any
assets held in the rabbi trust or trusts relating to such liabilities, will be
transferred to Spinco as soon as practicable after the Distribution Date.
Each of the parties agree 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, Spinco shall indemnify, defend
and hold harmless the Company, each Retained Subsidiary, the Purchaser and
Parent and each of their respective directors, officers, employees,
representatives, advisors, agents and affiliates (collectively, the "Parent
31--1
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 Spinco or, on
or prior to the Offer Purchase Date, made by or on behalf of the Company which
misrepresentation or breach of warranty is contained in 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 Spinco or, on or prior to the Offer
Purchase Date, on the part of the Company, (iii) any and all Spinco
Liabilities, (iv) the conduct of the Spinco Business or any part thereof on,
prior to or following the Distribution Date, (v) any transfer of Spinco Assets
to, or assumption of Spinco Liabilities by, Spinco or any Spinco Company in
accordance with 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,
Spinco, any Spinco Company, the Spinco Business, any Spinco Asset or any
Spinco Liability, and which occur on or prior to the Offer Purchase Date
(A) in the Information Statement, the Form 10 or in any registration statement
filed pursuant to 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 Spinco or any Spinco Company after
the date hereof pursuant to either the Securities Act or the Exchange Act (in
each case other than with respect to any statements or omissions which relate
solely to the Merger Agreement and 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 to any material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, (vii) the failure of the Company or Spinco to
obtain any final order or other consent or approval of the FCC with respect to
any of the transactions contemplated pursuant to either the Distribution
Agreement or the Merger Agreement and (viii) any Excluded Indemnifiable Losses
(as defined below). Notwithstanding the foregoing, Spinco'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 Spinco or any of
its affiliates in the documents referred to in clause (vi) above or (b) any
business activities, assets or liabilities of Spinco, any of the Spinco
Companies or the Spinco Business.
Notwithstanding Spinco's obligations to indemnify Parent Indemnified Parties
described above, Spinco 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 Spinco written notice thereof on or prior to the third anniversary
of the Distribution Date (it being understood that there shall be no
corresponding time limitation with respect to any Indemnifiable Losses arising
under clauses (iii), (iv), (v), (vii) and (viii) of 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 Spinco
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 Spinco, each Spinco Company and each of their
respective directors, officers, employees, representatives, advisors, agents
and affiliates (collectively, the "Spinco Indemnified
32
Parties") from, against and in respect of any and all indemnifiable losses of
the Spinco Indemnified Parties arising out of, relating to or resulting from,
directly or indirectly, (i) any breach of 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,
Spinco, any Spinco 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 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 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 Spinco Indemnified Party from and
against any Indemnifiable Loss resulting from any claims that the statements
included in the Information Statement, the Form 10 or in any registration
statement filed pursuant to Section 3.1 or Section 3.3 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 Spinco
Indemnified Parties described in the preceding paragraph, the Company will be
obligated to indemnify the Spinco Indemnified Parties only for those
Indemnifiable Losses under Clause (i) and (iv) of the immediately preceding
paragraph as to which the Spinco Indemnified Parties have given the Company
written notice thereof on or prior to the expiration of any applicable statute
of limitations period (it being understood that there 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
Spinco Indemnified Party has given notice to the Company of any matter which
would be the basis for a claim of indemnification by such Spinco Indemnified
Party pursuant to the immediately preceding paragraph, such Spinco 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.
TAX SHARING AGREEMENT
The following is a summary of certain provisions of the Tax Sharing
Agreement (as defined below). A copy of the Tax Sharing Agreement is attached
hereto as Exhibit (c)(5) and is incorporated herein by reference. The
following summary is qualified in its entirety by reference to the Tax Sharing
Agreement.
33
Pursuant to a tax sharing agreement, to be entered into prior to the
consummation of the Offer, between Parent, Purchaser, the Company and Spinco
(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 Spinco Assets to Spinco and the Spin-Off Loral Space. Spinco generally
has agreed, among other things, to file all tax returns with respect to Loral
Space or the Loral Space Spinco Companies for all taxable periods beginning
after the Distribution Date and to pay all taxes imposed upon or attributable
to Spinco or the Spinco Companies for all taxable periods. The Tax Sharing
Agreement will become effective only upon consummation of the Offer.
The foregoing summary of the Distribution Agreement and the Tax Sharing
Agreement (together, the "Ancillary Agreements") does not purport to be
complete and is qualified in its entirety by reference to the text of the
Ancillary Agreements, a copy of each of which is filed as an Exhibit to the
Schedule 14D-1 and is incorporated herein by reference. The Schedule 14D-1 may
be inspected and copies may be obtained from the offices of the Commission in
the same manner as set forth in Section 7.
THE RIGHTS AGREEMENT
The Company has advised Parent that 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 Spinco COMMON STOCK outstanding at
the close of business on January 22, 1996 (the "Rights Record Date") and with
respect to the Spinco Common Stock issued thereafter until the Rights
Distribution Date (as defined below) and, in certain circumstances, with
respect to Spinco 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 "Spinco Rights Preferred Stock"), of Spinco 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.
Initially, the Rights were and are attached to all certificates representing
shares of Spinco 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 Spinco Board of Directors 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 Spinco 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 Spinco Common Stock. The term "Acquiring Person" excludes (i) Spinco, (ii)
any subsidiary of Spinco, (iii) any employee benefit plan of Spinco or any
subsidiary of Spinco or (iv) any person or entity organized, appointed or
established by Spinco 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 Spinco Common Stock certificates and will be transferred with
and only with such Spinco Common Stock certificates, (ii) new Spinco 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 Spinco Common Stock outstanding will also
constitute the transfer of the Rights associated with the Spinco Common Stock
represented by such certificate. Pursuant to the Rights Agreement, Spinco
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 Spinco 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 Spinco Common Stock
as of the close of business on the Rights Distribution Date
34
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 of Spinco, only shares of
Spinco 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 Spinco 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, Spinco Common Stock
(or, in certain circumstances, cash, property or other securities of Spinco)
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 Spinco Common Stock (or other
consideration, as noted above) for $200. Assuming that the Spinco 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 Spinco 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) Spinco is acquired in a
merger or other business combination transaction in which Spinco is not the
surviving corporation (other than a merger which follows an offer described in
the preceding paragraph), or (ii) 50% or more of Spinco'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."
The Purchase Price payable, and the number of Units of Spinco 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 Spinco Rights Preferred Stock, (ii) if holders of
Spinco Rights Preferred Stock are granted certain rights or warrants to
subscribe for Spinco Rights Preferred Stock or convertible securities at less
than the current market price of the Spinco Rights Preferred Stock, or (iii)
upon the distribution to holders of the Spinco 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 Spinco Rights
Preferred Stock on the last trading date prior to the date of exercise.
Because of the nature of the Spinco Rights Preferred Stock's dividend and
liquidation rights, the value of the one one-thousandth interest in a share of
Spinco Rights Preferred Stock purchasable upon exercise of each Right should
approximate the value of one share of Spinco Common Stock. Shares of Spinco
Rights Preferred Stock purchasable upon exercise of the Rights will not be
redeemable. Each share of Spinco Rights Preferred Stock will be entitled to a
quarterly dividend payment of 1,000 times the dividend declared per share of
Spinco Common Stock. In the event of liquidation, each share of Spinco Rights
Preferred Stock will be entitled to a $1.00 preference and, thereafter the
holders of the shares of Spinco Rights Preferred Stock will be entitled to an
aggregate payment of 1,000 times the aggregate payment made per share of
Spinco Common Stock. Each share of Spinco Rights Preferred Stock will have one
vote, voting together with the shares of Spinco Common Stock. These rights are
protected by customary antidilution provisions.
35
At any time until ten days following the Stock Acquisition Date, Loral Space
may redeem the Rights in whole, but not in part, at a price (the "Spinco
Redemption Price") of $.0001 per Right (payable in cash, Spinco Common Stock
or other consideration deemed appropriate by the Loral Space Board of
Directors) by resolution of the Loral Space 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 stockholder of Spinco including, without limitation, the right to vote or
to receive dividends. While the distribution of the Rights will not be taxable
to stockholders or to Spinco, stockholders may, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable for Loral Space Common Stock (or other consideration) of Spinco 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 Loral Space's Board of Directors. After the Rights Distribution
Date, the provisions of the Rights Agreement may be amended by resolution of
Loral Space'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 stockholders and (ii) on
January 7, 1996, the Board of Directors 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 Spinco Common
Stock or, (c) give rise to a Triggering Event.
LORAL SPACE STOCKHOLDERS AGREEMENT
The following is a summary of certain provisions of the Stockholders
Agreement (as defined below). A copy of the Stockholders Agreement (with
certain Exhibits omitted) is attached hereto as Exhibit and is incorporated
herein by reference. The following summary is qualified in its entirety by
reference to 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, Spinco. The Stockholders Agreement
provides that, subject to certain exceptions, the Subject Stockholders are
obligated to vote any equity securities of Spinco, 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 Spinco vote their securities. The Stockholders Agreement
also limits the ability of the Subject Stockholders to transfer the equity
securities of Spinco 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 Spinco 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 transaction occur, the Company shall have
the right to purchase from Spinco (including any successor to the
36
rights and obligations of Loral Space) a certain number of shares of Spinco
(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 Spinco
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 represent, 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.
It is anticipated that Parent will enter into an employment agreement with
Frank C. Lanza. The agreement will provide for Mr. Lanza to serve as Executive
Vice President and co-Chief Operating Officer of Parent for a period
commencing with the Effective Time. The terms of the agreement have not yet
been determined.
11. PURPOSE OF THE OFFER, THE MERGER AND THE SPIN-OFF; PLANS FOR THE
COMPANY.
Purpose of the Offer. The purpose of the Offer, the Merger and the Spin-Off
is for the Purchaser to acquire control of the entire equity interest of the
Retained Business (and to acquire a 20% equity interest in Loral Space).
Consummation of the Offer in accordance with its terms and conditions will
provide the Purchaser with at least a two-thirds equity interest in the
Company. As described above, as a result of the Spin-Off, the Company will
continue to own only the Retained Business and a 20% equity interest in Loral
Space. The Merger will allow the Purchaser to acquire all outstanding Shares
not tendered and purchased pursuant to the Offer. The acquisition of the
entire equity interest in the Retained Business and the 20% equity interest in
Spinco has been structured as a cash tender offer followed by the Spin-Off and
a cash merger in order to provide a prompt and orderly transfer of ownership
of the Retained Business and the 20% equity interest in Loral Space from the
public stockholders of the Company to Parent and to provide stockholders with
cash and Loral Space Shares for all their Shares. The purchase of Shares
pursuant to the Offer will increase the likelihood that the Merger will be
effected.
Except as noted in this Offer to Purchase, neither Parent nor the Purchaser
has any present plans or proposals that would result in an extraordinary
corporate transaction, such as a merger, reorganization, liquidation,
relocation of operations, or sale or transfer of assets, involving the Company
or any of its subsidiaries, or any material changes in the Company's corporate
structure or business or the composition of its management or personnel.
12. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK EXCHANGE
LISTING; REGISTRATION UNDER THE EXCHANGE ACT. The purchase of Shares pursuant
to the Offer will reduce the number of Shares that might otherwise trade
publicly and may reduce the number of holders of Shares, which could adversely
affect the liquidity and market value of the remaining Shares held by
stockholders other than the Purchaser. The Purchaser cannot predict whether
the reduction in the number of Shares that might otherwise trade publicly
would have an adverse or beneficial effect on the market price for or
marketability of the Shares or whether it would cause future market prices to
be greater or less than the Offer price.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the requirements of the NYSE for continued listing
and may, therefore, be delisted from such exchange. According to the NYSE's
published guidelines, the NYSE could consider delisting the Shares if, among
other things, the number of publicly held Shares (excluding Shares held by
officers, directors, their immediate families and other concentrated holdings
of 10% or more) were less than 600,000, there were less than 1,200 holders of
at least 100 shares or the aggregate market value of the publicly held Shares
were less than $5 million. If, as a result of the purchase of Shares pursuant
to the Offer, the Shares no longer meet the requirements of the NYSE for
continued listing and the listing of Shares on such exchanges is discontinued,
the market for the Shares could be adversely affected.
37
If the NYSE were to delist the Shares, it is possible that the Shares would
trade on another securities exchange or in the over-the-counter market and
that price quotations for the Shares would be reported by such exchange or
through NASDAQ or other sources. The extent of the public market for the
Shares and availability of such quotations would, however, depend upon such
factors as the number of holders and/or the aggregate market value of the
publicly held Shares at such time, the interest in maintaining a market in the
Shares on the part of securities firms, the possible termination of
registration of the Shares under the Exchange Act and other factors.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), which has the effect, among other things, of allowing brokers to
extend credit on the collateral of the Shares. Depending upon factors similar
to those described above regarding listing and market quotations, the Shares
might no longer constitute "margin securities" for the purposes of the Federal
Reserve Board's margin regulations and, therefore, could no longer be used as
collateral for loans made by brokers.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated if the Shares are not listed on a national
securities exchange and there are fewer than 300 holders of record.
Termination of the registration of the Shares under the Exchange Act would
substantially reduce the information required to be furnished by the Company
to holders of Shares and to the Commission and would make certain of the
provisions of the Exchange Act, such as the short-swing profit recovery
provisions of Section 16(b), the requirement of furnishing a proxy or
information statement in connection with stockholder action and the related
requirement of an annual report to stockholders and the requirements of Rule
13e-3 under the Exchange Act with respect to "going private" transactions, no
longer applicable to the Shares. Furthermore, "affiliates" of the Company and
persons holding "restricted securities" of the Company may be deprived of the
ability to dispose of such securities pursuant to Rule 144 promulgated under
the Securities Act. If registration of the Shares under the Exchange Act were
terminated, the Shares would no longer be "margin securities" or eligible for
listing on a securities exchange or NASDAQ reporting. It is the current
intention of Parent to deregister the Shares after consummation of the Offer
if the requirements for termination of registration are met.
13. DIVIDENDS AND DISTRIBUTIONS. If, on or after the date of the Merger
Agreement, the Company should (i) split, combine or otherwise change the
Shares or its capitalization, (ii) issue or sell any additional securities of
the Company or otherwise cause an increase in the number of outstanding
securities of the Company (except for Shares issuable upon the exercise of
employee stock options outstanding on the date of the Merger Agreement) or
(iii) acquire currently outstanding Shares or otherwise cause a reduction in
the number of outstanding Shares, then, without prejudice to the Purchaser's
rights under Sections 1 and 15, the Purchaser, in its sole discretion, subject
to the terms of the Merger Agreement, may make such adjustments as it deems
appropriate in the purchase price and other terms of the Offer.
If, on or after the date of the Merger Agreement, the Company should declare
or pay any dividend on the Shares or make any distribution (including, without
limitation, cash dividends, the issuance of additional Shares pursuant to a
stock dividend or stock split, the issuance of other securities or the
issuance of rights for the purchase of any securities, but excluding any
regular quarterly dividend on the Shares of not more than $.08 per share on
the dividend and payment dates normally applicable to the Shares) with respect
to the Shares, other than Spinco Shares payable or distributable in respect of
the Shares in connection with the Spin-Off, that is payable or distributable
to stockholders of record on a date prior to the transfer to the name of the
Purchaser or its nominee or transferee on the Company's stock transfer records
of the Shares purchased pursuant to the Offer, then, without prejudice to the
Purchaser's rights under Sections 1 and 15, any such dividend, distribution or
right to be received by the tendering stockholders will be received and held
by the tendering stockholders for the account of the Purchaser and will be
required to be promptly remitted and transferred by each tendering stockholder
to the Depositary for the account of the Purchaser, accompanied by appropriate
documentation of transfer. Pending such remittance and subject to applicable
law, the Purchaser will be entitled to all rights and privileges as owner of
any such dividend, distribution or right and may withhold the entire purchase
price or deduct from the purchase price the amount or value thereof, as
determined by the Purchaser in its sole discretion.
38
14. EXTENSION OF TENDER PERIOD; AMENDMENT; TERMINATION. The Purchaser
expressly reserves the right, in its sole discretion, at any time or from time
to time, regardless of whether or not any of the events set forth in Section
15 will have occurred or will have been determined by the Purchaser to have
occurred, subject to the terms of the Merger Agreement and applicable rules of
the Commission, (i) to extend the period of time during which the Offer is
open and thereby delay acceptance for payment of, and the payment for, any
Shares, by giving oral or written notice of such extension to the Depositary
and (ii) to amend the Offer in any respect by giving oral or written notice of
such amendment to the Depositary. In the Merger Agreement, Parent and the
Purchaser have agreed not to extend the Expiration Date beyond the twentieth
business day following commencement of the Offer unless one or more of the
conditions set forth in Section 15 is not satisfied or unless Parent
reasonably determines that such extension is necessary to comply with any
legal or regulatory requirements relating to the Offer or the Spin-Off. Parent
and Purchaser have also agreed in the Merger Agreement, subject to the terms
and conditions thereof, to extend the Expiration Date if the Offer would
otherwise expire prior to Split-Off Record Date or the expiration or
termination of any applicable waiting period under the Antitrust Laws. In the
Merger Agreement, the Purchaser expressly reserves the right to amend the
terms or conditions of the Offer; provided, that without the consent of the
Company, the Purchaser will not amend the terms or conditions of the Offer to
change the form of consideration to be paid or decrease the price per Share
payable in the Offer, the number of Shares sought in the Offer or to impose
conditions to the Offer in addition to those set forth in Section 15 or to
amend any other term of the Offer in any manner materially adverse to the
holders of Shares. The rights reserved by the Purchaser in this paragraph are
in addition to the Purchaser's rights to terminate the Offer pursuant to
Section 15. Any extension, amendment or termination will be followed as
promptly as practicable by public announcement thereof, the announcement in
the case of an extension to be issued no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date
in accordance with the public announcement requirements of Rules 14d-4(c) and
14e-1(d) under the Exchange Act. Any reduction in the purchase price pursuant
to the Merger Agreement will be considered an amendment to the Offer, and will
be followed by the appropriate announcement. Without limiting the obligation
of the Purchaser under such Rules or the manner in which the Purchaser may
choose to make any public announcement, the Purchaser currently intends to
make announcements by issuing a release to the Dow Jones News Service or the
Reuters News Service.
The Purchaser also reserves the right, in its sole discretion, subject to
the terms of the Merger Agreement, in the event any of the conditions
specified in Section 15 will not have been satisfied and so long as Shares
have not theretofore been accepted for payment, to delay (except as otherwise
required by applicable law) acceptance for payment of or payment for Shares or
to terminate the Offer and not accept for payment or pay for Shares.
If the Purchaser extends the Offer, or if the Purchaser (whether before or
after its acceptance for payment of Shares) is delayed in its purchase of or
payment for Shares or is unable to pay for Shares pursuant to the Offer for
any reason, then, without prejudice to the Purchaser's rights under the Offer,
the Depositary may retain tendered shares on behalf of the Purchaser, and such
Shares may not be withdrawn except to the extent tendering stockholders are
entitled to withdrawal rights as described in Section 4. However, the ability
of the Purchaser to delay the payment for Shares which the Purchaser has
accepted for payment is limited by Rule 14e-1(c) under the Exchange Act, which
requires that a bidder pay the consideration offered or return the securities
deposited by or on behalf of holders of securities promptly after the
termination or withdrawal of such bidder's offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer
(including the Minimum Condition), the Purchaser will disseminate additional
tender offer materials and extend the Offer to the extent required by Rules
14d-4(c) and 14d-6(d) under the Exchange Act. The minimum period during which
the Offer must remain open following material changes in the terms of the
Offer or information concerning the Offer, other than a change in price or a
change in percentage of securities sought, will depend upon the facts and
circumstances, including the relative materiality of the terms or information.
With respect to a change in price or a change in percentage of securities
sought, a minimum ten business day period is generally required to allow for
adequate dissemination to stockholders and investor response. If prior to the
Expiration Date, the Purchaser should decide to increase the price per Share
being offered in the Offer, such increase will be applicable to all
stockholders whose Shares are accepted for payment pursuant to the Offer. As
used in this Offer to Purchase, "business day" means any day other than
Saturday, Sunday or a federal holiday and consists of the time period from
12:01 A.M. through 12:00 Midnight, New York City time as computed in
accordance with Rule 14d-l under the Exchange Act.
39
15. CERTAIN CONDITIONS TO THE OFFER. Notwithstanding any other provision of
the Offer, Purchaser shall not be required to accept for payment or pay for,
and may delay the acceptance for payment of (whether or not the Shares have
theretofore been accepted for payment), or the payment for, any Shares
tendered, and may terminate or extend the Offer and not accept for payment any
Shares, if:
(i) immediately prior to the expiration of the Offer (as extended in
accordance with the terms of the Offer), (A) any applicable waiting period
under the Antitrust Laws will not have expired or been terminated or any
approvals required under the EC Merger Regulation (as defined below) will not
have been received, (B) the Spin-Off Record Date for the distribution of
shares of Spinco common stock to stockholders of the Company pursuant to the
Distribution Agreement will not have been set by the Company's Board of
Directors, (C) the public indenture merger opinions will not have been
delivered to Purchaser and the applicable public indenture trustees, or (D)
the number of Shares validly tendered and not withdrawn when added to the
Shares then beneficially owned by Parent does not constitute two-thirds of the
Shares then outstanding and represent two-thirds of the voting power of the
Shares then outstanding on a fully diluted basis on the date of purchase; OR
(ii) on or after the date of the Merger Agreement and prior to the acceptance
for payment of Shares, any of the following conditions exist:
(a) any of the representations or warranties of the Company contained in
the Merger Agreement will not have been true and correct at the date when
made or (except for those representations and warranties made as of a
particular date which need only be true and correct as of such date) shall
cease to be true and correct at any time prior to consummation of the
Offer, except where the failure to be so true and correct would not,
individually or in the aggregate, have a Material Adverse Effect (as
defined in the Merger Agreement); provided, that if any such failure to be
so true and correct is curable by the Company through the exercise of its
reasonable efforts, then Purchaser may not terminate the Offer under this
subsection (a) until 10 business days after written notice thereof has been
given to the Company by Parent or Purchaser and unless at such time the
matter has not been cured; or
(b) any of the representations or warranties of Spinco contained in the
Distribution Agreement will not have been true and correct at the date when
made or (except for those representations and warranties made as of a
particular date which need only be true and correct as of such date) will
cease to be true and correct at any time prior to consummation of the
Offer, except where the failure to be so true and correct would not
individually or in the aggregate, have a Material Adverse Effect; provided,
that if any such failure to be so true and correct is curable by Spinco
through the exercise of its reasonable efforts, then Purchaser may not
terminate the Offer under this subsection (b) until 10 business days after
written notice thereof has been given to the Company by Parent or Purchaser
and unless at such time the matter has not been cured; or
(c) the Company will have breached any of its covenants or agreements
contained in the Merger Agreement, except for any such breaches that,
individually or in the aggregate, would not have a Material Adverse Effect;
provided that, if any such breach is curable by the Company through the
exercise of its reasonable efforts, then Purchaser may not terminate the
Offer under this subsection (c) until 10 business days after written notice
thereof has been given to the Company by Parent or Purchaser and unless at
such time the breach has not been cured; or
(d) Spinco or the Company will have breached any of its covenants or
agreements contained in the Distribution Agreement, except for any such
breaches that, individually or in the aggregate, would not have a Material
Adverse Effect; provided, that if any such breach is curable by Spinco or
the Company through the exercise of its reasonable efforts, then Purchaser
may not terminate the Offer under this subsection (d) until 10 business
days after written notice thereof has been given to the Company or Spinco,
as the case may be, by Parent or Purchaser and unless at such time the
breach has not been cured; or
(e) there will have been any statute, rule, regulation, judgment, order
or injunction promulgated, enacted, entered, enforced or deemed applicable
to the Offer, or any other legal action will have been taken, by any state,
federal or foreign government or governmental authority or by any U.S.
court, other than the routine application to the Offer, the Merger or the
Spin-Off of waiting periods under the HSR Act, that presents a substantial
likelihood of (1) making the acceptance for payment of, or the payment for,
some or
40
all of the Shares illegal or otherwise prohibiting, restricting or
significantly delaying consummation of the Offer, (2) imposing material
limitations on the ability of Purchaser or Parent to acquire or hold or to
exercise any rights of ownership of the Shares, or effectively to manage or
control the Retained Business, the Company, the Retained Subsidiaries,
Purchaser or any of their respective affiliates, which individually or in
the aggregate could constitute a Significant Adverse Effect; or
(f) any fact or circumstance exists or will have occurred that has a
Material Adverse Effect; or
(g) there will have occurred (1) any general suspension of trading in, or
limitation on prices for, securities on the NYSE, (2) the declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States (whether or not mandatory), (3) the commencement of a war,
armed hostilities or other international or national calamity directly or
indirectly involving the United States and having a Material Adverse Effect
or materially adversely affecting (or materially delaying) the consummation
of the Offer, (4) any limitation or proposed limitation (whether or not
mandatory) by any U.S. governmental authority or agency, or any other
event, that materially adversely affects generally the extension of credit
by banks or other financial institutions, (5) from the date of the Merger
Agreement through the date of termination or expiration of the Offer, a
decline of at least 25% in the Standard & Poor's 500 Index or (6) in the
case of any of the situations described in clauses (1) through (5)
inclusive, existing at the date of the commencement of the Offer, a
material acceleration, escalation or worsening thereof; or
(h) any person (which includes a "person" as such term is defined in
Section 13(d)(3) of the Exchange Act) other than Purchaser, any of its
affiliates, or any group of which any of them is a member will have
acquired beneficial ownership of more than 20% of the outstanding Shares or
will have entered into a definitive agreement or an agreement in principle
with the Company with respect to a tender offer or exchange offer for any
Shares or merger, consolidation or other business combination with or
involving the Company or any of its subsidiaries; or
(i) prior to the purchase of Shares pursuant to the Offer, the Board of
Directors of the Company will have withdrawn or modified (including by
amendment of the Schedule 14D-9) in a manner adverse to Purchaser its
approval or recommendation of the Offer, the Merger Agreement, the Merger
or the Spin-Off, will have recommended to the Company's stockholders
another offer, will have authorized the redemption of the Rights (whether
or not in accordance with Section 6.1(k) of the Merger Agreement) after the
Company has received an Acquisition Proposal, or will have adopted any
resolution to effect any of the foregoing which, in the sole judgment of
Purchaser in any such case, and regardless of the circumstances (including
any action or omission by Purchaser) giving rise to any such condition,
makes it inadvisable to proceed with such acceptance for payment; or
(j) the Merger Agreement will have been terminated in accordance with its
terms; or
(k) the Spin-Off Record Date will not have occurred; or
(l) the conditions to the Spin-Off will not have been satisfied or
waived; OR
(iii) Parent and Purchaser will not have secured financing on terms
reasonably acceptable to Parent to finance the purchase of all of the Shares
at the Merger Price and to consummate the transactions contemplated by the
Merger Agreement and the Ancillary Agreements; provided, that the condition
set forth in this clause (iii) will be a condition to Purchaser's obligations
with respect to the Offer only if (A) the Offer has not been consummated on or
before April 30, 1996, (B) Parent has not taken any significant action outside
of the ordinary course of business, which prevents Parent from obtaining
sufficient financing to purchase all of the Shares at the Merger Price and to
consummate the transactions contemplated by the Merger Agreement and the
Ancillary Agreements and (C) Parent and Purchaser are in substantial
compliance with their respective material obligations under Sections 6.4, 6.5
and 6.6 of the Merger Agreement.
The foregoing conditions are for the sole benefit of Purchaser and may be
asserted by Purchaser regardless of the circumstances giving rise to such
conditions, or may be waived by Purchaser in whole or in part at any time and
from time to time in its sole discretion; provided, that the condition set
forth in clause (ii)(j) above may be waived or modified only by the mutual
consent of Purchaser and the Company.
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16. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS. Except as described in this
Section 16, based on a review of publicly available filings by the Company
with the Commission and other publicly available information concerning the
Company, neither Parent nor the Purchaser is aware of any license or
regulatory permit that appears to be material to the business of the Company
and its subsidiaries, taken as a whole, that might be adversely affected by
the acquisition of Shares by the Purchaser or Parent pursuant to the Offer,
the Merger or otherwise or of any approval or other action by any
governmental, administrative or regulatory agency or authority, domestic or
foreign, that would be required prior to the acquisition of Shares by the
Purchaser or Parent pursuant to the Offer, the Merger or otherwise. Should any
such approval or other action be required, Parent and the Purchaser currently
contemplate that it will be sought. While the Purchaser does not currently
intend to delay the acceptance for payment of Shares tendered pursuant to the
Offer pending the outcome of any such matter, there can be no assurance that
any such approval or other action, if needed, would be obtained or would be
obtained without substantial conditions or that adverse consequences might not
result to the business of the Company or Parent or that certain parts of the
business of the Company or Parent might not have to be disposed of in the
event that such approvals were not obtained or any other actions were not
taken. The Purchaser's obligation under the Offer to accept for payment and
pay for Shares is subject to certain conditions, including conditions relating
to the legal matters discussed in this Section 16. See Section 15.
State Takeover Statutes. The Company is incorporated under the laws of the
State of New York. Section 912 of the NYBCL prohibits certain "business
combinations" (defined to include mergers and consolidations) involving a New
York corporation and an "interested shareholder" (defined generally as a
person who is the beneficial owner of 20% or more of the outstanding voting
stock of such New York corporation) for a period of five years following the
date on which such interested shareholder became such (such date, a "stock
acquisition date") unless such business combination or the purchase of stock
made by such interested shareholder is approved by the board of directors of
such New York corporation prior to such interested shareholder's stock
acquisition date or certain other statutory conditions have been met. At a
meeting on January 7, 1996, the Board of Directors approved the Merger
Agreement, the Merger, the Offer and the Purchaser's purchase of Shares
pursuant to the Offer. Accordingly, the provisions of Section 912 of the NYBCL
have been satisfied with respect to the Offer and the Merger and such
provisions will not delay the consummation of the Merger. Article 16 of the
NYBCL also requires a bidder for shares of a New York corporation to file a
registration statement with the attorney general and satisfy certain
disclosure requirements. Parent and the Purchaser have filed such a
registration statement and this Offer to Purchase sets forth the information
required to be disclosed pursuant to Article 16 of the NYBCL.
A number of other states have adopted "takeover" statutes that purport to
apply to attempts to acquire corporations that are incorporated in such
states, or whose business operations have substantial economic effects in such
states, or which have substantial assets, security holders, employees,
principal executive offices or places of business in such states.
In Edgar v. MITE Corporation, the Supreme Court of the United States
invalidated on constitutional grounds the Illinois Business Takeover Act,
which, as a matter of state securities law, made takeovers of corporations
meeting certain requirements more difficult. However, in CTS Corp. v. Dynamics
Corp. of America, the Supreme Court held that a state may, as a matter of
corporate law and, in particular, those laws concerning corporate governance,
constitutionally disqualify a potential acquiror from voting on the affairs of
a target corporation without prior approval of the remaining stockholders,
provided that such laws were applicable under certain conditions, in
particular, that the corporation has a substantial number of stockholders in
the state and is incorporated there.
The Company, directly or through subsidiaries, conducts business in a number
of states throughout the United States, some of which have enacted "takeover"
statutes. The Purchaser does not know whether any of these statutes will, by
their terms, apply to the Offer, and has not complied with any such statutes
other than those adopted by the State of New York. To the extent that certain
provisions of these statutes purport to apply
42
to the Offer, the Purchaser believes that there are reasonable bases for
contesting such statutes. If any person should seek to apply any state
takeover statute, the Purchaser would take such action as then appears
desirable, which action may include challenging the validity or applicability
of any such statute in appropriate court proceedings. If it is asserted that
one or more takeover statutes apply to the Offer, and it is not determined by
an appropriate court that such statute or statutes do not apply or are invalid
as applied to the Offer, the Purchaser might be required to file certain
information with, or receive approvals from, the relevant state authorities,
and the Purchaser might be unable to purchase or pay for Shares tendered
pursuant to the Offer, or be delayed in continuing or consummating the Offer.
In such case, the Purchaser may not be obligated to accept for payment or pay
for Shares tendered. See Section 15.
Antitrust. Under the HSR Act, certain acquisitions may not be consummated
unless information has been furnished to the FTC and the Antitrust Division
and certain waiting period requirements have been satisfied. The Offer and the
acquisition of Shares pursuant to the Merger Agreement are subject to the HSR
Act. Parent expects to file a Notification and Report Form with respect to the
Offer on or before January 19, 1996.
Under the provisions of the HSR Act applicable to the Offer, the purchase of
Shares under the Offer may not be consummated until the expiration of a 15-
calendar day waiting period following the filing by Parent. Accordingly, if
Parent files its HSR Notification and Report Form on January 19, 1996, the
waiting period with respect to the Offer will expire at 11:59 p.m., New York
City time, on February 3, 1996, unless Parent receives a request for
additional information or documentary material, or the Antitrust Division and
the FTC terminate the waiting period prior thereto. If, within such 15-day
waiting period, either the Antitrust Division or the FTC requests additional
information or material from Parent concerning the Offer, the waiting period
will be extended and would expire at 11:59 p.m., New York City time, on the
tenth calendar day after the date of substantial compliance by Parent with
such request. Only one extension of the waiting period pursuant to a request
for additional information is authorized by the HSR Act. Thereafter, such
waiting period may be extended only by court order or with the consent of
Parent. The Purchaser will not accept for payment Shares tendered pursuant to
the Offer unless and until the waiting period requirements imposed by the HSR
Act with respect to the Offer have been satisfied. See Section 15.
No separate HSR Act waiting period requirements with respect to the Merger
Agreement will apply, so long as the 15-day waiting period expires or is
terminated. Thus, all Shares will be acquired pursuant to the Offer at the
close of the 15-day waiting period or on the tenth calendar day after the date
of substantial compliance with a request for additional information (assuming
all other conditions to the Offer have been satisfied or waived in accordance
with the provisions thereof).
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's acquisition of
Shares pursuant to the Offer and the Merger Agreement. At any time before or
after the Purchaser's acquisition of Shares, the Antitrust Division or the FTC
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the acquisition
of Shares pursuant to the Offer or otherwise or seeking divestiture of Shares
acquired by the Purchaser or divestiture of substantial assets of Parent or
its subsidiaries. Private parties and state attorneys general may also bring
legal action under the antitrust laws under certain circumstances. Based upon
an examination of publicly available information relating to the businesses in
which Parent and the Company are engaged, Parent and the Purchaser believe
that the acquisition of Shares by the Purchaser will not violate the antitrust
laws. Nevertheless, there can be no assurance that a challenge to the Offer or
other acquisition of Shares by the Purchaser on antitrust grounds will not be
made or, if such a challenge is made, of the result. See Section 15 for
certain conditions to the Offer, including conditions with respect to
litigation and certain governmental actions.
EC Merger Regulation. According to the Company 10-K, the Company may conduct
substantial operations within the European Community (the "EC") and certain of
the individual member states of the EC. The EC Merger Regulation requires that
notices of concentrations with a "community dimension" be provided to the EC
Commission for review and approval prior to being put into effect. The Offer
will be deemed to have a
43
"community dimension" if the combined aggregate worldwide annual revenues of
both the Company and the Purchaser exceeds ECU 5 billion, if the community-
wide annual revenues of each of the Company and the Purchaser exceed ECU 250
million, and if both the Company and the Purchaser do not receive more than
two-thirds of their respective community-wide revenues from one and the same
member state. Based upon information contained in the Company 10-K, the
Purchaser believes that the Offer may be considered to have a "community
dimension" if the Offer falls within the EC Merger Regulation, the EC
Commission, as opposed to individual member states, has exclusive jurisdiction
to review it, subject to certain exceptions.
Under the EC Merger Regulation, a concentration that meets the foregoing
guidelines requires the filing of a notice in a prescribed form with the EC
Commission. This filing must normally be made within seven days of the earlier
of the announcement of a public bid, the conclusion of the relevant agreement
or acquisition of a controlling interest, although extensions of time are
sometimes granted. Transactions subject to the filing requirements of the EC
Merger Regulation are suspended automatically until three weeks after receipt
of the notice. The EC Commission may extend the suspension period for such
period as it finds necessary to make a final decision on the legality of the
transaction. In the case of a public bid, the bidder may acquire shares of the
target company during the suspension period, but may not vote such shares
until after the end of the period unless the EC Commission grants permission
to do so in order to permit the bidder to maintain the full value of its
investment.
The EC Commission must decide whether to initiate proceedings within one
month after the receipt of the notice, subject to certain extensions for EC
holidays or if an individual member state has requested a referral of the
transaction. If proceedings are initiated, the EC Commission must reach a
decision in the proceedings within four months of the commencement of the
proceedings. If the EC Commission fails to reach a decision within either of
these time periods the transactions will be deemed to be compatible with the
common market.
If the EC Commission declares the Offer to be not compatible with the common
market, it may prevent the consummation of the transaction, order a
divestiture if the transaction has already been consummated or impose
conditions or other obligations. In the event that the transaction is found
not to be subject to the EC Merger Regulation, various national merger control
regimes of the member states may apply, and it may be necessary to obtain
approvals from such national authorities.
There can be no assurance that a challenge to the Offer will not be made
pursuant to the EC Merger Regulation and if such a challenge is made, what the
outcome will be, or, alternatively, if the concentration does not meet the
aforementioned guidelines and does not require the filing of a notice with the
EC Commission, what the outcome will be pursuant to the merger regulations of
one or more of the various member states.
FCC Regulation. The Communications Act of 1934, as amended (the
"Communications Act"), requires prior approval by the FCC of the assignment or
transfer of control of any radio or satellite license or licensee, or the
assignment or transfer of any rights arising under any such license. The FCC
distinguishes between pro forma transfers and assignments, in which ultimate
ownership and control are not substantially changed and for which applications
are processed on an expedited basis, and "substantial" assignments and
transfers of control, which trigger an opportunity for public comment and
receive a more comprehensive review by the FCC. Applications must be filed
with the FCC seeking approval of both pro forma and substantial assignments
and transfers. The Communications Act requires the FCC to find that the
proposed transfer or assignment would serve the public interest, convenience
and necessity as a prerequisite to granting approval. The FCC may also require
that the applicant demonstrate that it possesses the requisite legal,
financial, technical and other qualifications to operate the licensed
facilities before it will approve the assignment or transfer. The FCC
assesses, as part of the process of considering applications proposing
assignments or transfers of control of FCC licenses or licensees, certain
information with respect to officers, directors and stockholders of the entity
to which control is to be transferred.
The Offer and acquisition of Shares pursuant to the Merger Agreement will
result in substantial assignments of, and transfers of control over, certain
private radio licenses used internally by the Company in connection with its
defense electronics and systems integration business. Such assignments and
transfers will require prior
44
FCC approval. The public-comment period, however, will not be triggered
because these licenses are private radio licenses. Moreover, in the case of
private radio licenses, special temporary authorizations possibly may be
obtained to allow the Offer and acquisition of Shares to close even if the FCC
has not yet granted its approval of the underlying private radio transfer
applications. In addition, based on publicly available information, Parent and
Purchaser believe that the Spin-Off will result in a pro forma assignment of,
and transfer of control over, certain licenses and authorizations issued by
the FCC to the Company and its subsidiaries in connection with their
telecommunications and space systems business, which will require prior FCC
approval. There can be no assurance that challenge to the Offer or the Spin-
Off will not be made pursuant to the Communications Act, and if such challenge
were made, what the outcome would be.
Commission Approval of Information Statement. The Company intends to file
the Information Statement with the Commission as part of a registration
statement of the Spinco Shares under the Exchange Act. The Company may not
distribute the Information Statement or the Spinco Shares until the Commission
has reviewed such registration statement and declared it effective.
Margin Rules. The Purchaser and Parent believe that the requirements of the
margin regulations promulgated by the Federal Reserve Board are not applicable
to the financing of the Offer and the Merger.
Short-Form Merger. Section 905 of the NYBCL would permit the Merger to occur
without a vote of the Company's shareholders (a "short-form merger") if the
Purchaser were to acquire at least 90% of the outstanding Shares in the Offer.
17. FEES AND EXPENSES. Parent and the Purchaser have engaged Bear Stearns to
act as financial advisor to Parent in connection with the proposed acquisition
of the Company and as Dealer Manager in connection with the Offer. Parent has
agreed to pay Bear Stearns a fee of $5 million as compensation for its
services to date as financial advisor to Parent and an additional fee of $20
million upon the consummation of the purchase by Parent or Purchaser of more
than 50% of the capital stock of the Company for a total fee of $25 million.
If Parent or Purchaser receives recovery of expenses or any other similar fee
pursuant to the Merger Agreement, then Parent shall pay Bear Stearns
immediately upon receipt of such expenses an additional fee of $20 million.
The Purchaser also has agreed to reimburse Bear Stearns for its expenses,
including reasonable counsel fees and to indemnify it against certain
liabilities and expenses, including certain liabilities under the federal
securities laws.
The Purchaser has retained Morrow & Co. to act as the Information Agent and
First Chicago Trust Company of New York to act as the Depositary in connection
with the Offer. The Information Agent may contact holders of Shares by mail,
telephone, telex, facsimile, telegraph and personal interview and may request
brokers, dealers, commercial banks, trust companies and other nominees to
forward the Offer material to beneficial owners. The Information Agent and
Depositary each will receive reasonable and customary compensation for their
services, will be reimbursed for certain reasonable out-of-pocket expenses and
will be indemnified against certain liabilities and expenses in connection
therewith, including certain liabilities under the federal securities laws.
The Depositary has not been retained to make solicitations or recommendations
in connection with the Offer.
Neither the Purchaser nor Parent will pay any fees or commissions to any
broker or dealer or other persons for soliciting tenders of Shares pursuant to
the Offer (other than the fees of the Dealer Manager and the Information
Agent). Brokers, dealers, commercial banks and trust companies will be
reimbursed by the Purchaser for reasonable expenses incurred by them in
forwarding material to their customers.
18. MISCELLANEOUS. The Purchaser is not aware of any jurisdiction in which
the making of the Offer is not in compliance with applicable law. If the
Purchaser becomes aware of any jurisdiction in which the making of the Offer
would not be in compliance with applicable law, the Purchaser will make a good
faith effort to comply with any such law. If, after such good faith effort,
the Purchaser cannot comply with any such law, the Offer will not be made to
(nor will tenders be accepted from or on behalf of) the holders of Shares
residing in such jurisdiction. In those jurisdictions where securities or blue
sky laws require the Offer to be made by a licensed broker or dealer, the
Offer is being made on behalf of the Purchaser by the Dealer Manager or one or
more registered brokers or dealers which are licensed under the laws of such
jurisdiction.
45
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR PARENT NOT CONTAINED IN THIS
OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
The Purchaser has filed with the Commission the Schedule 14D-1 pursuant to
Rule 14d-3 under the Exchange Act, furnishing certain additional information
with respect to the Offer, and may file amendments thereto. The Schedule 14D-l
and any amendments thereto, including exhibits, may be inspected and copies
may be obtained at the same places and in the same manner as set forth in
Section 7 (except they will not be available at the regional offices of the
Commission).
LAC Acquisition Corporation
January 12, 1996
46
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT
The name, business address, present principal occupation or employment and
five-year employment history of each director and executive officer of Parent
and certain other information are set forth below. Unless otherwise indicated
below, the address of each director and officer is c/o 6801 Rockledge Drive,
Bethesda, Maryland 20817. No information is provided in the right-hand column
where the individual has occupied the position indicated in the middle column
for the past five years and holds no outside directorships. Unless otherwise
indicated, each occupation set forth opposite an individual's name refers to
employment with Parent. All directors and officers listed below are citizens
of the United States. Parenthetical years indicate the year the individual was
elected or appointed a director of Lockheed Corporation or Martin Marietta
Corporation (which were combined into Lockheed Martin Corporation in the first
quarter of 1995).
PRINCIPAL OCCUPATION AND
NAME BUSINESS EXPERIENCE
(AGE AT POSITIONS AND OFFICES (PAST FIVE YEARS)
12/31/95) HELD WITH PARENT OUTSIDE DIRECTORSHIPS
--------- --------------------- ------------------------
Norman R. Au- President and Chief President of Lockheed Martin Corpo-
gustine (60) Executive Officer; ration since March 16, 1995 and
Director (1986) Chief Executive Officer of Lockheed
Martin Corporation since January 1,
1996. Chairman of the Board of Mar-
tin Marietta from 1988 to 1995 and
Chief Executive Officer from 1987 to
1995; served as Vice Chairman of
Martin Marietta between 1987 and
1988, as President and Chief Operat-
ing Officer in 1986 and 1987, as Ex-
ecutive Vice President in 1985 and
1986, and as a Senior Vice President
in 1985; director of Phillips Petro-
leum Company and Proctor & Gamble
Co.
Marcus C. Senior Vice President and Senior Vice President and Chief Fi-
Bennett (60) Chief Financial Officer; nancial Officer of Parent since
Director (1994) March 16, 1995. Vice President and
Chief Financial Officer of Martin
Marietta since 1988; served as Vice
President of Finance from 1984 to
1988; serves as Chairman of Martin
Marietta Materials, Inc., a majority
owned subsidiary of Martin Marietta,
and Orlando Central Park, Inc. and
Chesapeake Park, Inc., wholly owned
subsidiary of Martin Marietta; di-
rector of Carpenter Technology,
Inc.; member of Financial Executives
Institute, MAPI Finance Council and
The Conomic Club of Washington;
serves as a director of the Private
Sector Council and as a member of
its CFO Task Force.
Lynne V. Cheney Director (1994) W. H. Brady, Jr. Distinguished Fel-
(54) low at the American Enterprise In-
stitute for Public Policy Research,
an independent, nonpartisan organi-
zation sponsoring original research
on domestic and international eco-
nomic policy,
S-1
PRINCIPAL OCCUPATION AND
BUSINESS EXPERIENCE
NAME POSITIONS AND OFFICES (PAST FIVE YEARS)
(AGE AT 12/31/95) HELD WITH PARENT OUTSIDE DIRECTORSHIPS
----------------- --------------------- ------------------------
foreign and defense policy, and so-
cial and political issues since
1992; served as Chairman of the Na-
tional Endowment for the Humanities,
an independent federal agency sup-
porting education, research, preser-
vation, and public programs in hu-
manities, 1986-1992; director of
Reader's Digest Association, Inc.,
IDS Mutual Fund Group, FPL Group,
Inc. and UP Group Resources, Inc.
A. James Clark (68) Chairman of the Board of Clark En-
terprises, Inc., a holding company
engaged in the construction business
since 1987; served as its President
since 1972; Chairman of the Execu-
tive Committee for the Clark Con-
struction Group, Inc.; director of
GEICO Insurance Co., Potomac Elec-
tric Power Company and Carl Realty
Corporation; member of the Board of
Trustees of The Johns Hopkins Uni-
versity; director of the University
of Maryland Foundation and a member
of the Board of Visitors University
of Maryland Foundation.
Vance D. Coffman Director (1996) Director since 1996; Executive Vice
President and Chief Operating Offi-
cer since 1996; President and Chief
Operating Officer, Space and Strate-
gic 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.
Edwin I. Colodny Director (1987) Of Counsel to Paul, Hastings,
(69) Janofsky & Walker; served as Chief
Executive Officer of USAir, Inc.
from 1975 until retiring in June
1991 and as Chairman of the Board of
USAir, Inc. from 1978 until July
1992; also served as Chairman of the
Board of USAir Group, Inc. from 1983
until retiring from that position in
July 1992; director of USAir Group,
Inc., COMSAT Corporation, Esterline
Technologies Corp. and Ascent Enter-
tainment; member of the Board of
Trustees of the University of Roch-
ester.
Lodwrick M. Cook Director (1991) Chairman of the Board of ARCO, a pe-
(67) troleum, coal and chemical company,
served as Chief Executive Officer of
ARCO from October 1985 to July 1994;
served as a director of ARCO since
1980; served as an executive officer
of ARCO since 1970; director of
S-2
PRINCIPAL OCCUPATION AND
BUSINESS EXPERIENCE
NAME POSITIONS AND OFFICES (PAST FIVE YEARS)
(AGE AT 12/31/95) HELD WITH PARENT OUTSIDE DIRECTORSHIPS
----------------- --------------------- ------------------------
H.F. Ahmanson & Company; director of
Home Savings of America and Chairman
of the Board of Directors of ARCO
Chemical Company.
James L. Everett, Director (1976) Served as Chief Executive Officer of
III (69) Philadelphia Electric Company from
1978 and Chairman of its Board of
Directors from 1982 until his re-
tirement in 1988; director of Tasty
Baking Company.
Houston K. Flourney Director (1976) Special Assistant to the President
(66) for Governmental Affairs, University
of Southern California, Sacramento,
California, since August 1981; Pro-
fessor of Public Administration,
University of Southern California,
Sacramento, California, 1981 to
1993; served as Vice President for
Governmental Affairs, University of
Southern California, Los Angeles.
1978 to 1981; director of Fremont
General Corporation, Fremont Invest-
ment and Loan Corporation and Tosco
Corporation.
James F. Gibbons Director (1985) Dean of the School of Engineering,
(64) Stanford University, Stanford, Cali-
fornia, since September 1984; Pro-
fessor of Electronics, Stanford Uni-
versity, since 1964; director of
Raychem Corporation, Centrigram Com-
munications Corporation. Cisco Sys-
tems Incorporation, El Paso Natural
Gas Company and Amati Communications
Corp.
Edward L. Hennessy, Director (1983) Served as Chairman of the Board and
Jr. (67) Chief Executive Officer of
AlliedSignal Inc. from May 1979
through June 1991 and served as
Chairman of AlliedSignal Inc. from
July 1991 through December 1991; di-
rector of The Bank of New York, Ti-
tan Pharmaceuticals, Inc. The Wack-
enhut Corporation and Walden Resi-
dential Properties, Inc.; trustee of
Catholic University of America and
Stevens Institute of Technology, a
director and treasurer of March of
Dimes and a director of Public TV,
Channel 13.
Edward E. Hood, Jr. Director (1993) Joined GE in 1957 after service in
(65) the U.S. Air Force; elected a Vice
President of GE in 1968 and Vice
Chairman and Executive Officer of GE
in 1979; served as a director of GE
from 1980 until his retirement in
1993;
S-3
PRINCIPAL OCCUPATION AND
BUSINESS EXPERIENCE
NAME POSITIONS AND OFFICES (PAST FIVE YEARS)
(AGE AT 12/31/95) HELD WITH PARENT OUTSIDE DIRECTORSHIPS
----------------- --------------------- ------------------------
director of FlightSafety Interna-
tional, Inc., The Lincoln Electric
Company and Gerber Scientific, Inc.,
Chairman Emeritus of the Board of
Trustees of Rensselaer Polytechnic
Institute; serves as a trustee of
North Carolina State University.
Caleb B. Hurtt (64) Director (1987) Served as President and Chief Oper-
ating Officer of Martin Marietta
from 1987 until his retirement in
January 1990; was its Executive vice
President in 1987 and a Senior Vice
President from 1983 to 1987; Vice
Chairman of the Board of Trustees of
Stevens Institute of Technology;
served as Chairman of the Board of
Governors of the Aerospace Indus-
tries Association in 1989 and is a
past Chairman of the NASA Advisory
Council.
Gwendolyn S. King Director (1992) Senior Vice President of Corporate
(55) and Public Affairs for PECO Energy
Company (formerly Philadelphia Elec-
tric Company) since October 1992;
served as Commissioner of the Social
Security Administration from August
1989 through September 1992, and as
Executive Vice President of Gogol &
Associates in Washington, D.C. from
March 1988 to July 1989; director of
Monsanto Company; member of the Ex-
ecutive Committee of Pennsylvania
Electric Association and recently
appointed by President Clinton to
the Notch Commission.
Lawrence O. Kitchen Director (1975) Chairman of the Executive Committee
(72) of Lockheed Corporation from January
1, 1989 to March 16, 1995; served as
Chairman of the Board and Chief Ex-
ecutive Officer of Lockheed Corpora-
tion, 1986 to 1988; served as Presi-
dent and Chief Operating Officer of
Lockheed Corporation, 1975 to 1985;
serves on the Advisory Board of the
Industrial Bank of Japan; director
of Kendall-Jackson Winery, Ltd.
Gordon S. Macklin Director (1992) Chairman of the Board of White River
(67) Corporation, an information services
company; served as Chairman of the
Board of Hambrecht & Quist, Inc., a
venture capital and investment bank-
ing company, from 1987 until his re-
tirement in April 1992; served as
President of the National Associa-
tion of Securities Dealers, Inc.
from 1970 until 1987; director of
Fund American Enterprises Holdings,
Inc., MCI Communica
S-4
PRINCIPAL OCCUPATION AND
BUSINESS EXPERIENCE
NAME POSITIONS AND OFFICES (PAST FIVE YEARS)
(AGE AT 12/31/95) HELD WITH PARENT OUTSIDE DIRECTORSHIPS
----------------- --------------------- ------------------------
tions Corporation, Med-Immune, Inc.
and Info Vest Corporation; serves as
director, trustee or managing gen-
eral partner, as the case may be of
most of the investment companies in
the Franklin/Templeton Group of
Funds.
Vincent N. Marafino Director (1980) Executive Vice President of Lockheed
(65) Martin Corporation from March 16,
1995 to December 31, 1995. From
to March 16, 1996, of
Lockheed Corporation. Vice Chairman
of the Board and Chief Financial and
Administrative Officer of Lockheed
Corporation since August 1, 1988;
served as Executive Vice President
-- Chief Financial and Administra-
tive Officer of Lockheed Corpora-
tion, 1983 to 1988; served as an ex-
ecutive officer of Lockheed Corpora-
tion since 1971.
Eugene F. Murphy Director (1993) President and Chief Executive Offi-
(59) cer of GE Aircraft Engines since
1993; served as President and Chief
Executive Officer of GE Aerospace
from 1992 and 1993; served as Senior
Vice President of GE Communications
& Services from 1986 to 1992; served
as a member of President Reagan's
National Security Telecommunications
Advisory Committee; former Chairman
and permanent member of the Board of
Directors of the Armed Forces Commu-
nications and Electronics Associa-
tion; member of the Aerospace Indus-
tries Association Board of Gover-
nors.
Allen E. Murray Director (1991) Served as Chairman of the Board and
(66) Chief Executive Officer of Mobil
Corporation from 1986 until his re-
tirement on March 1, 1994; director
of Metropolitan Life Insurance Com-
pany, Minnesota Mining and Manufac-
turing Company, Morgan Stanley Group
inc. and St. Francis Hospital; mem-
ber of the Board of Trustees of New
York University, a member of the
Chase Manhattan Bank International
Advisory Committee, and serves as an
honorary director of the American
Petroleum Institute; member of The
Business Council, The Business
Roundtable, The Council on Foreign
Relations, and The Trilateral Com-
mission.
S-5
PRINCIPAL OCCUPATION AND
BUSINESS EXPERIENCE
NAME POSITIONS AND OFFICES (PAST FIVE YEARS)
(AGE AT 12/31/95) HELD WITH PARENT OUTSIDE DIRECTORSHIPS
- ----------------- --------------------- ------------------------
David S. Potter Director (1987) Served as Chairman of the Board of
(70) John Fluke Manufacturing Company,
Inc., an
lectronic instrument and sensor
firm, Everett, Washington. 1990-
1991; retired Vice President and
Group Executive of General Motors
Corporation; served as Vice Presi-
dent of General Motors Corporation
1976 to 1985; director of John Fluke
Manufacturing Company, Inc. 1986-
1995.
Frank Savage (57) Director (1990) Chairman, Alliance Capital Manage-
ment International, an investment
management company since 1994; Se-
nior Vice President of The Equitable
Life Assurance Society of the United
States since 1987; Chairman of the
Board of Alliance Corporate Finance
Group, Inc. since 1993; Chairman of
the Board of Equitable Capital Man-
agement Corporation, 1992-1993; and
Vice Chairman of the Board of Equi-
table Capital Management Corpora-
tion, 1986-1992; director of Alli-
ance Capital Management Corporation.
ARCO Chemical Company, and Essence
Communications, Inc.; trustee of
Johns Hopkins University and Howard
University; director of the Council
on Foreign Relations; New York Phil-
harmonic; and former U.S. Presiden-
tial appointee to the Board of Di-
rectors of U.S. Synthetic Fuels Cor-
poration.
Daniel M. Tellep Chairman of the Board; Chief Executive Officer of Parent
(64) Director (1987) from March 16, 1995 to December 31,
1995. Chairman of the Board and
Chief Executive Officer of Lockheed
Corporation January 1, 1989 to March
16, 1995; served as President of
Lockheed Corporation, August 1988 to
December 1988; served as Group Pres-
ident-- Missiles and Space Systems
of Lockheed Corporation, 1986 Mis-
siles & Space Company, Inc., a
wholly owned subsidiary of Lockheed
Corporation, 1984 to 1988; served as
an executive officer of Lockheed
Corporation since March 1983; direc-
tor of First Interstate Bancorp,
Southern California Edison Company,
and SCEcorp.
Carlisle A. H. Director (1990) Retired Admiral U.S. Navy, 1990;
Trost (65) Chief of Naval Operations, United
States Navy, 1986-1990; also served
as Commander in Chief, U.S. Atlantic
Fleet, Commander U.S.
S-6
PRINCIPAL OCCUPATION AND
NAME BUSINESS EXPERIENCE
(AGE AT POSITIONS AND OFFICES (PAST FIVE YEARS)
12/31/95) HELD WITH PARENT OUTSIDE DIRECTORSHIPS
--------- --------------------- ------------------------
Seventh Fleet, and Deputy Commander
in Chief of the U.S. Pacific Fleet;
director of Louisiana Land and Ex-
ploration Company, General Public
Utilities Corp., GPU -- Nuclear
Corp., General Dynamics Corporation,
Precision Components Corporation,
and Bird-Johnson Company, Trustee of
the U.S. Naval Academy Foundation
and U.S. Naval Academy Alumni Asso-
ciation.
James R. Director (1988) Partner, O'Melveny & Myers, a law
Ukropina firm, Los Angeles, California, since
(58) 1992; former Chairman of the Board
and Chief Executive Officer of Pa-
cific Enterprises, a diversified
holding company 1989 to 1991; direc-
tor of Pacific Mutual Life Insurance
Company and member of the Board of
Trustees of Stanford University.
Douglas C. Director (1990) Chairman of the Board, President and
Yearley (69) Chief Executive Officer of Phelps
Dodge Corporation, a producer of
copper and copper products, carbon
blacks, and wheels and rims for me-
dium and heavy trucks, Phoenix, Ari-
zona, serving as Chairman and Chief
Executive Officer since 1989 and
President since 1991; served as Ex-
ecutive Vice President of Phelps
Dodge Corporation form 1987 to 1989;
served as President of Phelps Dodge
Industries, a division of Phelps
Dodge Corporation, from 1988 to
1990; served as Senior Vice Presi-
dent of Phelps Dodge Corporation
from 1982 to 1986; director of
Phelps Dodge Corporation, J.P. Mor-
gan & Co. Incorporated, Morgan Guar-
anty Trust Company of New York and
USX Corporation.
Minoru S. President, Missiles & Space President, Lockheed Missiles and
Araki (64) Space Company, Inc. from March 16,
1995 until present; Previously
served in Lockheed Corporation as
Executive Vice President, Missiles
and Space Systems Group and Execu-
tive Vice President--Lockheed Mis-
siles & Space Company, Inc., from
October 1988 to March, 1995.
S-7
PRINCIPAL OCCUPATION AND
NAME BUSINESS EXPERIENCE
(AGE AT POSITIONS AND OFFICES (PAST FIVE YEARS)
12/31/95) HELD WITH PARENT OUTSIDE DIRECTORSHIPS
--------- --------------------- ------------------------
James A. Sector President and Chief President and Chief Operating Offi-
Blackwell Operating Officer--Aeronautics cer, Aeronautics Sector; Previously
(55) Sector served in Lockheed Corporation as
Vice President and President from
April 1993 to March 1995, Lockheed
Aeronautical Systems Company since
1993; served as an executive em-
ployee of Lockheed Aeronautical Sys-
tems Company from 1986 until March
1995.
Melvin R. Sector President-- Space & President and Chief Operating Offi-
Brashears Strategic Missiles cer, Space and Strategic Missiles
(50) Sector, from January 1996; Deputy,
Space and Strategic Missiles Sector
from November 1995 to December 1995;
Executive Vice President of Lockheed
Missiles & Space Company, Inc. from
March 1995-November 1995 and Presi-
dent of Lockheed Commercial Space
Company; previously served in Lock-
heed Corporation as Vice President
and Assistant General Manager, Space
Systems Division, Lockheed Missiles
and Space Company, Inc., from 1992-
1995; Director of Advanced Space
Programs, from 1991-1992.
Thomas A. Sector President--Electronics President and Chief Operating Offi-
Corcoran cer, Electronics Sector since March
(51) 1995; previously served in Martin
Marietta Corporation as President,
Electronics Group, from 1993-March
1995; previously served at General
Electric Corporation as Vice Presi-
dent and General Manager, from 1990-
1993.
Dain M. President, Tactical President, Tactical Aircraft Systems
Hancock Aircraft Systems since March 1995; previously served
(54) in Lockheed Corporation as Vice
President from 1993 to March 1995;
and Vice President and F-16 Program
Director, Lockheed Fort Worth Compa-
ny, from 1993 to March 1995. From
1966 until 1993 he was an employee
of General Dynamics Corporation.
John R. President, Lockheed President, Lockheed Sanders, Inc.;
Kreik Sanders, Inc. previously served in Lockheed Corpo-
(51) ration as President, Lockheed Sand-
ers, Inc. since 1990.
James W. President, Astronautics President, Astronautics since March
McAnally, 1995; previously served in Martin
Jr. (59) Marietta Corporation as President,
Astronautics from 1993 to March
1995.
S-8
PRINCIPAL OCCUPATION AND
BUSINESS EXPERIENCE
NAME POSITIONS AND OFFICES (PAST FIVE YEARS)
(AGE AT 12/31/95) HELD WITH PARENT OUTSIDE DIRECTORSHIPS
- ----------------- --------------------- ------------------------
John S. McLellan President, Aeronautical President, Aeronautical Systems
(54) Systems since March 1995; previously served
in Lockheed Corporation as Vice
President and Executive Vice Presi-
dent, Lockheed Aeronautical Systems
Company from March 1994 to March
1995; served as President, Lockheed
Aircraft Service Company-Ontario
from February 1992 to March 1994;
served as Executive Vice President
from April 1989 to February 1992.
Frank H. Menaker, Vice President and Vice President and General Counsel
Jr. (55) General Counsel for Lockheed Martin Corporation
since March 1995, after having
served in the same capacity for Mar-
tin Marietta Corporation since 1981.
He joined Martin Marietta Corpora-
tion in 1970 as an Assistant Divi-
sion Counsel for aerospace opera-
tions in Baltimore; became a Corpo-
rate Assistant General Counsel in
1973 and in 1977 was named General
Counsel of that corporation's aero-
space 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 Law-
yer's Committee for Human Rights.
Albert Narath President and Chief President and Chief Operating Offi-
(63) Operating Officer of cer, Energy and Environment Sector,
Energy and Environment Lockheed Martin Corporation from Au-
Sector gust 15, 1995 to present; President,
Sandia Corporation from April 1989
to August 14, 1995.
Robert E. Rulon Vice President and Vice President and Controller; pre-
(52) Controller viously served in Lockheed Corpora-
tion as Vice President and Control-
ler from 1992-1995; served as a Vice
President, Internal Audit from 1990-
1992.
Walter E. Vice President and Vice President and Treasurer; previ-
Skowronski (47) Treasurer ously served in Lockheed Corporation
as Vice President and Treasurer from
1992-1995; served as staff Vice
President, Investor Relations from
1990-1992.
S-9
PRINCIPAL OCCUPATION AND
NAME BUSINESS EXPERIENCE
(AGE AT POSITIONS AND OFFICES (PAST FIVE YEARS)
12/31/95) HELD WITH PARENT OUTSIDE DIRECTORSHIPS
--------- --------------------- ------------------------
Peter B. Sector President--Information President and Chief Operating Offi-
Teets (54) and Technology Services cer, Information and Technology
Services Sector; previously served
in Martin Marietta Corporation as
Corporate Vice President (since
1985) and President, Space Group,
from 1993-1995; served as President,
Astronautics Group from 1987-1993.
Lillian M. Corporate Secretary Corporate Secretary and Associate
Trippett General Counsel of Lockheed Martin
(42) Corporation since March 1995, after
having served as Corporate Secretary
and Assistant General Counsel of
Martin Marietta Corporation since
April 1993. Ms. Trippett joined Mar-
tin Marietta Corporation in July
1989 as a Director of Washington Op-
erations. 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 Repre-
sentatives. From 1983 - 1989 she
served as Counsel to the Subcommit-
tee on Space, Science and Applica-
tions, specializing in space commer-
cialization. Ms. Trippett is a mem-
ber of the International Institute
of Space Law of the International
Astronautical Federation, American
Bar Association and the American So-
ciety of Corporate Secretaries.
S-10
DIRECTORS AND EXECUTIVE OFFICERS
OF THE PURCHASER
The name, business address, present principal occupation or employment and
five-year employment history of each director and executive officer of
Purchaser and certain other information are set forth below. Unless otherwise
indicated below, the address of each director and officer is c/o 6801
Rockledge Drive, Bethesda, Maryland 20817. Unless otherwise indicated, each
occupation set forth opposite an individual's name refers to employment with
Parent. Parenthetical years indicate the year the individual was elected or
appointed to the position or office. All directors and officers listed below
are citizens of the United States.
PRINCIPAL OCCUPATION AND
BUSINESS EXPERIENCE
NAME POSITIONS AND OFFICES (PAST FIVE YEARS)
(AGE AT 12/31/95) HELD WITH PURCHASER OUTSIDE DIRECTORSHIPS
- ----------------- --------------------- ------------------------
Marcus C. Bennett President and Senior Vice President and Chief Fi-
(60) Director nancial Officer of Parent since
March 16, 1995. Vice President and
Chief Financial Officer of Martin
Marietta since 1988; served as Vice
President of Finance from 1984 to
1988; serves as Chairman of Martin
Marietta Materials, Inc., a majority
owned subsidiary of Martin Marietta,
and Orlando Central Park, Inc. and
Chesapeake Park, Inc., wholly owned
subsidiary of Martin Marietta; di-
rector of Carpenter Technology,
Inc.; member of Financial Executives
Institute, MAPI Finance Council and
The Conomic Club of Washington;
serves as a director of the Private
Sector Council and as a member of
its CFO Task Force.
Robert B. Corlett Director Vice President, Human Resources, of
(56) Lockheed Martin Corporation since
March 1995, after having served in
the same capacity for Lockheed Cor-
poration since 1991; served as Vice
President, Human Resources, for the
former Lockheed Aeronautical Sys-
tems, Company in 1987, after leaving
the Corporation in 1980 and re-
joining the Corporation in 1987;
served as director of Industrial Re-
lations in 1979 and in 1971 trans-
ferred to the Lockheed California
Company, where he held a variety of
Human Resources 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.
S-11
PRINCIPAL OCCUPATION AND
NAME BUSINESS EXPERIENCE
(AGE AT POSITIONS AND OFFICES (PAST FIVE YEARS)
12/31/95) HELD WITH PURCHASER OUTSIDE DIRECTORSHIPS
--------- --------------------- ------------------------
John F. Egan Director Vice President, Corporate Develop-
(60) ment, 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 Associ-
ates, Inc., by Lockheed Corporation.
Joined Sanders Associates, Inc. in
1973 as Director of Business Devel-
opment for the Federal Systems
Group; became General Manager of two
product divisions in 1975 and became
Vice President, Corporate Develop-
ment in 1978. Dr. Egan is a member
of the Chief of Naval Operations Ex-
ecutive Panel and the Naval Studies
Board, National Research Council.
Frank H. Vice President and Vice President and General Counsel
Menaker, Jr. General Counsel; Director for Lockheed Martin Corporation
(55) since March 1995, after having
served in the same capacity for Mar-
tin Marietta Corporation since 1981.
He joined Martin Marietta Corpora-
tion in 1970 as an Assistant Divi-
sion Counsel for aerospace opera-
tions in Baltimore; became a Corpo-
rate Assistant General Counsel in
1973 and in 1977 was named General
Counsel of that corporation's aero-
space 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 Law-
yer's Committee for Human Rights.
S-12
PRINCIPAL OCCUPATION AND
NAME BUSINESS EXPERIENCE
(AGE AT POSITIONS AND OFFICES (PAST FIVE YEARS)
12/31/95) HELD WITH PURCHASER OUTSIDE DIRECTORSHIPS
--------- --------------------- ------------------------
John E. Montague Vice President; Director Vice President, Financial Strate-
(41) gies, for Lockheed Martin Corpora-
tion since March 1995, after having
served as Vice President of Corpo-
rate Development and Investor Rela-
tions for Martin Marietta Corpora-
tion 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 & Communica-
tions Systems in Denver from 1984 to
1985; and joined Martin Marietta
Corporation in 1977 as a member of
the Engineering staff of Martin Mar-
ietta Denver Aerospace. Mr. Montague
is a member of the Board of Direc-
tors of Martin Marietta Corporation
and of Rational Software Corpora-
tion.
Walter E. Director Vice President and Treasurer of
Skowronski (47) Lockheed Martin Corporation since
March 1995, after having served in
the same capacity for Lockheed Cor-
poration since 1992, and as its
staff Vice President-Investor Rela-
tions 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 Rela-
tions at Northeastern University's
Graduate School of Business Adminis-
tration. Mr. Skowronski is a former
director of the National Investor
Relations Institute and served as
its Chairman and Chief Executive Of-
ficer.
S-13
PRINCIPAL OCCUPATION AND
BUSINESS EXPERIENCE
NAME POSITIONS AND OFFICES (PAST FIVE YEARS)
(AGE AT 12/31/95) HELD WITH PURCHASER OUTSIDE DIRECTORSHIPS
----------------- --------------------- ------------------------
Lillian M. Trippett Director Corporate Secretary and Associate
(42) 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 Mar-
tin Marietta Corporation in July
1989 as a Director of Washington Op-
erations. 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 Repre-
sentatives. From 1983 - 1989 she
served as Counsel to the Subcommit-
tee on Space, Science and Applica-
tions, specializing in space commer-
cialization. Ms. Trippett is a mem-
ber of the International Institute
of Space Law of the International
Astronautical Federation, American
Bar Association and the American So-
ciety of Corporate Secretaries.
S-14
SCHEDULE II
CERTAIN INFORMATION ABOUT PARENT REQUIRED BY NEW YORK LAW
EDUCATIONAL OPPORTUNITIES
Parent provides assistance to eligible employees participating in study
programs leading to an undergraduate or an advanced degree. Such study
programs must be consistent with Parent's business goals and objectives and
applicable to the employee's field of work. Parent may limit the reimbursement
of the academic costs of tuition.
RELOCATION ADJUSTMENTS
Parent may reimburse job applicants for reasonable and actual interview
expenses, and may reimburse new and existing employees for reasonable and
actual travel and relocation expenses in accordance with the provisions of
corporate policy.
CHARITABLE CONTRIBUTIONS
Parent supports a broad spectrum of public interest activities through a
gifts and grants program, with emphasis on recognized agencies in such fields
as health, education, civic affairs, and cultural activities. Individual
companies are authorized to make community contributions out of their
operating funds.
POST-EMPLOYMENT BENEFIT PLANS
Parent sponsors a number of retirement plans that cover substantially all
employees. Defined benefit plans for salaried and certain hourly employees
provide benefits based on employees' years of service and compensation, either
on a final or career average basis. Defined benefit plans for other hourly
employees generally provide benefits of stated amounts for specified periods
of service. Certain health care and life insurance benefits are provided to
eligible retirees by Parent. For recently retired participants, the health
benefits generally provide for cost sharing through participant contributions
and copayments. For certain groups of employees who recently retired there is
an annual limit on the Corporation's contribution per participant.
STOCK OPTION AND AWARD PLANS
Under Parent's 1995 Omnibus Performance Award Plan (the "Plan"), employees
of Parent may be granted stock-based incentive awards, including options to
purchase common stock, stock appreciation rights, restricted stock or other
stock-based incentive awards. Cash-based incentive awards such as performance
units may also be awarded. These awards may be granted singly or in
combination with other awards. To date, Parent has awarded stock options under
the Plan. The options to purchase its common stock were granted at a price
equal to the market value at the date of grant. These options become
exercisable in two approximately equal annual increments in multiples of 100
on the first and second anniversary dates of such grants and expire 10 years
from such date. The Plan allows Parent to provide financing for purchases,
subject to certain conditions, by interest-bearing notes payable to Parent.
S-15
SCHEDULE III
CERTAIN BUSINESS RELATIONSHIPS
INVOLVING PARENT, COMPANY AND
THEIR RESPECTIVE AFFILIATES
DOLLAR VALUE PERIOD OF BRIEF DESCRIPTION
OF TRANSACTION PERFORMANCE OF TRANSACTION
-------------- ----------- -----------------
1. In excess of 11/91--10/98 (beyond Teaming agreement between Sanders
$100 Million 1998 for production) and Loral Infrared and Imaging Sys-
tems ("LIRIS"), on the U.S. Army's
Advanced Threat Infrared Countermea-
sures Program pursuant to which
Sanders is the prime contractor and
LIRIS is the subcontractor.
2. $76.136 Million 9/92--7/96 Loral subcontractor to Lockheed Mar-
tin Missiles & Space Division on in-
frared seek for Theater High Alti-
tude Area Defense Program.
3. $37.2 Million 5/93--4/99 Loral Federal System ("LFS") devel-
oped and tested the service layer
software for the REARC Program. This
software was delivered to Management
& Data Systems ("M&DS") in August,
1995, and LFS is currently perform-
ing on the post-delivery activities,
which is essentially a level of sup-
port task in Valley Forge. This is a
cost plus award fee subcontract.
4. $295 Million 7/93--late 1999 Prime contract between Loral Space
Systems and Lockheed-Krunichev-
Energia International.
5. $81.5 Million 1/94--9/96 (Options
firm fixed could extend to late
price, $275 1999) Prime contract between Loral Space
Million in Systems and Lockheed Martin Commer-
options cial Launch Services, Inc.
6. $39.167 Million 1/94 -12/96 Subcontract from Company to Parent
of ground support operations and
maintenance.
7. $232.0 Million 8/94--12/99 LFS is in a sole source teaming
agreement which will result in sub-
contracts from M&DS to LFS.
8. In excess of 9/94--9/96 Teaming agreement providing for
$100 Million award by Parent to Company of a sub-
contract in event parent wins GPS
IIF competition.
9. $120.345 Mil- 1/96--12/2002 Teaming agreement between Sanders
lion and Company on the U.S. Army's
TACJAM-A/IEWCS Program pursuant to
which Company is the prime contrac-
tor and Sanders is the subcontrac-
tor.
S-16
The Letter of Transmittal, certificates for Shares and any other required
documents should be sent or delivered by each shareholder of the Company or his
broker, dealer, commercial bank or other nominee to the Depository at one of
its addresses set forth below.
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Mail: By Hand or Overnight Courier:
Tenders & Exchanges Tenders & Exchanges
P.O. Box 2564 14 Wall Street, Suite 4680--Loral
Suite 4660--Loral 8th Floor
Jersey City, New Jersey 07303-2564 New York, New York 10005
Any questions or requests for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery
may be directed to the Information Agent or the Dealer Manager at their
respective telephone numbers and locations listed below. You may also contact
your broker, dealer, commercial bank or trust company or nominee for assistance
concerning the Offer.
The Information Agent for the Offer is:
LOGO
909 Third Avenue, 20th Floor
New York, New York 10022
(212) 754-8000
or
Call Toll Free: (800) 566-9058
Banks and Brokerage Firms, please call: (800) 662-5200
The Dealer Manager for the Offer is:
BEAR, STEARNS & CO. INC.
245 Park Avenue
New York, New York 10167
Call toll free: (800) 726-9849
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
LORAL CORPORATION
PURSUANT TO THE OFFER TO PURCHASE
DATED JANUARY 12, 1996
BY
LAC ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
LOCKHEED MARTIN CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, FEBRUARY 9, 1996, UNLESS THE OFFER IS EXTENDED. LAC
ACQUISITION CORPORATION HAS AGREED, SUBJECT TO THE TERMS AND CONDITIONS OF
THE OFFER, TO EXTEND THE OFFER UNTIL IMMEDIATELY AFTER THE TIME OF THE SPIN-
OFF RECORD DATE (AS DEFINED IN THE OFFER TO PURCHASE).
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Mail: By Hand or By Overnight
TENDERS & EXCHANGES Courier:
P.O. BOX 2559--SUITE TENDERS & EXCHANGES
4660--LORAL 14 WALL STREET, SUITE
JERSEY CITY, NEW JERSEY 4680--LORAL
07303-2559 8TH FLOOR
NEW YORK, NEW YORK 10005
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders either if
certificates are to be forwarded herewith or if delivery is to be made by book-
entry transfer to the Depositary's account at The Depository Trust Company
("DTC"), the Midwest Securities Trust Company ("MSTC") or the Philadelphia
Depository Trust Company ("PDTC"), which are hereinafter collectively referred
to as the "Book-Entry Transfer Facilities," pursuant to the procedures set
forth in Section 3 of the Offer to Purchase (as defined below). Stockholders
whose certificates are not immediately available or who cannot deliver their
certificates and all other documents required hereby to the Depositary prior to
the Expiration Date (as defined in Section 1 of the Offer to Purchase) or who
cannot comply with the book-entry transfer procedures on a timely basis must
tender their Shares (as defined below) according to the guaranteed delivery
procedure set forth in Section 3 of the Offer to Purchase. See Instruction 2.
Delivery of documents to a Book-Entry Transfer Facility does not constitute
delivery to the Depositary.
[_CHECK]HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH DTC, MSTC OR PDTC AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution _______________________________________________
Check Box of Book-Entry Transfer Facility (check one):
[_] DTC [_] MSTC [_] PDTC
Account Number ______________________________________________________________
Transaction Code Number _____________________________________________________
[_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY SENT TO THE DEPOSITARY PRIOR TO THE DATE HEREOF AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s) ______________________________________________
Window Ticket Number (if any) _______________________________________________
Date of Execution of Notice of Guaranteed Delivery __________________________
Name of Institution that Guaranteed Delivery ________________________________
Check Box of Book-Entry Transfer Facility if Delivered by Book-Entry
Transfer (check one):
[_] DTC [_] MSTC [_] PDTC
Account Number (if delivered by Book-Entry Transfer) _______________________
Transaction Code Number _____________________________________________________
BOXES ABOVE FOR USE BY ELIGIBLE INSTITUTIONS ONLY
DESCRIPTION OF SHARES TENDERED
- -----------------------------------------------------------------------------------------------------
CERTIFICATE(S) TENDERED
(ATTACH
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) ADDITIONAL
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON LIST IF
CERTIFICATE(S)) NECESSARY)
- -----------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES NUMBER OF
CERTIFICATE REPRESENTED BY SHARES
NUMBER(S)* CERTIFICATE(S)** TENDERED**
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
TOTAL SHARES
- -----------------------------------------------------------------------------------------------------
* Need not be completed by stockholders tendering by book-entry transfer.
**Unless otherwise indicated, it will be assumed that all Shares evidenced by
any certificates delivered to the Depositary are being tendered. See
Instruction 4.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to LAC Acquisition Corporation (the
"Purchaser"), a New York corporation and a wholly owned subsidiary of Lockheed
Martin Corporation, a Maryland corporation ("Parent"), the above-described
shares of common stock (the "Common Stock"), par value $0.25 per share, of
Loral Corporation, a New York corporation (the "Company"), and the associated
preferred stock purchase rights (the "Rights", and together with the Common
Stock (the "Shares") at $38.00 per Share, net to the seller in cash, without
interest, upon the terms and subject to the conditions set forth in the Offer
to Purchase, dated January 12, 1996 (the "Offer to Purchase"), receipt of which
is hereby acknowledged, and in this Letter of Transmittal (which, together with
the Offer to Purchase, constitutes the "Offer"). The Rights were issued
pursuant to a Rights Agreement, dated as of January 10, 1996, between the
Company and Bank of New York, as amended, and are currently evidenced by and
trade with certificates evidencing the Common Stock. The undersigned
understands that Purchaser reserves the right to transfer or assign, in whole
or in part from time to time or to one or more direct or indirect wholly owned
subsidiaries of Parent, the right to purchase Shares tendered pursuant to the
Offer.
Subject to and effective upon acceptance for payment of the Shares tendered
herewith in accordance with the terms and subject to the conditions of the
Offer, the undersigned hereby sells, assigns and transfers to, or upon the
order of, the Purchaser all right, title and interest in and to all of the
Shares that are being tendered hereby (and any and all other Shares or other
securities or property (other than regular quarterly cash dividends of not more
than $0.08 per Share) issued or issuable in respect thereof on or after January
12, 1996, other than the Spinco Shares distributed in respect of the Shares in
connection with the Spin-Off (as such terms are defined in the Offer to
Purchase)) such other Shares, securities or property other than the Shares
being referred to herein as the "Other Securities" and irrevocably appoints the
Depositary the true and lawful agent and attorney-in-fact of the undersigned
with respect to such Shares and any such Other Securities with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to (a) deliver certificates for such Shares (and any
such Other Securities), or transfer ownership of such Shares on the account
books maintained by any of the Book-Entry Transfer Facilities (and any such
Other Securities), together in any such case with all accompanying evidences of
transfer and authenticity, to or upon the order of the Purchaser, upon receipt
by the Depositary, as the undersigned's agent, of the purchase price (adjusted,
if appropriate, as provided in the Offer to Purchase), (b) present such Shares
and any such Other Securities for transfer on the books of the Company and (c)
receive all benefits and otherwise exercise all rights of beneficial ownership
of such Shares and any such Other Securities, all in accordance with the terms
of the Offer.
The undersigned hereby irrevocably appoints Frank H. Menaker, Jr. and Lillian
M. Trippett, and each of them or any other designees of the Purchaser, the
attorneys and proxies of the undersigned, each with full power of substitution,
to exercise such voting and other rights as each such attorney and proxy or his
substitute shall, in his sole discretion, deem proper, and otherwise act
(including pursuant to written consent) with respect to all of the Shares
tendered hereby which have been accepted for payment by the Purchaser prior to
the time of such vote or action and any and all Other Securities issued or
issuable in respect thereof on or after January 12, 1996), which the
undersigned is entitled to vote at any meeting of stockholders of the Company
(whether annual or special and whether or not an adjourned meeting), or written
consent in lieu of such meeting, or otherwise. This proxy is coupled with an
interest in the Shares tendered hereby and is irrevocable and is granted in
consideration of, and is effective upon, the acceptance for payment of such
Shares by the Purchaser in accordance with the terms of the Offer. Such
acceptance for payment shall revoke all prior proxies granted by the
undersigned with respect to such Shares and any such Other Securities and no
subsequent proxies may be given (and if given will be deemed not to be
effective) with respect thereto by the undersigned. The Purchaser reserves the
right to require that, in order for Shares to be deemed validly tendered,
immediately upon the Purchaser's acceptance for payment of such Shares, the
Purchaser is able to exercise full voting and other rights of a record holder
or beneficial holder, including rights in respect of acting by written consent,
with respect to such Shares and Other Securities.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby (and any and all Other Securities issued or issuable in respect thereof
on or after January 12, 1996), and that when the same are accepted for payment
by the Purchaser, the Purchaser will acquire good, marketable and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances, and the same will not be subject to any adverse claim. The
undersigned, upon request, will execute and deliver any signature guarantees or
additional documents deemed by the Depositary or the Purchaser to be necessary
or desirable to complete the sale, assignment and transfer of the Shares
tendered hereby and any and all such Other Securities. In addition, the
undersigned shall promptly remit and transfer to the Depositary for the account
of the Purchaser any such Other Securities issued to the undersigned on or
after January 12, 1996, in respect of the Shares tendered hereby, accompanied
by appropriate documentation of transfer, and pending such remittance or
appropriate assurance thereof, the Purchaser shall be entitled to all rights
and privileges as owner of any such Other Securities and may withhold the
entire purchase price or deduct from the purchase price the amount or value
thereof, as determined by the Purchaser in its sole discretion.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned. Except as stated
in the Offer to Purchase, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of the
procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Purchaser upon the terms and subject to the conditions of the Offer.
The undersigned recognizes that under certain circumstances set forth in the
Offer to Purchase, the Purchaser may not be required to accept for payment any
of the Shares tendered hereby.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any certificates
for Shares not tendered or not accepted for payment in the name(s) of the
registered holder(s) appearing under "Description of Shares Tendered."
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the purchase price and/or return any certificates for
Shares not tendered or accepted for payment (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing under
"Description of Shares Tendered." In the event that both the Special Delivery
Instructions and the Special Payment Instructions are completed, please issue
the check for the purchase price and/or return any certificates for Shares not
purchased (together with accompanying documents as appropriate) in the name(s)
of, and deliver said check and/or return such certificates to, the person or
persons so indicated. Stockholders tendering Shares by book-entry transfer may
request that any Shares not accepted for payment be returned by crediting such
account maintained at DTC, MSTC or PDTC as such stockholder may designate by
making an appropriate entry under "Special Payment Instructions." The
undersigned recognizes that the Purchaser has no obligation pursuant to the
Special Payment Instructions to transfer any Shares from the name of the
registered holder(s) thereof if the Purchaser does not accept for payment any
of the Shares so tendered.
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 5 AND 7)
To be completed ONLY if To be completed ONLY if
certificates for Shares not certificates for Shares not
tendered or not purchased and/or tendered or not purchased and/or
the check for the purchase price of the check for the purchase price of
Shares purchased are to be issued Shares purchased are to be sent to
in the name of someone other than someone other than the undersigned
the undersigned. or to the undersigned at an address
other than that appearing under
"Description of Shares Tendered."
Issue: [_] Check [_] Certificate(s) to:
Name _______________________________ Issue: [_] Check [_] Certificate(s)
(Please Print) to:
Address ____________________________ Name _______________________________
------------------------------------ (Please Print)
(Include Zip Code)
------------------------------------ Address ____________________________
(Tax Identification or Social ------------------------------------
Security Number) (Include Zip Code)
------------------------------------
(See Substitute Form W-9 Included (Tax Identification or Social
Herein) Security Number)
------------------------------------ (See Substitute Form W-9 Included
(Account Number) Herein)
STOCKHOLDERS SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
-------------------------------------------------------
-------------------------------------------------------
(Signature(s) of Owner(s))
(MUST BE SIGNED BY REGISTERED HOLDER(S) EXACTLY AS
NAME(S) APPEAR(S) ON STOCK CERTIFICATE(S) OR ON A
SECURITY POSITION LISTING OR BY PERSON(S) AUTHORIZED
TO BECOME REGISTERED HOLDER(S) BY CERTIFICATES AND
DOCUMENTS TRANSMITTED HEREWITH. IF SIGNATURE IS BY
TRUSTEE, EXECUTOR, ADMINISTRATOR, GUARDIAN, ATTORNEY-
IN-FACT, AGENT, OFFICER OF A CORPORATION OR ANY OTHER
PERSON ACTING IN A FIDUCIARY OR REPRESENTATIVE
CAPACITY, PLEASE PROVIDE THE FOLLOWING INFORMATION.
SEE INSTRUCTION 5.)
Dated ___________________________________________, 1996
Name(s) _______________________________________________
_______________________________________________________
(Please Print)
Capacity (full title) _________________________________
Address _______________________________________________
_______________________________________________________
(Include Zip Code)
Area Code and Telephone Number ________________________
Tax Identification or Social Security Number __________
_______________________________________________________
(See Substitute Form W-9 Below)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTIONS 1 AND 5)
Authorized Signature __________________________________
Name __________________________________________________
(Please Print)
Name of Firm __________________________________________
Address _______________________________________________
(Include Zip Code)
Area Code and Telephone Number ________________________
Dated ___________________________________________, 1996
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Signatures on all Letters of Transmittal must be
guaranteed by a recognized member of a Medallion Signature Guarantee Program
(each of the foregoing being referred to as an "Eligible Institution"), unless
(i) this Letter of Transmittal is signed by the registered holder(s) of Shares
(which term, for the purposes of this document, shall include any participant
in a Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of Shares) and such holder(s) has (have) not completed
either the box entitled "Special Delivery Instructions" or the box entitled
"Special Payment Instructions" on this Letter of Transmittal or (ii) such
shares are tendered for the account of an Eligible Institution. See Instruction
5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed by stockholders
either if certificates for Shares are to be forwarded herewith or if a tender
of Shares is to be made pursuant to the procedures for delivery by book-entry
transfer set forth in Section 3 of the Offer to Purchase. Certificates for all
physically tendered Shares, or confirmation ("Book-Entry Confirmation") of any
book-entry transfer into the Depositary's account at DTC, MSTC or PDTC of
Shares delivered by book-entry transfer as well as a properly completed and
duly executed Letter of Transmittal, must be received by the Depositary, at one
of the addresses set forth herein prior to the Expiration Date (as defined in
Section 1 of the Offer to Purchase). Stockholders whose certificates are not
immediately available or who cannot deliver their certificates and all other
required documents to the Depositary prior to the Expiration Date or who cannot
comply with the book-entry transfer procedures on a timely basis may tender
their Shares by properly completing and duly executing a Notice of Guaranteed
Delivery pursuant to the guaranteed delivery procedure set forth in Section 3
of the Offer to Purchase. Pursuant to such procedure, (i) such tender must be
made by or through an Eligible Institution, (ii) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form provided by
the Purchaser, must be received by the Depositary (as provided in (iii) below)
prior to the Expiration Date and (iii) the certificates for all physically
tendered Shares (or Book-Entry Confirmation with respect to such Shares), as
well as a properly completed and duly executed Letter of Transmittal (or a
facsimile thereof) with any required signature guarantees and any other
documents required by this Letter of Transmittal, must be received by the
Depositary within five New York Stock Exchange, Inc. trading days after the
date of execution of such Notice of Guaranteed Delivery, all as provided in
Section 3 of the Offer to Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, CERTIFICATES FOR SHARES
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER AND
THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY.
IF DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT SUCH CERTIFICATES AND DOCUMENTS
BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED. IN
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO INSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution
of this Letter of Transmittal (or facsimile thereof), waive any right to
receive any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
signed schedule attached hereto.
4. PARTIAL TENDERS. (Not applicable to stockholders who tender by book-entry
transfer.) If fewer than all the Shares evidenced by any certificate submitted
are to be tendered, fill in the number of Shares which are to be tendered in
the box entitled "Number of Shares Tendered." In such case, new certificate(s)
for the remainder of the Shares that were evidenced by the old certificate(s)
will be sent to the registered holder, unless otherwise provided in the
appropriate box on this Letter of Transmittal, as soon as practicable after the
Expiration Date. All Shares represented by certificates delivered to the
Depositary will be deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond exactly with the name(s) as
written on the face of the certificate(s) without alteration, enlargement or
any change whatsoever. If any of the Shares tendered hereby are held of record
by two or more persons, all such persons must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any certificates or stock powers are signed
by a trustee, executor, administrator, guardian, attorney-in-fact, agent,
officer of a corporation or any person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to the Purchaser of such person's authority so to act must be
submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares evidenced by certificates listed and transmitted hereby, no endorsements
of certificates or separate stock powers are required unless payment is to be
made to or certificates for Shares not tendered or purchased are to be issued
in the name of a person other than the registered holder(s). Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the registered
holder(s) of the Shares, evidenced by certificates listed and transmitted
hereby, the certificates must be endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name or names of the registered
holder or holders appear on the certificates. Signatures on such certificates
or stock powers must be guaranteed by an Eligible Institution.
6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, the
Purchaser will pay or cause to be paid any stock transfer taxes with respect to
the transfer and sale of Shares to it or its order pursuant to the Offer. If,
however, payment of the purchase price is to be made to, or if certificates for
Shares not tendered or purchased are to be registered in the name of, any
person other than the registered holder(s), or if certificates for tendered
shares are registered in the name of any person other than the person(s)
signing this letter of transmittal, the amount of any stock transfer taxes
(whether imposed on the registered holder(s) or such other person) payable on
account of the transfer to such person will be deducted from the purchase price
unless satisfactory evidence of the payment of such taxes or exemption
therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATE(S) LISTED IN THIS LETTER
OF TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check is to be issued in
the name of and/or certificates for Shares not tendered or not purchased are to
be returned to a person other than the signer of this Letter of Transmittal or
if a check is to be sent and/or such certificates are to be returned to someone
other than the signer above, the appropriate boxes on this Letter of
Transmittal should be completed. Stockholders tendering Shares by book-entry
transfer may request that Shares not purchased be credited to such account
maintained at any of the Book-Entry Transfer Facilities as such stockholder may
designate under "Special Delivery Instructions". If no such instructions are
given, any such Share not purchased will be returned by crediting the account
at the Book-Entry Transfer Facilities designated above.
8. REQUEST FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance may
be directed to, or additional copies of the Offer to Purchase and this Letter
of Transmittal may be obtained from, the Information Agent or Dealer Manager at
the telephone numbers and addresses set forth below. Stockholders may also
contact their broker, dealer, commercial bank or trust company.
9. WAIVER OF CONDITIONS. Except as otherwise provided in the Offer to
Purchase, the Purchaser reserves the right in its sole discretion to waive in
whole or in part at any time or from time to time any of the specified
conditions of the Offer or any defect or irregularity in tender with regard to
any Shares tendered.
10. SUBSTITUTE FORM W-9. The tendering stockholder is required to provide the
Depositary with a correct Taxpayer Identification Number ("TIN"), generally the
stockholder's social security or employer identification number, on Substitute
Form W-9, which is provided under "Important Tax Information" below, and to
certify whether he or she is subject to backup withholding of federal income
tax. If a tendering stockholder is subject to backup withholding, he or she
must cross out item (2) of the Certification Box on Substitute Form W-9.
Failure to provide the information on Substitute Form W-9 may subject the
tendering stockholder to 31% federal income tax withholding on the payment of
the purchase price. If the tendering stockholder has not been issued a TIN and
has applied for a number or intends to apply for a number in the near future,
he or she should write "Applied For" in the space provided for the TIN in Part
I, sign and date the Substitute Form W-9 and sign and date the Certificate of
Awaiting Taxpayer Identification Number. If "Applied For" is written in Part I
and the Depositary is not provided with a TIN within 60 days, the Depositary
will withhold 31% of payments for surrendered Shares thereafter until a TIN is
provided to the Depositary.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF) TOGETHER WITH
CERTIFICATES (OR BOOK-ENTRY CONFIRMATION) AND ALL OTHER REQUIRED DOCUMENTS OR
THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY ON OR
PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE).
IMPORTANT TAX INFORMATION
Under federal tax law, a stockholder whose tendered Shares are accepted for
payment is required to provide the Depositary (as payor) with such
stockholder's correct TIN on Substitute Form W-9 below. If such stockholder is
an individual, the TIN is his Social Security Number. If the Depositary is not
provided with the correct TIN or an adequate basis for exemption, the
stockholder may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, payments that are made to such stockholder with respect
to Shares purchased pursuant to the Offer may be subject to backup withholding
in an amount equal to 31% of the gross proceeds resulting from the Offer.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that stockholder must submit an IRS Form W-8, signed under penalties
of perjury, attesting to that individual's exempt status. Such statements can
be obtained from the Depositary. See the enclosed Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9 for additional
instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a stockholder with
respect to Shares purchased pursuant to the Offer, the stockholder is required
to notify the Depositary of his correct TIN by completing the Substitute Form
W-9 contained herein certifying that the TIN provided on the Substitute Form W-
9 is correct (or that such stockholder is awaiting a TIN) and that (1) the
stockholder is exempt from backup withholding, (2) the stockholder has not been
notified by the Internal Revenue Service that he is subject to backup
withholding as a result of failure to report all interest or dividends, or (3)
the Internal Revenue Service has notified the stockholder that he or she is no
longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security number
or employer identification number of the record owner of the Shares. If the
Shares are in more than one name or are not in the name of the actual owner,
consult the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional guidance on which number to
report. If the tendering stockholder has not been issued a TIN and has applied
for a number or intends to apply for a number in the near future, he or she
should write "Applied For" in the space provided for the TIN in Part I, sign
and date the Substitute Form W-9 and sign and date the Certificate of Awaiting
Taxpayer Identification Number. If "Applied For" is written in Part I and the
Depositary is not provided with a TIN within 60 days, the Depositary will
withhold 31% of all payments of the purchase price until a TIN is provided to
the Depositary.
PAYOR'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK
PART I--PLEASE PROVIDE YOUR
SUBSTITUTE TIN IN THE BOX AT RIGHT AND
CERTIFY BY SIGNING AND
DATING BELOW:
-----------------------
FORM W-9 Social Security Number
Department of the Treasury
Internal Revenue Service OR ____________________
Employer
Payor's Request for Taxpayer Identification No.
Identificatin Number (TIN) (If Awaiting TIN write
"Applied for")
---------------------------------------------------------
PART II--For Payees NOT subject to backup
withholding, see the enclosed Guidelines for
Certification of Taxpayer Identification Number on
Substitute Form W-9 and complete as instructed
therein.
- --------------------------------------------------------------------------------
CERTIFICATION--Under the penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification
number (or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding because either (a) I am exempt
from backup withholding, (b) I have not been notified by the Internal
Revenue Service ("IRS") that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because
of underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item (2). (Also see instructions in the
enclosed Guidelines.)
- --------------------------------------------------------------------------------
Signature ____________________________ Date ___, 1996
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
WROTE "APPLIED FOR" IN PART I OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under the penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered
an application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Officer, or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number within
sixty (60) days, 31% of all reportable payments made to me thereafter will be
withheld until I provide a number.
-------------------------------------
-------------------------------------
Signature(s) Date
The Information Agent for the Offer is:
MORROW & CO INC., INC.
909 Third Avenue, 20th Floor
New York, New York 10022
(212) 754-8000
or
Call Toll Free: (800) 566-9058
Banks and Brokerage Firms, please call: (800) 622-5200
The Dealer Manager for the Offer is:
BEAR, STEARNS & CO. INC.
245 Park Avenue
New York, New York 10167
Call Toll Free: (800) 726-9849
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
LORAL CORPORATION
This form, or a form substantially equivalent to this form, must be used to
accept the Offer (as defined below) if the certificates representing shares of
common stock, par value $0.25 per share, of Loral Corporation and the
associated preferred stock purchase rights (collectively, the "Shares") are
not immediately available or if the procedure for book-entry transfer cannot
be completed on a timely basis or if time will not permit all required
documents to reach the Depositary at or prior to the expiration of the Offer.
Such form may be delivered by hand or transmitted by telegram, facsimile
transmission or mail to the Depositary. See Section 3 of the Offer to
Purchase.
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Mail: By Facsimile By Hand or By Overnight
Transmission: Courier:
Tenders & Exchanges
P.O. Box 2559--Suite 4660-- (201) 222-4720 Tenders & Exchanges
LORAL or 14 Wall Street, Suite
Jersey City, New Jersey (201) 222-4721 4680--LORAL
07303-2559 8th Floor
New York, New York 10005
Confirm Receipt of Notice of Guaranteed Delivery by Telephone:
(201) 222-4707
----------------
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER
THAN AS LISTED ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tenders to LAC Acquisition Corporation (the
"Purchaser"), a New York corporation and a wholly owned subsidiary of Lockheed
Martin Corporation, a Maryland corporation, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated January 12, 1996 (the
"Offer to Purchase"), and the related Letter of Transmittal (which together
constitute the "Offer"), receipt of which is hereby acknowledged, the number
of Shares indicated below pursuant to the guaranteed delivery procedure set
forth in Section 3 of the Offer to Purchase.
Number of Shares: _________________ Name(s) of Record Holder(s):
-----------------------------------
Share Certificate Numbers (if -----------------------------------
available): Please Type or Print
----------------------------------- Address(es) _______________________
----------------------------------- -----------------------------------
Zip Code
If Shares will be delivered by Area Code and Telephone Number:
book-entry -----------------------------------
transfer, check one box: -----------------------------------
-----------------------------------
[_] The Depository Trust Company -----------------------------------
Signature(s)
[_] Midwest Securities Trust
Company
Dated: _______________ , 1996
[_] Philadelphia Depository Trust
Company
Account Number ____________________
Dated: _______________ , 1996
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities exchange,
a member of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or correspondent in the
United States (each, an "Eligible Institution"), hereby guarantees that either
the certificates representing the Shares tendered hereby in proper form for
transfer, or timely confirmation of a book-entry transfer of such Shares into
the Depositary's account at The Depository Trust Company, the Midwest
Securities Trust Company or the Philadelphia Depository Trust Company
(pursuant to guaranteed delivery procedures set forth in Section 3 of the
Offer to Purchase), together with a properly completed and duly executed
Letter of Transmittal (or manually signed facsimile thereof) with any required
signature guarantee and any other required documents, will be received by the
Depositary at one of its addresses set forth above within five (5) New York
Stock Exchange, Inc. trading days after the date of execution hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible
Institution.
Name of Firm: _______________________ -------------------------------------
Address: ____________________________ Authorized Signature
------------------------------- Name: _______________________________
Zip Code Please Type or Print
Area Code and Title: ______________________________
Telephone Number: ___________________ Dated: _______________________ , 1996
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED
DELIVERY. CERTIFICATES FOR SHARES ARE TO BE DELIVERED WITH THE LETTER OF
TRANSMITTAL.
2
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
LORAL CORPORATION
BY
LAC ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
LOCKHEED MARTIN CORPORATION
AT
$38.00 NET PER SHARE
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, FEBRUARY 9, 1996, UNLESS THE OFFER IS EXTENDED. LAC
ACQUISITION CORPORATION HAS AGREED, SUBJECT TO THE TERMS AND CONDITIONS OF
THE OFFER, TO EXTEND THE OFFER UNTIL IMMEDIATELY AFTER THE TIME OF THE SPIN-
OFF RECORD DATE (AS DEFINED IN THE OFFER TO PURCHASE).
To Brokers, Dealers, Commercial Banks, January 12, 1996
Trust Companies and Other Nominees:
We have been appointed by LAC Acquisition Corporation (the "Purchaser"), a
New York corporation and a wholly owned subsidiary of Lockheed Martin
Corporation, a Maryland corporation, to act as Dealer Manager in connection
with its offer to purchase all outstanding shares of common stock, par value
$0.25 per share (including the associated Rights (as defined in the Offer to
Purchase referred to below)) (collectively, the "Shares"), of Loral
Corporation, a New York corporation (the "Company"), at $38.00 per Share, net
to the seller in cash, without interest, upon the terms and subject to the
conditions set forth in the Purchaser's Offer to Purchase, dated January 12,
1996 (the "Offer to Purchase"), and the related Letter of Transmittal (which
together constitute the "Offer").
For your information and for forwarding to your clients for whose accounts
you hold Shares registered in your name or in the name of your nominee, we are
enclosing the following documents:
1. Offer to Purchase, dated January 12, 1996;
2. Letter of Transmittal for your use and for the information of your
clients, together with Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 providing information
relating to backup federal income tax withholding;
3. Notice of Guaranteed Delivery to be used to accept the Offer if the
Shares and all other required documents cannot be delivered to the
Depositary by the Expiration Date (as defined in the Offer to Purchase);
4. A form of letter which may be sent to your clients for whose accounts
you hold Shares registered in your name or in the name of your nominee,
with space provided for obtaining such clients' instructions with regard
to the Offer;
5. Solicitation/Recommendation Statement on Schedule 14D-9 issued by the
Company; and
6. Return envelope addressed to First Chicago Trust Company of New York,
the Depositary.
The Company has advised the Parent and Purchaser that, prior to the time
notice of the Spin-Off Record Date (as defined in the Offer to Purchase) is
given and at least ten days prior to the Expiration Date, it expects to
distribute to holders of Shares and holders of other equity securities of the
Company an Information Statement with respect to the Spin-Off (as defined in
the Offer to Purchase).
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will be deemed to have accepted for payment, and
will pay for, all Shares validly tendered and not properly withdrawn prior to
the Expiration Date (as defined in the Offer to Purchase) when, as and if the
Purchaser gives oral or written notice to the Depositary of the Purchaser's
acceptance of such Shares for payment pursuant to the Offer. Payment for
Shares purchased pursuant to the Offer will be made only after timely receipt
by the Depositary of certificates for such Shares (or confirmation of a book-
entry transfer of such Shares into the Depositary's account at one of the
Book-Entry Transfer Facilities (as defined in the Offer to Purchase)), a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) (unless, in the case of a book-entry transfer, an Agent's Message (as
defined in the Offer to Purchase) is utilized) and any other documents
required by the Letter of Transmittal.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal, with any required signature guarantees and
any other required documents, should be sent to the Depositary, and
certificates representing the tendered Shares should be delivered, all in
accordance with the instructions set forth in the Letter of Transmittal and
the Offer to Purchase.
If holders of Shares wish to tender their Shares, but it is impracticable
for them to deliver their certificates on or prior to the Expiration Date or
to comply with the book-entry transfer procedures on a timely basis, a tender
may be effected by following the guaranteed delivery procedures specified in
Section 3 of the Offer to Purchase.
The Purchaser will not pay any fees or commissions to any broker, dealer or
other person (other than the Dealer Manager or the Information Agent as
described in the Offer to Purchase) for soliciting tenders of Shares pursuant
to the Offer. The Purchaser will, however, upon request, reimburse brokers,
dealers, commercial banks and trust companies for reasonable and necessary
costs and expenses incurred by them in forwarding materials to their
customers. The Purchaser will pay all stock transfer taxes applicable to its
purchase of Shares pursuant to the Offer, subject to Instruction 6 of the
Letter of Transmittal.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, FEBRUARY 9, 1996, UNLESS THE OFFER IS
EXTENDED. LAC ACQUISITION CORPORATION HAS AGREED, SUBJECT TO THE TERMS AND
CONDITIONS OF THE OFFER, TO EXTEND THE OFFER, UNTIL IMMEDIATELY AFTER THE TIME
OF THE SPIN-OFF RECORD DATE.
Any inquiries you may have with respect to the Offer should be addressed to,
and additional copies of the enclosed materials may be obtained from, the
Information Agent or the undersigned at the addresses and telephone numbers
set forth on the back cover of the Offer to Purchase.
Very truly yours,
Bear, Stearns & Co. Inc.
as Dealer Manager
245 Park Avenue
New York, New York 10167
Call Toll Free: (800) 726-9849
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY PERSON AS AN AGENT OF THE PURCHASER, THE COMPANY, ANY AFFILIATE OF
THE COMPANY, LOCKHEED MARTIN CORPORATION, THE DEALER MANAGER, THE
INFORMATION AGENT OR THE DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER PERSON TO
USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN
CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE
STATEMENTS CONTAINED THEREIN.
2
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
LORAL CORPORATION
BY
LAC ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
LOCKHEED MARTIN CORPORATION
AT
$38.00 NET PER SHARE
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, FEBRUARY 9, 1996, UNLESS THE OFFER IS EXTENDED. LAC
ACQUISITION CORPORATION HAS AGREED, SUBJECT TO THE TERMS AND CONDITIONS OF
THE OFFER, TO EXTEND THE OFFER UNTIL IMMEDIATELY AFTER THE TIME OF THE SPIN-
OFF RECORD DATE (AS DEFINED IN THE OFFER TO PURCHASE).
January 12, 1996
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated January 12,
1996 (the "Offer to Purchase"), and the related Letter of Transmittal (which
together constitute the "Offer") and other materials relating to the Offer by
LAC Acquisition Corporation (the "Purchaser"), a New York corporation and a
wholly owned subsidiary of Lockheed Martin Corporation, a Maryland corporation
(the "Parent"), to purchase all outstanding shares of common stock, par value
$0.25 per share (including the associated Rights (as defined in the Offer to
Purchase)) (collectively, the "Shares"), of Loral Corporation, a New York
corporation (the "Company"), at $38.00 per Share, net to the seller in cash,
without interest, upon the terms and subject to the conditions set forth in
the Offer. This material is being sent to you as the beneficial owner of
Shares held by us for your account but not registered in your name. A TENDER
OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL ACCOMPANYING THIS LETTER IS
FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER
SHARES HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to have us tender any or all
of the Shares held by us for your account, upon the terms and subject to the
conditions set forth in the Offer.
Your attention is directed to the following:
1. The tender price is $38.00 per Share, net to the seller in cash, without
interest.
2. The Offer and withdrawal rights will expire at 12:00 Midnight, New York
City time, on Friday, February 9, 1996 unless the Offer is extended. LAC
Acquisition Corporation has agreed, subject to the terms and conditions
of the Offer, to extend the Offer until immediately after the time of
the Spin-Off Record Date (as defined in the Offer to Purchase).
3. The Offer is being made as part of a series of transactions that are
expected to result in (i) the distribution to the stockholders of the
Company of shares of stock in Loral Space & Communications Ltd., a
newly-formed Bermuda company that will own and manage substantially all
of the Company's space and satellite telecommunications interests,
including Globalstar, L.P. ("Globalstar") and Space Systems/ Loral, Inc.
("SS/L") and certain other assets of the Company (the "Spin-Off") and
(ii) the acquisition of the Company's defense electronics and systems
integration businesses by the Parent pursuant to the Offer and the
Merger (as defined in the Offer to Purchase).
4. The Board of Directors of the Company has unanimously approved the
Offer, the Merger and the Spin-Off, determined that the Offer, the
Merger and the Spin-Off are fair to the stockholders of the Company and
are in the best interests of the stockholders of the Company, and
recommends acceptance of the Offer and approval and adoption of the
Merger Agreement and the Merger by the stockholders of the Company.
5. The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the Expiration Date (as defined in
the Offer to Purchase) a number of Shares which, when added to the
number of shares then beneficially owned by Parent and its affiliates,
represents at least two-thirds of the total number of Shares outstanding
and two-thirds of the voting power of the Shares outstanding on a fully
diluted basis.
6. Any stock transfer taxes applicable to the sale of Shares to the
Purchaser pursuant to the Offer will be paid by the Purchaser, except as
otherwise provided in Instruction 6 of the Letter of Transmittal.
The Company has advised the Purchaser that, prior to the time notice of the
Spin-Off Record Date is given and at least ten days prior to the Expiration
Date, it expects to distribute to holders of Shares and holders of other
equity securities of the Company an Information Statement with respect to the
Spin-Off (each as defined in the Offer to Purchase).
The Offer is being made to all holders of Shares. The Offer is not being
made to, nor will tenders be accepted from or on behalf of, holders of Shares
in any jurisdiction in which the making of the Offer or acceptance thereof
would not be in compliance with the laws of such jurisdiction. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made
on behalf of the Purchaser by Bear, Stearns & Co. Inc. or one or more
registered brokers or dealers licensed under the laws of such jurisdictions.
If you wish to have us tender any or all of the Shares held by us for your
account, please so instruct us by completing, executing and returning to us
the instruction form set forth below. Please forward your instructions to us
in ample time to permit us to submit a tender on your behalf prior to the
expiration of the Offer. If you authorize the tender of your Shares, all such
Shares will be tendered unless otherwise specified on the instruction form set
forth below.
INSTRUCTIONS WITH RESPECT TO
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
LORAL CORPORATION
BY
LAC ACQUISITION CORPORATION
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase, dated January 12, 1996, and the related Letter of Transmittal, in
connection with the offer by LAC Acquisition Corporation, a New York
corporation and a wholly owned subsidiary of Lockheed Martin Corporation, a
Maryland corporation, to purchase for cash all outstanding shares of common
stock, par value $0.25 per share (including the associated Rights (as defined
in the Offer to Purchase)) (collectively, the "Shares"), of Loral Corporation,
a New York corporation.
This will instruct you to tender the number of Shares indicated below (or if
no number is indicated below, all Shares) that are held by you for the account
of the undersigned, upon the terms and subject to the conditions set forth in
the Offer.
Dated: , 1996
NUMBER OF SHARES TO BE TENDERED:
SHARES*
-------------------------------------
-------------------------------------
Signature(s)
-------------------------------------
Please Print Name(s)
-------------------------------------
-------------------------------------
Please Print Address(es)
-------------------------------------
Area Code and Telephone Number(s)
-------------------------------------
Tax, Identification, or Social
Security Number(s)
- --------
*I (We) understand that if I (we) sign this instruction form without
indicating a lesser number of Shares in the space above, all Shares held by
you for my (our) account will be tendered.
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER
ON SUBSTITUTE FORM W-9
SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE.
Purpose of Form. -- A person who is required to file an information return
with the Internal Revenue Service ("IRS") must obtain your correct taxpayer
identification number ("TIN") to report income paid to you, real estate
transactions, mortgage interest you paid, the acquisition or abandonment of
secured property, or contributions you made to an IRA. Use Form W-9 to furnish
your correct TIN to the requester (the person asking you to furnish your TIN)
and, when applicable, (1) to certify that the TIN you are furnishing is
correct (or that you are waiting for a number to be issued), (2) to certify
that you are not subject to backup withholding, and (3) to claim exemption
from backup withholding if you are an exempt payee. Furnishing your correct
TIN and making the appropriate certifications will prevent certain payments
from being subject to backup withholding.
Note: If a requester gives you a form other than W-9 to request your TIN,
you must use the requester's form.
How To Obtain a TIN. -- If you do not have a TIN, apply for one immediately.
To apply, get Form SS-5, Application for a Social Security Card (for
individuals), from your local office of the Social Security Administration, or
Form SS-4, Application for Employer Identification Number (for businesses and
all other entities), from your local IRS office.
To complete Form W-9 if you do not have a TIN, write "Applied for" in the
space for the TIN in Part I, sign and date the form, and give it to the
requester. Generally, you will then have 60 days to obtain a TIN and furnish
it to the requester. If the requester does not receive your TIN within 60
days, backup withholding, if applicable, will begin and continue until you
furnish your TIN to the requester. For reportable interest or dividend
payments, the payor must exercise one of the following options concerning
backup withholding during this 60-day period. Under option (1), a payor must
backup withhold on any withdrawals you make from your account after 7 business
days after the requester receives this form back from you. Under option (2),
the payor must backup withhold on any reportable interest or dividend payments
made to your account, regardless of whether you make any withdrawals. The
backup withholding under option (2) must begin no later than 7 business days
after the requester receives this form back. Under option (2), the payor is
required to refund the amounts withheld if your certified TIN is received
within the 60-day period and you were not subject to backup withholding during
that period.
Note: Writing "Applied for" on the form means that you have already applied
for a TIN or that you intend to apply for one in the near future.
As soon as you receive your TIN, complete another Form W-9, include your
TIN, sign and date the form, and give it to the requester.
What Is Backup Withholding? -- persons making certain payments to you after
1992 are required to withhold and pay to the IRS 31% of such payments under
certain conditions. This is called "backup withholding." Payments that could
be subject to backup withholding include interest, dividends, broker and
barter exchange transactions, rents, royalties, nonemployee compensation, and
certain payments from fishing boat operators, but do not include real estate
transactions.
If you give the requester your correct TIN, make the appropriate
certifications, and report all your taxable interest and dividends on your tax
return, your payments will not be subject to backup withholding. Payments you
receive will be subject to backup withholding if:
1. You do not furnish your TIN to the requester, or
2. The IRS notifies the requester that you furnished an incorrect TIN, or
3. You are notified by the IRS that you are subject to backup withholding
because you failed to report all your interest and dividends on your tax
return (for reportable interest and dividends only), or
4. You do not certify to the requester that you are not subject to backup
withholding under 3 above (for reportable interest and dividend accounts
opened after 1983 only), or
5. You do not certify your TIN. This applies only to reportable interest,
dividend, broker, or barter exchange accounts opened after 1983, or broker
accounts considered inactive in 1983.
Except as explained in 5 above, other reportable payments are subject to
backup withholding only if 1 or 2 above applies. Certain payees and payments
are exempt from backup withholding and information reporting. See Payees and
Payments Exempt From Backup Withholding, below, and Example Payees and
Payments under Specific Instructions, below, if you are an exempt payee.
Payees and Payments Exempt From Backup Withholding. -- The following is a
list of payees exempt from backup withholding and for which no information
reporting is required. For interest and dividends, all listed payees are
exempt except as listed in item (9). For broker transactions, payees listed in
items (1) through (13) and a person registered under the Investment Advisers
Act of 1940 who regularly acts as a broker are exempt. Payments subject to
reporting under sections 6041 and 6041A are generally exempt from backup
withholding only if made to payees described in items (1) through (7), except
a corporation that provides medical and health care services or bills and
collects payments for such services is not exempt from backup withholding or
information reporting. Only payees described in items (2) through (6) are
exempt from backup withholding for barter exchange transactions, patronage
dividends, and payments by certain fishing boat operators.
(1) A corporation. (2) An organization exempt from tax under section 501(a),
an IRA, or a custodial account under section 403(b)(7). (3) The United States
or any of its agencies or instrumentalities. (4) A state, the District of
Columbia, a possession of the United States, or any of their political
subdivisions or instrumentalities. (5) A foreign government or any of its
political subdivisions, agencies, or instrumentalities. (6) An international
organization or any of its agencies or instrumentalities. (7) A foreign
central bank of issue. (8) A dealer in securities or commodities required to
register in the United States or a possession of the United States. (9) A
futures commission merchant registered with the Commodity Futures Trading
Commission. (10) A real estate investment trust. (11) An entity registered at
all times during the tax year under the Investment Company Act of 1940. (12) A
common trust fund operated by a bank under section 584(a). (13) A financial
institution. (14) A middleman known in the investment community as a nominee
or listed in the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List. (15) A trust exempt from tax under section
664 or described in section 4947.
Payments of dividend and patronage dividends generally not subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the United
States and that have at least one nonresident partner.
. Payments of patronage dividends not paid in money.
. Payments made by certain foreign organizations.
Payments of interest generally not subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals.
Note: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payor's trade or business and you have
not provided your correct TIN to the payor.
. Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
. Payments described in section 6049(b)(5) to nonresident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Mortgage interest paid by you.
Payments that are not subject to information reporting are also not subject
to backup withholding. For details, see sections 6041, 6041A(a), 6042, 6044,
6045, 6049, 6050A, and 6050N, and the regulations under those sections.
PENALTIES
Failure To Furnish TIN. -- If you fail to furnish your correct TIN to a
requester, you are subject to a penalty of $50 for each such failure unless
your failure is due to reasonable cause and not to willful neglect.
2
Civil Penalty for False Information With Respect to Withholding. -- If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
Criminal Penalty for Falsifying Information. -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
Misuse of TINs. -- If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
SPECIFIC INSTRUCTIONS
Name. -- If you are an individual, you must generally provide the name shown
on your social security card. However, if you have changed your last name, for
instance, due to marriage, without informing the Social Security
Administration of the name change, please enter your first name, the last name
shown on your social security card, and your new last name.
If you are a sole proprietor, you must furnish your individual name and
either your SSN or EIN. You may also enter your business name or "doing
business as" name on the business name line. Enter your name(s) as shown on
your social security card and/or as it was used to apply for your EIN on Form
SS-4.
SIGNING THE CERTIFICATION.
1. Interest, Dividend, and Barter Exchange Accounts Opened Before 1984 and
Broker Accounts Considered Active During 1983. You are required to furnish
your correct TIN, but you are not required to sign the certification.
2. Interest, Dividend, Broker, and Barter Exchange Accounts Opened After
1983 and Broker Accounts Considered Inactive During 1983. You must sign the
certification or backup withholding will apply. If you are subject to backup
withholding and you are merely providing your correct TIN to the requester,
you must cross out item 2 in the certification before signing the form.
3. Real Estate Transactions. You must sign the certification. You may cross
out item 2 of the certification.
4. Other Payments. You are required to furnish your correct TIN, but you are
not required to sign the certification unless you have been notified of an
incorrect TIN. Other payments include payments made in the course of the
requester's trade or business for rents, royalties, goods (other than bills
for merchandise), medical and health care services, payments to a nonemployee
for services (including attorney and accounting fees), and payments to certain
fishing boat crew members.
5. Mortgage Interest Paid by You, Acquisition or Abandonment of Secured
Property, or IRA Contributions. You are required to furnish your correct TIN,
but you are not required to sign the certification.
6. Exempt Payees and Payments. If you are exempt from backup withholding,
you should complete this form to avoid possible erroneous backup withholding.
Enter your correct TIN in Part I, write "EXEMPT" in the block in Part II, and
sign and date the form. If you are a nonresident alien or foreign entity not
subject to backup withholding, give the requester a complete Form W-8,
Certificate of Foreign Status.
7. TIN "Applied for." Follow the instructions under How To Obtain a TIN, on
page 1, and sign and date this form.
Signature. -- For a joint account, only the person whose TIN is shown in
Part I should sign.
Privacy Act Notice. -- Section 6109 requires you to furnish your correct TIN
to persons who must file information returns with the IRS to report interest,
dividends, and certain other income paid to you, mortgage interest you paid,
the acquisition or abandonment of secured property, or contributions you made
to an IRA. The IRS uses the numbers for identification purposes and to help
verify the accuracy of your tax return. You must provide your TIN whether or
not you are required to file a tax return. Payors must generally withhold 31%
of taxable interest, dividends, and certain other payments to a payee who does
not furnish a TIN to a payor. Certain penalties may also apply.
3
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
- ------------------------------------------------
GIVE NAME AND SSN
FOR THIS TYPE OF ACCOUNT: OF:
- ------------------------------------------------
1. Individual The individual
2. Two or more individuals The actual owner of
(joint account) the account or, if
combined funds, the
first individual on
the account (1)
3. Custodian account of a The minor (2)
minor (Uniform Gift to
Minors Act)
4.a. The usual revocable The grantor-trustee
savings trust (grantor (1)
is also trustee)
b. So-called trust The actual owner
account that is not a (1)
legal or valid trust
under state law
5. Sole proprietorship The owner (3)
GIVE NAME AND EIN
FOR THIS TYPE OF ACCOUNT: OF:
-------
6. Sole proprietorship The owner (3)
7. A valid trust, estate, Legal entity (4)
or pension trust
8. Corporate The corporation
9. Association, club, The organization
religious, charitable,
educational, or other
tax-exempt organization
10. Partnership The partnership
11. A broker or registered The broker or
nominee nominee
12. Account with the The public entity
Department of
Agriculture in the name
of a public entity
(such as a state or
local government,
school district or
prison) that receives
agriculture program
payments
- --------------------------------------
- -------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's SSN.
(3) Show your individual name. You may also enter your business name. You may
use your SSN or EIN.
(4) List first and circle the name of the legal trust, estate, or pension
trust. (Do not furnish the TIN of the personal representative or trustee
unless the legal entity itself is not designated in the account title).
Note: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
4
Exhibit 99(a)(7)
LOCKHEED MARTIN AND LORAL
AGREE TO STRATEGIC COMBINATION
Lockheed Martin Will Acquire Loral's Defense Electronics
and System Integration Businesses for $9.1 Billion
Loral's Shareholders to Receive $38 Per Share in Cash and
Shares in New Loral Space and Communications Corporation
Lockheed Martin to Invest $344 Million for 20 Percent
of Loral Space at an Effective Price of $7.50 Per Share
Total Transaction Has Estimated Value In Excess of $10
Billion
BETHESDA, Maryland and NEW YORK CITY, January 8 -- Daniel M. Tellep, Chairman of
Lockheed Martin Corporation (NYSE:LMT), Norman R. Augustine, Lockheed Martin's
president and chief executive officer, and Bernard L. Schwartz, chairman and
chief executive officer of Loral Corporation (NYSE:LOR), today announced
agreement on a series of interrelated strategic transactions with an estimated
value exceeding $10 billion.
The three key elements of the agreement are: first, the combination of
the two companies' defense electronics and system integration businesses to
enhance competitiveness and opportunities for growth in the rapidly evolving
global environment; second, the distribution to Loral shareholders of its
holdings in the fast-growing space and telecommunications market through a newly
formed company to be called Loral Space and Communications Corporation; and
third, a purchase by Lockheed Martin of an equity position in Loral Space.
Under the agreement, which has been unanimously approved by both
companies' boards of directors:
. Lockheed Martin will acquire Loral's defense electronics and system
integration businesses for approximately $9.1 billion, including $2.1
billion of assumed debt. Of the total, $7 billion, or $38 in cash per
share, will be paid directly to Loral shareholders by Lockheed Martin
through a tender offer commencing no later than Friday, January 12.
. Loral shareholders also will receive for each share, one share of the newly
formed public company which will own Loral's present satellite and
telecommunications interests, including Globalstar (NASDAQ:GSTRF) and Space
Systems/Loral.
. Lockheed Martin will invest an additional $344 million for a 20% equity
position in Loral Space, at an effective price of $7.50 per share. Loral
Space will begin business with over $700 million in cash and no debt.
. Lockheed Martin will provide Loral Space with support in key technologies
to further reinforce the strategic relationship.
. Schwartz will be chairman and CEO of Loral Space and will become vice
chairman of Lockheed Martin and join its board of directors.
The agreement represents the culmination of a long-term relationship
between Lockheed Martin and Loral, bringing together the technologies, resources
and talents of two of the most successful companies in the defense electronics
industry and creating a new space-based telecommunications company.
"The strategic combination with Loral solidifies Lockheed Martin's
leadership position as a world premier high technology company," said Tellep.
"It enhances our technology base, improves our competitiveness, expands our
global reach and provides new opportunities for growth. With some $30 billion in
annual sales and a broad portfolio of businesses spanning aerospace, defense,
commercial and civil programs, we are well positioned for the 21st century. Our
shareholders, customers and employees will benefit from this landmark event."
Schwartz said, "Our board and management team enthusiastically support
this transaction as the right move at the right time. It ensures our customers
and employees the long-term capabilities needed in our increasingly demanding
marketplace. The combined businesses build on the complementary cultures of
Lockheed Martin and Loral, and I look forward to working with our new partners.
At the same time, the transaction provides Loral shareholders with significant
present value together with continuing ownership in Loral Space, which itself
has substantial potential for shareholder value growth. We intend to create a
major space-based telecommunications enterprise, building on this foundation."
Augustine noted that the aerospace/electronics industry is continuing
to consolidate with a corresponding strengthening of a number of other large
competitors, both in the U.S. and abroad.
"The Lockheed Martin/Loral strategic combination expands our ability
to serve our customers in areas spanning the depths of the oceans to the reaches
of space. Moreover, the continued participation in the combined company of an
industry leader like Bernard Schwartz will further enhance our ability to
deliver shareholder value," Augustine said. "Financially, in 1996 the dilution
to earnings will be minimal, even before
-2-
considering synergy benefits, and accretive thereafter. With the cash flow of
the combined enterprise, we expect leverage to drop from 67% at the time of
closing to less than 60% by year end 1996 with strong debt coverage maintained,"
Augustine said.
Lockheed Martin Highlights
- --------------------------
When the transaction is complete, Lockheed Martin's annual combined
sales will reach approximately $30 billion with a total backlog of approximately
$47 billion. The combination with Loral enhances key core businesses --
electronics, tactical systems, and information and technology services -- with
major opportunities for improving competitiveness and capitalizing on
complementary strengths in system integration; electronic combat systems;
tactical missiles; data management systems; simulation and training systems; and
command, control and communications. The company will operate with a
discretionary research and development budget of approximately $1 billion per
year, and is expected to generate approximately $1.5 billion to $2.0 billion in
free cash annually.
Lockheed Martin currently is organized in five business sectors:
Aeronautics, Electronics, Energy & Environment, Information & Technology
Services, and Space & Strategic Missiles. When this transaction is completed,
the Loral business units initially will constitute a sixth sector, Tactical
Systems. A long-term consolidation plan will be developed following thorough
review and analysis to determine how to best integrate these businesses.
Tellep, who remains chairman of the board, Augustine, who becomes vice
chairman and continues as chief executive officer, and Schwartz, will form the
Office of the Chairman, which will address key strategic issues. Schwartz
intends to invest $10 million personally in Lockheed Martin common stock.
Two executive vice presidents and chief operating officers will report
to Augustine. Vance D. Coffman, executive vice president and chief operating
officer of Lockheed Martin, will have overall responsibility for the
Aeronautics, Energy & Environment and Space & Strategic Missiles businesses.
Frank C. Lanza, currently Loral's president and chief operating officer, also
will join Lockheed Martin's board of directors and serve as an executive vice
president and chief operating officer, with overall responsibility for the
Electronics, Information & Technology Services and Tactical Systems businesses.
In addition, Lanza will serve as president of Tactical Systems.
-3-
Loral Space Highlights
- ----------------------
Loral Space's space and telecommunications operations now will have
concentrated management focus, over $700 million in cash, no debt, a sufficient
financing in place to take advantage of a range of promising growth
opportunities in satellite-based businesses worldwide, including those that are
here now and those that will emerge in the future.
Loral Space has several principal operating assets. First is its 31%
interest in Globalstar, which is developing a $2 billion worldwide
satellite-based communications system capable of serving 10 million subscribers.
Loral Space is the managing general partner of Globalstar. Second is its 33%
interest in Space Systems/Loral, which is a leading commercial satellite
manufacturing company with annual sales of $1 billion. Other assets of the
enterprise will include all of Loral's Globalstar service provider franchises in
Canada, Mexico and Brazil; Loral's interest in the projected domestic and
international satellite DBS and broadband data projects, for example, Cyberstar;
and Loral's 22% interest in K&F Industries, a $250-million revenue aircraft
braking company. It is the intention over time to integrate the component
operating parts of Loral Space into a single entity.
"This transaction will enable the senior management of Loral Space to
focus on the satellite and space businesses, which have excellent potential for
growth," said Schwartz. "The participation of Lockheed Martin will enhance the
future of the new space company and will assure that the resources will be
available to complete the Globalstar project. Loral now will be a leading space
and communications company and have the opportunity to build and expand on its
current positions in satellite, data and information technologies, and direct
broadcast services."
At the same time it approved the Lockheed Martin strategic
combination, the Loral board of directors adopted a shareholder rights plan,
which is intended primarily to deter predatory or unfair acquisitions that might
interfere with the company's strategic objectives.
Terms of the Transaction
- ------------------------
Lockheed Martin's offer is contingent, among other things, on the
tendering of two-thirds of Loral's outstanding shares and government approvals,
including U.S. and European antitrust reviews.
-4-
Loral's board of directors will declare the distribution of Loral
Space and Communications Corporation shares to Loral shareholders of record
prior to closing the tender offer. The proceeds of the transaction received by
Loral's shareholders will be taxable to them. The two companies expect to close
the transaction by the end of February 1996.
A bank group, consisting of Morgan Guaranty Trust Co. of New York,
Bank of America and Citicorp USA, has committed $3.5 billion of financing and
has commenced the process to syndicate a $10-billion credit facility for
Lockheed Martin to support the tender offer.
Bear, Stearns & Co. is financial advisor to Lockheed Martin, will act
as dealer-manager in connection with the tender offer, and also rendered a
fairness opinion. Lazard Freres & Co, LLC and Lehman Brothers, Inc., are
financial advisors to Loral and Lazard has rendered a fairness opinion to
Loral's board of directors. The tender offer will be made pursuant to definitive
offering documents to be filed with the Securities and Exchange Commission.
Lockheed Martin, headquartered in Bethesda, Maryland, is a highly
diversified advanced technology company with current annual sales of $23
billion. It has 165,000 employees worldwide. Loral is a high technology company
that primarily concentrates in defense electronics, communications, space and
systems integration with annual sales of $6.7 billion. Headquartered in New York
City, Loral has 38,000 employees.
CONTACT:
Charles Manor/Lockheed Martin Corporation/301-897-6258
Joanne Hvala/Loral Corporation/212-697-1105
Ruth Pachman/Jim Fingeroth/Kekst and Co./212-593-2655
-5-
EXHIBIT 99(a)(8)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase, dated January
12, 1996, and the related Letter of Transmittal and is not being made to, nor
will tenders be accepted from or on behalf of, holders of Shares in any
jurisdiction in which the making of the Offer or acceptance thereof would not be
in compliance with the laws of such jurisdiction. In those jurisdictions where
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on behalf of the
Purchaser by Bear, Stearns & Co. Inc. or one or more registered brokers or
dealers licensed under the laws of such jurisdictions.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(Including the Associated Rights)
of
LORAL CORPORATION
at
$38.00 NET PER SHARE
by
LAC ACQUISITION CORPORATION
a wholly owned subsidiary of
LOCKHEED MARTIN CORPORATION
LAC Acquisition Corporation, a New York corporation (the "Purchaser") and a
wholly owned subsidiary of Lockheed Martin Corporation, a Maryland corporation
("Parent"), is offering to purchase all outstanding shares of common stock, par
value $.25 per share (including the associated Rights (as defined in the Offer
to Purchase)) (collectively, the "Shares"), of Loral Corporation, a New York
corporation (the "Company"), at $38.00 per Share, net to the seller in cash,
without interest, upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated January 12, 1996 (the "Offer to Purchase") and in the
related Letter of Transmittal (which together constitute the "Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, FEBRUARY 9, 1996, UNLESS THE OFFER IS EXTENDED. THE
PURCHASER HAS AGREED, SUBJECT TO THE TERMS AND CONDITIONS OF THE OFFER, TO
EXTEND THE OFFER UNTIL IMMEDIATELY AFTER THE TIME OF THE SPIN-OFF RECORD
DATE (AS DEFINED BELOW).
THE OFFER IS BEING MADE AS PART OF A SERIES OF TRANSACTIONS THAT ARE EXPECTED
TO RESULT IN (I) THE DISTRIBUTION TO THE COMPANY'S STOCKHOLDERS OF SHARES IN
LORAL SPACE & COMMUNICATIONS LTD., A NEWLY-FORMED BERMUDA COMPANY ("LORAL
SPACE") THAT WILL OWN AND MANAGE SUBSTANTIALLY ALL OF THE COMPANY'S SPACE AND
SATELLITE INTERESTS, INCLUDING GLOBALSTAR, L.P. AND SPACE SYSTEMS/LORAL, INC.,
AND CERTAIN OTHER ASSETS OF THE COMPANY (THE "SPIN-OFF"), AND (II) THE
ACQUISITION OF THE COMPANY'S DEFENSE ELECTRONICS AND SYSTEMS INTEGRATION
BUSINESSES BY PARENT PURSUANT TO THE OFFER AND MERGER DESCRIBED HEREIN.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated as
of January 7, 1996 (the "Merger Agreement"), among Parent, the Purchaser and the
Company. The Merger Agreement provides that, among other things, the Purchaser
will make the Offer and that following the purchase of Shares pursuant to the
Offer and the satisfaction of the other conditions set forth in the Merger
Agreement and in accordance with relevant provisions of the New York Business
Corporation Law, the Purchaser will be merged with and into the Company (the
"Merger"). Following consummation of the Merger, the Company will continue as
the surviving corporation and will be a wholly owned subsidiary of Parent. At
the effective time of the Merger (the "Effective Time"), each Share issued and
outstanding immediately prior to the Effective Time (other than Shares held by
the Company as treasury stock or by any subsidiary of the Company that will be a
subsidiary of Loral Space or by Parent, the Purchaser or any other subsidiary of
Parent and other than Shares held by a holder who has not voted in favor of the
Merger or consented thereto in writing and who has filed with the Company a
written objection to the Merger and demanded fair value for such Shares in
accordance with Section 623 of the New York Business Corporation Law) will be
converted into the right to receive cash without interest in an amount equal to
the price per Share paid in the Offer.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER, THE
MERGER AND THE SPIN-OFF, DETERMINED THAT THE OFFER, THE MERGER AND THE SPIN-OFF
ARE FAIR TO THE STOCKHOLDERS OF THE COMPANY AND ARE IN THE BEST INTERESTS OF THE
STOCKHOLDERS OF THE COMPANY AND RECOMMENDS ACCEPTANCE OF THE OFFER AND APPROVAL
AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER BY THE STOCKHOLDERS OF THE
COMPANY.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the Expiration Date (as defined in the Offer
to Purchase) a number of Shares which, when added to the number of Shares then
beneficially owned by Parent and its affiliates, represents at least two-thirds
of the total number of Shares outstanding and two-thirds of the voting power of
the Shares outstanding on a fully diluted basis.
The Offer is not conditioned upon the Purchaser obtaining financing; provided,
that if the Offer remains outstanding after April 30, 1996, the Offer will,
subject to certain provisions of the Merger Agreement, be conditioned upon the
Purchaser obtaining financing.
Promptly following consummation of the Offer, the Company will distribute
shares of Loral Space (the "Loral Space Shares") to the record holders of Shares
on a date to be determined by the Board of Directors of the Company (the "Spin-
Off Record Date") pursuant to a Restructuring, Financing and Distribution
Agreement, dated as of January 7, 1996, among Parent, the Company, a predecessor
to Loral Space and various other subsidiaries of the Company (the "Distribution
Agreement"). Because the parties to the Distribution Agreement have agreed to
use their reasonable efforts to cause the time of the Spin-Off Record Date to be
established so as to occur immediately prior to the acceptance for payment by
the Purchaser of Shares, a record holder of Shares who tenders Shares pursuant
to the Offer (and who does not subsequently withdraw and sell such Shares) is
expected to be the record holder thereof on the Spin-Off Record Date.
Accordingly, in the event that Shares are accepted for payment pursuant to the
Offer, such record holders should be entitled to receive, in respect of each
Share tendered, $38.00 net in cash from the Purchaser and one Loral Space Share
from the Company. As a result of the Spin-Off, Loral Space will own and manage
substantially all of the Company's space and satellite interests, including
Globalstar, L.P. and Space Systems/Loral, Inc., and certain other assets of the
Company. In addition, pursuant to the terms of the Distribution Agreement,
approximately $712 million, subject to adjustment under certain circumstances,
will be included in the assets of Loral Space after the Spin-Off. After the
Spin-Off, the Company will continue to own and operate the defense electronics
and systems integration business of the Company and will own shares of preferred
stock of Loral Space that are convertible into 20% of Loral Space's common
stock.
The Offer is subject to certain conditions set forth in the Offer to Purchase.
If any such condition is not satisfied, the Purchaser may (i) terminate the
Offer and return all tendered Shares to tendering stockholders, (ii) subject to
the terms of the Merger Agreement, extend the Offer and, subject to withdrawal
rights as set forth below, retain all such Shares until the expiration of the
Offer as so extended, (iii) subject to the terms of the Merger Agreement, waive
such condition and, subject to any requirement to extend the time during which
the Offer is open, purchase all Shares validly tendered and not withdrawn prior
to the Expiration Date or (iv) delay acceptance for payment of (whether or not
Shares have theretofore been accepted for payment) or payment for Shares,
subject to applicable law, until satisfaction or waiver of the conditions to the
Offer.
The Purchaser reserves the right, at any time or from time to time in
accordance with the terms of the Merger Agreement, to extend the period of time
during which the Offer is open by giving oral or written notice of such
extension to First Chicago Trust Company of New York (the "Depositary"). Any
such extension will be followed as promptly as practicable by public
announcement thereof no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled date on which the Offer was to
expire. During any such extension, all Shares previously tendered and not
withdrawn will remain subject to the Offer subject to the right of a tendering
stockholder to withdraw such stockholder's Shares.
For purposes of the Offer, the Purchaser shall be deemed to have accepted for
payment tendered Shares when, as and if the Purchaser gives oral or written
notice to the Depositary of its acceptance of the tenders of such Shares.
Payment for Shares accepted for payment pursuant to the Offer will be made only
after timely receipt by the Depositary of certificates for such Shares (or a
confirmation of a book-entry transfer of such Shares into the Depositary's
account at one of the Book-Entry Transfer Facilities (as defined in the Offer to
Purchase)), a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) and any other documents required by the Letter of
Transmittal.
Tenders of Shares made pursuant to the Offer may be withdrawn at any time
prior to the Expiration Date. Thereafter, such tenders are irrevocable, except
that they may be withdrawn at any time after March 11, 1996 unless theretofore
accepted for payment as provided in the Offer to Purchase. To be effective, a
written, telegraphic, telex or facsimile transmission notice of withdrawal must
be timely received by the Depositary at one of its addresses set forth in the
Offer to Purchase and must specify the name of the person who tendered the
Shares to be withdrawn and the number of Shares to be withdrawn. If the Shares
to be withdrawn have been delivered to the Depositary, a signed notice of
withdrawal with (except in the case of Shares tendered by an Eligible
Institution (as defined in the Offer to Purchase)) signatures guaranteed by an
Eligible Institution must be submitted prior to the release of such Shares. In
addition, such notice must specify, in the case of Shares tendered by delivery
of certificates, the name of the registered holder (if different from that of
the tendering stockholder) and the serial numbers shown on the particular
certificates evidencing the Shares to be withdrawn, or, in the case of Shares
tendered by book-entry transfer, the name and number of the account at one of
the Book-Entry Transfer Facilities to be credited with the withdrawn Shares.
The information required to be disclosed by paragraph (e)(1)(vii) of Rule 14d-
6 of the General Rules and Regulations under the Securities Exchange Act of
1934, as amended, is contained in the Offer to Purchase and is incorporated
herein by reference.
The Company has agreed to provide the Purchaser with the Company's stockholder
list and security position listings for the purpose of disseminating the Offer
to holders of Shares. The Offer to Purchase and the related Letter of
Transmittal will be mailed to record holders of Shares and will be furnished to
brokers, banks and similar persons whose names, or the names of whose nominees,
appear on the stockholder list or, if applicable, who are listed as participant
in a clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
Requests for copies of the Offer to Purchase, the related Letter of
Transmittal and other tender offer materials may be directed to the Information
Agent or the Dealer Manager as set forth below, and copies will be furnished
promptly at the Purchaser's expense. The Purchaser will not pay any fees or
commissions to any broker or dealer or any other person (other than the Dealer
Manager and the Information Agent) for soliciting tenders of Shares pursuant to
the Offer.
The Information Agent for the Offer is:
MORROW & CO., INC.
909 Third Avenue, 20th Floor
New York, New York 10022
(212) 754-8000
or
Call Toll Free: (800) 566-9058
Banks and Brokerage Firms, please call: (800) 662-5200
The Dealer Manager for the Offer is:
BEAR, STEARNS & CO. INC.
245 Park Avenue
New York, New York 10167
Call Toll Free: (800) 726-9849
January 12, 1996
[LOGO -- JP Morgan]
January 5, 1996
Mr. Walter E. Skowronski
Vice President and Treasurer
Lockheed Martin Corporation
6801 Rockledge Drive
Bethesda, Maryland 20817
Dear Walt:
You have advised us that Lockheed Martin Corporation ("LMC" or the "Company")
proposes to raise up to $10,000,000,000 in new senior bank financing for the
purchase of the common stock of "Wings" and for general corporate purposes. It
is also our understanding that the Company's current revolving credit facility
will be canceled and replaced with the bank financing referred to above. In
connection with this transaction, Morgan Guaranty Trust Company of New York
("Morgan") is pleased to propose (i) a $5,000,000,000, 364-day revolving credit
facility and (ii) a $5,000,000,000, five-year revolving credit facility
(collectively the "Credit Facilities") under the terms and conditions described
in the attached Summary of Terms and Conditions (the "Term Sheet") for the
Credit Facilities.
Morgan hereby commits to provide an aggregate of up to $1,375,000,000 comprised
of (i) up to $687,500,000 in a five-year Credit Facility and (ii) at least
$687,500,000 in a 364-day Credit Facility. This commitment is subject to (i)
acceptance by you as set forth in the last paragraph of this letter by 5:00 p.m.
(EST) on January 9, 1996, (ii) acceptance by you of a commitment for
$1,375,000,000 to the Credit Facilities from Bank of America National Trust and
Savings Association ("Bank of America") on the same terms and conditions and
(iii) negotiation, execution and delivery of mutually acceptable definitive loan
documentation (to be prepared by Morgan's counsel, Davis Polk & Wardwell) on or
before April 30, 1996 or May 31, 1996 if Morgan's commitment is extended
pursuant to the next sentence. In addition, Morgan's commitment will expire if
your tender offer for the common stock of "Wings" does not close on or before
April 30, 1996, unless such failure is due solely to the failure to have
obtained any clearance which may be necessary under the Hart-Scott-Rodino
Antitrust Improvements Act, in which case such expiration date shall be extended
to May 31, 1996.
It is J.P. Morgan Securities Inc.'s ("JPMSI") intention to use best efforts to
syndicate the Credit Facilities with BA Securities, Inc. ("BASI") to a group of
leaders acceptable to Morgan, Bank of America and LMC (Morgan and such other
lenders herein being called the "Banks"). LMC agrees to provide such assistance
in the syndication effort as may be reasonably requested, including making
members of management of the Company and its subsidiaries available to meet with
prospective syndicate members, and assisting JPMSI and BASI in the preparation
of a financing memorandum. It is our further expectation that no fewer than 50
banks will be invited to participate in the general syndication of these
facilities and that the general syndication will be launched in approximately 2
weeks from the date of your acceptance.
By signing below, LMC acknowledges its obligation to pay Morgan and JPMSI the
fees set forth in the Fee Letter dated January 5, 1996 (the "Fee Letter") among
the Company, Morgan and JPMSI.
JP Morgan
Page 2
In addition, by signing below, LMC agrees to indemnify and defend Morgan and
JPMSI and each other Bank and their respective directors, officers, agents,
employees and affiliates from, and hold each of them harmless against, any and
all losses, liabilities, claims, damages or reasonable expenses incurred by any
of them arising out of or by reason of any investigation, litigation or other
proceeding brought or threatened relating to any loan made or proposed to be
made to LMC or any of its affiliates in connection with the matters herein
referred to (including, but without limitation, any use made or proposed to be
made by LMC or any of its affiliates of the proceeds of such loans, but
excluding any such losses, liabilities, claims, damages or expenses relating to
the relationships of, between or among each of, or any of,the Banks, the Co-
Arranger (as defined in the Term Sheet) and any assignees or participants
thereof after the loan agreements have been executed by all parties thereto and
excluding any such losses, liabilities, claims, damages or expenses incurred by
reason of the gross negligence or willful misconduct of the indemnitee),
including, without limitation, amounts paid in settlement (approved in writing
by LMC), court costs, and reasonable fees and disbursements of counsel incurred
in connection with any such pending or threatened investigation, litigation or
other proceeding.
If you accept and agree to this proposal, please so indicate by signing in the
space provided below and returning a copy of this letter to us. This offer will
expire at 5:00 p.m. (EST) on January 9, 1996, if this letter and the Fee Letter
have not been accepted by you by that time.
Very truly yours,
MORGAN GUARANTY TRUST COMPANY J.P. MORGAN SECURITIES INC.
OF NEW YORK
By: /s/ Robert M. Osieski By: /s/ Michael C. Marcer
------------------------- ------------------------
Name: Robert M. Osieski Name: Michael C. Marcer
Title: Vice President Title: Vice President
60 Wall Street 60 Wall Street
New York, New York 10260 New York, New York 10260
ACCEPTED AND AGREED TO
this 7th day of January, 1996:
LOCKHEED MARTIN CORPORATION
By: /s/ Walter E. Skowronski
---------------------------
Name: Walter E. Skowronski
Title: Vice President and Treasurer
SUMMARY OF TERMS AND CONDITIONS
FOR LOCKHEED MARTIN CORPORATION
BORROWER: Lockheed Martin Corporation ("Company"),
directly or indirectly through LAC
Acquisition Corp.
AMOUNT: $5,000,000,000.
PURPOSE: The purchase of the common stock of
"Wings" and general corporate purposes
including commercial paper backup.
ARRANGER AND SYNDICATION AGENT: J.P. Morgan Securities Inc.
CO-ARRANGER: BA Securities, Inc.
MANAGING AGENTS: Citibank, N.A.
DOCUMENTATION AGENT: Morgan Guaranty Trust Company of
New York.
ADMINISTRATIVE AGENT: Bank of America National Trust and
Savings Association.
FACILITY DESCRIPTION: 364-day facility on a fully revolving
basis.
BORROWING OPTIONS: Committed Loans consisting of Base Rate
Loans, CD Loans and LIBOR Loans.
Uncommitted Money Market bid rate options
("Money Market Loans").
LENDERS: Syndicate of lenders acceptable to
Company and Arranger ("Banks").
TIMING: Closing to occur by May 1996.
GUARANTORS: Lockheed Corporation, Martin Marietta
Corporation, Martin Marietta
Technologies, Inc., LAC Acquisition
Corporation or the Company if LAC
Acquisition Corp. is the Borrower.
COMMITMENTS AND FEES:
- ---------------------
COMMITMENT: With respect to Committed Loans, each
Bank will fund each draw in proportion to
its Commitment.
With respect to Money Market Loans, each
Bank may, but shall have no obligation
to, make offers to make such Loans
pursuant to requests submitted by
Company. Drawdown of Money
January 4, 1996 Page 1
Market Loans will be deemed a use of
Commitments of all Banks on pro rata
basis.
REDUCTION OR CANCELLATION OF
COMMITMENTS: Commitments cancelable in whole or in
part (ratably reduced in amounts of at
least $25,000,000 and multiples of
$5,000,000 in excess thereof) at election
of Company upon not less than three
business days' notice.
TERMINATION OF BANKS/REPLACING BANKS: Company may terminate the entire
Commitment of any Bank upon 10 business
days' notice if a Bank demands increased
costs or capital adequacy payments from
Company or if the commitment of a Bank to
make LIBOR Loans is suspended due to its
inability to make such Loans. Company may
replace such Bank with a new or existing
Bank.
FACILITY FEE: To be paid quarterly in arrears on the
daily average of the total Commitments at
a rate determined by reference to
attached Pricing Schedule. Facility Fee
will increase if ratings downgraded and
decrease if ratings upgraded.
Facility Fee computed on the basis of a
year of 365 or 366 days over the actual
number of days elapsed. Any change in
Facility Fee shall become effective the
day on which a rating agency shall have
announced a ratings change.
INTEREST RATES
- --------------
INTEREST RATE OPTIONS: LIBOR, CD Rate or Base Rate at the
election of Company.
LIBOR INTEREST PERIOD OPTIONS: One, two, three or six months, as
selected by Company. Twelve-month LIBOR
-----
option available upon request of Company
and consent of all Banks.
CD RATE INTEREST PERIOD OPTIONS: 30, 60, 90 or 180 days, as selected by
Company.
RATE BASIS: LIBOR
CD Rate - Adjusted CD Rate.
3 LIBOR/CD Reference Banks to be
appointed.
Base Rate - higher of Reference Rate as
announced by Administrative Agent or
federal funds rate plus .5%.
Any change in Base Rate effective on the
day change is announced by Administrative
Agent.
January 4, 1996 Page 2
INTEREST PAYMENT: Interest on LIBOR Loans, CD Loans and
Base Rate Loans (if federal funds rate is
effective rate) shall be computed on the
basis of a year of 360 days and paid for
the actual number of days elapsed.
Interest on Base Rate Loans (if Reference
Rate is effective rate) shall be computed
on the basis of a year of 365 or 366
days, as the case may be, and paid for
the actual number of days elapsed.
Interest accrued on Base Rate Loans shall
be paid quarterly. Interest accrued on
LIBOR Loans shall be paid on the last day
of the Interest Period, on the date of
any prepayment or conversion thereof,
together with breakage costs, if any, and
in the case of a LIBOR Loan with an
Interest Period of twelve-months, on the
six-month anniversary of the making of
the LIBOR Loan. Interest accrued on CD
Loans shall be paid on the last day of
the Interest Period and on the date of
any prepayment or conversion thereof,
together with breakage costs, if any. If
any CD Loan or portion thereof shall have
an Interest Period of less than 30 days,
such portion shall bear interest at the
Base Rate during such period.
Interest obligations accrue from the day
funds are received through the day before
principal is repaid.
RATE SPREAD: For Base Rate Loans, Base Rate. For LIBOR
Loans, LIBOR plus LIBOR Margin. For CD
Loans, Adjusted CD Rate plus CD Margin.
LIBOR Margin and CD Margin determined by
reference to attached Pricing Schedule.
LIBOR Margin and CD Margin will increase
if ratings downgraded and decrease if
ratings upgraded.
Any change in the LIBOR Margin or CD
Margin shall become effective for LIBOR
Loans or CD Loans, as applicable, the day
on which a rating agency shall have
announced a ratings change.
POST DEFAULT RATE: 2% per annum above the Base Rate for such
date.
BORROWING PROCEDURES
- --------------------
MINIMUM DRAW: $10,000,000 with additional increments of
$1,000,000. No per draw limit up to total
unused Commitments.
NOTIFICATION/TIMING: Base Rate: To Administrative Agent, by
11:00 a.m. New York City time on day of
draw.
LIBOR: To Administrative Agent, by 1:00
p.m. New York City time, 3 business days
before draw or, in the case of an
Interest Period of twelve-months, by 1:00
p.m. New York City time, 4 business days
before draw.
January 4, 1996 Page 3
CD Rate: To Administrative Agent, by 1:00
p.m. New York City time, 2 business days
before draw.
An officer or a Designated Representative
(certain designated employees) to provide
notice to Administrative Agent. An
officer or Designated Representative may
provide telephonic notice, to be followed
by appropriately authorized written
notice.
FUND DELIVERY: Banks to deliver funds to Administrative
Agent by 1:00 p.m. New York City time.
Administrative Agent to wire transfer
loan principal (U.S. Dollars) in
immediately available funds to an account
to be designated by Company immediately
upon receipt, but not later than 4:00
p.m. New York City time. Administrative
Agent may make up a shortfall of funds
received. Any Bank not making its pro
rata share of any Loan available to
Administrative Agent and Company, if it
does not repay such share of any Loan, at
the required date and time severally
agree to repay Administrative Agent such
shortfall, with interest (at the federal
funds rate). If a Bank fails to fund a
Loan, amounts received by Administrative
Agent will be deemed to have been paid to
Bank and made available to Administrative
Agent for the Loan.
CONVERSION/CONTINUATION: Company may (i) convert all or any
portion of outstanding Base Rate Loans
equal to $10,000,000 and multiples of
$1,000,000 in excess thereof to LIBOR
Loans or CD Loans, (ii) convert all or
any portion of outstanding LIBOR Loans
equal to $10,000,000 and multiples of
$1,000,000 in excess thereof to Base Rate
Loans or CD Loans, and (iii) convert all
or any portion of outstanding CD Loans
equal to $10,000,000 and multiples of
$1,000,000 in excess thereof to Base Rate
Loans or LIBOR Loans. Upon the expiration
of any Interest Period applicable to a
LIBOR Loan or a CD Loan, Company may
continue all or any portion of such Loans
equal to $10,000,000 and multiples of
$1,000,000 in excess thereof as LIBOR
Loans or CD Loans, as applicable. Written
or telephonic notice of such
conversion/continuation shall be
delivered to Administrative Agent no
later than (i) 1:00 p.m. New York City
time (a) at least 3 business days in
advance of the proposed date of
conversion to or continuation of LIBOR
Loans or (b) at least 2 business days in
advance of the proposed date of
conversion to or continuation of CD Loans
and (ii) 11:00 a.m. New York City time on
the day of the proposed conversion to a
Base Rate Loan. Telephonic notice of
conversion/continuation to be promptly
followed by a written notice thereof. If
timely notice of conversion/continuation
not provided by Company as to any LIBOR
loan or CD Loan and such Loan is not
repaid by
January 4, 1996 Page 4
Company at the end of the applicable
Interest Period thereof, such Loan shall
be converted to a Base Rate Loan.
PREPAYMENTS: Base Rate Loans can be repaid in whole or
in part on any day without penalty or
premium. CD Loans can be repaid with 1
business day's notice. LIBOR Loans can be
repaid with 3 business days' notice. Each
partial prepayment shall be in an
aggregate amount of not less than
$10,000,000 and shall include interest
accrued on the Loans to the prepayment
date and any breakage costs (excluding
loss of Margin).
PAYMENTS TO BANKS: All payments by Company to Banks under
Loan Agreement are to be in U.S. Dollars,
free of taxes, and wire transferred to
Administrative Agent in immediately
available funds no later than 2:00 p.m.
New York City time.
PARTICIPATIONS/ASSIGNMENTS: Assignments may be made to Eligible
Institutions with the prior notification
to the Administrative Agent and prior
written consent of Company, which shall
not be unreasonably withheld, in minimum
amounts of $15,000,000. Withholding of
consent is not unreasonable if based
solely on desire to manage loan exposures
to proposed assignee or avoid payment of
additional increased costs of taxes
payable by Company by reason of such
assignment. No Company consent required
for assignment to an affiliate of a Bank.
Each Bank must retain at least
$15,000,000 commitment. Participations
permitted without consent of Company upon
prior written notification to Company (no
prior notification required in the case
of participations of Money Market Loans).
Transferability of voting rights limited
to change in principal, rate, fees and
term. "Eligible Institution" means any
commercial bank having total assets in
excess of $3,000,000,000 or the
equivalent amount of local currency of
such bank or affiliates of such bank that
are financial institutions.
CONDITIONS PRECEDENT
- --------------------
(A) Effectiveness of Loan Agreement:
customary for this type of transaction,
including:
1) termination of, and payment of
amounts due under, existing revolving
credit agreements.
2) execution and delivery of:
a) opinion of General Counsel or
Assistant General Counsel to
Company and opinion of special
counsel to company;
January 4, 1996 Page 5
b) opinion of Bank counsel;
c) certified copies of charters,
bylaws, and corporate action
authoring Loan Agreement;
d) note for each Bank, if requested;
e) certificate indicating incumbency
and signatures of officers
signing Loan Agreement and those
officers and employees authorized
to give notice of borrowing; and
f) LAC and Wings shall have entered
into a merger agreement in form
and substance satisfactory to the
Banks providing for the
acquisition to be effected by a
cash tender offer for at least
66% of Wing's common stock and
subsequent merger.
(g) terms and conditions of the
tender offer shall be in
substance as disclosed to the
Banks prior to their commitments
but shall in all events include
that LAC shall own and control
the number of shares of Wing's
common stock as shall be
necessary to approve the merger
without the affirmative vote or
approval of any other
shareholders; the conditions to
the consummation of the tender
offer shall have been satisfied
and shall not have been waived,
except for conditions (x) not
material to the combined entity
or the prospects and timing of
the consummation of the merger
and (y) not relating to the
legality, validity or legal
effect of the financing; and
tendered shares shall have been
accepted for payment pursuant to
the tender offer in accordance
with the terms of the tender
offer.
(h) evidence satisfaction to the
Documentation Agent and
Administrative Agent that all
other necessary licenses, permits
and governmental and third-party
filings, consents and approvals
for the acquisition and merger
have been made or obtained and
remain in full force and effect,
except for those (x) not material
to the combined entity or the
prospects and timing of the
consummation of the merger and
(y) not relating to the legality,
validity or legal effect of the
financing; and the tender offer
and the financing thereof shall
be in compliance with all laws
and regulations (including,
without limitation, the margin
regulations).
January 4, 1996 Page 6
(B) All Loans: (i) accuracy of
Representations and Warranties, with the
exception, for Loans other than the
tender offer funding, of the
representations concerning litigation,
taxes, ERISA, no Material Adverse Effect
since date of pro forma financial
statements delivered to Banks and
environmental matters and (ii) no Event
of Default.
REPRESENTATIONS AND WARRANTIES
- ------------------------------
CORPORATE EXISTENCE & POWER: Company and its Significant Subsidiaries
duly organized, validly existing and in
good standing in respective state of
incorporation and qualified to do
business where necessary, except where
failure to be so qualified would not be
reasonably likely to have a Material
Adverse Effect. Company has all necessary
corporate power to enter into and perform
under Loan Agreement and Notes.
"Material Adverse Effect" means a
material adverse effect on (a) ability of
Company to perform obligations under
Agreement or Notes, (b) validity or
enforceability of Agreement or Notes, (c)
rights and remedies of any Bank or Agents
or (d) timely payment of principal of or
interest on the Loans or other amounts
paid in connection therewith.
"Significant Subsidiary" means a
Subsidiary with total assets, net of
depreciation and amortization and after
intercompany eliminations, in excess of
$100,000,000.
"Subsidiary" as defined does not include
any Exempt Subsidiary, but otherwise
means any entity of which Company owns a
sufficient number of securities having
ordinary voting power to elect a majority
of the board of directors or other
governing body.
"Restricted Subsidiary" means any
Significant Subsidiary, any Subsidiary
that has substantially all of its
property located in the United States and
that owns a Principal Property and any
other Subsidiary designated from time to
time by the Company as a "Restricted
Subsidiary." Subsidiaries of a Restricted
Subsidiary are not Restricted
Subsidiaries solely by virtue of such
Subsidiary status. If at the end of any
fiscal quarter, the aggregate net assets
of the Company and all of its Restricted
Subsidiaries are less than a specified
percentage of the total net assets of the
Company and its Subsidiaries taken as a
whole, as reported in the Company's
financial statements (the "Total Net
Assets") , the Company shall designate
another Subsidiary or Subsidiaries as
Restricted Subsidiaries such that the net
assets of such Subsidiary or Subsidiaries
that are not encumbered to secure Debt,
plus the net assets of the Company and
the other Restricted Subsidiaries, equals
or exceeds a specified percentage of the
Total Net Assets.
January 4, 1996 Page 7
Thereafter, the Company may designate a
Subsidiary or Subsidiaries (other than a
Restricted Subsidiary as defined without
regard to any prior such designations by
the Company) as no longer a Restricted
Subsidiary, provided that the aggregate
net assets of the Company and all of its
Restricted Subsidiaries after giving
effect thereto shall equal or exceed a
specified percentage of the Total Net
Assets.
"Exempt Subsidiary" means Lockheed Martin
Finance Corporation, Martin Marietta
Materials, Inc. and any other entity of
which Company owns a sufficient number of
securities having ordinary voting power
to elect a majority of the board of
directors or other governing body, the
book value, net of depreciation,
amortization and intercompany
eliminations, of the assets of which,
when aggregated with the book values, net
of depreciation, amortization and
intercompany eliminations, of the assets
of any other Exempt Subsidiary other than
Lockheed Martin Finance Corporation or
Martin Marietta Materials, Inc., do not
exceed a specified percentage of the
value of total assets of Company and its
consolidated subsidiaries, and which are
designated as such by Company.
"Principal Property" defined as any
manufacturing property with a book value,
net of depreciation and amortization, in
excess of $5,000,000 .
NO CONTRAVENTION: Execution, delivery and performance of
Loan Agreement and Notes do not
contravene, or constitute a default
under, Company's or Guarantors' charter
documents or any applicable laws or
regulations or any agreements or
instruments to which Company is a party
which would be reasonably likely to have
a Material Adverse Effect.
CORPORATE AUTHORIZATION: Company and Guarantors have taken all
corporate action necessary for entering
into Loan Agreement and Notes and
consummating transaction thereunder; Loan
Agreement and Notes are valid, binding
and enforceable against Company and
Guarantors, subject to bankruptcy and
equity exceptions.
FINANCIAL INFORMATION: Pro forma financial statements delivered
to Banks fairly present financial
position as of date of such financial
statements on a pro forma basis
consistent with the assumptions stated
therein; includes representation that no
Material Adverse Effect has occurred
since date of such financial statements.
LITIGATION; TAXES: No litigation exists against Company or
any Subsidiary, an adverse determination
of which is reasonably likely to occur
and if so adversely determined would be
reasonably likely to have a
January 4, 1996 Page 8
Material Adverse Effect and, at the time
of the tender offer closing, there shall
be (i) no injunction against consummation
of the tender offer, (ii) no litigation
pending or threatened which gives rise to
a material likelihood that the merger
will not be consummated or will be
subject to the undue delay and (iii) no
litigation pending or threatened, other
than that as to which there is not a
material likelihood of success,
challenging the legality, validity or
legal effect of the financing. Company
and each Subsidiary have filed all
material tax returns and paid all taxes
due thereunder when due, except for those
not delinquent, those the nonpayment of
which would not be reasonably likely to
result in a Material Adverse Effect and
those contested in good faith.
GOVERNMENTAL APPROVALS: No governmental consents or approvals
required in connection with Loan
Agreement and Notes, except routine
filings under Securities Exchange Act of
1934 and the filing of International
Capital Form CQ-1's.
MARGIN REGULATIONS: No part of proceeds of Loans will be used
in violation of Federal Reserve
Regulation U, G, T and X.
PARI PASSU OBLIGATIONS: Claims of other parties to Loan Agreement
against Company will not be subordinate
to, and will rank at least pari passu
with, claims of other unsecured creditors
of Company, except as may be provided for
under applicable bankruptcy laws.
NO DEFAULTS: No payment default in respect of Material
Debt.
"Material Debt" defined as debt of
Company and/or one or more of its
Subsidiaries exceeding $100,000,000 in an
aggregate principal amount.
ERISA: Company and related ERISA entities (the
"ERISA Group") have fulfilled their
obligations under minimum funding
standards of ERISA and the Internal
Revenue Code and are in substantial
compliance with all material provisions
of ERISA and Internal Revenue Code with
respect to each ERISA plan. ERISA Group
has not (i) sought a waiver of minimum
funding standards, (ii) failed to make a
contribution to any plan or made any
amendment to any plan which could result
in material lien or posting of material
bonds or (iii) incurred material
liability under Title IV of ERISA (other
than for payment of premiums under
ERISA).
DISCLOSURE: Written information provided to the Banks
in connection with Loan Agreement,
collectively, does not contain any
misstatement of a material fact or omit
to state a fact necessary to make the
statements contained therein, in light of
the circumstances under
January 4, 1996 Page 9
which they were made, not misleading in
any material respect on and as of the
date of Loan Agreement.
ENVIRONMENTAL: Based upon Company's periodic review of
its ongoing operations (and those of its
Restricted Subsidiaries), to the best
knowledge of Company, ongoing operations
at the Principal Properties are currently
being conducted in substantial compliance
with applicable environmental laws,
except to the extent that noncompliance
would not be reasonably likely to result
in a material adverse change in the
consolidated financial conditions of
Company and its consolidated
subsidiaries.
COVENANTS Covenants customary for this type of
- --------- transaction, including:
ACCOUNTING: Except as otherwise specified, accounting
measurements will be per GAAP as in
effect from time to time. Company or
Required Banks have ability to request
covenant change if change in GAAP affects
covenant; effect of change in GAAP then
suspended until new covenant negotiated.
INFORMATION/REPORTING/DISTRIBUTION: 60 day delivery for quarterly financial
reports and 120 day delivery for annual
financial reports; delivery of such
statements as filed with the SEC
satisfies requirement. Documents
distributed to shareholders or filed with
the SEC (with certain exceptions) to be
distributed to the Banks promptly after
becoming available. Company to provide
prompt notice of (i) the occurrence of
any Default and (ii) certain litigation.
COMPUTATION OF COVENANTS: Company to provide with each distribution
of annual and quarterly financial
statements computations of leverage
ratio.
MAINTENANCE OF EXISTENCE: Company and Significant Subsidiaries will
preserve and maintain corporate
existence. Company may terminate business
or corporate existence of a Subsidiary
which in Company's judgment is no longer
necessary or desirable. Mergers,
consolidations and transfers of assets
permitted as set forth below. No
prohibition on merger of a Subsidiary
into Company, or merger or consolidation
of a Subsidiary with or into another
entity if surviving corporation is a
Subsidiary and no Default shall have
occurred and be continuing.
MERGERS, CONSOLIDATIONS &
SALES OF ASSETS: Merger, consolidation, transfer or
conveyance of substantially all Company's
assets prohibited unless resulting
corporation is Company or a consolidated
subsidiary that is a domestic corporation
that expressly assumes payment of
indebtedness and performance of covenants
under Loan Agreement, no Default shall
have occurred and be continuing after
giving effect to transaction
January 4, 1996 Page 10
and if Company is not surviving
corporation, there has been delivered an
Officer's Certificate and legal opinion
of its counsel stating that such
transaction complies with Loan Agreement.
Upon any such transaction, the entity
formed by such transaction shall succeed
to and be substituted for Company under
Loan Agreement. This covenant shall not
apply to any sale of Wing's stock, so
long as it is margin stock, for value.
LIMITATION ON LIENS: No liens on assets of the Company or any
Restricted Subsidiary to secure Debt
allowed except (i) liens existing on the
date of Loan Agreement, (ii) liens on
property of a corporation existing at the
time the corporation is merged or
consolidated with Company or a Restricted
Subsidiary, (iii) liens securing debt
owing to Company or another Restricted
Subsidiary, (iv) mechanic's liens, (v)
liens on property of a corporation
existing at the time the corporation
becomes a Restricted Subsidiary, (vi)
liens on property at time of acquisition
of property and purchase money liens,
including liens incurred in connection
with industrial revenue bonds, to secure
payment of purchase price or indebtedness
incurred or guaranteed prior to, at the
time of or within one year after
acquisition, completion of full operation
of property if indebtedness incurred or
guaranteed to pay purchase price of
property or improvements, (vii) liens in
favor of any customer (including any
governmental authority) to secure
partial, progress, advance or other
payments or performance pursuant to any
contract or statute or to secure any
related indebtedness or to secure Debt
guaranteed by a governmental authority,
(viii) liens on cash or certificates of
deposit or other bank obligations
securing indebtedness in aggregate
principal amount not in excess of
$200,000,000 (which may be in a different
currency) of an amount substantially
equal in value (at the time the lien is
created) to such cash, certificates of
deposit or other obligations, (ix) any
extension, renewal, replacement of the
foregoing, (x) liens equally and ratably
severing this credit facility and such
Debt and (xi) liens not otherwise
referred to securing Debt that does not
in the aggregate exceed the greater of
10% of stockholders' equity at the end of
the preceding fiscal quarter or
$1,000,000,000. Liens described in (ii),
(v) and (vi) shall not include any liens
on stock or assets of "Wings" or its
subsidiaries incurred in contemplation of
the merger. This covenant shall not apply
to margin stock in excess of 25% in value
of the assets covered by this covenant.
PAYMENT OF OBLIGATIONS: Company and each Significant Subsidiary
will pay all material taxes, assessments,
and governmental charges imposed upon it
and all lawful material claims prior to
date any penalty accrues or lien imposed
except for (i) those contested in good
faith, (ii) those not delinquent and
(iii) those the nonpayment of which would
not be reasonably likely to result in a
Material Adverse Effect.
January 4, 1996 Page 11
COMPLIANCE WITH LAWS: Company and each Significant Subsidiary
shall comply with all laws, a breach of
which would be reasonably likely to have
a Material Adverse Effect, except where
contested in good faith and by proper
proceedings.
INSURANCE: Company and each Significant Subsidiary
will maintain insurance as is customarily
carried by owners of similar businesses
and properties (or to the customary
extent, self-insurance).
MAINTENANCE OF PROPERTIES: Company and its Significant Subsidiaries
will keep all properties necessary in its
business in good working order, normal
wear and tear excepted; Company or any
Subsidiary may discontinue operation
and/or maintenance of such properties if
discontinuance is in Company's (or such
Subsidiary's) judgment desirable.
LEVERAGE RATIO: Ratio of Debt (as defined) as of the last
day of any fiscal quarter to the sum of
(i) Debt (as defined) and (ii)
Stockholders' Equity (as defined) at
levels to be determined.
STOCKHOLDERS' EQUITY AS DEFINED: Consolidated Stockholders' Equity of
Company and consolidated Subsidiaries as
reported.
DEBT AS DEFINED: Debt shall mean, without duplication:
(i) all debt, including ESOP guarantees
and capitalized lease obligations,
reported as debt in the
consolidated financial statements
of the Company and its consolidated
Subsidiaries, plus
----
(ii) all indebtedness for borrowed money
and capitalized lease obligations
incurred by third parties
guaranteed by Company and its
consolidated Subsidiaries not
otherwise reported as debt in the
consolidated financial statements
of the Company and its consolidated
Subsidiaries.
USE OF LOANS: Proceeds of the Loans may be used for any
lawful corporate purpose.
WAIVERS: Required Banks may waive compliance with
any covenant (other than certain
provisions relating to principal
payments, fees, interest rate, due dates
and guarantees, which require consent of
all Banks).
EVENTS OF DEFAULT
- -----------------
PRINCIPAL PAYMENTS: Failure to pay when due.
January 4, 1996 Page 12
INTEREST AND FACILITY FEE PAYMENTS: Failure to pay within 5 days of due date.
OTHER FEES: Failure to pay within 30 days after
written request for payment thereof.
BREACH OF CERTAIN COVENANTS: Failure to perform under the following
covenants:
1) Merger/Consolidation Restrictions
2) Limitations on Liens
3) Leverage Ratio
BREACH OF OTHER COVENANTS: Failure to perform within 30 days after
written notice.
REPRESENTATIONS: 5 days to correct after written notice.
ACCELERATION OF DEBT: Any Material Debt shall be accelerated by
reasons of default thereunder or not paid
when due and corrective action shall not
have been taken within 5 days after
written notice thereof.
BANKRUPTCY: Company or any Significant Subsidiary
shall commence voluntary proceeding under
bankruptcy laws, or seek appointment of
receiver or trustee, or shall consent to
any of the foregoing; or makes a general
assignment for benefit of creditors; or
fails generally to pay its debts as they
become due; or takes any corporate action
to authorize the foregoing.
Involuntary case or proceeding commenced
against Company or any Significant
Subsidiary seeking relief under
bankruptcy laws or seeking appointment of
trustee or receiver, and such proceeding
shall remain undismissed and unstayed for
a period of 90 days; or an order for
relief shall be entered against Company
or any Significant Subsidiary under
federal bankruptcy laws.
FINAL JUDGMENTS: Final judgment requiring payment of
$150,000,000 or more that has not been
satisfied or stayed within 60 days and
such failure to satisfy or stay is
unremedied for 5 days after notice.
ERISA: A final judgment either (1) requiring
termination or imposing liability under
Title IV of ERISA (other than for
premiums) in respect of, or requiring a
trustee to be appointed pursuant to Title
IV of ERISA to administer, any plan or
plans having unfunded liabilities in
excess of $150,000,000 or (2) in an
action relating to a Multiemployer Plan
involving a current payment obligation in
excess of $150,000,000, which judgment in
either case has not been satisfied or
stayed within 60 days and such failure to
satisfy or stay is unremedied for 5 days
after notice.
January 4, 1996 Page 13
CHANGE IN OWNERSHIP OF STOCK: Any person or group of persons (other
than employee benefit or stock ownership
plan of Company) has acquired shares of
capital stock having ordinary voting
power to elect a majority of the Board of
Directors of Company or change in
majority of Board of Directors within a
two-year period.
GUARANTY INVALIDATED: Revocation or invalidation of guaranty of
the Loan Agreement and the Notes.
REMEDIES: Commitments terminate and loan/interest
become due and payable upon the receipt
of notice from Documentation Agent
(automatic in case of bankruptcy).
NOTICES OF DEFAULT: All notices or requests specified in
Events of Default provisions to be given
by Documentation Agent at the request of
the Required Banks.
MISCELLANEOUS
- -------------
GOVERNING LAW/SUBMISSION
TO JURISDICTION: New York law governs. Parties submit to
the jurisdiction of New York courts for
all legal proceedings and waive any
objection to the laying of venue of any
such proceeding brought in such a court
and claim of inconvenient forum.
WAIVER OF JURY TRIAL: Company, Agents and Banks each waive
rights to trial by jury.
REQUIRED BANKS: Banks holding in excess of 50% of
outstanding Commitments.
INCREASED COSTS/CAPITAL ADEQUACY/
ILLEGALITY: Increased cost/capital adequacy/
illegality provisions to be included and
will generally provide that no increased
cost or capital adequacy payment may be
claimed if allocable to periods prior to
30 days prior to date Company is notified
of claim by a Bank; no compensation for
increases in capital not occasioned by a
Change in Law or beyond that required by
a Change in Law. Any Bank requesting
additional compensation shall designate a
different lending office if such
designation will avoid the need for, or
reduce the amount of, such compensation
or permit the Bank to make or maintain
any LIBOR Loan, so long as such
designation is not disadvantageous to
such Bank. Any Regulation D charges shall
be billed through Administrative Agent.
"Change in Law" as defined is the
adoption of any law, rule or regulation,
or any change therein, or any change in
the interpretation or administration
thereof, after Closing Date, by any
governmental authority, central bank or
comparable agency or
January 4, 1996 Page 14
compliance with any directive (whether or
not having the force of law) of any such
entity.
INDEMNITY: Company to indemnify Banks for (i)
funding costs and/or losses (excluding
loss of margin) if prepayment or
conversion of a LIBOR Loan or a CD Loan
occurs prior to the end of an Interest
Period or if Company fails to consummate
a LIBOR Loan or a CD Loan because
conditions precedent to borrowing or
conversion not satisfied and (ii)
reasonable costs and expenses of
litigation in response to or in defense
of any proceeding brought or threatened
against a Bank relating to the Agreement
or Company's use of proceeds of the
Loans.
EXPENSES: In connection with preparing Loan
Agreement, Company will pay reasonable
fees and disbursements of special counsel
to Agents and reasonable out-of-pocket
expenses incurred by Agents. In
connection with an Event of Default and
enforcement proceedings, Company will pay
reasonable out-of-pocket expenses of
Agents and Banks, including reasonable
fees and expenses of counsel (including
in-house counsel).
DOCUMENT PREPARATION: Loan Agreement to be prepared by Davis
Polk & Wardwell.
January 4, 1996 Page 15
JP MORGAN
LOCKHEED MARTIN CORPORATION
PRICING SCHEDULE
364-DAY REVOLVER
The LIBOR Margin, the CD Margin and the Facility Fee shall be as
specified below (in basis points per annum).
====================================================================================================================================
LEVEL I LEVEL II LEVEL III LEVEL IV
====================================================================================================================================
BASIS FOR PRICING If Company is rated A or If Company is rated A- If Company is rated If Company is rated BBB
better by S&P or A2 or or better by S&P or A3 BBB+ or better by S&P or better by S&P
-- --
better by Moody's or better by Moody's or Baa1 or better by or Baa2 or better by
-- --
Moody's Moody's
- ------------------------------------------------------------------------------------------------------------------------------------
FACILITY FEE 6.00 7.00 8.00 9.00
- ------------------------------------------------------------------------------------------------------------------------------------
LIBOR + Greater than 50% 16.50 18.00 22.00 26.00
Less than 50% 16.50 18.00 27.00 31.00
- ------------------------------------------------------------------------------------------------------------------------------------
CD + Greater than 50% 29.00 30.50 34.50 38.50
Less than 50% 29.00 30.50 39.50 43.50
- ------------------------------------------------------------------------------------------------------------------------------------
UNUSED COST 6.00 7.00 8.00 9.00
- ------------------------------------------------------------------------------------------------------------------------------------
USED COST Greater than 50% 22.50 25.00 30.00 35.00
Less than 50% 22.50 25.00 35.00 40.00
====================================================================================================================================
SUMMARY OF TERMS AND CONDITIONS
FOR LOCKHEED MARTIN CORPORATION
BORROWER: Lockheed Martin Corporation ("Company"),
directly or indirectly through LAC
Acquisition Corp.
AMOUNT: $5,000,000,000.
PURPOSE: The purchase of the common stock of
"Wings" and general corporate purposes
including commercial paper backup.
ARRANGER AND SYNDICATION AGENT: J.P. Morgan Securities Inc.
CO-ARRANGER: BA Securities, Inc.
MANAGING AGENTS: Citibank, N.A.
DOCUMENTATION AGENT: Morgan Guaranty Trust Company of New
York.
ADMINISTRATIVE AGENT: Bank of America National Trust and
Savings Association.
FACILITY DESCRIPTION: Five-year facility on a fully revolving
basis.
BORROWING OPTIONS: Committed Loans consisting of Base Rate
Loans, CD Loans and LIBOR Loans.
Uncommitted Money Market bid rate
options ("Money Market Loans").
LENDERS: Syndicate of lenders acceptable to
Company and Arranger ("Banks").
TIMING: Closing to occur by May 1996.
GUARANTORS: Lockheed Corporation, Martin Marietta
Corporation, Martin Marietta
Technologies, Inc., LAC Acquisition
Corporation or the Company if LAC
Acquisition Corp. is the Borrower .
COMMITMENTS AND FEES:
- ---------------------
COMMITMENT: With respect to Committed Loans, each
Bank will fund each draw in proportion
to its Commitment.
With respect to Money Market Loans, each
Bank may, but shall have no obligation
to, make offers to make such Loans
pursuant to requests submitted by
Company. Drawdown of Money
January 4, 1996 Page 1
Market Loans will be deemed a use of
Commitments of all Banks on pro rata
basis.
REDUCTION OR CANCELLATION OF
COMMITMENTS: Commitments cancelable in whole or in
part (ratably reduced in amounts of at
least $25,000,000 and multiples of
$5,000,000 in excess thereof) at
election of Company upon not less than
three business days' notice.
TERMINATION OF BANKS/REPLACING BANKS: Company may terminate the entire
Commitment of any Bank upon 10 business
days' notice if a Bank demands increased
costs or capital adequacy payments from
Company or if the commitment of a Bank
to make LIBOR Loans is suspended due to
its inability to make such Loans.
Company may replace such Bank with a new
or existing Bank.
FACILITY FEE: To be paid quarterly in arrears on the
daily average of the total Commitments
at a rate determined by reference to
attached Pricing Schedule. Facility Fee
will increase if ratings downgraded and
decrease if ratings upgraded.
Facility Fee computed on the basis of a
year of 365 or 366 days over the actual
number of days elapsed. Any change in
Facility Fee shall become effective the
day on which a rating agency shall have
announced a ratings change.
INTEREST RATES
- --------------
INTEREST RATE OPTIONS: LIBOR, CD Rate or Base Rate at the
election of Company.
LIBOR INTEREST PERIOD OPTIONS: One, two, three or six months, as
selected by Company. Twelve-month LIBOR
-----
option available upon request of Company
and consent of all Banks.
CD RATE INTEREST PERIOD OPTIONS: 30, 60, 90 or 180 days, as selected by
Company.
RATE BASIS: LIBOR
CD Rate - Adjusted CD Rate.
3 LIBOR/CD Reference Banks to be
appointed.
Base Rate - higher of Reference Rate as
announced by Administrative Agent or
federal funds rate plus .5%.
Any change in Base Rate effective on the
day change is announced by
Administrative Agent.
January 4, 1996 Page 2
INTEREST PAYMENT: Interest on LIBOR Loans, CD Loans and
Base Rate Loans (if federal funds rate
is effective rate) shall be computed on
the basis of a year of 360 days and paid
for the actual number of days elapsed.
Interest on Base Rate Loans (if
Reference Rate is effective rate) shall
be computed on the basis of a year of
365 or 366 days, as the case may be, and
paid for the actual number of days
elapsed. Interest accrued on Base Rate
Loans shall be paid quarterly. Interest
accrued on LIBOR Loans shall be paid on
the last day of the Interest Period, on
the date of any prepayment or conversion
thereof, together with breakage costs,
if any, and in the case of a LIBOR Loan
with an Interest Period of twelve-
months, on the six-month anniversary of
the making of the LIBOR Loan. Interest
accrued on CD Loans shall be paid on the
last day of the Interest Period and on
the date of any prepayment or conversion
thereof, together with breakage costs,
if any. If any CD Loan or portion
thereof shall have an Interest Period of
less than 30 days, such portion shall
bear interest at the Base Rate during
such period.
Interest obligations accrue from the day
funds are received through the day
before principal is repaid.
RATE SPREAD: For Base Rate Loans, Base Rate. For
LIBOR Loans, LIBOR plus LIBOR Margin.
For CD Loans, Adjusted CD Rate plus CD
Margin. LIBOR Margin and CD Margin
determined by reference to attached
Pricing Schedule. LIBOR Margin and CD
Margin will increase if ratings
downgraded and decrease if ratings
upgraded.
Any change in the LIBOR Margin or CD
Margin shall become effective for LIBOR
Loans or CD Loans, as applicable, the
day on which a rating agency shall have
announced a ratings change.
POST DEFAULT RATE: 2% per annum above the Base Rate for
such date.
BORROWING PROCEDURES
- --------------------
MINIMUM DRAW: $10,000,000 with additional increments
of $1,000,000. No per draw limit up to
total unused Commitments.
NOTIFICATION/TIMING: Base Rate: To Administrative Agent, by
11:00 a.m. New York City time on day of
draw.
LIBOR: To Administrative Agent, by 1:00
p.m. New York City time, 3 business days
before draw or, in the case of an
Interest Period of twelve-months, by
1:00 p.m. New York City time, 4 business
days before draw.
January 4, 1996 Page 3
CD Rate: To Administrative Agent, by
1:00 p.m. New York City time, 2 business
days before draw.
An officer or a Designated
Representative (certain designated
employees) to provide notice to
Administrative Agent. An officer or
Designated Representative may provide
telephonic notice, to be followed by
appropriately authorized written notice.
FUND DELIVERY: Banks to deliver funds to Administrative
Agent by 1:00 p.m. New York City time.
Administrative Agent to wire transfer
loan principal (U.S. Dollars) in
immediately available funds to an
account to be designated by Company
immediately upon receipt, but not later
than 4:00 p.m. New York City time.
Administrative Agent may make up a
shortfall of funds received. Any Bank
not making its pro rata share of any
Loan available to Administrative Agent
and Company, if it does not repay such
share of any Loan, at the required date
and time severally agree to repay
Administrative Agent such shortfall,
with interest (at the federal funds
rate). If a Bank fails to fund a Loan,
amounts received by Administrative Agent
will be deemed to have been paid to Bank
and made available to Administrative
Agent for the Loan.
CONVERSION/CONTINUATION: Company may (i) convert all or any
portion of outstanding Base Rate Loans
equal to $10,000,000 and multiples of
$1,000,000 in excess thereof to LIBOR
Loans or CD Loans, (ii) convert all or
any portion of outstanding LIBOR Loans
equal to $10,000,000 and multiples of
$1,000,000 in excess thereof to Base
Rate Loans or CD Loans, and (iii)
convert all or any portion of
outstanding CD Loans equal to
$10,000,000 and multiples of $1,000,000
in excess thereof to Base Rate Loans or
LIBOR Loans. Upon the expiration of any
Interest Period applicable to a LIBOR
Loan or a CD Loan, Company may continue
all or any portion of such Loans equal
to $10,000,000 and multiples of
$1,000,000 in excess thereof as LIBOR
Loans or CD Loans, as applicable.
Written or telephonic notice of such
conversion/continuation shall be
delivered to Administrative Agent no
later than (i) 1:00 p.m. New York City
time (a) at least 3 business days in
advance of the proposed date of
conversion to or continuation of LIBOR
Loans or (b) at least 2 business days in
advance of the proposed date of
conversion to or continuation of CD
Loans and (ii) 11:00 a.m. New York City
time on the day of the proposed
conversion to a Base Rate Loan.
Telephonic notice of
conversion/continuation to be promptly
followed by a written notice thereof. If
timely notice of conversion/continuation
not provided by Company as to any LIBOR
loan or CD Loan and such Loan is not
repaid by
January 4, 1996 Page 4
Company at the end of the applicable
Interest Period thereof, such Loan shall
be converted to a Base Rate Loan.
PREPAYMENTS: Base Rate Loans can be repaid in whole
or in part on any day without penalty or
premium. CD Loans can be repaid with 1
business day's notice. LIBOR Loans can
be repaid with 3 business days' notice.
Each partial prepayment shall be in an
aggregate amount of not less than
$10,000,000 and shall include interest
accrued on the Loans to the prepayment
date and any breakage costs (excluding
loss of Margin).
PAYMENTS TO BANKS: All payments by Company to Banks under
Loan Agreement are to be in U.S.
Dollars, free of taxes, and wire
transferred to Administrative Agent in
immediately available funds no later
than 2:00 p.m. New York City time.
PARTICIPATIONS/ASSIGNMENTS: Assignments may be made to Eligible
Institutions with the prior notification
to the Administrative Agent and prior
written consent of Company, which shall
not be unreasonably withheld, in minimum
amounts of $15,000,000. Withholding of
consent is not unreasonable if based
solely on desire to manage loan
exposures to proposed assignee or avoid
payment of additional increased costs of
taxes payable by Company by reason of
such assignment. No Company consent
required for assignment to an affiliate
of a Bank. Each Bank must retain at
least $15,000,000 commitment.
Participations permitted without consent
of Company upon prior written
notification to Company (no prior
notification required in the case of
participations of Money Market Loans).
Transferability of voting rights limited
to change in principal, rate, fees and
term. "Eligible Institution" means any
commercial bank having total assets in
excess of $3,000,000,000 or the
equivalent amount of local currency of
such bank or affiliates of such bank
that are financial institutions.
CONDITIONS PRECEDENT
- --------------------
(A) Effectiveness of Loan Agreement:
customary for this type of transaction,
including:
1) termination of, and payment of
amounts due under, existing revolving
credit agreements.
2) execution and delivery of:
a) opinion of General Counsel or
Assistant General Counsel to
Company and opinion of special
counsel to company;
January 4, 1996 Page 5
b) opinion of Bank counsel;
c) certified copies of charters,
bylaws, and corporate action
authoring Loan Agreement;
d) note for each Bank, if
requested;
e) certificate indicating
incumbency and signatures of
officers signing Loan Agreement
and those officers and employees
authorized to give notice of
borrowing; and
f) LAC and Wings shall have entered
into a merger agreement in form
and substance satisfactory to
the Banks providing for the
acquisition to be effected by a
cash tender offer for at least
66% of Wing's common stock and
subsequent merger.
(g) terms and conditions of the
tender offer shall be in
substance as disclosed to the
Banks prior to their commitments
but shall in all events include
that LAC shall own and control
the number of shares of Wing's
common stock as shall be
necessary to approve the merger
without the affirmative vote or
approval of any other
shareholders; the conditions to
the consummation of the tender
offer shall have been satisfied
and shall not have been waived,
except for conditions (x) not
material to the combined entity
or the prospects and timing of
the consummation of the merger
and (y) not relating to the
legality, validity or legal
effect of the financing; and
tendered shares shall have been
accepted for payment pursuant to
the tender offer in accordance
with the terms of the tender
offer.
(h) evidence satisfaction to the
Documentation Agent and
Administrative Agent that all
other necessary licenses,
permits and governmental and
third-party filings, consents
and approvals for the
acquisition and merger have been
made or obtained and remain in
full force and effect, except
for those (x) not material to
the combined entity or the
prospects and timing of the
consummation of the merger and
(y) not relating to the
legality, validity or legal
effect of the financing; and the
tender offer and the financing
thereof shall be in compliance
with all laws and regulations
(including, without limitation,
the margin regulations).
January 4, 1996 Page 6
(B) All Loans: (i) accuracy of
Representations and Warranties, with the
exception, for Loans other than the
tender offer funding, of the
representations concerning litigation,
taxes, ERISA, no Material Adverse Effect
since date of pro forma financial
statements delivered to Banks and
environmental matters and (ii) no Event
of Default.
REPRESENTATIONS AND WARRANTIES
- ------------------------------
CORPORATE EXISTENCE & POWER: Company and its Significant Subsidiaries
duly organized, validly existing and in
good standing in respective state of
incorporation and qualified to do
business where necessary, except where
failure to be so qualified would not be
reasonably likely to have a Material
Adverse Effect. Company has all
necessary corporate power to enter into
and perform under Loan Agreement and
Notes.
"Material Adverse Effect" means a
material adverse effect on (a) ability
of Company to perform obligations under
Agreement or Notes, (b) validity or
enforceability of Agreement or Notes,
(c) rights and remedies of any Bank or
Agents or (d) timely payment of
principal of or interest on the Loans or
other amounts paid in connection
therewith.
"Significant Subsidiary" means a
Subsidiary with total assets, net of
depreciation and amortization and after
intercompany eliminations, in excess of
$100,000,000.
"Subsidiary" as defined does not include
any Exempt Subsidiary, but otherwise
means any entity of which Company owns a
sufficient number of securities having
ordinary voting power to elect a
majority of the board of directors or
other governing body.
"Restricted Subsidiary" means any
Significant Subsidiary, any Subsidiary
that has substantially all of its
property located in the United States
and that owns a Principal Property and
any other Subsidiary designated from
time to time by the Company as a
"Restricted Subsidiary." Subsidiaries of
a Restricted Subsidiary are not
Restricted Subsidiaries solely by virtue
of such Subsidiary status. If at the end
of any fiscal quarter, the aggregate net
assets of the Company and all of its
Restricted Subsidiaries are less than a
specified percentage of the total net
assets of the Company and its
Subsidiaries taken as a whole, as
reported in the Company's financial
statements (the "Total Net Assets") ,
the Company shall designate another
Subsidiary or Subsidiaries as Restricted
Subsidiaries such that the net assets of
such Subsidiary or Subsidiaries that are
not encumbered to secure Debt, plus the
net assets of the Company and the other
Restricted Subsidiaries, equals or
exceeds a specified percentage of the
Total Net Assets.
January 4, 1996 Page 7
Thereafter, the Company may designate a
Subsidiary or Subsidiaries (other than a
Restricted Subsidiary as defined without
regard to any prior such designations by
the Company) as no longer a Restricted
Subsidiary, provided that the aggregate
net assets of the Company and all of its
Restricted Subsidiaries after giving
effect thereto shall equal or exceed a
specified percentage of the Total Net
Assets.
"Exempt Subsidiary" means Lockheed
Martin Finance Corporation, Martin
Marietta Materials, Inc. and any other
entity of which Company owns a
sufficient number of securities having
ordinary voting power to elect a
majority of the board of directors or
other governing body, the book value,
net of depreciation, amortization and
intercompany eliminations, of the assets
of which, when aggregated with the book
values, net of depreciation,
amortization and intercompany
eliminations, of the assets of any other
Exempt Subsidiary other than Lockheed
Martin Finance Corporation or Martin
Marietta Materials, Inc., do not exceed
a specified percentage of the value of
total assets of Company and its
consolidated subsidiaries, and which are
designated as such by Company.
"Principal Property" defined as any
manufacturing property with a book
value, net of depreciation and
amortization, in excess of $5,000,000.
NO CONTRAVENTION: Execution, delivery and performance of
Loan Agreement and Notes do not
contravene, or constitute a default
under, Company's or Guarantors' charter
documents or any applicable laws or
regulations or any agreements or
instruments to which Company is a party
which would be reasonably likely to have
a Material Adverse Effect.
CORPORATE AUTHORIZATION: Company and Guarantors have taken all
corporate action necessary for entering
into Loan Agreement and Notes and
consummating transaction thereunder;
Loan Agreement and Notes are valid,
binding and enforceable against Company
and Guarantors, subject to bankruptcy
and equity exceptions.
FINANCIAL INFORMATION: Pro forma financial statements delivered
to Banks fairly present financial
position as of date of such financial
statements on a pro forma basis
consistent with the assumptions stated
therein; includes representation that no
Material Adverse Effect has occurred
since date of such financial statements.
LITIGATION; TAXES: No litigation exists against Company or
any Subsidiary, an adverse determination
of which is reasonably likely to occur
and if so adversely determined would be
reasonably likely to have a
January 4, 1996 Page 8
Material Adverse Effect and, at the time
of the tender offer closing, there shall
be (i) no injunction against
consummation of the tender offer, (ii)
no litigation pending or threatened
which gives rise to a material
likelihood that the merger will not be
consummated or will be subject to the
undue delay and (iii) no litigation
pending or threatened, other than that
as to which there is not a material
likelihood of success, challenging the
legality, validity or legal effect of
the financing. Company and each
Subsidiary have filed all material tax
returns and paid all taxes due
thereunder when due, except for those
not delinquent, those the nonpayment of
which would not be reasonably likely to
result in a Material Adverse Effect and
those contested in good faith.
GOVERNMENTAL APPROVALS: No governmental consents or approvals
required in connection with Loan
Agreement and Notes, except routine
filings under Securities Exchange Act of
1934 and the filing of International
Capital Form CQ-1's.
MARGIN REGULATIONS: No part of proceeds of Loans will be
used in violation of Federal Reserve
Regulation U, G, T and X.
PARI PASSU OBLIGATIONS: Claims of other parties to Loan
Agreement against Company will not be
subordinate to, and will rank at least
pari passu with, claims of other
unsecured creditors of Company, except
as may be provided for under applicable
bankruptcy laws.
NO DEFAULTS: No payment default in respect of
Material Debt.
"Material Debt" defined as debt of
Company and/or one or more of its
Subsidiaries exceeding $100,000,000 in
an aggregate principal amount.
ERISA: Company and related ERISA entities (the
"ERISA Group") have fulfilled their
obligations under minimum funding
standards of ERISA and the Internal
Revenue Code and are in substantial
compliance with all material provisions
of ERISA and Internal Revenue Code with
respect to each ERISA plan. ERISA Group
has not (i) sought a waiver of minimum
funding standards, (ii) failed to make a
contribution to any plan or made any
amendment to any plan which could result
in material lien or posting of material
bonds or (iii) incurred material
liability under Title IV of ERISA (other
than for payment of premiums under
ERISA).
DISCLOSURE: Written information provided to the
Banks in connection with Loan Agreement,
collectively, does not contain any
misstatement of a material fact or omit
to state a fact necessary to make the
statements contained therein, in light
of the circumstances under
January 4, 1996 Page 9
which they were made, not misleading in
any material respect on and as of the
date of Loan Agreement.
ENVIRONMENTAL: Based upon Company's periodic review of
its ongoing operations (and those of its
Restricted Subsidiaries), to the best
knowledge of Company, ongoing operations
at the Principal Properties are
currently being conducted in substantial
compliance with applicable environmental
laws, except to the extent that
noncompliance would not be reasonably
likely to result in a material adverse
change in the consolidated financial
conditions of Company and its
consolidated subsidiaries.
COVENANTS Covenants customary for this type of
- --------- transaction, including:
ACCOUNTING: Except as otherwise specified,
accounting measurements will be per GAAP
as in effect from time to time. Company
or Required Banks have ability to
request covenant change if change in
GAAP affects covenant; effect of change
in GAAP then suspended until new
covenant negotiated.
INFORMATION/REPORTING/DISTRIBUTION: 60 day delivery for quarterly financial
reports and 120 day delivery for annual
financial reports; delivery of such
statements as filed with the SEC
satisfies requirement. Documents
distributed to shareholders or filed
with the SEC (with certain exceptions)
to be distributed to the Banks promptly
after becoming available. Company to
provide prompt notice of (i) the
occurrence of any Default and (ii)
certain litigation.
COMPUTATION OF COVENANTS: Company to provide with each
distribution of annual and quarterly
financial statements computations of
leverage ratio.
MAINTENANCE OF EXISTENCE: Company and Significant Subsidiaries
will preserve and maintain corporate
existence. Company may terminate
business or corporate existence of a
Subsidiary which in Company's judgment
is no longer necessary or desirable.
Mergers, consolidations and transfers of
assets permitted as set forth below. No
prohibition on merger of a Subsidiary
into Company, or merger or consolidation
of a Subsidiary with or into another
entity if surviving corporation is a
Subsidiary and no Default shall have
occurred and be continuing.
MERGERS, CONSOLIDATIONS &
SALES OF ASSETS: Merger, consolidation, transfer or
conveyance of substantially all
Company's assets prohibited unless
resulting corporation is Company or a
consolidated subsidiary that is a
domestic corporation that expressly
assumes payment of indebtedness and
performance of covenants under Loan
Agreement, no Default shall have
occurred and be continuing after giving
effect to transaction
January 4, 1996 Page 10
and if Company is not surviving
corporation, there has been delivered an
Officer's Certificate and legal opinion
of its counsel stating that such
transaction complies with Loan
Agreement. Upon any such transaction,
the entity formed by such transaction
shall succeed to and be substituted for
Company under Loan Agreement. This
covenant shall not apply to any sale of
Wing's stock, so long as it is margin
stock, for value.
LIMITATION ON LIENS: No liens on assets of the Company or any
Restricted Subsidiary to secure Debt
allowed except (i) liens existing on the
date of Loan Agreement, (ii) liens on
property of a corporation existing at
the time the corporation is merged or
consolidated with Company or a
Restricted Subsidiary, (iii) liens
securing debt owing to Company or
another Restricted Subsidiary, (iv)
mechanic's liens, (v) liens on property
of a corporation existing at the time
the corporation becomes a Restricted
Subsidiary, (vi) liens on property at
time of acquisition of property and
purchase money liens, including liens
incurred in connection with industrial
revenue bonds, to secure payment of
purchase price or indebtedness incurred
or guaranteed prior to, at the time of
or within one year after acquisition,
completion of full operation of property
if indebtedness incurred or guaranteed
to pay purchase price of property or
improvements, (vii) liens in favor of
any customer (including any governmental
authority) to secure partial, progress,
advance or other payments or performance
pursuant to any contract or statute or
to secure any related indebtedness or to
secure Debt guaranteed by a governmental
authority, (viii) liens on cash or
certificates of deposit or other bank
obligations securing indebtedness in
aggregate principal amount not in excess
of $200,000,000 (which may be in a
different currency) of an amount
substantially equal in value (at the
time the lien is created) to such cash,
certificates of deposit or other
obligations, (ix) any extension,
renewal, replacement of the foregoing,
(x) liens equally and ratably severing
this credit facility and such Debt and
(xi) liens not otherwise referred to
securing Debt that does not in the
aggregate exceed the greater of 10% of
stockholders' equity at the end of the
preceding fiscal quarter or
$1,000,000,000. Liens described in (ii),
(v) and (vi) shall not include any liens
on stock or assets of "Wings" or its
subsidiaries incurred in contemplation
of the merger. This covenant shall not
apply to margin stock in excess of 25%
in value of the assets covered by this
covenant.
PAYMENT OF OBLIGATIONS: Company and each Significant Subsidiary
will pay all material taxes,
assessments, and governmental charges
imposed upon it and all lawful material
claims prior to date any penalty accrues
or lien imposed except for (i) those
contested in good faith, (ii) those not
delinquent and (iii) those the
nonpayment of which would not be
reasonably likely to result in a
Material Adverse Effect.
January 4, 1996 Page 11
COMPLIANCE WITH LAWS: Company and each Significant Subsidiary
shall comply with all laws, a breach of
which would be reasonably likely to have
a Material Adverse Effect, except where
contested in good faith and by proper
proceedings.
INSURANCE: Company and each Significant Subsidiary
will maintain insurance as is
customarily carried by owners of similar
businesses and properties (or to the
customary extent, self-insurance).
MAINTENANCE OF PROPERTIES: Company and its Significant Subsidiaries
will keep all properties necessary in
its business in good working order,
normal wear and tear excepted; Company
or any Subsidiary may discontinue
operation and/or maintenance of such
properties if discontinuance is in
Company's (or such Subsidiary's)
judgment desirable.
LEVERAGE RATIO: Ratio of Debt (as defined) as of the
last day of any fiscal quarter to the
sum of (i) Debt (as defined) and (ii)
Stockholders' Equity (as defined) at
levels to be determined.
STOCKHOLDERS' EQUITY AS DEFINED: Consolidated Stockholders' Equity of
Company and consolidated Subsidiaries as
reported.
DEBT AS DEFINED: Debt shall mean, without duplication:
(i) all debt, including ESOP
guarantees and capitalized lease
obligations, reported as debt in
the consolidated financial
statements of the Company and its
consolidated Subsidiaries, plus
----
(ii) all indebtedness for borrowed
money and capitalized lease
obligations incurred by third
parties guaranteed by Company and
its consolidated Subsidiaries not
otherwise reported as debt in the
consolidated financial statements
of the Company and its
consolidated Subsidiaries.
USE OF LOANS: Proceeds of the Loans may be used for
any lawful corporate purpose.
WAIVERS: Required Banks may waive compliance with
any covenant (other than certain
provisions relating to principal
payments, fees, interest rate, due dates
and guarantees, which require consent of
all Banks).
EVENTS OF DEFAULT
- -----------------
PRINCIPAL PAYMENTS: Failure to pay when due.
January 4, 1996 Page 12
INTEREST AND FACILITY FEE PAYMENTS: Failure to pay within 5 days of due
date.
OTHER FEES: Failure to pay within 30 days after
written request for payment thereof.
BREACH OF CERTAIN COVENANTS: Failure to perform under the following
covenants:
1) Merger/Consolidation Restrictions
2) Limitations on Liens
3) Leverage Ratio
BREACH OF OTHER COVENANTS: Failure to perform within 30 days after
written notice.
REPRESENTATIONS: 5 days to correct after written notice.
ACCELERATION OF DEBT: Any Material Debt shall be accelerated
by reasons of default thereunder or not
paid when due and corrective action
shall not have been taken within 5 days
after written notice thereof.
BANKRUPTCY: Company or any Significant Subsidiary
shall commence voluntary proceeding
under bankruptcy laws, or seek
appointment of receiver or trustee, or
shall consent to any of the foregoing;
or makes a general assignment for
benefit of creditors; or fails generally
to pay its debts as they become due; or
takes any corporate action to authorize
the foregoing.
Involuntary case or proceeding commenced
against Company or any Significant
Subsidiary seeking relief under
bankruptcy laws or seeking appointment
of trustee or receiver, and such
proceeding shall remain undismissed and
unstayed for a period of 90 days; or an
order for relief shall be entered
against Company or any Significant
Subsidiary under federal bankruptcy
laws.
FINAL JUDGMENTS: Final judgment requiring payment of
$150,000,000 or more that has not been
satisfied or stayed within 60 days and
such failure to satisfy or stay is
unremedied for 5 days after notice.
ERISA: A final judgment either (1) requiring
termination or imposing liability under
Title IV of ERISA (other than for
premiums) in respect of, or requiring a
trustee to be appointed pursuant to
Title IV of ERISA to administer, any
plan or plans having unfunded
liabilities in excess of $150,000,000 or
(2) in an action relating to a
Multiemployer Plan involving a current
payment obligation in excess of
$150,000,000, which judgment in either
case has not been satisfied or stayed
within 60 days and such failure to
satisfy or stay is unremedied for 5 days
after notice.
January 4, 1996 Page 13
CHANGE IN OWNERSHIP OF STOCK: Any person or group of persons (other
than employee benefit or stock ownership
plan of Company) has acquired shares of
capital stock having ordinary voting
power to elect a majority of the Board
of Directors of Company or change in
majority of Board of Directors within a
two-year period.
GUARANTY INVALIDATED: Revocation or invalidation of guaranty
of the Loan Agreement and the Notes.
REMEDIES: Commitments terminate and loan/interest
become due and payable upon the receipt
of notice from Documentation Agent
(automatic in case of bankruptcy).
NOTICES OF DEFAULT: All notices or requests specified in
Events of Default provisions to be given
by Documentation Agent at the request of
the Required Banks.
MISCELLANEOUS
- -------------
GOVERNING LAW/SUBMISSION
TO JURISDICTION: New York law governs. Parties submit to
the jurisdiction of New York courts for
all legal proceedings and waive any
objection to the laying of venue of any
such proceeding brought in such a court
and claim of inconvenient forum.
WAIVER OF JURY TRIAL: Company, Agents and Banks each waive
rights to trial by jury.
REQUIRED BANKS: Banks holding in excess of 50% of
outstanding Commitments.
INCREASED COSTS/CAPITAL ADEQUACY/
ILLEGALITY: Increased cost/capital adequacy/
illegality provisions to be included and
will generally provide that no increased
cost or capital adequacy payment may be
claimed if allocable to periods prior to
30 days prior to date Company is
notified of claim by a Bank; no
compensation for increases in capital
not occasioned by a Change in Law or
beyond that required by a Change in Law.
Any Bank requesting additional
compensation shall designate a different
lending office if such designation will
avoid the need for, or reduce the amount
of, such compensation or permit the Bank
to make or maintain any LIBOR Loan, so
long as such designation is not
disadvantageous to such Bank. Any
Regulation D charges shall be billed
through Administrative Agent.
"Change in Law" as defined is the
adoption of any law, rule or regulation,
or any change therein, or any change in
the interpretation or administration
thereof, after Closing Date, by any
governmental authority, central bank or
comparable agency or
January 4, 1996 Page 14
compliance with any directive (whether
or not having the force of law) of any
such entity.
INDEMNITY: Company to indemnify Banks for (i)
funding costs and/or losses (excluding
loss of margin) if prepayment or
conversion of a LIBOR Loan or a CD Loan
occurs prior to the end of an Interest
Period or if Company fails to consummate
a LIBOR Loan or a CD Loan because
conditions precedent to borrowing or
conversion not satisfied and (ii)
reasonable costs and expenses of
litigation in response to or in defense
of any proceeding brought or threatened
against a Bank relating to the Agreement
or Company's use of proceeds of the
Loans.
EXPENSES: In connection with preparing Loan
Agreement, Company will pay reasonable
fees and disbursements of special
counsel to Agents and reasonable out-of-
pocket expenses incurred by Agents. In
connection with an Event of Default and
enforcement proceedings, Company will
pay reasonable out-of-pocket expenses of
Agents and Banks, including reasonable
fees and expenses of counsel (including
in-house counsel).
DOCUMENT PREPARATION: Loan Agreement to be prepared by Davis
Polk & Wardwell.
January 4, 1996 Page 15
JP MORGAN
LOCKHEED MARTIN CORPORATION
PRICING SCHEDULE
FIVE YEAR REVOLVER
The LIBOR Margin, the CD Margin and the Facility Fee shall be as
specified below (in basis points per annum).
====================================================================================================================================
LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V LEVEL VI
====================================================================================================================================
BASIS FOR PRICING If Company is If Company is If Company is If Company is If Company is If Company is
rated A or rated A- or rated BBB+ or rated BBB or rated BBB- by rated lower
better by S&P better by S&P better by S&P better by S&P S&P and Baa3 than BBB- by
---
or A2 or or A3 or better or Baa1 or or Baa2 or by Moody's S&P or Baa3 by
-- -- -- --
better by by Moody's better by better by Moody's or is
Moody's Moody's Moody's unrated and no
other level
applies
- ------------------------------------------------------------------------------------------------------------------------------------
FACILITY FEE 8.00 10.00 11.00 13.75 17.50 25.00
- ------------------------------------------------------------------------------------------------------------------------------------
LIBOR + Greater than 50% 14.50 15.00 19.00 21.25 32.50 50.00
Less than 50% 14.50 15.00 24.00 26.25 37.50 50.00
- ------------------------------------------------------------------------------------------------------------------------------------
CD + Greater than 50% 27.00 27.50 31.50 33.75 45.00 62.50
Less than 50% 27.00 27.50 36.50 38.75 50.00 62.50
- ------------------------------------------------------------------------------------------------------------------------------------
UNUSED COST 8.00 10.00 11.00 13.75 17.50 25.00
- ------------------------------------------------------------------------------------------------------------------------------------
USED COST Greater than 50% 22.50 25.00 30.00 35.00 50.00 75.00
Less than 50% 22.50 25.00 35.00 40.00 55.00 75.00
====================================================================================================================================
[BANK OF AMERICA LOGO]
January 5, 1996
Mr. Walter E. Skowronski
Vice President and Treasurer
Lockheed Martin Corporation
6801 Rockledge Drive
Bethesda, Maryland 20817
Dear Walt:
You have advised us that Lockheed Martin Corporation ("LMC" or the "Company")
proposes to raise up to $10,000,000,000 in new senior bank financing for the
purchase of the common stock of "Wings." It is also our understanding that the
Company's current revolving credit facility will be canceled and replaced with
the bank financing referred to above. In connection with this transaction, Bank
of America National Trust and Savings Association ("Bank of America") is pleased
to propose (i) a $5,000,000,000 364-day revolving credit facility and (ii) a
$5,000,000,000 5-year revolving credit facility (collectively the "Credit
Facilities") under the terms and conditions described in the attached Summary of
Terms and Conditions (the "Term Sheet") for the Credit Facilities.
Bank of America hereby commits to provide an aggregate commitment of up to
$1,375,000,000 subject to (i) acceptance by you as set forth in the last
paragraph of this letter by 5:00 p.m. (E.S.T.) on January 9, 1996, (ii)
acceptance by you of a commitment for $1,375,000,000 to the Credit Facilities
from Morgan Guaranty Trust Company of New York ("Morgan") on the same terms and
conditions and (iii) negotiation, execution and delivery of mutually acceptable
definitive loan documentation (to be prepared by Morgan's counsel, Davis Polk &
Wardwell) on or before April 30, 1996 or May 31, 1996 if Bank of America's
commitment is extended pursuant to the next sentence. In addition, Bank of
America's commitment will expire if your tender offer for the common stock of
"Wings" does not close on or before April 30, 1996, unless such failure is due
solely to the failure to have obtained any clearance which may be necessary
under the Hart-Scott-Rodino Act, in which case such expiration date shall be
extended to May 31, 1996.
It is BA Securities, Inc.'s ("BASI") intention to syndicate the Credit
Facilities with J.P. Morgan Securities, Inc. ("JPMSI") to a group of lenders
acceptable to Bank of America, Morgan and LMC (Bank of America and such other
lenders herein being called the "Banks"). LMC agrees to provide such assistance
in the syndication effort as may be reasonably requested, including making
members of management of the Company and its subsidiaries available to meet with
prospective syndicate members, and assisting BASI and JPMSI in the preparation
of a financing memorandum. It is our further expectation that no fewer than 45
banks will be invited to participate in the general syndication of these
facilities.
and that the general syndication will be launched in approximately two weeks
from the date of your acceptance.
By signing below LMC acknowledges its obligation to pay Bank of America and BASI
the fees as set forth in the Fee Letter dated January 5, 1996 among the Company,
Bank of America and BASI.
In addition, by signing below, LMC agrees to indemnify and defend Bank of
America and BASI and each other Bank and their respective directors, officers,
agents, employees and affiliates from, and hold each of them harmless against,
any and all losses, liabilities, claims, damages or reasonable expenses incurred
by any of them arising out of or by reason of any investigation, litigation or
other proceeding brought or threatened relating to any loan made or proposed to
be made by LMC or any of its affiliates in connection with the matters herein
referred to (including, but without limitation, any use made or proposed to be
made by LMC or any of its affiliates of the proceeds of such loans, but
excluding any such losses, liabilities, claims, damages or expenses relating to
the relationships of, between or among each of, or any of, the Banks, the Co-
Arranger(s) (as defined in the Term Sheet) and any assignees or participants
thereof after the loan agreements have been executed by all parties thereto and
excluding any such losses, liabilities, claims, damages or expenses incurred by
reason of the gross negligence or willful misconduct of the indemnitee),
including, without limitation, amounts paid in settlement (approved in writing
by LMC), court costs, and reasonable fees and disbursements of counsel incurred
in connection with any such pending or threatened investigation, litigation or
other proceeding.
If you accept and agree to this proposal, lease so indicate by signing in the
space provided below and returning a copy of this letter to us. This offer will
expire at 5:00 p.m. (E.S.T.) on January 9, 1996 if this letter and the Fee
Letters have not been accepted by you that time.
Very truly yours,
BANK OF AMERICA NATIONAL TRUST BA SECURITIES, INC.
AND SAVINGS ASSOCIATION
By: /s/ Lori Y. Kannegieter By: /s/ Keith S. Barnish
----------------------------- ------------------------------
Name: Lori Y. Kannegieter Name: Keith S. Barnish
Title: Vice President Title: Senior Managing Director
ACCEPTED AND AGREED TO
this 7th day of January, 1996:
LOCKHEED MARTIN CORPORATION
By: /s/ Walter E. Skowronski
-----------------------------
Name: Walter E. Skowronski
Title: Vice President and Treasurer
SUMMARY OF TERMS AND CONDITIONS
FOR LOCKHEED MARTIN CORPORATION
BORROWER: Lockheed Martin Corporation ("Company"),
directly or indirectly through LAC
Acquisition Corp.
AMOUNT: $5,000,000,000.
PURPOSE: The purchase of the common stock of
"Wings" and general corporate purposes
including commercial paper backup.
ARRANGER AND SYNDICATION AGENT: J.P. Morgan Securities Inc.
CO-ARRANGER: BA Securities, Inc.
MANAGING AGENTS: Citibank, N.A.
DOCUMENTATION AGENT: Morgan Guaranty Trust Company of
New York.
ADMINISTRATIVE AGENT: Bank of America National Trust and
Savings Association.
FACILITY DESCRIPTION: 364-day facility on a fully revolving
basis.
BORROWING OPTIONS: Committed Loans consisting of Base Rate
Loans, CD Loans and LIBOR Loans.
Uncommitted Money Market bid rate options
("Money Market Loans").
LENDERS: Syndicate of lenders acceptable to
Company and Arranger ("Banks").
TIMING: Closing to occur by May 1996.
GUARANTORS: Lockheed Corporation, Martin Marietta
Corporation, Martin Marietta
Technologies, Inc., LAC Acquisition
Corporation or the Company if LAC
Acquisition Corp. is the Borrower.
COMMITMENTS AND FEES:
- ---------------------
COMMITMENT: With respect to Committed Loans, each
Bank will fund each draw in proportion to
its Commitment.
With respect to Money Market Loans, each
Bank may, but shall have no obligation
to, make offers to make such Loans
pursuant to requests submitted by
Company. Drawdown of Money
January 4, 1996 Page 1
Market Loans will be deemed a use of
Commitments of all Banks on pro rata
basis.
REDUCTION OR CANCELLATION OF
COMMITMENTS: Commitments cancelable in whole or in
part (ratably reduced in amounts of at
least $25,000,000 and multiples of
$5,000,000 in excess thereof) at election
of Company upon not less than three
business days' notice.
TERMINATION OF BANKS/REPLACING BANKS: Company may terminate the entire
Commitment of any Bank upon 10 business
days' notice if a Bank demands increased
costs or capital adequacy payments from
Company or if the commitment of a Bank to
make LIBOR Loans is suspended due to its
inability to make such Loans. Company may
replace such Bank with a new or existing
Bank.
FACILITY FEE: To be paid quarterly in arrears on the
daily average of the total Commitments at
a rate determined by reference to
attached Pricing Schedule. Facility Fee
will increase if ratings downgraded and
decrease if ratings upgraded.
Facility Fee computed on the basis of a
year of 365 or 366 days over the actual
number of days elapsed. Any change in
Facility Fee shall become effective the
day on which a rating agency shall have
announced a ratings change.
INTEREST RATES
- --------------
INTEREST RATE OPTIONS: LIBOR, CD Rate or Base Rate at the
election of Company.
LIBOR INTEREST PERIOD OPTIONS: One, two, three or six months, as
selected by Company. Twelve-month LIBOR
-----
option available upon request of Company
and consent of all Banks.
CD RATE INTEREST PERIOD OPTIONS: 30, 60, 90 or 180 days, as selected by
Company.
RATE BASIS: LIBOR
CD Rate - Adjusted CD Rate.
3 LIBOR/CD Reference Banks to be
appointed.
Base Rate - higher of Reference Rate as
announced by Administrative Agent or
federal funds rate plus .5%.
Any change in Base Rate effective on the
day change is announced by Administrative
Agent.
January 4, 1996 Page 2
INTEREST PAYMENT: Interest on LIBOR Loans, CD Loans and
Base Rate Loans (if federal funds rate is
effective rate) shall be computed on the
basis of a year of 360 days and paid for
the actual number of days elapsed.
Interest on Base Rate Loans (if Reference
Rate is effective rate) shall be computed
on the basis of a year of 365 or 366
days, as the case may be, and paid for
the actual number of days elapsed.
Interest accrued on Base Rate Loans shall
be paid quarterly. Interest accrued on
LIBOR Loans shall be paid on the last day
of the Interest Period, on the date of
any prepayment or conversion thereof,
together with breakage costs, if any, and
in the case of a LIBOR Loan with an
Interest Period of twelve-months, on the
six-month anniversary of the making of
the LIBOR Loan. Interest accrued on CD
Loans shall be paid on the last day of
the Interest Period and on the date of
any prepayment or conversion thereof,
together with breakage costs, if any. If
any CD Loan or portion thereof shall have
an Interest Period of less than 30 days,
such portion shall bear interest at the
Base Rate during such period.
Interest obligations accrue from the day
funds are received through the day before
principal is repaid.
RATE SPREAD: For Base Rate Loans, Base Rate. For LIBOR
Loans, LIBOR plus LIBOR Margin. For CD
Loans, Adjusted CD Rate plus CD Margin.
LIBOR Margin and CD Margin determined by
reference to attached Pricing Schedule.
LIBOR Margin and CD Margin will increase
if ratings downgraded and decrease if
ratings upgraded.
Any change in the LIBOR Margin or CD
Margin shall become effective for LIBOR
Loans or CD Loans, as applicable, the day
on which a rating agency shall have
announced a ratings change.
POST DEFAULT RATE: 2% per annum above the Base Rate for such
date.
BORROWING PROCEDURES
- --------------------
MINIMUM DRAW: $10,000,000 with additional increments of
$1,000,000. No per draw limit up to total
unused Commitments.
NOTIFICATION/TIMING: Base Rate: To Administrative Agent, by
11:00 a.m. New York City time on day of
draw.
LIBOR: To Administrative Agent, by 1:00
p.m. New York City time, 3 business days
before draw or, in the case of an
Interest Period of twelve-months, by 1:00
p.m. New York City time, 4 business days
before draw.
January 4, 1996 Page 3
CD Rate: To Administrative Agent, by 1:00
p.m. New York City time, 2 business days
before draw.
An officer or a Designated Representative
(certain designated employees) to provide
notice to Administrative Agent. An
officer or Designated Representative may
provide telephonic notice, to be followed
by appropriately authorized written
notice.
FUND DELIVERY: Banks to deliver funds to Administrative
Agent by 1:00 p.m. New York City time.
Administrative Agent to wire transfer
loan principal (U.S. Dollars) in
immediately available funds to an account
to be designated by Company immediately
upon receipt, but not later than 4:00
p.m. New York City time. Administrative
Agent may make up a shortfall of funds
received. Any Bank not making its pro
rata share of any Loan available to
Administrative Agent and Company, if it
does not repay such share of any Loan, at
the required date and time severally
agree to repay Administrative Agent such
shortfall, with interest (at the federal
funds rate). If a Bank fails to fund a
Loan, amounts received by Administrative
Agent will be deemed to have been paid to
Bank and made available to Administrative
Agent for the Loan.
CONVERSION/CONTINUATION: Company may (i) convert all or any
portion of outstanding Base Rate Loans
equal to $10,000,000 and multiples of
$1,000,000 in excess thereof to LIBOR
Loans or CD Loans, (ii) convert all or
any portion of outstanding LIBOR Loans
equal to $10,000,000 and multiples of
$1,000,000 in excess thereof to Base Rate
Loans or CD Loans, and (iii) convert all
or any portion of outstanding CD Loans
equal to $10,000,000 and multiples of
$1,000,000 in excess thereof to Base Rate
Loans or LIBOR Loans. Upon the expiration
of any Interest Period applicable to a
LIBOR Loan or a CD Loan, Company may
continue all or any portion of such Loans
equal to $10,000,000 and multiples of
$1,000,000 in excess thereof as LIBOR
Loans or CD Loans, as applicable. Written
or telephonic notice of such
conversion/continuation shall be
delivered to Administrative Agent no
later than (i) 1:00 p.m. New York City
time (a) at least 3 business days in
advance of the proposed date of
conversion to or continuation of LIBOR
Loans or (b) at least 2 business days in
advance of the proposed date of
conversion to or continuation of CD Loans
and (ii) 11:00 a.m. New York City time on
the day of the proposed conversion to a
Base Rate Loan. Telephonic notice of
conversion/continuation to be promptly
followed by a written notice thereof. If
timely notice of conversion/continuation
not provided by Company as to any LIBOR
loan or CD Loan and such Loan is not
repaid by
January 4, 1996 Page 4
Company at the end of the applicable
Interest Period thereof, such Loan shall
be converted to a Base Rate Loan.
PREPAYMENTS: Base Rate Loans can be repaid in whole or
in part on any day without penalty or
premium. CD Loans can be repaid with 1
business day's notice. LIBOR Loans can be
repaid with 3 business days' notice. Each
partial prepayment shall be in an
aggregate amount of not less than
$10,000,000 and shall include interest
accrued on the Loans to the prepayment
date and any breakage costs (excluding
loss of Margin).
PAYMENTS TO BANKS: All payments by Company to Banks under
Loan Agreement are to be in U.S. Dollars,
free of taxes, and wire transferred to
Administrative Agent in immediately
available funds no later than 2:00 p.m.
New York City time.
PARTICIPATIONS/ASSIGNMENTS: Assignments may be made to Eligible
Institutions with the prior notification
to the Administrative Agent and prior
written consent of Company, which shall
not be unreasonably withheld, in minimum
amounts of $15,000,000. Withholding of
consent is not unreasonable if based
solely on desire to manage loan exposures
to proposed assignee or avoid payment of
additional increased costs of taxes
payable by Company by reason of such
assignment. No Company consent required
for assignment to an affiliate of a Bank.
Each Bank must retain at least
$15,000,000 commitment. Participations
permitted without consent of Company upon
prior written notification to Company (no
prior notification required in the case
of participations of Money Market Loans).
Transferability of voting rights limited
to change in principal, rate, fees and
term. "Eligible Institution" means any
commercial bank having total assets in
excess of $3,000,000,000 or the
equivalent amount of local currency of
such bank or affiliates of such bank that
are financial institutions.
CONDITIONS PRECEDENT
- --------------------
(A) Effectiveness of Loan Agreement:
customary for this type of transaction,
including:
1) termination of, and payment of
amounts due under, existing revolving
credit agreements.
2) execution and delivery of:
a) opinion of General Counsel or
Assistant General Counsel to
Company and opinion of special
counsel to company;
January 4, 1996 Page 5
b) opinion of Bank counsel;
c) certified copies of charters,
bylaws, and corporate action
authoring Loan Agreement;
d) note for each Bank, if requested;
e) certificate indicating incumbency
and signatures of officers
signing Loan Agreement and those
officers and employees authorized
to give notice of borrowing; and
f) LAC and Wings shall have entered
into a merger agreement in form
and substance satisfactory to the
Banks providing for the
acquisition to be effected by a
cash tender offer for at least
66% of Wing's common stock and
subsequent merger.
(g) terms and conditions of the
tender offer shall be in
substance as disclosed to the
Banks prior to their commitments
but shall in all events include
that LAC shall own and control
the number of shares of Wing's
common stock as shall be
necessary to approve the merger
without the affirmative vote or
approval of any other
shareholders; the conditions to
the consummation of the tender
offer shall have been satisfied
and shall not have been waived,
except for conditions (x) not
material to the combined entity
or the prospects and timing of
the consummation of the merger
and (y) not relating to the
legality, validity or legal
effect of the financing; and
tendered shares shall have been
accepted for payment pursuant to
the tender offer in accordance
with the terms of the tender
offer.
(h) evidence satisfaction to the
Documentation Agent and
Administrative Agent that all
other necessary licenses, permits
and governmental and third-party
filings, consents and approvals
for the acquisition and merger
have been made or obtained and
remain in full force and effect,
except for those (x) not material
to the combined entity or the
prospects and timing of the
consummation of the merger and
(y) not relating to the legality,
validity or legal effect of the
financing; and the tender offer
and the financing thereof shall
be in compliance with all laws
and regulations (including,
without limitation, the margin
regulations).
January 4, 1996 Page 6
(B) All Loans: (i) accuracy of
Representations and Warranties, with the
exception, for Loans other than the
tender offer funding, of the
representations concerning litigation,
taxes, ERISA, no Material Adverse Effect
since date of pro forma financial
statements delivered to Banks and
environmental matters and (ii) no Event
of Default.
REPRESENTATIONS AND WARRANTIES
- ------------------------------
CORPORATE EXISTENCE & POWER: Company and its Significant Subsidiaries
duly organized, validly existing and in
good standing in respective state of
incorporation and qualified to do
business where necessary, except where
failure to be so qualified would not be
reasonably likely to have a Material
Adverse Effect. Company has all necessary
corporate power to enter into and perform
under Loan Agreement and Notes.
"Material Adverse Effect" means a
material adverse effect on (a) ability of
Company to perform obligations under
Agreement or Notes, (b) validity or
enforceability of Agreement or Notes, (c)
rights and remedies of any Bank or Agents
or (d) timely payment of principal of or
interest on the Loans or other amounts
paid in connection therewith.
"Significant Subsidiary" means a
Subsidiary with total assets, net of
depreciation and amortization and after
intercompany eliminations, in excess of
$100,000,000.
"Subsidiary" as defined does not include
any Exempt Subsidiary, but otherwise
means any entity of which Company owns a
sufficient number of securities having
ordinary voting power to elect a majority
of the board of directors or other
governing body.
"Restricted Subsidiary" means any
Significant Subsidiary, any Subsidiary
that has substantially all of its
property located in the United States and
that owns a Principal Property and any
other Subsidiary designated from time to
time by the Company as a "Restricted
Subsidiary." Subsidiaries of a Restricted
Subsidiary are not Restricted
Subsidiaries solely by virtue of such
Subsidiary status. If at the end of any
fiscal quarter, the aggregate net assets
of the Company and all of its Restricted
Subsidiaries are less than a specified
percentage of the total net assets of the
Company and its Subsidiaries taken as a
whole, as reported in the Company's
financial statements (the "Total Net
Assets") , the Company shall designate
another Subsidiary or Subsidiaries as
Restricted Subsidiaries such that the net
assets of such Subsidiary or Subsidiaries
that are not encumbered to secure Debt,
plus the net assets of the Company and
the other Restricted Subsidiaries, equals
or exceeds a specified percentage of the
Total Net Assets.
January 4, 1996 Page 7
Thereafter, the Company may designate a
Subsidiary or Subsidiaries (other than a
Restricted Subsidiary as defined without
regard to any prior such designations by
the Company) as no longer a Restricted
Subsidiary, provided that the aggregate
net assets of the Company and all of its
Restricted Subsidiaries after giving
effect thereto shall equal or exceed a
specified percentage of the Total Net
Assets.
"Exempt Subsidiary" means Lockheed Martin
Finance Corporation, Martin Marietta
Materials, Inc. and any other entity of
which Company owns a sufficient number of
securities having ordinary voting power
to elect a majority of the board of
directors or other governing body, the
book value, net of depreciation,
amortization and intercompany
eliminations, of the assets of which,
when aggregated with the book values, net
of depreciation, amortization and
intercompany eliminations, of the assets
of any other Exempt Subsidiary other than
Lockheed Martin Finance Corporation or
Martin Marietta Materials, Inc., do not
exceed a specified percentage of the
value of total assets of Company and its
consolidated subsidiaries, and which are
designated as such by Company.
"Principal Property" defined as any
manufacturing property with a book value,
net of depreciation and amortization, in
excess of $5,000,000 .
NO CONTRAVENTION: Execution, delivery and performance of
Loan Agreement and Notes do not
contravene, or constitute a default
under, Company's or Guarantors' charter
documents or any applicable laws or
regulations or any agreements or
instruments to which Company is a party
which would be reasonably likely to have
a Material Adverse Effect.
CORPORATE AUTHORIZATION: Company and Guarantors have taken all
corporate action necessary for entering
into Loan Agreement and Notes and
consummating transaction thereunder; Loan
Agreement and Notes are valid, binding
and enforceable against Company and
Guarantors, subject to bankruptcy and
equity exceptions.
FINANCIAL INFORMATION: Pro forma financial statements delivered
to Banks fairly present financial
position as of date of such financial
statements on a pro forma basis
consistent with the assumptions stated
therein; includes representation that no
Material Adverse Effect has occurred
since date of such financial statements.
LITIGATION; TAXES: No litigation exists against Company or
any Subsidiary, an adverse determination
of which is reasonably likely to occur
and if so adversely determined would be
reasonably likely to have a
January 4, 1996 Page 8
Material Adverse Effect and, at the time
of the tender offer closing, there shall
be (i) no injunction against consummation
of the tender offer, (ii) no litigation
pending or threatened which gives rise to
a material likelihood that the merger
will not be consummated or will be
subject to the undue delay and (iii) no
litigation pending or threatened, other
than that as to which there is not a
material likelihood of success,
challenging the legality, validity or
legal effect of the financing. Company
and each Subsidiary have filed all
material tax returns and paid all taxes
due thereunder when due, except for those
not delinquent, those the nonpayment of
which would not be reasonably likely to
result in a Material Adverse Effect and
those contested in good faith.
GOVERNMENTAL APPROVALS: No governmental consents or approvals
required in connection with Loan
Agreement and Notes, except routine
filings under Securities Exchange Act of
1934 and the filing of International
Capital Form CQ-1's.
MARGIN REGULATIONS: No part of proceeds of Loans will be used
in violation of Federal Reserve
Regulation U, G, T and X.
PARI PASSU OBLIGATIONS: Claims of other parties to Loan Agreement
against Company will not be subordinate
to, and will rank at least pari passu
with, claims of other unsecured creditors
of Company, except as may be provided for
under applicable bankruptcy laws.
NO DEFAULTS: No payment default in respect of Material
Debt.
"Material Debt" defined as debt of
Company and/or one or more of its
Subsidiaries exceeding $100,000,000 in an
aggregate principal amount.
ERISA: Company and related ERISA entities (the
"ERISA Group") have fulfilled their
obligations under minimum funding
standards of ERISA and the Internal
Revenue Code and are in substantial
compliance with all material provisions
of ERISA and Internal Revenue Code with
respect to each ERISA plan. ERISA Group
has not (i) sought a waiver of minimum
funding standards, (ii) failed to make a
contribution to any plan or made any
amendment to any plan which could result
in material lien or posting of material
bonds or (iii) incurred material
liability under Title IV of ERISA (other
than for payment of premiums under
ERISA).
DISCLOSURE: Written information provided to the Banks
in connection with Loan Agreement,
collectively, does not contain any
misstatement of a material fact or omit
to state a fact necessary to make the
statements contained therein, in light of
the circumstances under
January 4, 1996 Page 9
which they were made, not misleading in
any material respect on and as of the
date of Loan Agreement.
ENVIRONMENTAL: Based upon Company's periodic review of
its ongoing operations (and those of its
Restricted Subsidiaries), to the best
knowledge of Company, ongoing operations
at the Principal Properties are currently
being conducted in substantial compliance
with applicable environmental laws,
except to the extent that noncompliance
would not be reasonably likely to result
in a material adverse change in the
consolidated financial conditions of
Company and its consolidated
subsidiaries.
COVENANTS Covenants customary for this type of
- --------- transaction, including:
ACCOUNTING: Except as otherwise specified, accounting
measurements will be per GAAP as in
effect from time to time. Company or
Required Banks have ability to request
covenant change if change in GAAP affects
covenant; effect of change in GAAP then
suspended until new covenant negotiated.
INFORMATION/REPORTING/DISTRIBUTION: 60 day delivery for quarterly financial
reports and 120 day delivery for annual
financial reports; delivery of such
statements as filed with the SEC
satisfies requirement. Documents
distributed to shareholders or filed with
the SEC (with certain exceptions) to be
distributed to the Banks promptly after
becoming available. Company to provide
prompt notice of (i) the occurrence of
any Default and (ii) certain litigation.
COMPUTATION OF COVENANTS: Company to provide with each distribution
of annual and quarterly financial
statements computations of leverage
ratio.
MAINTENANCE OF EXISTENCE: Company and Significant Subsidiaries will
preserve and maintain corporate
existence. Company may terminate business
or corporate existence of a Subsidiary
which in Company's judgment is no longer
necessary or desirable. Mergers,
consolidations and transfers of assets
permitted as set forth below. No
prohibition on merger of a Subsidiary
into Company, or merger or consolidation
of a Subsidiary with or into another
entity if surviving corporation is a
Subsidiary and no Default shall have
occurred and be continuing.
MERGERS, CONSOLIDATIONS &
SALES OF ASSETS: Merger, consolidation, transfer or
conveyance of substantially all Company's
assets prohibited unless resulting
corporation is Company or a consolidated
subsidiary that is a domestic corporation
that expressly assumes payment of
indebtedness and performance of covenants
under Loan Agreement, no Default shall
have occurred and be continuing after
giving effect to transaction
January 4, 1996 Page 10
and if Company is not surviving
corporation, there has been delivered an
Officer's Certificate and legal opinion
of its counsel stating that such
transaction complies with Loan Agreement.
Upon any such transaction, the entity
formed by such transaction shall succeed
to and be substituted for Company under
Loan Agreement. This covenant shall not
apply to any sale of Wing's stock, so
long as it is margin stock, for value.
LIMITATION ON LIENS: No liens on assets of the Company or any
Restricted Subsidiary to secure Debt
allowed except (i) liens existing on the
date of Loan Agreement, (ii) liens on
property of a corporation existing at the
time the corporation is merged or
consolidated with Company or a Restricted
Subsidiary, (iii) liens securing debt
owing to Company or another Restricted
Subsidiary, (iv) mechanic's liens, (v)
liens on property of a corporation
existing at the time the corporation
becomes a Restricted Subsidiary, (vi)
liens on property at time of acquisition
of property and purchase money liens,
including liens incurred in connection
with industrial revenue bonds, to secure
payment of purchase price or indebtedness
incurred or guaranteed prior to, at the
time of or within one year after
acquisition, completion of full operation
of property if indebtedness incurred or
guaranteed to pay purchase price of
property or improvements, (vii) liens in
favor of any customer (including any
governmental authority) to secure
partial, progress, advance or other
payments or performance pursuant to any
contract or statute or to secure any
related indebtedness or to secure Debt
guaranteed by a governmental authority,
(viii) liens on cash or certificates of
deposit or other bank obligations
securing indebtedness in aggregate
principal amount not in excess of
$200,000,000 (which may be in a different
currency) of an amount substantially
equal in value (at the time the lien is
created) to such cash, certificates of
deposit or other obligations, (ix) any
extension, renewal, replacement of the
foregoing, (x) liens equally and ratably
severing this credit facility and such
Debt and (xi) liens not otherwise
referred to securing Debt that does not
in the aggregate exceed the greater of
10% of stockholders' equity at the end of
the preceding fiscal quarter or
$1,000,000,000. Liens described in (ii),
(v) and (vi) shall not include any liens
on stock or assets of "Wings" or its
subsidiaries incurred in contemplation of
the merger. This covenant shall not apply
to margin stock in excess of 25% in value
of the assets covered by this covenant.
PAYMENT OF OBLIGATIONS: Company and each Significant Subsidiary
will pay all material taxes, assessments,
and governmental charges imposed upon it
and all lawful material claims prior to
date any penalty accrues or lien imposed
except for (i) those contested in good
faith, (ii) those not delinquent and
(iii) those the nonpayment of which would
not be reasonably likely to result in a
Material Adverse Effect.
January 4, 1996 Page 11
COMPLIANCE WITH LAWS: Company and each Significant Subsidiary
shall comply with all laws, a breach of
which would be reasonably likely to have
a Material Adverse Effect, except where
contested in good faith and by proper
proceedings.
INSURANCE: Company and each Significant Subsidiary
will maintain insurance as is customarily
carried by owners of similar businesses
and properties (or to the customary
extent, self-insurance).
MAINTENANCE OF PROPERTIES: Company and its Significant Subsidiaries
will keep all properties necessary in its
business in good working order, normal
wear and tear excepted; Company or any
Subsidiary may discontinue operation
and/or maintenance of such properties if
discontinuance is in Company's (or such
Subsidiary's) judgment desirable.
LEVERAGE RATIO: Ratio of Debt (as defined) as of the last
day of any fiscal quarter to the sum of
(i) Debt (as defined) and (ii)
Stockholders' Equity (as defined) at
levels to be determined.
STOCKHOLDERS' EQUITY AS DEFINED: Consolidated Stockholders' Equity of
Company and consolidated Subsidiaries as
reported.
DEBT AS DEFINED: Debt shall mean, without duplication:
(i) all debt, including ESOP guarantees
and capitalized lease obligations,
reported as debt in the
consolidated financial statements
of the Company and its consolidated
Subsidiaries, plus
----
(ii) all indebtedness for borrowed money
and capitalized lease obligations
incurred by third parties
guaranteed by Company and its
consolidated Subsidiaries not
otherwise reported as debt in the
consolidated financial statements
of the Company and its consolidated
Subsidiaries.
USE OF LOANS: Proceeds of the Loans may be used for any
lawful corporate purpose.
WAIVERS: Required Banks may waive compliance with
any covenant (other than certain
provisions relating to principal
payments, fees, interest rate, due dates
and guarantees, which require consent of
all Banks).
EVENTS OF DEFAULT
- -----------------
PRINCIPAL PAYMENTS: Failure to pay when due.
January 4, 1996 Page 12
INTEREST AND FACILITY FEE PAYMENTS: Failure to pay within 5 days of due date.
OTHER FEES: Failure to pay within 30 days after
written request for payment thereof.
BREACH OF CERTAIN COVENANTS: Failure to perform under the following
covenants:
1) Merger/Consolidation Restrictions
2) Limitations on Liens
3) Leverage Ratio
BREACH OF OTHER COVENANTS: Failure to perform within 30 days after
written notice.
REPRESENTATIONS: 5 days to correct after written notice.
ACCELERATION OF DEBT: Any Material Debt shall be accelerated by
reasons of default thereunder or not paid
when due and corrective action shall not
have been taken within 5 days after
written notice thereof.
BANKRUPTCY: Company or any Significant Subsidiary
shall commence voluntary proceeding under
bankruptcy laws, or seek appointment of
receiver or trustee, or shall consent to
any of the foregoing; or makes a general
assignment for benefit of creditors; or
fails generally to pay its debts as they
become due; or takes any corporate action
to authorize the foregoing.
Involuntary case or proceeding commenced
against Company or any Significant
Subsidiary seeking relief under
bankruptcy laws or seeking appointment of
trustee or receiver, and such proceeding
shall remain undismissed and unstayed for
a period of 90 days; or an order for
relief shall be entered against Company
or any Significant Subsidiary under
federal bankruptcy laws.
FINAL JUDGMENTS: Final judgment requiring payment of
$150,000,000 or more that has not been
satisfied or stayed within 60 days and
such failure to satisfy or stay is
unremedied for 5 days after notice.
ERISA: A final judgment either (1) requiring
termination or imposing liability under
Title IV of ERISA (other than for
premiums) in respect of, or requiring a
trustee to be appointed pursuant to Title
IV of ERISA to administer, any plan or
plans having unfunded liabilities in
excess of $150,000,000 or (2) in an
action relating to a Multiemployer Plan
involving a current payment obligation in
excess of $150,000,000, which judgment in
either case has not been satisfied or
stayed within 60 days and such failure to
satisfy or stay is unremedied for 5 days
after notice.
January 4, 1996 Page 13
CHANGE IN OWNERSHIP OF STOCK: Any person or group of persons (other
than employee benefit or stock ownership
plan of Company) has acquired shares of
capital stock having ordinary voting
power to elect a majority of the Board of
Directors of Company or change in
majority of Board of Directors within a
two-year period.
GUARANTY INVALIDATED: Revocation or invalidation of guaranty of
the Loan Agreement and the Notes.
REMEDIES: Commitments terminate and loan/interest
become due and payable upon the receipt
of notice from Documentation Agent
(automatic in case of bankruptcy).
NOTICES OF DEFAULT: All notices or requests specified in
Events of Default provisions to be given
by Documentation Agent at the request of
the Required Banks.
MISCELLANEOUS
- -------------
GOVERNING LAW/SUBMISSION
TO JURISDICTION: New York law governs. Parties submit to
the jurisdiction of New York courts for
all legal proceedings and waive any
objection to the laying of venue of any
such proceeding brought in such a court
and claim of inconvenient forum.
WAIVER OF JURY TRIAL: Company, Agents and Banks each waive
rights to trial by jury.
REQUIRED BANKS: Banks holding in excess of 50% of
outstanding Commitments.
INCREASED COSTS/CAPITAL ADEQUACY/
ILLEGALITY: Increased cost/capital adequacy/
illegality provisions to be included and
will generally provide that no increased
cost or capital adequacy payment may be
claimed if allocable to periods prior to
30 days prior to date Company is notified
of claim by a Bank; no compensation for
increases in capital not occasioned by a
Change in Law or beyond that required by
a Change in Law. Any Bank requesting
additional compensation shall designate a
different lending office if such
designation will avoid the need for, or
reduce the amount of, such compensation
or permit the Bank to make or maintain
any LIBOR Loan, so long as such
designation is not disadvantageous to
such Bank. Any Regulation D charges shall
be billed through Administrative Agent.
"Change in Law" as defined is the
adoption of any law, rule or regulation,
or any change therein, or any change in
the interpretation or administration
thereof, after Closing Date, by any
governmental authority, central bank or
comparable agency or
January 4, 1996 Page 14
compliance with any directive (whether or
not having the force of law) of any such
entity.
INDEMNITY: Company to indemnify Banks for (i)
funding costs and/or losses (excluding
loss of margin) if prepayment or
conversion of a LIBOR Loan or a CD Loan
occurs prior to the end of an Interest
Period or if Company fails to consummate
a LIBOR Loan or a CD Loan because
conditions precedent to borrowing or
conversion not satisfied and (ii)
reasonable costs and expenses of
litigation in response to or in defense
of any proceeding brought or threatened
against a Bank relating to the Agreement
or Company's use of proceeds of the
Loans.
EXPENSES: In connection with preparing Loan
Agreement, Company will pay reasonable
fees and disbursements of special counsel
to Agents and reasonable out-of-pocket
expenses incurred by Agents. In
connection with an Event of Default and
enforcement proceedings, Company will pay
reasonable out-of-pocket expenses of
Agents and Banks, including reasonable
fees and expenses of counsel (including
in-house counsel).
DOCUMENT PREPARATION: Loan Agreement to be prepared by Davis
Polk & Wardwell.
January 4, 1996 Page 15
JP MORGAN
LOCKHEED MARTIN CORPORATION
PRICING SCHEDULE
364-DAY REVOLVER
The LIBOR Margin, the CD Margin and the Facility Fee shall be as
specified below (in basis points per annum).
====================================================================================================================================
LEVEL I LEVEL II LEVEL III LEVEL IV
====================================================================================================================================
BASIS FOR PRICING If Company is rated A or If Company is rated A- If Company is rated If Company is rated BBB
better by S&P or A2 or or better by S&P or A3 BBB+ or better by S&P or better by S&P
-- --
better by Moody's or better by Moody's or Baa1 or better by or Baa2 or better by
-- --
Moody's Moody's
- ------------------------------------------------------------------------------------------------------------------------------------
FACILITY FEE 6.00 7.00 8.00 9.00
- ------------------------------------------------------------------------------------------------------------------------------------
LIBOR + Greater than 50% 16.50 18.00 22.00 26.00
Less than 50% 16.50 18.00 27.00 31.00
- ------------------------------------------------------------------------------------------------------------------------------------
CD + Greater than 50% 29.00 30.50 34.50 38.50
Less than 50% 29.00 30.50 39.50 43.50
- ------------------------------------------------------------------------------------------------------------------------------------
UNUSED COST 6.00 7.00 8.00 9.00
- ------------------------------------------------------------------------------------------------------------------------------------
USED COST Greater than 50% 22.50 25.00 30.00 35.00
Less than 50% 22.50 25.00 35.00 40.00
====================================================================================================================================
SUMMARY OF TERMS AND CONDITIONS
FOR LOCKHEED MARTIN CORPORATION
BORROWER: Lockheed Martin Corporation ("Company"),
directly or indirectly through LAC
Acquisition Corp.
AMOUNT: $5,000,000,000.
PURPOSE: The purchase of the common stock of
"Wings" and general corporate purposes
including commercial paper backup.
ARRANGER AND SYNDICATION AGENT: J.P. Morgan Securities Inc.
CO-ARRANGER: BA Securities, Inc.
MANAGING AGENTS: Citibank, N.A.
DOCUMENTATION AGENT: Morgan Guaranty Trust Company of New
York.
ADMINISTRATIVE AGENT: Bank of America National Trust and
Savings Association.
FACILITY DESCRIPTION: Five-year facility on a fully revolving
basis.
BORROWING OPTIONS: Committed Loans consisting of Base Rate
Loans, CD Loans and LIBOR Loans.
Uncommitted Money Market bid rate
options ("Money Market Loans").
LENDERS: Syndicate of lenders acceptable to
Company and Arranger ("Banks").
TIMING: Closing to occur by May 1996.
GUARANTORS: Lockheed Corporation, Martin Marietta
Corporation, Martin Marietta
Technologies, Inc., LAC Acquisition
Corporation or the Company if LAC
Acquisition Corp. is the Borrower .
COMMITMENTS AND FEES:
- ---------------------
COMMITMENT: With respect to Committed Loans, each
Bank will fund each draw in proportion
to its Commitment.
With respect to Money Market Loans, each
Bank may, but shall have no obligation
to, make offers to make such Loans
pursuant to requests submitted by
Company. Drawdown of Money
January 4, 1996 Page 1
Market Loans will be deemed a use of
Commitments of all Banks on pro rata
basis.
REDUCTION OR CANCELLATION OF
COMMITMENTS: Commitments cancelable in whole or in
part (ratably reduced in amounts of at
least $25,000,000 and multiples of
$5,000,000 in excess thereof) at
election of Company upon not less than
three business days' notice.
TERMINATION OF BANKS/REPLACING BANKS: Company may terminate the entire
Commitment of any Bank upon 10 business
days' notice if a Bank demands increased
costs or capital adequacy payments from
Company or if the commitment of a Bank
to make LIBOR Loans is suspended due to
its inability to make such Loans.
Company may replace such Bank with a new
or existing Bank.
FACILITY FEE: To be paid quarterly in arrears on the
daily average of the total Commitments
at a rate determined by reference to
attached Pricing Schedule. Facility Fee
will increase if ratings downgraded and
decrease if ratings upgraded.
Facility Fee computed on the basis of a
year of 365 or 366 days over the actual
number of days elapsed. Any change in
Facility Fee shall become effective the
day on which a rating agency shall have
announced a ratings change.
INTEREST RATES
- --------------
INTEREST RATE OPTIONS: LIBOR, CD Rate or Base Rate at the
election of Company.
LIBOR INTEREST PERIOD OPTIONS: One, two, three or six months, as
selected by Company. Twelve-month LIBOR
-----
option available upon request of Company
and consent of all Banks.
CD RATE INTEREST PERIOD OPTIONS: 30, 60, 90 or 180 days, as selected by
Company.
RATE BASIS: LIBOR
CD Rate - Adjusted CD Rate.
3 LIBOR/CD Reference Banks to be
appointed.
Base Rate - higher of Reference Rate as
announced by Administrative Agent or
federal funds rate plus .5%.
Any change in Base Rate effective on the
day change is announced by
Administrative Agent.
January 4, 1996 Page 2
INTEREST PAYMENT: Interest on LIBOR Loans, CD Loans and
Base Rate Loans (if federal funds rate
is effective rate) shall be computed on
the basis of a year of 360 days and paid
for the actual number of days elapsed.
Interest on Base Rate Loans (if
Reference Rate is effective rate) shall
be computed on the basis of a year of
365 or 366 days, as the case may be, and
paid for the actual number of days
elapsed. Interest accrued on Base Rate
Loans shall be paid quarterly. Interest
accrued on LIBOR Loans shall be paid on
the last day of the Interest Period, on
the date of any prepayment or conversion
thereof, together with breakage costs,
if any, and in the case of a LIBOR Loan
with an Interest Period of twelve-
months, on the six-month anniversary of
the making of the LIBOR Loan. Interest
accrued on CD Loans shall be paid on the
last day of the Interest Period and on
the date of any prepayment or conversion
thereof, together with breakage costs,
if any. If any CD Loan or portion
thereof shall have an Interest Period of
less than 30 days, such portion shall
bear interest at the Base Rate during
such period.
Interest obligations accrue from the day
funds are received through the day
before principal is repaid.
RATE SPREAD: For Base Rate Loans, Base Rate. For
LIBOR Loans, LIBOR plus LIBOR Margin.
For CD Loans, Adjusted CD Rate plus CD
Margin. LIBOR Margin and CD Margin
determined by reference to attached
Pricing Schedule. LIBOR Margin and CD
Margin will increase if ratings
downgraded and decrease if ratings
upgraded.
Any change in the LIBOR Margin or CD
Margin shall become effective for LIBOR
Loans or CD Loans, as applicable, the
day on which a rating agency shall have
announced a ratings change.
POST DEFAULT RATE: 2% per annum above the Base Rate for
such date.
BORROWING PROCEDURES
- --------------------
MINIMUM DRAW: $10,000,000 with additional increments
of $1,000,000. No per draw limit up to
total unused Commitments.
NOTIFICATION/TIMING: Base Rate: To Administrative Agent, by
11:00 a.m. New York City time on day of
draw.
LIBOR: To Administrative Agent, by 1:00
p.m. New York City time, 3 business days
before draw or, in the case of an
Interest Period of twelve-months, by
1:00 p.m. New York City time, 4 business
days before draw.
January 4, 1996 Page 3
CD Rate: To Administrative Agent, by
1:00 p.m. New York City time, 2 business
days before draw.
An officer or a Designated
Representative (certain designated
employees) to provide notice to
Administrative Agent. An officer or
Designated Representative may provide
telephonic notice, to be followed by
appropriately authorized written notice.
FUND DELIVERY: Banks to deliver funds to Administrative
Agent by 1:00 p.m. New York City time.
Administrative Agent to wire transfer
loan principal (U.S. Dollars) in
immediately available funds to an
account to be designated by Company
immediately upon receipt, but not later
than 4:00 p.m. New York City time.
Administrative Agent may make up a
shortfall of funds received. Any Bank
not making its pro rata share of any
Loan available to Administrative Agent
and Company, if it does not repay such
share of any Loan, at the required date
and time severally agree to repay
Administrative Agent such shortfall,
with interest (at the federal funds
rate). If a Bank fails to fund a Loan,
amounts received by Administrative Agent
will be deemed to have been paid to Bank
and made available to Administrative
Agent for the Loan.
CONVERSION/CONTINUATION: Company may (i) convert all or any
portion of outstanding Base Rate Loans
equal to $10,000,000 and multiples of
$1,000,000 in excess thereof to LIBOR
Loans or CD Loans, (ii) convert all or
any portion of outstanding LIBOR Loans
equal to $10,000,000 and multiples of
$1,000,000 in excess thereof to Base
Rate Loans or CD Loans, and (iii)
convert all or any portion of
outstanding CD Loans equal to
$10,000,000 and multiples of $1,000,000
in excess thereof to Base Rate Loans or
LIBOR Loans. Upon the expiration of any
Interest Period applicable to a LIBOR
Loan or a CD Loan, Company may continue
all or any portion of such Loans equal
to $10,000,000 and multiples of
$1,000,000 in excess thereof as LIBOR
Loans or CD Loans, as applicable.
Written or telephonic notice of such
conversion/continuation shall be
delivered to Administrative Agent no
later than (i) 1:00 p.m. New York City
time (a) at least 3 business days in
advance of the proposed date of
conversion to or continuation of LIBOR
Loans or (b) at least 2 business days in
advance of the proposed date of
conversion to or continuation of CD
Loans and (ii) 11:00 a.m. New York City
time on the day of the proposed
conversion to a Base Rate Loan.
Telephonic notice of
conversion/continuation to be promptly
followed by a written notice thereof. If
timely notice of conversion/continuation
not provided by Company as to any LIBOR
loan or CD Loan and such Loan is not
repaid by
January 4, 1996 Page 4
Company at the end of the applicable
Interest Period thereof, such Loan shall
be converted to a Base Rate Loan.
PREPAYMENTS: Base Rate Loans can be repaid in whole
or in part on any day without penalty or
premium. CD Loans can be repaid with 1
business day's notice. LIBOR Loans can
be repaid with 3 business days' notice.
Each partial prepayment shall be in an
aggregate amount of not less than
$10,000,000 and shall include interest
accrued on the Loans to the prepayment
date and any breakage costs (excluding
loss of Margin).
PAYMENTS TO BANKS: All payments by Company to Banks under
Loan Agreement are to be in U.S.
Dollars, free of taxes, and wire
transferred to Administrative Agent in
immediately available funds no later
than 2:00 p.m. New York City time.
PARTICIPATIONS/ASSIGNMENTS: Assignments may be made to Eligible
Institutions with the prior notification
to the Administrative Agent and prior
written consent of Company, which shall
not be unreasonably withheld, in minimum
amounts of $15,000,000. Withholding of
consent is not unreasonable if based
solely on desire to manage loan
exposures to proposed assignee or avoid
payment of additional increased costs of
taxes payable by Company by reason of
such assignment. No Company consent
required for assignment to an affiliate
of a Bank. Each Bank must retain at
least $15,000,000 commitment.
Participations permitted without consent
of Company upon prior written
notification to Company (no prior
notification required in the case of
participations of Money Market Loans).
Transferability of voting rights limited
to change in principal, rate, fees and
term. "Eligible Institution" means any
commercial bank having total assets in
excess of $3,000,000,000 or the
equivalent amount of local currency of
such bank or affiliates of such bank
that are financial institutions.
CONDITIONS PRECEDENT
- --------------------
(A) Effectiveness of Loan Agreement:
customary for this type of transaction,
including:
1) termination of, and payment of
amounts due under, existing revolving
credit agreements.
2) execution and delivery of:
a) opinion of General Counsel or
Assistant General Counsel to
Company and opinion of special
counsel to company;
January 4, 1996 Page 5
b) opinion of Bank counsel;
c) certified copies of charters,
bylaws, and corporate action
authoring Loan Agreement;
d) note for each Bank, if
requested;
e) certificate indicating
incumbency and signatures of
officers signing Loan Agreement
and those officers and employees
authorized to give notice of
borrowing; and
f) LAC and Wings shall have entered
into a merger agreement in form
and substance satisfactory to
the Banks providing for the
acquisition to be effected by a
cash tender offer for at least
66% of Wing's common stock and
subsequent merger.
(g) terms and conditions of the
tender offer shall be in
substance as disclosed to the
Banks prior to their commitments
but shall in all events include
that LAC shall own and control
the number of shares of Wing's
common stock as shall be
necessary to approve the merger
without the affirmative vote or
approval of any other
shareholders; the conditions to
the consummation of the tender
offer shall have been satisfied
and shall not have been waived,
except for conditions (x) not
material to the combined entity
or the prospects and timing of
the consummation of the merger
and (y) not relating to the
legality, validity or legal
effect of the financing; and
tendered shares shall have been
accepted for payment pursuant to
the tender offer in accordance
with the terms of the tender
offer.
(h) evidence satisfaction to the
Documentation Agent and
Administrative Agent that all
other necessary licenses,
permits and governmental and
third-party filings, consents
and approvals for the
acquisition and merger have been
made or obtained and remain in
full force and effect, except
for those (x) not material to
the combined entity or the
prospects and timing of the
consummation of the merger and
(y) not relating to the
legality, validity or legal
effect of the financing; and the
tender offer and the financing
thereof shall be in compliance
with all laws and regulations
(including, without limitation,
the margin regulations).
January 4, 1996 Page 6
(B) All Loans: (i) accuracy of
Representations and Warranties, with the
exception, for Loans other than the
tender offer funding, of the
representations concerning litigation,
taxes, ERISA, no Material Adverse Effect
since date of pro forma financial
statements delivered to Banks and
environmental matters and (ii) no Event
of Default.
REPRESENTATIONS AND WARRANTIES
- ------------------------------
CORPORATE EXISTENCE & POWER: Company and its Significant Subsidiaries
duly organized, validly existing and in
good standing in respective state of
incorporation and qualified to do
business where necessary, except where
failure to be so qualified would not be
reasonably likely to have a Material
Adverse Effect. Company has all
necessary corporate power to enter into
and perform under Loan Agreement and
Notes.
"Material Adverse Effect" means a
material adverse effect on (a) ability
of Company to perform obligations under
Agreement or Notes, (b) validity or
enforceability of Agreement or Notes,
(c) rights and remedies of any Bank or
Agents or (d) timely payment of
principal of or interest on the Loans or
other amounts paid in connection
therewith.
"Significant Subsidiary" means a
Subsidiary with total assets, net of
depreciation and amortization and after
intercompany eliminations, in excess of
$100,000,000.
"Subsidiary" as defined does not include
any Exempt Subsidiary, but otherwise
means any entity of which Company owns a
sufficient number of securities having
ordinary voting power to elect a
majority of the board of directors or
other governing body.
"Restricted Subsidiary" means any
Significant Subsidiary, any Subsidiary
that has substantially all of its
property located in the United States
and that owns a Principal Property and
any other Subsidiary designated from
time to time by the Company as a
"Restricted Subsidiary." Subsidiaries of
a Restricted Subsidiary are not
Restricted Subsidiaries solely by virtue
of such Subsidiary status. If at the end
of any fiscal quarter, the aggregate net
assets of the Company and all of its
Restricted Subsidiaries are less than a
specified percentage of the total net
assets of the Company and its
Subsidiaries taken as a whole, as
reported in the Company's financial
statements (the "Total Net Assets") ,
the Company shall designate another
Subsidiary or Subsidiaries as Restricted
Subsidiaries such that the net assets of
such Subsidiary or Subsidiaries that are
not encumbered to secure Debt, plus the
net assets of the Company and the other
Restricted Subsidiaries, equals or
exceeds a specified percentage of the
Total Net Assets.
January 4, 1996 Page 7
Thereafter, the Company may designate a
Subsidiary or Subsidiaries (other than a
Restricted Subsidiary as defined without
regard to any prior such designations by
the Company) as no longer a Restricted
Subsidiary, provided that the aggregate
net assets of the Company and all of its
Restricted Subsidiaries after giving
effect thereto shall equal or exceed a
specified percentage of the Total Net
Assets.
"Exempt Subsidiary" means Lockheed
Martin Finance Corporation, Martin
Marietta Materials, Inc. and any other
entity of which Company owns a
sufficient number of securities having
ordinary voting power to elect a
majority of the board of directors or
other governing body, the book value,
net of depreciation, amortization and
intercompany eliminations, of the assets
of which, when aggregated with the book
values, net of depreciation,
amortization and intercompany
eliminations, of the assets of any other
Exempt Subsidiary other than Lockheed
Martin Finance Corporation or Martin
Marietta Materials, Inc., do not exceed
a specified percentage of the value of
total assets of Company and its
consolidated subsidiaries, and which are
designated as such by Company.
"Principal Property" defined as any
manufacturing property with a book
value, net of depreciation and
amortization, in excess of $5,000,000.
NO CONTRAVENTION: Execution, delivery and performance of
Loan Agreement and Notes do not
contravene, or constitute a default
under, Company's or Guarantors' charter
documents or any applicable laws or
regulations or any agreements or
instruments to which Company is a party
which would be reasonably likely to have
a Material Adverse Effect.
CORPORATE AUTHORIZATION: Company and Guarantors have taken all
corporate action necessary for entering
into Loan Agreement and Notes and
consummating transaction thereunder;
Loan Agreement and Notes are valid,
binding and enforceable against Company
and Guarantors, subject to bankruptcy
and equity exceptions.
FINANCIAL INFORMATION: Pro forma financial statements delivered
to Banks fairly present financial
position as of date of such financial
statements on a pro forma basis
consistent with the assumptions stated
therein; includes representation that no
Material Adverse Effect has occurred
since date of such financial statements.
LITIGATION; TAXES: No litigation exists against Company or
any Subsidiary, an adverse determination
of which is reasonably likely to occur
and if so adversely determined would be
reasonably likely to have a
January 4, 1996 Page 8
Material Adverse Effect and, at the time
of the tender offer closing, there shall
be (i) no injunction against
consummation of the tender offer, (ii)
no litigation pending or threatened
which gives rise to a material
likelihood that the merger will not be
consummated or will be subject to the
undue delay and (iii) no litigation
pending or threatened, other than that
as to which there is not a material
likelihood of success, challenging the
legality, validity or legal effect of
the financing. Company and each
Subsidiary have filed all material tax
returns and paid all taxes due
thereunder when due, except for those
not delinquent, those the nonpayment of
which would not be reasonably likely to
result in a Material Adverse Effect and
those contested in good faith.
GOVERNMENTAL APPROVALS: No governmental consents or approvals
required in connection with Loan
Agreement and Notes, except routine
filings under Securities Exchange Act of
1934 and the filing of International
Capital Form CQ-1's.
MARGIN REGULATIONS: No part of proceeds of Loans will be
used in violation of Federal Reserve
Regulation U, G, T and X.
PARI PASSU OBLIGATIONS: Claims of other parties to Loan
Agreement against Company will not be
subordinate to, and will rank at least
pari passu with, claims of other
unsecured creditors of Company, except
as may be provided for under applicable
bankruptcy laws.
NO DEFAULTS: No payment default in respect of
Material Debt.
"Material Debt" defined as debt of
Company and/or one or more of its
Subsidiaries exceeding $100,000,000 in
an aggregate principal amount.
ERISA: Company and related ERISA entities (the
"ERISA Group") have fulfilled their
obligations under minimum funding
standards of ERISA and the Internal
Revenue Code and are in substantial
compliance with all material provisions
of ERISA and Internal Revenue Code with
respect to each ERISA plan. ERISA Group
has not (i) sought a waiver of minimum
funding standards, (ii) failed to make a
contribution to any plan or made any
amendment to any plan which could result
in material lien or posting of material
bonds or (iii) incurred material
liability under Title IV of ERISA (other
than for payment of premiums under
ERISA).
DISCLOSURE: Written information provided to the
Banks in connection with Loan Agreement,
collectively, does not contain any
misstatement of a material fact or omit
to state a fact necessary to make the
statements contained therein, in light
of the circumstances under
January 4, 1996 Page 9
which they were made, not misleading in
any material respect on and as of the
date of Loan Agreement.
ENVIRONMENTAL: Based upon Company's periodic review of
its ongoing operations (and those of its
Restricted Subsidiaries), to the best
knowledge of Company, ongoing operations
at the Principal Properties are
currently being conducted in substantial
compliance with applicable environmental
laws, except to the extent that
noncompliance would not be reasonably
likely to result in a material adverse
change in the consolidated financial
conditions of Company and its
consolidated subsidiaries.
COVENANTS Covenants customary for this type of
- --------- transaction, including:
ACCOUNTING: Except as otherwise specified,
accounting measurements will be per GAAP
as in effect from time to time. Company
or Required Banks have ability to
request covenant change if change in
GAAP affects covenant; effect of change
in GAAP then suspended until new
covenant negotiated.
INFORMATION/REPORTING/DISTRIBUTION: 60 day delivery for quarterly financial
reports and 120 day delivery for annual
financial reports; delivery of such
statements as filed with the SEC
satisfies requirement. Documents
distributed to shareholders or filed
with the SEC (with certain exceptions)
to be distributed to the Banks promptly
after becoming available. Company to
provide prompt notice of (i) the
occurrence of any Default and (ii)
certain litigation.
COMPUTATION OF COVENANTS: Company to provide with each
distribution of annual and quarterly
financial statements computations of
leverage ratio.
MAINTENANCE OF EXISTENCE: Company and Significant Subsidiaries
will preserve and maintain corporate
existence. Company may terminate
business or corporate existence of a
Subsidiary which in Company's judgment
is no longer necessary or desirable.
Mergers, consolidations and transfers of
assets permitted as set forth below. No
prohibition on merger of a Subsidiary
into Company, or merger or consolidation
of a Subsidiary with or into another
entity if surviving corporation is a
Subsidiary and no Default shall have
occurred and be continuing.
MERGERS, CONSOLIDATIONS &
SALES OF ASSETS: Merger, consolidation, transfer or
conveyance of substantially all
Company's assets prohibited unless
resulting corporation is Company or a
consolidated subsidiary that is a
domestic corporation that expressly
assumes payment of indebtedness and
performance of covenants under Loan
Agreement, no Default shall have
occurred and be continuing after giving
effect to transaction
January 4, 1996 Page 10
and if Company is not surviving
corporation, there has been delivered an
Officer's Certificate and legal opinion
of its counsel stating that such
transaction complies with Loan
Agreement. Upon any such transaction,
the entity formed by such transaction
shall succeed to and be substituted for
Company under Loan Agreement. This
covenant shall not apply to any sale of
Wing's stock, so long as it is margin
stock, for value.
LIMITATION ON LIENS: No liens on assets of the Company or any
Restricted Subsidiary to secure Debt
allowed except (i) liens existing on the
date of Loan Agreement, (ii) liens on
property of a corporation existing at
the time the corporation is merged or
consolidated with Company or a
Restricted Subsidiary, (iii) liens
securing debt owing to Company or
another Restricted Subsidiary, (iv)
mechanic's liens, (v) liens on property
of a corporation existing at the time
the corporation becomes a Restricted
Subsidiary, (vi) liens on property at
time of acquisition of property and
purchase money liens, including liens
incurred in connection with industrial
revenue bonds, to secure payment of
purchase price or indebtedness incurred
or guaranteed prior to, at the time of
or within one year after acquisition,
completion of full operation of property
if indebtedness incurred or guaranteed
to pay purchase price of property or
improvements, (vii) liens in favor of
any customer (including any governmental
authority) to secure partial, progress,
advance or other payments or performance
pursuant to any contract or statute or
to secure any related indebtedness or to
secure Debt guaranteed by a governmental
authority, (viii) liens on cash or
certificates of deposit or other bank
obligations securing indebtedness in
aggregate principal amount not in excess
of $200,000,000 (which may be in a
different currency) of an amount
substantially equal in value (at the
time the lien is created) to such cash,
certificates of deposit or other
obligations, (ix) any extension,
renewal, replacement of the foregoing,
(x) liens equally and ratably severing
this credit facility and such Debt and
(xi) liens not otherwise referred to
securing Debt that does not in the
aggregate exceed the greater of 10% of
stockholders' equity at the end of the
preceding fiscal quarter or
$1,000,000,000. Liens described in (ii),
(v) and (vi) shall not include any liens
on stock or assets of "Wings" or its
subsidiaries incurred in contemplation
of the merger. This covenant shall not
apply to margin stock in excess of 25%
in value of the assets covered by this
covenant.
PAYMENT OF OBLIGATIONS: Company and each Significant Subsidiary
will pay all material taxes,
assessments, and governmental charges
imposed upon it and all lawful material
claims prior to date any penalty accrues
or lien imposed except for (i) those
contested in good faith, (ii) those not
delinquent and (iii) those the
nonpayment of which would not be
reasonably likely to result in a
Material Adverse Effect.
January 4, 1996 Page 11
COMPLIANCE WITH LAWS: Company and each Significant Subsidiary
shall comply with all laws, a breach of
which would be reasonably likely to have
a Material Adverse Effect, except where
contested in good faith and by proper
proceedings.
INSURANCE: Company and each Significant Subsidiary
will maintain insurance as is
customarily carried by owners of similar
businesses and properties (or to the
customary extent, self-insurance).
MAINTENANCE OF PROPERTIES: Company and its Significant Subsidiaries
will keep all properties necessary in
its business in good working order,
normal wear and tear excepted; Company
or any Subsidiary may discontinue
operation and/or maintenance of such
properties if discontinuance is in
Company's (or such Subsidiary's)
judgment desirable.
LEVERAGE RATIO: Ratio of Debt (as defined) as of the
last day of any fiscal quarter to the
sum of (i) Debt (as defined) and (ii)
Stockholders' Equity (as defined) at
levels to be determined.
STOCKHOLDERS' EQUITY AS DEFINED: Consolidated Stockholders' Equity of
Company and consolidated Subsidiaries as
reported.
DEBT AS DEFINED: Debt shall mean, without duplication:
(i) all debt, including ESOP
guarantees and capitalized lease
obligations, reported as debt in
the consolidated financial
statements of the Company and its
consolidated Subsidiaries, plus
----
(ii) all indebtedness for borrowed
money and capitalized lease
obligations incurred by third
parties guaranteed by Company and
its consolidated Subsidiaries not
otherwise reported as debt in the
consolidated financial statements
of the Company and its
consolidated Subsidiaries.
USE OF LOANS: Proceeds of the Loans may be used for
any lawful corporate purpose.
WAIVERS: Required Banks may waive compliance with
any covenant (other than certain
provisions relating to principal
payments, fees, interest rate, due dates
and guarantees, which require consent of
all Banks).
EVENTS OF DEFAULT
- -----------------
PRINCIPAL PAYMENTS: Failure to pay when due.
January 4, 1996 Page 12
INTEREST AND FACILITY FEE PAYMENTS: Failure to pay within 5 days of due
date.
OTHER FEES: Failure to pay within 30 days after
written request for payment thereof.
BREACH OF CERTAIN COVENANTS: Failure to perform under the following
covenants:
1) Merger/Consolidation Restrictions
2) Limitations on Liens
3) Leverage Ratio
BREACH OF OTHER COVENANTS: Failure to perform within 30 days after
written notice.
REPRESENTATIONS: 5 days to correct after written notice.
ACCELERATION OF DEBT: Any Material Debt shall be accelerated
by reasons of default thereunder or not
paid when due and corrective action
shall not have been taken within 5 days
after written notice thereof.
BANKRUPTCY: Company or any Significant Subsidiary
shall commence voluntary proceeding
under bankruptcy laws, or seek
appointment of receiver or trustee, or
shall consent to any of the foregoing;
or makes a general assignment for
benefit of creditors; or fails generally
to pay its debts as they become due; or
takes any corporate action to authorize
the foregoing.
Involuntary case or proceeding commenced
against Company or any Significant
Subsidiary seeking relief under
bankruptcy laws or seeking appointment
of trustee or receiver, and such
proceeding shall remain undismissed and
unstayed for a period of 90 days; or an
order for relief shall be entered
against Company or any Significant
Subsidiary under federal bankruptcy
laws.
FINAL JUDGMENTS: Final judgment requiring payment of
$150,000,000 or more that has not been
satisfied or stayed within 60 days and
such failure to satisfy or stay is
unremedied for 5 days after notice.
ERISA: A final judgment either (1) requiring
termination or imposing liability under
Title IV of ERISA (other than for
premiums) in respect of, or requiring a
trustee to be appointed pursuant to
Title IV of ERISA to administer, any
plan or plans having unfunded
liabilities in excess of $150,000,000 or
(2) in an action relating to a
Multiemployer Plan involving a current
payment obligation in excess of
$150,000,000, which judgment in either
case has not been satisfied or stayed
within 60 days and such failure to
satisfy or stay is unremedied for 5 days
after notice.
January 4, 1996 Page 13
CHANGE IN OWNERSHIP OF STOCK: Any person or group of persons (other
than employee benefit or stock ownership
plan of Company) has acquired shares of
capital stock having ordinary voting
power to elect a majority of the Board
of Directors of Company or change in
majority of Board of Directors within a
two-year period.
GUARANTY INVALIDATED: Revocation or invalidation of guaranty
of the Loan Agreement and the Notes.
REMEDIES: Commitments terminate and loan/interest
become due and payable upon the receipt
of notice from Documentation Agent
(automatic in case of bankruptcy).
NOTICES OF DEFAULT: All notices or requests specified in
Events of Default provisions to be given
by Documentation Agent at the request of
the Required Banks.
MISCELLANEOUS
- -------------
GOVERNING LAW/SUBMISSION
TO JURISDICTION: New York law governs. Parties submit to
the jurisdiction of New York courts for
all legal proceedings and waive any
objection to the laying of venue of any
such proceeding brought in such a court
and claim of inconvenient forum.
WAIVER OF JURY TRIAL: Company, Agents and Banks each waive
rights to trial by jury.
REQUIRED BANKS: Banks holding in excess of 50% of
outstanding Commitments.
INCREASED COSTS/CAPITAL ADEQUACY/
ILLEGALITY: Increased cost/capital adequacy/
illegality provisions to be included and
will generally provide that no increased
cost or capital adequacy payment may be
claimed if allocable to periods prior to
30 days prior to date Company is
notified of claim by a Bank; no
compensation for increases in capital
not occasioned by a Change in Law or
beyond that required by a Change in Law.
Any Bank requesting additional
compensation shall designate a different
lending office if such designation will
avoid the need for, or reduce the amount
of, such compensation or permit the Bank
to make or maintain any LIBOR Loan, so
long as such designation is not
disadvantageous to such Bank. Any
Regulation D charges shall be billed
through Administrative Agent.
"Change in Law" as defined is the
adoption of any law, rule or regulation,
or any change therein, or any change in
the interpretation or administration
thereof, after Closing Date, by any
governmental authority, central bank or
comparable agency or
January 4, 1996 Page 14
compliance with any directive (whether
or not having the force of law) of any
such entity.
INDEMNITY: Company to indemnify Banks for (i)
funding costs and/or losses (excluding
loss of margin) if prepayment or
conversion of a LIBOR Loan or a CD Loan
occurs prior to the end of an Interest
Period or if Company fails to consummate
a LIBOR Loan or a CD Loan because
conditions precedent to borrowing or
conversion not satisfied and (ii)
reasonable costs and expenses of
litigation in response to or in defense
of any proceeding brought or threatened
against a Bank relating to the Agreement
or Company's use of proceeds of the
Loans.
EXPENSES: In connection with preparing Loan
Agreement, Company will pay reasonable
fees and disbursements of special
counsel to Agents and reasonable out-of-
pocket expenses incurred by Agents. In
connection with an Event of Default and
enforcement proceedings, Company will
pay reasonable out-of-pocket expenses of
Agents and Banks, including reasonable
fees and expenses of counsel (including
in-house counsel).
DOCUMENT PREPARATION: Loan Agreement to be prepared by Davis
Polk & Wardwell.
January 4, 1996 Page 15
JP MORGAN
LOCKHEED MARTIN CORPORATION
PRICING SCHEDULE
FIVE YEAR REVOLVER
The LIBOR Margin, the CD Margin and the Facility Fee shall be as
specified below (in basis points per annum).
====================================================================================================================================
LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V LEVEL VI
====================================================================================================================================
BASIS FOR PRICING If Company is If Company is If Company is If Company is If Company is If Company is
rated A or rated A- or rated BBB+ or rated BBB or rated BBB- by rated lower
better by S&P better by S&P better by S&P better by S&P S&P and Baa3 than BBB- by
---
or A2 or or A3 or better or Baa1 or or Baa2 or by Moody's S&P or Baa3 by
-- -- -- --
better by by Moody's better by better by Moody's or is
Moody's Moody's Moody's unrated and no
other level
applies
- ------------------------------------------------------------------------------------------------------------------------------------
FACILITY FEE 8.00 10.00 11.00 13.75 17.50 25.00
- ------------------------------------------------------------------------------------------------------------------------------------
LIBOR + Greater than 50% 14.50 15.00 19.00 21.25 32.50 50.00
Less than 50% 14.50 15.00 24.00 26.25 37.50 50.00
- ------------------------------------------------------------------------------------------------------------------------------------
CD + Greater than 50% 27.00 27.50 31.50 33.75 45.00 62.50
Less than 50% 27.00 27.50 36.50 38.75 50.00 62.50
- ------------------------------------------------------------------------------------------------------------------------------------
UNUSED COST 8.00 10.00 11.00 13.75 17.50 25.00
- ------------------------------------------------------------------------------------------------------------------------------------
USED COST Greater than 50% 22.50 25.00 30.00 35.00 50.00 75.00
Less than 50% 22.50 25.00 35.00 40.00 55.00 75.00
====================================================================================================================================
[CITICORP LOGO AND LETTERHEAD]
January 5, 1996
J. P. Morgan Securities, Inc.
60 Wall Street
New York, NY 10260
Attention Mr. Michael Mauer
Vice President
$5,000,000,000 364-Day Revolving Credit Facility
$5,000,000,000 Five-Year Revolving Credit Facility
Dear Mr. Mauer:
Citicorp Securities, Inc. is pleased to inform you of the commitment of Citicorp
USA, Inc. as Managing Agent and Lender to provide up to US $750,000,000 of the
Facilities on a pro rata basis for the syndicated loans for Lockheed Martin
Corporation ("LMC"), the terms and conditions of which are outlined in the
Summary of Terms and Conditions dated January 4, 1996, which is attached as
Annex I. Terms not made clear in Annex I are subject to the mutual agreement of
the parties. Our commitment is subject only to (i) satisfactory documentation
and (ii) receiving the fees set forth in the separate fee letter dated January
5, 1996.
This commitment will expire at 5:00 p.m. (EST) on January 9, 1996 if this letter
has not been accepted by LMC by that time.
Sincerely,
CITICORP SECURITIES, INC.
By: /s/ William L. Hartmann
_________________________
William L. Hartmann
Managing Director
ACCEPTED AND AGREED TO
LOCKHEED MARTIN CORPORATION
By: /s/ Walter E. Skowronski
_________________________________
Name: Walter E. Skowronski
Title: Vice President and Treasurer
Date: January 7, 1996
SUMMARY OF TERMS AND CONDITIONS
FOR LOCKHEED MARTIN CORPORATION
BORROWER: Lockheed Martin Corporation ("Company"),
directly or indirectly through LAC
Acquisition Corp.
AMOUNT: $5,000,000,000.
PURPOSE: The purchase of the common stock of
"Wings" and general corporate purposes
including commercial paper backup.
ARRANGER AND SYNDICATION AGENT: J.P. Morgan Securities Inc.
CO-ARRANGER: BA Securities, Inc.
MANAGING AGENTS: Citibank, N.A.
DOCUMENTATION AGENT: Morgan Guaranty Trust Company of
New York.
ADMINISTRATIVE AGENT: Bank of America National Trust and
Savings Association.
FACILITY DESCRIPTION: 364-day facility on a fully revolving
basis.
BORROWING OPTIONS: Committed Loans consisting of Base Rate
Loans, CD Loans and LIBOR Loans.
Uncommitted Money Market bid rate options
("Money Market Loans").
LENDERS: Syndicate of lenders acceptable to
Company and Arranger ("Banks").
TIMING: Closing to occur by May 1996.
GUARANTORS: Lockheed Corporation, Martin Marietta
Corporation, Martin Marietta
Technologies, Inc., LAC Acquisition
Corporation or the Company if LAC
Acquisition Corp. is the Borrower.
COMMITMENTS AND FEES:
- ---------------------
COMMITMENT: With respect to Committed Loans, each
Bank will fund each draw in proportion to
its Commitment.
With respect to Money Market Loans, each
Bank may, but shall have no obligation
to, make offers to make such Loans
pursuant to requests submitted by
Company. Drawdown of Money
January 4, 1996 Page 1
Market Loans will be deemed a use of
Commitments of all Banks on pro rata
basis.
REDUCTION OR CANCELLATION OF
COMMITMENTS: Commitments cancelable in whole or in
part (ratably reduced in amounts of at
least $25,000,000 and multiples of
$5,000,000 in excess thereof) at election
of Company upon not less than three
business days' notice.
TERMINATION OF BANKS/REPLACING BANKS: Company may terminate the entire
Commitment of any Bank upon 10 business
days' notice if a Bank demands increased
costs or capital adequacy payments from
Company or if the commitment of a Bank to
make LIBOR Loans is suspended due to its
inability to make such Loans. Company may
replace such Bank with a new or existing
Bank.
FACILITY FEE: To be paid quarterly in arrears on the
daily average of the total Commitments at
a rate determined by reference to
attached Pricing Schedule. Facility Fee
will increase if ratings downgraded and
decrease if ratings upgraded.
Facility Fee computed on the basis of a
year of 365 or 366 days over the actual
number of days elapsed. Any change in
Facility Fee shall become effective the
day on which a rating agency shall have
announced a ratings change.
INTEREST RATES
- --------------
INTEREST RATE OPTIONS: LIBOR, CD Rate or Base Rate at the
election of Company.
LIBOR INTEREST PERIOD OPTIONS: One, two, three or six months, as
selected by Company. Twelve-month LIBOR
-----
option available upon request of Company
and consent of all Banks.
CD RATE INTEREST PERIOD OPTIONS: 30, 60, 90 or 180 days, as selected by
Company.
RATE BASIS: LIBOR
CD Rate - Adjusted CD Rate.
3 LIBOR/CD Reference Banks to be
appointed.
Base Rate - higher of Reference Rate as
announced by Administrative Agent or
federal funds rate plus .5%.
Any change in Base Rate effective on the
day change is announced by Administrative
Agent.
January 4, 1996 Page 2
INTEREST PAYMENT: Interest on LIBOR Loans, CD Loans and
Base Rate Loans (if federal funds rate is
effective rate) shall be computed on the
basis of a year of 360 days and paid for
the actual number of days elapsed.
Interest on Base Rate Loans (if Reference
Rate is effective rate) shall be computed
on the basis of a year of 365 or 366
days, as the case may be, and paid for
the actual number of days elapsed.
Interest accrued on Base Rate Loans shall
be paid quarterly. Interest accrued on
LIBOR Loans shall be paid on the last day
of the Interest Period, on the date of
any prepayment or conversion thereof,
together with breakage costs, if any, and
in the case of a LIBOR Loan with an
Interest Period of twelve-months, on the
six-month anniversary of the making of
the LIBOR Loan. Interest accrued on CD
Loans shall be paid on the last day of
the Interest Period and on the date of
any prepayment or conversion thereof,
together with breakage costs, if any. If
any CD Loan or portion thereof shall have
an Interest Period of less than 30 days,
such portion shall bear interest at the
Base Rate during such period.
Interest obligations accrue from the day
funds are received through the day before
principal is repaid.
RATE SPREAD: For Base Rate Loans, Base Rate. For LIBOR
Loans, LIBOR plus LIBOR Margin. For CD
Loans, Adjusted CD Rate plus CD Margin.
LIBOR Margin and CD Margin determined by
reference to attached Pricing Schedule.
LIBOR Margin and CD Margin will increase
if ratings downgraded and decrease if
ratings upgraded.
Any change in the LIBOR Margin or CD
Margin shall become effective for LIBOR
Loans or CD Loans, as applicable, the day
on which a rating agency shall have
announced a ratings change.
POST DEFAULT RATE: 2% per annum above the Base Rate for such
date.
BORROWING PROCEDURES
- --------------------
MINIMUM DRAW: $10,000,000 with additional increments of
$1,000,000. No per draw limit up to total
unused Commitments.
NOTIFICATION/TIMING: Base Rate: To Administrative Agent, by
11:00 a.m. New York City time on day of
draw.
LIBOR: To Administrative Agent, by 1:00
p.m. New York City time, 3 business days
before draw or, in the case of an
Interest Period of twelve-months, by 1:00
p.m. New York City time, 4 business days
before draw.
January 4, 1996 Page 3
CD Rate: To Administrative Agent, by 1:00
p.m. New York City time, 2 business days
before draw.
An officer or a Designated Representative
(certain designated employees) to provide
notice to Administrative Agent. An
officer or Designated Representative may
provide telephonic notice, to be followed
by appropriately authorized written
notice.
FUND DELIVERY: Banks to deliver funds to Administrative
Agent by 1:00 p.m. New York City time.
Administrative Agent to wire transfer
loan principal (U.S. Dollars) in
immediately available funds to an account
to be designated by Company immediately
upon receipt, but not later than 4:00
p.m. New York City time. Administrative
Agent may make up a shortfall of funds
received. Any Bank not making its pro
rata share of any Loan available to
Administrative Agent and Company, if it
does not repay such share of any Loan, at
the required date and time severally
agree to repay Administrative Agent such
shortfall, with interest (at the federal
funds rate). If a Bank fails to fund a
Loan, amounts received by Administrative
Agent will be deemed to have been paid to
Bank and made available to Administrative
Agent for the Loan.
CONVERSION/CONTINUATION: Company may (i) convert all or any
portion of outstanding Base Rate Loans
equal to $10,000,000 and multiples of
$1,000,000 in excess thereof to LIBOR
Loans or CD Loans, (ii) convert all or
any portion of outstanding LIBOR Loans
equal to $10,000,000 and multiples of
$1,000,000 in excess thereof to Base Rate
Loans or CD Loans, and (iii) convert all
or any portion of outstanding CD Loans
equal to $10,000,000 and multiples of
$1,000,000 in excess thereof to Base Rate
Loans or LIBOR Loans. Upon the expiration
of any Interest Period applicable to a
LIBOR Loan or a CD Loan, Company may
continue all or any portion of such Loans
equal to $10,000,000 and multiples of
$1,000,000 in excess thereof as LIBOR
Loans or CD Loans, as applicable. Written
or telephonic notice of such
conversion/continuation shall be
delivered to Administrative Agent no
later than (i) 1:00 p.m. New York City
time (a) at least 3 business days in
advance of the proposed date of
conversion to or continuation of LIBOR
Loans or (b) at least 2 business days in
advance of the proposed date of
conversion to or continuation of CD Loans
and (ii) 11:00 a.m. New York City time on
the day of the proposed conversion to a
Base Rate Loan. Telephonic notice of
conversion/continuation to be promptly
followed by a written notice thereof. If
timely notice of conversion/continuation
not provided by Company as to any LIBOR
loan or CD Loan and such Loan is not
repaid by
January 4, 1996 Page 4
Company at the end of the applicable
Interest Period thereof, such Loan shall
be converted to a Base Rate Loan.
PREPAYMENTS: Base Rate Loans can be repaid in whole or
in part on any day without penalty or
premium. CD Loans can be repaid with 1
business day's notice. LIBOR Loans can be
repaid with 3 business days' notice. Each
partial prepayment shall be in an
aggregate amount of not less than
$10,000,000 and shall include interest
accrued on the Loans to the prepayment
date and any breakage costs (excluding
loss of Margin).
PAYMENTS TO BANKS: All payments by Company to Banks under
Loan Agreement are to be in U.S. Dollars,
free of taxes, and wire transferred to
Administrative Agent in immediately
available funds no later than 2:00 p.m.
New York City time.
PARTICIPATIONS/ASSIGNMENTS: Assignments may be made to Eligible
Institutions with the prior notification
to the Administrative Agent and prior
written consent of Company, which shall
not be unreasonably withheld, in minimum
amounts of $15,000,000. Withholding of
consent is not unreasonable if based
solely on desire to manage loan exposures
to proposed assignee or avoid payment of
additional increased costs of taxes
payable by Company by reason of such
assignment. No Company consent required
for assignment to an affiliate of a Bank.
Each Bank must retain at least
$15,000,000 commitment. Participations
permitted without consent of Company upon
prior written notification to Company (no
prior notification required in the case
of participations of Money Market Loans).
Transferability of voting rights limited
to change in principal, rate, fees and
term. "Eligible Institution" means any
commercial bank having total assets in
excess of $3,000,000,000 or the
equivalent amount of local currency of
such bank or affiliates of such bank that
are financial institutions.
CONDITIONS PRECEDENT
- --------------------
(A) Effectiveness of Loan Agreement:
customary for this type of transaction,
including:
1) termination of, and payment of
amounts due under, existing revolving
credit agreements.
2) execution and delivery of:
a) opinion of General Counsel or
Assistant General Counsel to
Company and opinion of special
counsel to company;
January 4, 1996 Page 5
b) opinion of Bank counsel;
c) certified copies of charters,
bylaws, and corporate action
authoring Loan Agreement;
d) note for each Bank, if requested;
e) certificate indicating incumbency
and signatures of officers
signing Loan Agreement and those
officers and employees authorized
to give notice of borrowing; and
f) LAC and Wings shall have entered
into a merger agreement in form
and substance satisfactory to the
Banks providing for the
acquisition to be effected by a
cash tender offer for at least
66% of Wing's common stock and
subsequent merger.
(g) terms and conditions of the
tender offer shall be in
substance as disclosed to the
Banks prior to their commitments
but shall in all events include
that LAC shall own and control
the number of shares of Wing's
common stock as shall be
necessary to approve the merger
without the affirmative vote or
approval of any other
shareholders; the conditions to
the consummation of the tender
offer shall have been satisfied
and shall not have been waived,
except for conditions (x) not
material to the combined entity
or the prospects and timing of
the consummation of the merger
and (y) not relating to the
legality, validity or legal
effect of the financing; and
tendered shares shall have been
accepted for payment pursuant to
the tender offer in accordance
with the terms of the tender
offer.
(h) evidence satisfaction to the
Documentation Agent and
Administrative Agent that all
other necessary licenses, permits
and governmental and third-party
filings, consents and approvals
for the acquisition and merger
have been made or obtained and
remain in full force and effect,
except for those (x) not material
to the combined entity or the
prospects and timing of the
consummation of the merger and
(y) not relating to the legality,
validity or legal effect of the
financing; and the tender offer
and the financing thereof shall
be in compliance with all laws
and regulations (including,
without limitation, the margin
regulations).
January 4, 1996 Page 6
(B) All Loans: (i) accuracy of
Representations and Warranties, with the
exception, for Loans other than the
tender offer funding, of the
representations concerning litigation,
taxes, ERISA, no Material Adverse Effect
since date of pro forma financial
statements delivered to Banks and
environmental matters and (ii) no Event
of Default.
REPRESENTATIONS AND WARRANTIES
- ------------------------------
CORPORATE EXISTENCE & POWER: Company and its Significant Subsidiaries
duly organized, validly existing and in
good standing in respective state of
incorporation and qualified to do
business where necessary, except where
failure to be so qualified would not be
reasonably likely to have a Material
Adverse Effect. Company has all necessary
corporate power to enter into and perform
under Loan Agreement and Notes.
"Material Adverse Effect" means a
material adverse effect on (a) ability of
Company to perform obligations under
Agreement or Notes, (b) validity or
enforceability of Agreement or Notes, (c)
rights and remedies of any Bank or Agents
or (d) timely payment of principal of or
interest on the Loans or other amounts
paid in connection therewith.
"Significant Subsidiary" means a
Subsidiary with total assets, net of
depreciation and amortization and after
intercompany eliminations, in excess of
$100,000,000.
"Subsidiary" as defined does not include
any Exempt Subsidiary, but otherwise
means any entity of which Company owns a
sufficient number of securities having
ordinary voting power to elect a majority
of the board of directors or other
governing body.
"Restricted Subsidiary" means any
Significant Subsidiary, any Subsidiary
that has substantially all of its
property located in the United States and
that owns a Principal Property and any
other Subsidiary designated from time to
time by the Company as a "Restricted
Subsidiary." Subsidiaries of a Restricted
Subsidiary are not Restricted
Subsidiaries solely by virtue of such
Subsidiary status. If at the end of any
fiscal quarter, the aggregate net assets
of the Company and all of its Restricted
Subsidiaries are less than a specified
percentage of the total net assets of the
Company and its Subsidiaries taken as a
whole, as reported in the Company's
financial statements (the "Total Net
Assets") , the Company shall designate
another Subsidiary or Subsidiaries as
Restricted Subsidiaries such that the net
assets of such Subsidiary or Subsidiaries
that are not encumbered to secure Debt,
plus the net assets of the Company and
the other Restricted Subsidiaries, equals
or exceeds a specified percentage of the
Total Net Assets.
January 4, 1996 Page 7
Thereafter, the Company may designate a
Subsidiary or Subsidiaries (other than a
Restricted Subsidiary as defined without
regard to any prior such designations by
the Company) as no longer a Restricted
Subsidiary, provided that the aggregate
net assets of the Company and all of its
Restricted Subsidiaries after giving
effect thereto shall equal or exceed a
specified percentage of the Total Net
Assets.
"Exempt Subsidiary" means Lockheed Martin
Finance Corporation, Martin Marietta
Materials, Inc. and any other entity of
which Company owns a sufficient number of
securities having ordinary voting power
to elect a majority of the board of
directors or other governing body, the
book value, net of depreciation,
amortization and intercompany
eliminations, of the assets of which,
when aggregated with the book values, net
of depreciation, amortization and
intercompany eliminations, of the assets
of any other Exempt Subsidiary other than
Lockheed Martin Finance Corporation or
Martin Marietta Materials, Inc., do not
exceed a specified percentage of the
value of total assets of Company and its
consolidated subsidiaries, and which are
designated as such by Company.
"Principal Property" defined as any
manufacturing property with a book value,
net of depreciation and amortization, in
excess of $5,000,000 .
NO CONTRAVENTION: Execution, delivery and performance of
Loan Agreement and Notes do not
contravene, or constitute a default
under, Company's or Guarantors' charter
documents or any applicable laws or
regulations or any agreements or
instruments to which Company is a party
which would be reasonably likely to have
a Material Adverse Effect.
CORPORATE AUTHORIZATION: Company and Guarantors have taken all
corporate action necessary for entering
into Loan Agreement and Notes and
consummating transaction thereunder; Loan
Agreement and Notes are valid, binding
and enforceable against Company and
Guarantors, subject to bankruptcy and
equity exceptions.
FINANCIAL INFORMATION: Pro forma financial statements delivered
to Banks fairly present financial
position as of date of such financial
statements on a pro forma basis
consistent with the assumptions stated
therein; includes representation that no
Material Adverse Effect has occurred
since date of such financial statements.
LITIGATION; TAXES: No litigation exists against Company or
any Subsidiary, an adverse determination
of which is reasonably likely to occur
and if so adversely determined would be
reasonably likely to have a
January 4, 1996 Page 8
Material Adverse Effect and, at the time
of the tender offer closing, there shall
be (i) no injunction against consummation
of the tender offer, (ii) no litigation
pending or threatened which gives rise to
a material likelihood that the merger
will not be consummated or will be
subject to the undue delay and (iii) no
litigation pending or threatened, other
than that as to which there is not a
material likelihood of success,
challenging the legality, validity or
legal effect of the financing. Company
and each Subsidiary have filed all
material tax returns and paid all taxes
due thereunder when due, except for those
not delinquent, those the nonpayment of
which would not be reasonably likely to
result in a Material Adverse Effect and
those contested in good faith.
GOVERNMENTAL APPROVALS: No governmental consents or approvals
required in connection with Loan
Agreement and Notes, except routine
filings under Securities Exchange Act of
1934 and the filing of International
Capital Form CQ-1's.
MARGIN REGULATIONS: No part of proceeds of Loans will be used
in violation of Federal Reserve
Regulation U, G, T and X.
PARI PASSU OBLIGATIONS: Claims of other parties to Loan Agreement
against Company will not be subordinate
to, and will rank at least pari passu
with, claims of other unsecured creditors
of Company, except as may be provided for
under applicable bankruptcy laws.
NO DEFAULTS: No payment default in respect of Material
Debt.
"Material Debt" defined as debt of
Company and/or one or more of its
Subsidiaries exceeding $100,000,000 in an
aggregate principal amount.
ERISA: Company and related ERISA entities (the
"ERISA Group") have fulfilled their
obligations under minimum funding
standards of ERISA and the Internal
Revenue Code and are in substantial
compliance with all material provisions
of ERISA and Internal Revenue Code with
respect to each ERISA plan. ERISA Group
has not (i) sought a waiver of minimum
funding standards, (ii) failed to make a
contribution to any plan or made any
amendment to any plan which could result
in material lien or posting of material
bonds or (iii) incurred material
liability under Title IV of ERISA (other
than for payment of premiums under
ERISA).
DISCLOSURE: Written information provided to the Banks
in connection with Loan Agreement,
collectively, does not contain any
misstatement of a material fact or omit
to state a fact necessary to make the
statements contained therein, in light of
the circumstances under
January 4, 1996 Page 9
which they were made, not misleading in
any material respect on and as of the
date of Loan Agreement.
ENVIRONMENTAL: Based upon Company's periodic review of
its ongoing operations (and those of its
Restricted Subsidiaries), to the best
knowledge of Company, ongoing operations
at the Principal Properties are currently
being conducted in substantial compliance
with applicable environmental laws,
except to the extent that noncompliance
would not be reasonably likely to result
in a material adverse change in the
consolidated financial conditions of
Company and its consolidated
subsidiaries.
COVENANTS Covenants customary for this type of
- --------- transaction, including:
ACCOUNTING: Except as otherwise specified, accounting
measurements will be per GAAP as in
effect from time to time. Company or
Required Banks have ability to request
covenant change if change in GAAP affects
covenant; effect of change in GAAP then
suspended until new covenant negotiated.
INFORMATION/REPORTING/DISTRIBUTION: 60 day delivery for quarterly financial
reports and 120 day delivery for annual
financial reports; delivery of such
statements as filed with the SEC
satisfies requirement. Documents
distributed to shareholders or filed with
the SEC (with certain exceptions) to be
distributed to the Banks promptly after
becoming available. Company to provide
prompt notice of (i) the occurrence of
any Default and (ii) certain litigation.
COMPUTATION OF COVENANTS: Company to provide with each distribution
of annual and quarterly financial
statements computations of leverage
ratio.
MAINTENANCE OF EXISTENCE: Company and Significant Subsidiaries will
preserve and maintain corporate
existence. Company may terminate business
or corporate existence of a Subsidiary
which in Company's judgment is no longer
necessary or desirable. Mergers,
consolidations and transfers of assets
permitted as set forth below. No
prohibition on merger of a Subsidiary
into Company, or merger or consolidation
of a Subsidiary with or into another
entity if surviving corporation is a
Subsidiary and no Default shall have
occurred and be continuing.
MERGERS, CONSOLIDATIONS &
SALES OF ASSETS: Merger, consolidation, transfer or
conveyance of substantially all Company's
assets prohibited unless resulting
corporation is Company or a consolidated
subsidiary that is a domestic corporation
that expressly assumes payment of
indebtedness and performance of covenants
under Loan Agreement, no Default shall
have occurred and be continuing after
giving effect to transaction
January 4, 1996 Page 10
and if Company is not surviving
corporation, there has been delivered an
Officer's Certificate and legal opinion
of its counsel stating that such
transaction complies with Loan Agreement.
Upon any such transaction, the entity
formed by such transaction shall succeed
to and be substituted for Company under
Loan Agreement. This covenant shall not
apply to any sale of Wing's stock, so
long as it is margin stock, for value.
LIMITATION ON LIENS: No liens on assets of the Company or any
Restricted Subsidiary to secure Debt
allowed except (i) liens existing on the
date of Loan Agreement, (ii) liens on
property of a corporation existing at the
time the corporation is merged or
consolidated with Company or a Restricted
Subsidiary, (iii) liens securing debt
owing to Company or another Restricted
Subsidiary, (iv) mechanic's liens, (v)
liens on property of a corporation
existing at the time the corporation
becomes a Restricted Subsidiary, (vi)
liens on property at time of acquisition
of property and purchase money liens,
including liens incurred in connection
with industrial revenue bonds, to secure
payment of purchase price or indebtedness
incurred or guaranteed prior to, at the
time of or within one year after
acquisition, completion of full operation
of property if indebtedness incurred or
guaranteed to pay purchase price of
property or improvements, (vii) liens in
favor of any customer (including any
governmental authority) to secure
partial, progress, advance or other
payments or performance pursuant to any
contract or statute or to secure any
related indebtedness or to secure Debt
guaranteed by a governmental authority,
(viii) liens on cash or certificates of
deposit or other bank obligations
securing indebtedness in aggregate
principal amount not in excess of
$200,000,000 (which may be in a different
currency) of an amount substantially
equal in value (at the time the lien is
created) to such cash, certificates of
deposit or other obligations, (ix) any
extension, renewal, replacement of the
foregoing, (x) liens equally and ratably
severing this credit facility and such
Debt and (xi) liens not otherwise
referred to securing Debt that does not
in the aggregate exceed the greater of
10% of stockholders' equity at the end of
the preceding fiscal quarter or
$1,000,000,000. Liens described in (ii),
(v) and (vi) shall not include any liens
on stock or assets of "Wings" or its
subsidiaries incurred in contemplation of
the merger. This covenant shall not apply
to margin stock in excess of 25% in value
of the assets covered by this covenant.
PAYMENT OF OBLIGATIONS: Company and each Significant Subsidiary
will pay all material taxes, assessments,
and governmental charges imposed upon it
and all lawful material claims prior to
date any penalty accrues or lien imposed
except for (i) those contested in good
faith, (ii) those not delinquent and
(iii) those the nonpayment of which would
not be reasonably likely to result in a
Material Adverse Effect.
January 4, 1996 Page 11
COMPLIANCE WITH LAWS: Company and each Significant Subsidiary
shall comply with all laws, a breach of
which would be reasonably likely to have
a Material Adverse Effect, except where
contested in good faith and by proper
proceedings.
INSURANCE: Company and each Significant Subsidiary
will maintain insurance as is customarily
carried by owners of similar businesses
and properties (or to the customary
extent, self-insurance).
MAINTENANCE OF PROPERTIES: Company and its Significant Subsidiaries
will keep all properties necessary in its
business in good working order, normal
wear and tear excepted; Company or any
Subsidiary may discontinue operation
and/or maintenance of such properties if
discontinuance is in Company's (or such
Subsidiary's) judgment desirable.
LEVERAGE RATIO: Ratio of Debt (as defined) as of the last
day of any fiscal quarter to the sum of
(i) Debt (as defined) and (ii)
Stockholders' Equity (as defined) at
levels to be determined.
STOCKHOLDERS' EQUITY AS DEFINED: Consolidated Stockholders' Equity of
Company and consolidated Subsidiaries as
reported.
DEBT AS DEFINED: Debt shall mean, without duplication:
(i) all debt, including ESOP guarantees
and capitalized lease obligations,
reported as debt in the
consolidated financial statements
of the Company and its consolidated
Subsidiaries, plus
----
(ii) all indebtedness for borrowed money
and capitalized lease obligations
incurred by third parties
guaranteed by Company and its
consolidated Subsidiaries not
otherwise reported as debt in the
consolidated financial statements
of the Company and its consolidated
Subsidiaries.
USE OF LOANS: Proceeds of the Loans may be used for any
lawful corporate purpose.
WAIVERS: Required Banks may waive compliance with
any covenant (other than certain
provisions relating to principal
payments, fees, interest rate, due dates
and guarantees, which require consent of
all Banks).
EVENTS OF DEFAULT
- -----------------
PRINCIPAL PAYMENTS: Failure to pay when due.
January 4, 1996 Page 12
INTEREST AND FACILITY FEE PAYMENTS: Failure to pay within 5 days of due date.
OTHER FEES: Failure to pay within 30 days after
written request for payment thereof.
BREACH OF CERTAIN COVENANTS: Failure to perform under the following
covenants:
1) Merger/Consolidation Restrictions
2) Limitations on Liens
3) Leverage Ratio
BREACH OF OTHER COVENANTS: Failure to perform within 30 days after
written notice.
REPRESENTATIONS: 5 days to correct after written notice.
ACCELERATION OF DEBT: Any Material Debt shall be accelerated by
reasons of default thereunder or not paid
when due and corrective action shall not
have been taken within 5 days after
written notice thereof.
BANKRUPTCY: Company or any Significant Subsidiary
shall commence voluntary proceeding under
bankruptcy laws, or seek appointment of
receiver or trustee, or shall consent to
any of the foregoing; or makes a general
assignment for benefit of creditors; or
fails generally to pay its debts as they
become due; or takes any corporate action
to authorize the foregoing.
Involuntary case or proceeding commenced
against Company or any Significant
Subsidiary seeking relief under
bankruptcy laws or seeking appointment of
trustee or receiver, and such proceeding
shall remain undismissed and unstayed for
a period of 90 days; or an order for
relief shall be entered against Company
or any Significant Subsidiary under
federal bankruptcy laws.
FINAL JUDGMENTS: Final judgment requiring payment of
$150,000,000 or more that has not been
satisfied or stayed within 60 days and
such failure to satisfy or stay is
unremedied for 5 days after notice.
ERISA: A final judgment either (1) requiring
termination or imposing liability under
Title IV of ERISA (other than for
premiums) in respect of, or requiring a
trustee to be appointed pursuant to Title
IV of ERISA to administer, any plan or
plans having unfunded liabilities in
excess of $150,000,000 or (2) in an
action relating to a Multiemployer Plan
involving a current payment obligation in
excess of $150,000,000, which judgment in
either case has not been satisfied or
stayed within 60 days and such failure to
satisfy or stay is unremedied for 5 days
after notice.
January 4, 1996 Page 13
CHANGE IN OWNERSHIP OF STOCK: Any person or group of persons (other
than employee benefit or stock ownership
plan of Company) has acquired shares of
capital stock having ordinary voting
power to elect a majority of the Board of
Directors of Company or change in
majority of Board of Directors within a
two-year period.
GUARANTY INVALIDATED: Revocation or invalidation of guaranty of
the Loan Agreement and the Notes.
REMEDIES: Commitments terminate and loan/interest
become due and payable upon the receipt
of notice from Documentation Agent
(automatic in case of bankruptcy).
NOTICES OF DEFAULT: All notices or requests specified in
Events of Default provisions to be given
by Documentation Agent at the request of
the Required Banks.
MISCELLANEOUS
- -------------
GOVERNING LAW/SUBMISSION
TO JURISDICTION: New York law governs. Parties submit to
the jurisdiction of New York courts for
all legal proceedings and waive any
objection to the laying of venue of any
such proceeding brought in such a court
and claim of inconvenient forum.
WAIVER OF JURY TRIAL: Company, Agents and Banks each waive
rights to trial by jury.
REQUIRED BANKS: Banks holding in excess of 50% of
outstanding Commitments.
INCREASED COSTS/CAPITAL ADEQUACY/
ILLEGALITY: Increased cost/capital adequacy/
illegality provisions to be included and
will generally provide that no increased
cost or capital adequacy payment may be
claimed if allocable to periods prior to
30 days prior to date Company is notified
of claim by a Bank; no compensation for
increases in capital not occasioned by a
Change in Law or beyond that required by
a Change in Law. Any Bank requesting
additional compensation shall designate a
different lending office if such
designation will avoid the need for, or
reduce the amount of, such compensation
or permit the Bank to make or maintain
any LIBOR Loan, so long as such
designation is not disadvantageous to
such Bank. Any Regulation D charges shall
be billed through Administrative Agent.
"Change in Law" as defined is the
adoption of any law, rule or regulation,
or any change therein, or any change in
the interpretation or administration
thereof, after Closing Date, by any
governmental authority, central bank or
comparable agency or
January 4, 1996 Page 14
compliance with any directive (whether or
not having the force of law) of any such
entity.
INDEMNITY: Company to indemnify Banks for (i)
funding costs and/or losses (excluding
loss of margin) if prepayment or
conversion of a LIBOR Loan or a CD Loan
occurs prior to the end of an Interest
Period or if Company fails to consummate
a LIBOR Loan or a CD Loan because
conditions precedent to borrowing or
conversion not satisfied and (ii)
reasonable costs and expenses of
litigation in response to or in defense
of any proceeding brought or threatened
against a Bank relating to the Agreement
or Company's use of proceeds of the
Loans.
EXPENSES: In connection with preparing Loan
Agreement, Company will pay reasonable
fees and disbursements of special counsel
to Agents and reasonable out-of-pocket
expenses incurred by Agents. In
connection with an Event of Default and
enforcement proceedings, Company will pay
reasonable out-of-pocket expenses of
Agents and Banks, including reasonable
fees and expenses of counsel (including
in-house counsel).
DOCUMENT PREPARATION: Loan Agreement to be prepared by Davis
Polk & Wardwell.
January 4, 1996 Page 15
JP MORGAN
LOCKHEED MARTIN CORPORATION
PRICING SCHEDULE
364-DAY REVOLVER
The LIBOR Margin, the CD Margin and the Facility Fee shall be as
specified below (in basis points per annum).
====================================================================================================================================
LEVEL I LEVEL II LEVEL III LEVEL IV
====================================================================================================================================
BASIS FOR PRICING If Company is rated A or If Company is rated A- If Company is rated If Company is rated BBB
better by S&P or A2 or or better by S&P or A3 BBB+ or better by S&P or better by S&P
-- --
better by Moody's or better by Moody's or Baa1 or better by or Baa2 or better by
-- --
Moody's Moody's
- ------------------------------------------------------------------------------------------------------------------------------------
FACILITY FEE 6.00 7.00 8.00 9.00
- ------------------------------------------------------------------------------------------------------------------------------------
LIBOR + Greater than 50% 16.50 18.00 22.00 26.00
Less than 50% 16.50 18.00 27.00 31.00
- ------------------------------------------------------------------------------------------------------------------------------------
CD + Greater than 50% 29.00 30.50 34.50 38.50
Less than 50% 29.00 30.50 39.50 43.50
- ------------------------------------------------------------------------------------------------------------------------------------
UNUSED COST 6.00 7.00 8.00 9.00
- ------------------------------------------------------------------------------------------------------------------------------------
USED COST Greater than 50% 22.50 25.00 30.00 35.00
Less than 50% 22.50 25.00 35.00 40.00
====================================================================================================================================
SUMMARY OF TERMS AND CONDITIONS
FOR LOCKHEED MARTIN CORPORATION
BORROWER: Lockheed Martin Corporation ("Company"),
directly or indirectly through LAC
Acquisition Corp.
AMOUNT: $5,000,000,000.
PURPOSE: The purchase of the common stock of
"Wings" and general corporate purposes
including commercial paper backup.
ARRANGER AND SYNDICATION AGENT: J.P. Morgan Securities Inc.
CO-ARRANGER: BA Securities, Inc.
MANAGING AGENTS: Citibank, N.A.
DOCUMENTATION AGENT: Morgan Guaranty Trust Company of New
York.
ADMINISTRATIVE AGENT: Bank of America National Trust and
Savings Association.
FACILITY DESCRIPTION: Five-year facility on a fully revolving
basis.
BORROWING OPTIONS: Committed Loans consisting of Base Rate
Loans, CD Loans and LIBOR Loans.
Uncommitted Money Market bid rate
options ("Money Market Loans").
LENDERS: Syndicate of lenders acceptable to
Company and Arranger ("Banks").
TIMING: Closing to occur by May 1996.
GUARANTORS: Lockheed Corporation, Martin Marietta
Corporation, Martin Marietta
Technologies, Inc., LAC Acquisition
Corporation or the Company if LAC
Acquisition Corp. is the Borrower .
COMMITMENTS AND FEES:
- ---------------------
COMMITMENT: With respect to Committed Loans, each
Bank will fund each draw in proportion
to its Commitment.
With respect to Money Market Loans, each
Bank may, but shall have no obligation
to, make offers to make such Loans
pursuant to requests submitted by
Company. Drawdown of Money
January 4, 1996 Page 1
Market Loans will be deemed a use of
Commitments of all Banks on pro rata
basis.
REDUCTION OR CANCELLATION OF
COMMITMENTS: Commitments cancelable in whole or in
part (ratably reduced in amounts of at
least $25,000,000 and multiples of
$5,000,000 in excess thereof) at
election of Company upon not less than
three business days' notice.
TERMINATION OF BANKS/REPLACING BANKS: Company may terminate the entire
Commitment of any Bank upon 10 business
days' notice if a Bank demands increased
costs or capital adequacy payments from
Company or if the commitment of a Bank
to make LIBOR Loans is suspended due to
its inability to make such Loans.
Company may replace such Bank with a new
or existing Bank.
FACILITY FEE: To be paid quarterly in arrears on the
daily average of the total Commitments
at a rate determined by reference to
attached Pricing Schedule. Facility Fee
will increase if ratings downgraded and
decrease if ratings upgraded.
Facility Fee computed on the basis of a
year of 365 or 366 days over the actual
number of days elapsed. Any change in
Facility Fee shall become effective the
day on which a rating agency shall have
announced a ratings change.
INTEREST RATES
- --------------
INTEREST RATE OPTIONS: LIBOR, CD Rate or Base Rate at the
election of Company.
LIBOR INTEREST PERIOD OPTIONS: One, two, three or six months, as
selected by Company. Twelve-month LIBOR
-----
option available upon request of Company
and consent of all Banks.
CD RATE INTEREST PERIOD OPTIONS: 30, 60, 90 or 180 days, as selected by
Company.
RATE BASIS: LIBOR
CD Rate - Adjusted CD Rate.
3 LIBOR/CD Reference Banks to be
appointed.
Base Rate - higher of Reference Rate as
announced by Administrative Agent or
federal funds rate plus .5%.
Any change in Base Rate effective on the
day change is announced by
Administrative Agent.
January 4, 1996 Page 2
INTEREST PAYMENT: Interest on LIBOR Loans, CD Loans and
Base Rate Loans (if federal funds rate
is effective rate) shall be computed on
the basis of a year of 360 days and paid
for the actual number of days elapsed.
Interest on Base Rate Loans (if
Reference Rate is effective rate) shall
be computed on the basis of a year of
365 or 366 days, as the case may be, and
paid for the actual number of days
elapsed. Interest accrued on Base Rate
Loans shall be paid quarterly. Interest
accrued on LIBOR Loans shall be paid on
the last day of the Interest Period, on
the date of any prepayment or conversion
thereof, together with breakage costs,
if any, and in the case of a LIBOR Loan
with an Interest Period of twelve-
months, on the six-month anniversary of
the making of the LIBOR Loan. Interest
accrued on CD Loans shall be paid on the
last day of the Interest Period and on
the date of any prepayment or conversion
thereof, together with breakage costs,
if any. If any CD Loan or portion
thereof shall have an Interest Period of
less than 30 days, such portion shall
bear interest at the Base Rate during
such period.
Interest obligations accrue from the day
funds are received through the day
before principal is repaid.
RATE SPREAD: For Base Rate Loans, Base Rate. For
LIBOR Loans, LIBOR plus LIBOR Margin.
For CD Loans, Adjusted CD Rate plus CD
Margin. LIBOR Margin and CD Margin
determined by reference to attached
Pricing Schedule. LIBOR Margin and CD
Margin will increase if ratings
downgraded and decrease if ratings
upgraded.
Any change in the LIBOR Margin or CD
Margin shall become effective for LIBOR
Loans or CD Loans, as applicable, the
day on which a rating agency shall have
announced a ratings change.
POST DEFAULT RATE: 2% per annum above the Base Rate for
such date.
BORROWING PROCEDURES
- --------------------
MINIMUM DRAW: $10,000,000 with additional increments
of $1,000,000. No per draw limit up to
total unused Commitments.
NOTIFICATION/TIMING: Base Rate: To Administrative Agent, by
11:00 a.m. New York City time on day of
draw.
LIBOR: To Administrative Agent, by 1:00
p.m. New York City time, 3 business days
before draw or, in the case of an
Interest Period of twelve-months, by
1:00 p.m. New York City time, 4 business
days before draw.
January 4, 1996 Page 3
CD Rate: To Administrative Agent, by
1:00 p.m. New York City time, 2 business
days before draw.
An officer or a Designated
Representative (certain designated
employees) to provide notice to
Administrative Agent. An officer or
Designated Representative may provide
telephonic notice, to be followed by
appropriately authorized written notice.
FUND DELIVERY: Banks to deliver funds to Administrative
Agent by 1:00 p.m. New York City time.
Administrative Agent to wire transfer
loan principal (U.S. Dollars) in
immediately available funds to an
account to be designated by Company
immediately upon receipt, but not later
than 4:00 p.m. New York City time.
Administrative Agent may make up a
shortfall of funds received. Any Bank
not making its pro rata share of any
Loan available to Administrative Agent
and Company, if it does not repay such
share of any Loan, at the required date
and time severally agree to repay
Administrative Agent such shortfall,
with interest (at the federal funds
rate). If a Bank fails to fund a Loan,
amounts received by Administrative Agent
will be deemed to have been paid to Bank
and made available to Administrative
Agent for the Loan.
CONVERSION/CONTINUATION: Company may (i) convert all or any
portion of outstanding Base Rate Loans
equal to $10,000,000 and multiples of
$1,000,000 in excess thereof to LIBOR
Loans or CD Loans, (ii) convert all or
any portion of outstanding LIBOR Loans
equal to $10,000,000 and multiples of
$1,000,000 in excess thereof to Base
Rate Loans or CD Loans, and (iii)
convert all or any portion of
outstanding CD Loans equal to
$10,000,000 and multiples of $1,000,000
in excess thereof to Base Rate Loans or
LIBOR Loans. Upon the expiration of any
Interest Period applicable to a LIBOR
Loan or a CD Loan, Company may continue
all or any portion of such Loans equal
to $10,000,000 and multiples of
$1,000,000 in excess thereof as LIBOR
Loans or CD Loans, as applicable.
Written or telephonic notice of such
conversion/continuation shall be
delivered to Administrative Agent no
later than (i) 1:00 p.m. New York City
time (a) at least 3 business days in
advance of the proposed date of
conversion to or continuation of LIBOR
Loans or (b) at least 2 business days in
advance of the proposed date of
conversion to or continuation of CD
Loans and (ii) 11:00 a.m. New York City
time on the day of the proposed
conversion to a Base Rate Loan.
Telephonic notice of
conversion/continuation to be promptly
followed by a written notice thereof. If
timely notice of conversion/continuation
not provided by Company as to any LIBOR
loan or CD Loan and such Loan is not
repaid by
January 4, 1996 Page 4
Company at the end of the applicable
Interest Period thereof, such Loan shall
be converted to a Base Rate Loan.
PREPAYMENTS: Base Rate Loans can be repaid in whole
or in part on any day without penalty or
premium. CD Loans can be repaid with 1
business day's notice. LIBOR Loans can
be repaid with 3 business days' notice.
Each partial prepayment shall be in an
aggregate amount of not less than
$10,000,000 and shall include interest
accrued on the Loans to the prepayment
date and any breakage costs (excluding
loss of Margin).
PAYMENTS TO BANKS: All payments by Company to Banks under
Loan Agreement are to be in U.S.
Dollars, free of taxes, and wire
transferred to Administrative Agent in
immediately available funds no later
than 2:00 p.m. New York City time.
PARTICIPATIONS/ASSIGNMENTS: Assignments may be made to Eligible
Institutions with the prior notification
to the Administrative Agent and prior
written consent of Company, which shall
not be unreasonably withheld, in minimum
amounts of $15,000,000. Withholding of
consent is not unreasonable if based
solely on desire to manage loan
exposures to proposed assignee or avoid
payment of additional increased costs of
taxes payable by Company by reason of
such assignment. No Company consent
required for assignment to an affiliate
of a Bank. Each Bank must retain at
least $15,000,000 commitment.
Participations permitted without consent
of Company upon prior written
notification to Company (no prior
notification required in the case of
participations of Money Market Loans).
Transferability of voting rights limited
to change in principal, rate, fees and
term. "Eligible Institution" means any
commercial bank having total assets in
excess of $3,000,000,000 or the
equivalent amount of local currency of
such bank or affiliates of such bank
that are financial institutions.
CONDITIONS PRECEDENT
- --------------------
(A) Effectiveness of Loan Agreement:
customary for this type of transaction,
including:
1) termination of, and payment of
amounts due under, existing revolving
credit agreements.
2) execution and delivery of:
a) opinion of General Counsel or
Assistant General Counsel to
Company and opinion of special
counsel to company;
January 4, 1996 Page 5
b) opinion of Bank counsel;
c) certified copies of charters,
bylaws, and corporate action
authoring Loan Agreement;
d) note for each Bank, if
requested;
e) certificate indicating
incumbency and signatures of
officers signing Loan Agreement
and those officers and employees
authorized to give notice of
borrowing; and
f) LAC and Wings shall have entered
into a merger agreement in form
and substance satisfactory to
the Banks providing for the
acquisition to be effected by a
cash tender offer for at least
66% of Wing's common stock and
subsequent merger.
(g) terms and conditions of the
tender offer shall be in
substance as disclosed to the
Banks prior to their commitments
but shall in all events include
that LAC shall own and control
the number of shares of Wing's
common stock as shall be
necessary to approve the merger
without the affirmative vote or
approval of any other
shareholders; the conditions to
the consummation of the tender
offer shall have been satisfied
and shall not have been waived,
except for conditions (x) not
material to the combined entity
or the prospects and timing of
the consummation of the merger
and (y) not relating to the
legality, validity or legal
effect of the financing; and
tendered shares shall have been
accepted for payment pursuant to
the tender offer in accordance
with the terms of the tender
offer.
(h) evidence satisfaction to the
Documentation Agent and
Administrative Agent that all
other necessary licenses,
permits and governmental and
third-party filings, consents
and approvals for the
acquisition and merger have been
made or obtained and remain in
full force and effect, except
for those (x) not material to
the combined entity or the
prospects and timing of the
consummation of the merger and
(y) not relating to the
legality, validity or legal
effect of the financing; and the
tender offer and the financing
thereof shall be in compliance
with all laws and regulations
(including, without limitation,
the margin regulations).
January 4, 1996 Page 6
(B) All Loans: (i) accuracy of
Representations and Warranties, with the
exception, for Loans other than the
tender offer funding, of the
representations concerning litigation,
taxes, ERISA, no Material Adverse Effect
since date of pro forma financial
statements delivered to Banks and
environmental matters and (ii) no Event
of Default.
REPRESENTATIONS AND WARRANTIES
- ------------------------------
CORPORATE EXISTENCE & POWER: Company and its Significant Subsidiaries
duly organized, validly existing and in
good standing in respective state of
incorporation and qualified to do
business where necessary, except where
failure to be so qualified would not be
reasonably likely to have a Material
Adverse Effect. Company has all
necessary corporate power to enter into
and perform under Loan Agreement and
Notes.
"Material Adverse Effect" means a
material adverse effect on (a) ability
of Company to perform obligations under
Agreement or Notes, (b) validity or
enforceability of Agreement or Notes,
(c) rights and remedies of any Bank or
Agents or (d) timely payment of
principal of or interest on the Loans or
other amounts paid in connection
therewith.
"Significant Subsidiary" means a
Subsidiary with total assets, net of
depreciation and amortization and after
intercompany eliminations, in excess of
$100,000,000.
"Subsidiary" as defined does not include
any Exempt Subsidiary, but otherwise
means any entity of which Company owns a
sufficient number of securities having
ordinary voting power to elect a
majority of the board of directors or
other governing body.
"Restricted Subsidiary" means any
Significant Subsidiary, any Subsidiary
that has substantially all of its
property located in the United States
and that owns a Principal Property and
any other Subsidiary designated from
time to time by the Company as a
"Restricted Subsidiary." Subsidiaries of
a Restricted Subsidiary are not
Restricted Subsidiaries solely by virtue
of such Subsidiary status. If at the end
of any fiscal quarter, the aggregate net
assets of the Company and all of its
Restricted Subsidiaries are less than a
specified percentage of the total net
assets of the Company and its
Subsidiaries taken as a whole, as
reported in the Company's financial
statements (the "Total Net Assets") ,
the Company shall designate another
Subsidiary or Subsidiaries as Restricted
Subsidiaries such that the net assets of
such Subsidiary or Subsidiaries that are
not encumbered to secure Debt, plus the
net assets of the Company and the other
Restricted Subsidiaries, equals or
exceeds a specified percentage of the
Total Net Assets.
January 4, 1996 Page 7
Thereafter, the Company may designate a
Subsidiary or Subsidiaries (other than a
Restricted Subsidiary as defined without
regard to any prior such designations by
the Company) as no longer a Restricted
Subsidiary, provided that the aggregate
net assets of the Company and all of its
Restricted Subsidiaries after giving
effect thereto shall equal or exceed a
specified percentage of the Total Net
Assets.
"Exempt Subsidiary" means Lockheed
Martin Finance Corporation, Martin
Marietta Materials, Inc. and any other
entity of which Company owns a
sufficient number of securities having
ordinary voting power to elect a
majority of the board of directors or
other governing body, the book value,
net of depreciation, amortization and
intercompany eliminations, of the assets
of which, when aggregated with the book
values, net of depreciation,
amortization and intercompany
eliminations, of the assets of any other
Exempt Subsidiary other than Lockheed
Martin Finance Corporation or Martin
Marietta Materials, Inc., do not exceed
a specified percentage of the value of
total assets of Company and its
consolidated subsidiaries, and which are
designated as such by Company.
"Principal Property" defined as any
manufacturing property with a book
value, net of depreciation and
amortization, in excess of $5,000,000.
NO CONTRAVENTION: Execution, delivery and performance of
Loan Agreement and Notes do not
contravene, or constitute a default
under, Company's or Guarantors' charter
documents or any applicable laws or
regulations or any agreements or
instruments to which Company is a party
which would be reasonably likely to have
a Material Adverse Effect.
CORPORATE AUTHORIZATION: Company and Guarantors have taken all
corporate action necessary for entering
into Loan Agreement and Notes and
consummating transaction thereunder;
Loan Agreement and Notes are valid,
binding and enforceable against Company
and Guarantors, subject to bankruptcy
and equity exceptions.
FINANCIAL INFORMATION: Pro forma financial statements delivered
to Banks fairly present financial
position as of date of such financial
statements on a pro forma basis
consistent with the assumptions stated
therein; includes representation that no
Material Adverse Effect has occurred
since date of such financial statements.
LITIGATION; TAXES: No litigation exists against Company or
any Subsidiary, an adverse determination
of which is reasonably likely to occur
and if so adversely determined would be
reasonably likely to have a
January 4, 1996 Page 8
Material Adverse Effect and, at the time
of the tender offer closing, there shall
be (i) no injunction against
consummation of the tender offer, (ii)
no litigation pending or threatened
which gives rise to a material
likelihood that the merger will not be
consummated or will be subject to the
undue delay and (iii) no litigation
pending or threatened, other than that
as to which there is not a material
likelihood of success, challenging the
legality, validity or legal effect of
the financing. Company and each
Subsidiary have filed all material tax
returns and paid all taxes due
thereunder when due, except for those
not delinquent, those the nonpayment of
which would not be reasonably likely to
result in a Material Adverse Effect and
those contested in good faith.
GOVERNMENTAL APPROVALS: No governmental consents or approvals
required in connection with Loan
Agreement and Notes, except routine
filings under Securities Exchange Act of
1934 and the filing of International
Capital Form CQ-1's.
MARGIN REGULATIONS: No part of proceeds of Loans will be
used in violation of Federal Reserve
Regulation U, G, T and X.
PARI PASSU OBLIGATIONS: Claims of other parties to Loan
Agreement against Company will not be
subordinate to, and will rank at least
pari passu with, claims of other
unsecured creditors of Company, except
as may be provided for under applicable
bankruptcy laws.
NO DEFAULTS: No payment default in respect of
Material Debt.
"Material Debt" defined as debt of
Company and/or one or more of its
Subsidiaries exceeding $100,000,000 in
an aggregate principal amount.
ERISA: Company and related ERISA entities (the
"ERISA Group") have fulfilled their
obligations under minimum funding
standards of ERISA and the Internal
Revenue Code and are in substantial
compliance with all material provisions
of ERISA and Internal Revenue Code with
respect to each ERISA plan. ERISA Group
has not (i) sought a waiver of minimum
funding standards, (ii) failed to make a
contribution to any plan or made any
amendment to any plan which could result
in material lien or posting of material
bonds or (iii) incurred material
liability under Title IV of ERISA (other
than for payment of premiums under
ERISA).
DISCLOSURE: Written information provided to the
Banks in connection with Loan Agreement,
collectively, does not contain any
misstatement of a material fact or omit
to state a fact necessary to make the
statements contained therein, in light
of the circumstances under
January 4, 1996 Page 9
which they were made, not misleading in
any material respect on and as of the
date of Loan Agreement.
ENVIRONMENTAL: Based upon Company's periodic review of
its ongoing operations (and those of its
Restricted Subsidiaries), to the best
knowledge of Company, ongoing operations
at the Principal Properties are
currently being conducted in substantial
compliance with applicable environmental
laws, except to the extent that
noncompliance would not be reasonably
likely to result in a material adverse
change in the consolidated financial
conditions of Company and its
consolidated subsidiaries.
COVENANTS Covenants customary for this type of
- --------- transaction, including:
ACCOUNTING: Except as otherwise specified,
accounting measurements will be per GAAP
as in effect from time to time. Company
or Required Banks have ability to
request covenant change if change in
GAAP affects covenant; effect of change
in GAAP then suspended until new
covenant negotiated.
INFORMATION/REPORTING/DISTRIBUTION: 60 day delivery for quarterly financial
reports and 120 day delivery for annual
financial reports; delivery of such
statements as filed with the SEC
satisfies requirement. Documents
distributed to shareholders or filed
with the SEC (with certain exceptions)
to be distributed to the Banks promptly
after becoming available. Company to
provide prompt notice of (i) the
occurrence of any Default and (ii)
certain litigation.
COMPUTATION OF COVENANTS: Company to provide with each
distribution of annual and quarterly
financial statements computations of
leverage ratio.
MAINTENANCE OF EXISTENCE: Company and Significant Subsidiaries
will preserve and maintain corporate
existence. Company may terminate
business or corporate existence of a
Subsidiary which in Company's judgment
is no longer necessary or desirable.
Mergers, consolidations and transfers of
assets permitted as set forth below. No
prohibition on merger of a Subsidiary
into Company, or merger or consolidation
of a Subsidiary with or into another
entity if surviving corporation is a
Subsidiary and no Default shall have
occurred and be continuing.
MERGERS, CONSOLIDATIONS &
SALES OF ASSETS: Merger, consolidation, transfer or
conveyance of substantially all
Company's assets prohibited unless
resulting corporation is Company or a
consolidated subsidiary that is a
domestic corporation that expressly
assumes payment of indebtedness and
performance of covenants under Loan
Agreement, no Default shall have
occurred and be continuing after giving
effect to transaction
January 4, 1996 Page 10
and if Company is not surviving
corporation, there has been delivered an
Officer's Certificate and legal opinion
of its counsel stating that such
transaction complies with Loan
Agreement. Upon any such transaction,
the entity formed by such transaction
shall succeed to and be substituted for
Company under Loan Agreement. This
covenant shall not apply to any sale of
Wing's stock, so long as it is margin
stock, for value.
LIMITATION ON LIENS: No liens on assets of the Company or any
Restricted Subsidiary to secure Debt
allowed except (i) liens existing on the
date of Loan Agreement, (ii) liens on
property of a corporation existing at
the time the corporation is merged or
consolidated with Company or a
Restricted Subsidiary, (iii) liens
securing debt owing to Company or
another Restricted Subsidiary, (iv)
mechanic's liens, (v) liens on property
of a corporation existing at the time
the corporation becomes a Restricted
Subsidiary, (vi) liens on property at
time of acquisition of property and
purchase money liens, including liens
incurred in connection with industrial
revenue bonds, to secure payment of
purchase price or indebtedness incurred
or guaranteed prior to, at the time of
or within one year after acquisition,
completion of full operation of property
if indebtedness incurred or guaranteed
to pay purchase price of property or
improvements, (vii) liens in favor of
any customer (including any governmental
authority) to secure partial, progress,
advance or other payments or performance
pursuant to any contract or statute or
to secure any related indebtedness or to
secure Debt guaranteed by a governmental
authority, (viii) liens on cash or
certificates of deposit or other bank
obligations securing indebtedness in
aggregate principal amount not in excess
of $200,000,000 (which may be in a
different currency) of an amount
substantially equal in value (at the
time the lien is created) to such cash,
certificates of deposit or other
obligations, (ix) any extension,
renewal, replacement of the foregoing,
(x) liens equally and ratably severing
this credit facility and such Debt and
(xi) liens not otherwise referred to
securing Debt that does not in the
aggregate exceed the greater of 10% of
stockholders' equity at the end of the
preceding fiscal quarter or
$1,000,000,000. Liens described in (ii),
(v) and (vi) shall not include any liens
on stock or assets of "Wings" or its
subsidiaries incurred in contemplation
of the merger. This covenant shall not
apply to margin stock in excess of 25%
in value of the assets covered by this
covenant.
PAYMENT OF OBLIGATIONS: Company and each Significant Subsidiary
will pay all material taxes,
assessments, and governmental charges
imposed upon it and all lawful material
claims prior to date any penalty accrues
or lien imposed except for (i) those
contested in good faith, (ii) those not
delinquent and (iii) those the
nonpayment of which would not be
reasonably likely to result in a
Material Adverse Effect.
January 4, 1996 Page 11
COMPLIANCE WITH LAWS: Company and each Significant Subsidiary
shall comply with all laws, a breach of
which would be reasonably likely to have
a Material Adverse Effect, except where
contested in good faith and by proper
proceedings.
INSURANCE: Company and each Significant Subsidiary
will maintain insurance as is
customarily carried by owners of similar
businesses and properties (or to the
customary extent, self-insurance).
MAINTENANCE OF PROPERTIES: Company and its Significant Subsidiaries
will keep all properties necessary in
its business in good working order,
normal wear and tear excepted; Company
or any Subsidiary may discontinue
operation and/or maintenance of such
properties if discontinuance is in
Company's (or such Subsidiary's)
judgment desirable.
LEVERAGE RATIO: Ratio of Debt (as defined) as of the
last day of any fiscal quarter to the
sum of (i) Debt (as defined) and (ii)
Stockholders' Equity (as defined) at
levels to be determined.
STOCKHOLDERS' EQUITY AS DEFINED: Consolidated Stockholders' Equity of
Company and consolidated Subsidiaries as
reported.
DEBT AS DEFINED: Debt shall mean, without duplication:
(i) all debt, including ESOP
guarantees and capitalized lease
obligations, reported as debt in
the consolidated financial
statements of the Company and its
consolidated Subsidiaries, plus
----
(ii) all indebtedness for borrowed
money and capitalized lease
obligations incurred by third
parties guaranteed by Company and
its consolidated Subsidiaries not
otherwise reported as debt in the
consolidated financial statements
of the Company and its
consolidated Subsidiaries.
USE OF LOANS: Proceeds of the Loans may be used for
any lawful corporate purpose.
WAIVERS: Required Banks may waive compliance with
any covenant (other than certain
provisions relating to principal
payments, fees, interest rate, due dates
and guarantees, which require consent of
all Banks).
EVENTS OF DEFAULT
- -----------------
PRINCIPAL PAYMENTS: Failure to pay when due.
January 4, 1996 Page 12
INTEREST AND FACILITY FEE PAYMENTS: Failure to pay within 5 days of due
date.
OTHER FEES: Failure to pay within 30 days after
written request for payment thereof.
BREACH OF CERTAIN COVENANTS: Failure to perform under the following
covenants:
1) Merger/Consolidation Restrictions
2) Limitations on Liens
3) Leverage Ratio
BREACH OF OTHER COVENANTS: Failure to perform within 30 days after
written notice.
REPRESENTATIONS: 5 days to correct after written notice.
ACCELERATION OF DEBT: Any Material Debt shall be accelerated
by reasons of default thereunder or not
paid when due and corrective action
shall not have been taken within 5 days
after written notice thereof.
BANKRUPTCY: Company or any Significant Subsidiary
shall commence voluntary proceeding
under bankruptcy laws, or seek
appointment of receiver or trustee, or
shall consent to any of the foregoing;
or makes a general assignment for
benefit of creditors; or fails generally
to pay its debts as they become due; or
takes any corporate action to authorize
the foregoing.
Involuntary case or proceeding commenced
against Company or any Significant
Subsidiary seeking relief under
bankruptcy laws or seeking appointment
of trustee or receiver, and such
proceeding shall remain undismissed and
unstayed for a period of 90 days; or an
order for relief shall be entered
against Company or any Significant
Subsidiary under federal bankruptcy
laws.
FINAL JUDGMENTS: Final judgment requiring payment of
$150,000,000 or more that has not been
satisfied or stayed within 60 days and
such failure to satisfy or stay is
unremedied for 5 days after notice.
ERISA: A final judgment either (1) requiring
termination or imposing liability under
Title IV of ERISA (other than for
premiums) in respect of, or requiring a
trustee to be appointed pursuant to
Title IV of ERISA to administer, any
plan or plans having unfunded
liabilities in excess of $150,000,000 or
(2) in an action relating to a
Multiemployer Plan involving a current
payment obligation in excess of
$150,000,000, which judgment in either
case has not been satisfied or stayed
within 60 days and such failure to
satisfy or stay is unremedied for 5 days
after notice.
January 4, 1996 Page 13
CHANGE IN OWNERSHIP OF STOCK: Any person or group of persons (other
than employee benefit or stock ownership
plan of Company) has acquired shares of
capital stock having ordinary voting
power to elect a majority of the Board
of Directors of Company or change in
majority of Board of Directors within a
two-year period.
GUARANTY INVALIDATED: Revocation or invalidation of guaranty
of the Loan Agreement and the Notes.
REMEDIES: Commitments terminate and loan/interest
become due and payable upon the receipt
of notice from Documentation Agent
(automatic in case of bankruptcy).
NOTICES OF DEFAULT: All notices or requests specified in
Events of Default provisions to be given
by Documentation Agent at the request of
the Required Banks.
MISCELLANEOUS
- -------------
GOVERNING LAW/SUBMISSION
TO JURISDICTION: New York law governs. Parties submit to
the jurisdiction of New York courts for
all legal proceedings and waive any
objection to the laying of venue of any
such proceeding brought in such a court
and claim of inconvenient forum.
WAIVER OF JURY TRIAL: Company, Agents and Banks each waive
rights to trial by jury.
REQUIRED BANKS: Banks holding in excess of 50% of
outstanding Commitments.
INCREASED COSTS/CAPITAL ADEQUACY/
ILLEGALITY: Increased cost/capital adequacy/
illegality provisions to be included and
will generally provide that no increased
cost or capital adequacy payment may be
claimed if allocable to periods prior to
30 days prior to date Company is
notified of claim by a Bank; no
compensation for increases in capital
not occasioned by a Change in Law or
beyond that required by a Change in Law.
Any Bank requesting additional
compensation shall designate a different
lending office if such designation will
avoid the need for, or reduce the amount
of, such compensation or permit the Bank
to make or maintain any LIBOR Loan, so
long as such designation is not
disadvantageous to such Bank. Any
Regulation D charges shall be billed
through Administrative Agent.
"Change in Law" as defined is the
adoption of any law, rule or regulation,
or any change therein, or any change in
the interpretation or administration
thereof, after Closing Date, by any
governmental authority, central bank or
comparable agency or
January 4, 1996 Page 14
compliance with any directive (whether
or not having the force of law) of any
such entity.
INDEMNITY: Company to indemnify Banks for (i)
funding costs and/or losses (excluding
loss of margin) if prepayment or
conversion of a LIBOR Loan or a CD Loan
occurs prior to the end of an Interest
Period or if Company fails to consummate
a LIBOR Loan or a CD Loan because
conditions precedent to borrowing or
conversion not satisfied and (ii)
reasonable costs and expenses of
litigation in response to or in defense
of any proceeding brought or threatened
against a Bank relating to the Agreement
or Company's use of proceeds of the
Loans.
EXPENSES: In connection with preparing Loan
Agreement, Company will pay reasonable
fees and disbursements of special
counsel to Agents and reasonable out-of-
pocket expenses incurred by Agents. In
connection with an Event of Default and
enforcement proceedings, Company will
pay reasonable out-of-pocket expenses of
Agents and Banks, including reasonable
fees and expenses of counsel (including
in-house counsel).
DOCUMENT PREPARATION: Loan Agreement to be prepared by Davis
Polk & Wardwell.
January 4, 1996 Page 15
JP MORGAN
LOCKHEED MARTIN CORPORATION
PRICING SCHEDULE
FIVE YEAR REVOLVER
The LIBOR Margin, the CD Margin and the Facility Fee shall be as
specified below (in basis points per annum).
====================================================================================================================================
LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V LEVEL VI
====================================================================================================================================
BASIS FOR PRICING If Company is If Company is If Company is If Company is If Company is If Company is
rated A or rated A- or rated BBB+ or rated BBB or rated BBB- by rated lower
better by S&P better by S&P better by S&P better by S&P S&P and Baa3 than BBB- by
---
or A2 or or A3 or better or Baa1 or or Baa2 or by Moody's S&P or Baa3 by
-- -- -- --
better by by Moody's better by better by Moody's or is
Moody's Moody's Moody's unrated and no
other level
applies
- ------------------------------------------------------------------------------------------------------------------------------------
FACILITY FEE 8.00 10.00 11.00 13.75 17.50 25.00
- ------------------------------------------------------------------------------------------------------------------------------------
LIBOR + Greater than 50% 14.50 15.00 19.00 21.25 32.50 50.00
Less than 50% 14.50 15.00 24.00 26.25 37.50 50.00
- ------------------------------------------------------------------------------------------------------------------------------------
CD + Greater than 50% 27.00 27.50 31.50 33.75 45.00 62.50
Less than 50% 27.00 27.50 36.50 38.75 50.00 62.50
- ------------------------------------------------------------------------------------------------------------------------------------
UNUSED COST 8.00 10.00 11.00 13.75 17.50 25.00
- ------------------------------------------------------------------------------------------------------------------------------------
USED COST Greater than 50% 22.50 25.00 30.00 35.00 50.00 75.00
Less than 50% 22.50 25.00 35.00 40.00 55.00 75.00
====================================================================================================================================
January 7, 1996 [LOGO - JP MORGAN]
Lockheed Martin Corporation
6801 Rockledge Drive
Bethesda, Maryland 20817
Attention: Mr. Walter E. Skowronski
Vice President and Treasurer
Ladies and Gentlemen:
We understand that Lockheed Martin Corporation (the "Borrower"), directly
or indirectly through a wholly owned subsidiary, intends to purchase the common
stock of "Wings" in a transaction to be agreed to by the respective Boards of
Directors of the Borrower and "Wings" (the "Transaction"). The financing for
such purchase would be effected by a syndicated loan financing. You have
requested J.P. Morgan Securities Inc. ("JPMSI") to arrange and BA Securities,
Inc. ("BASI") to co-arrange financing in the syndicated bank market for an
amount up to $10,000,000,000 for the Borrower in connection with the Transaction
(the "Proposed Financing").
By separate letters dated as of the date hereof, each of Morgan Guaranty
Trust Company of New York and Bank of America National Trust and Savings
Association have committed to provide up to $1,375,000,000 of the Proposed
Financing (the "Commitment Letters"). In response to your request in connection
with the Transaction and the Proposed Financing, please be advised that we are
highly confident that we will be able to arrange a syndicate of lenders for the
balance of the maximum aggregate amount of the Proposed Financing on the terms
contemplated by the Commitment Letters. The foregoing is based upon our
knowledge and experience in the loan syndication market and subject to the
assumptions set forth below.
Our view is based on and subject to, among other factors, (i) our
consideration of the information the Borrower has supplied to us to date
(without any independent investigation) and our consideration of the information
available concerning the Borrower and "Wings" under the Securities Exchange Act
of 1934; (ii) the absence of adverse changes in the relevant markets or in the
regulatory environment, and the absence of any domestic or international event,
act or occurrence ("Disruption"), that in our reasonable judgment is likely to
materially and adversely affect the syndication of the Proposed Financing; it
being understood that there can be no assurance that such markets or regulatory
environment will not so change, or that such Disruption will not occur, in the
future; (iii) our present understanding of the terms upon which the Borrower
intends to effect the Transaction (including the terms contemplated by the
Commitment Letters); (iv) representations by the Borrower to us of its
willingness to
cooperate with us in structuring an appropriate credit facility; (v) our current
understanding of the proposed capital structure and investment grade status of
the Borrower after giving effect to any financing referred to herein; (vi) the
absence of material adverse changes in the financial condition, business,
assets, or results of operations of the Borrower or "Wings" and (vii) any
necessary actions by or restrictions of federal, state, or other governmental
agencies or regulatory authorities in connection with the Transaction.
Please be advised that this letter is not a commitment to obtain financing
for the Transaction and creates no obligation on our part in connection
therewith.
This letter is intended solely for the use of the Borrower and not any
other person and may not be used or relied upon by, or disclosed, referred to or
communicated by you (in whole or in part) to any third party for any purpose
whatsoever (except to your professional advisors, "Wings" and its professional
advisors for their purposes in evaluating the Borrower's proposal with respect
to the Transaction and as may otherwise be required by law in the opinion of
your counsel), except with our prior written permission and except that you may
disclose the contents of this letter and include a copy of the letter in your
Schedule 14D-1 to be filed with the Securities and Exchange Commission and the
Offer to Purchase included therein.
We look forward to working with you on this transaction.
Sincerely,
J.P. MORGAN SECURITIES INC.
By: /s/ Michael C. Mauer
____________________________
Name: Michael C. Mauer
Title: Vice President
Exhibit 99(c)(1)
CONFIDENTIALITY AND STANDSTILL AGREEMENT
This agreement will confirm our possible interest in preliminary
discussions ("DISCUSSIONS") which might lead to some form of negotiated
transaction between the parties (the "TRANSACTION"). During such Discussions,
we, which term (as well as the terms "us" and "party" when referring to Lockheed
Martin Corporation shall include Lockheed Martin Corporation and its affiliates
and their directors, officers, employees and Representatives (as hereinafter
defined) and you, which term (as well as the term "party" when referring to
Loral Corporation shall include Loral Corporation and its affiliates and their
directors, officers, employees and Representatives, may determine that it is
necessary and appropriate to exchange certain information relating to us or you
respectively. Any such information (whether written or oral) furnished (whether
before or after the date hereof) by you to us or by us to you, including your or
our respective financial advisors, attorneys, accountants or agents
(collectively, "REPRESENTATIVES") and all analyses, compilations, forecasts,
studies or other documents prepared by you or by us in connection with your or
our review of, or interest in, the Discussions or the Transactions which contain
or reflect any such information is hereinafter referred to as the "INFORMATION."
The term Information will not include information which (i) is or becomes
publicly available other than as a result of a disclosure by the receiving party
or (ii) is or becomes available to the receiving party on a nonconfidential
basis from a source (other than that party) which, to the best of the receiving
party's knowledge, is not prohibited from disclosing such information to it by a
legal, contractual or fiduciary obligation, or (iii) is independently developed
by the receiving party without reference to the Information.
Accordingly, it is hereby agreed that:
1. Each of the parties (i) will keep the Information confidential and will not
(except as required by applicable law, regulation or legal process, and
only after compliance with paragraph 3 below), without the prior written
consent to the party which furnished the Information, disclose the
Information in any manner whatsoever, and (ii) will not use the Information
other than in connection with the Transaction. Information may be revealed
to a receiving party's Representatives only if such Representatives (a)
need to know the Information for the purpose of evaluating, or advising the
receiving party with respect to the Transaction, (b) are informed of the
confidential nature of the Information and (c) agree to act in accordance
with the terms of this agreement.
2. Each of the parties will not (except as required by applicable law,
regulation or legal process, and only after compliance with paragraph 3
below), without the other party's prior written consent, disclose to any
person the fact that the Information exists or has been made available,
that either party is considering the Transaction, or that discussions or
negotiations are taking or have taken place concerning the Transactions or
any term, condition or other fact relating to any such Transaction or such
discussions or negotiations, including, without limitation, the status
thereof.
3. In the event that we are requested pursuant to, or required by, applicable
law, regulation or legal process to disclose any of the Information, we
will notify you promptly so that you may seek a protective order or other
appropriate remedy or, in your sole discretion, waive compliance with the
terms of this agreement. Similarly, in the event that you are requested
pursuant to, or required by, applicable law, regulation or legal process to
disclose any of the Information provided by us, you will notify us promptly
so that we may seek a protective order or other appropriate remedy or in
our sole discretion, waive compliance with the terms of this agreement. In
the event that no such protective order or other remedy is obtained, that
we or you waive compliance with the terms of this agreement, or that
disclosure is legally required, the disclosing party will furnish only that
portion of the information which it is advised by counsel is legally
required and will exercise reasonable efforts to obtain reliable assurance
that confidential treatment will be accorded the Information.
4. If either party determines to cease discussions and/or not to proceed with
a Transaction, it will promptly inform the other party of that decision.
In that case, each party at its sole election will either (i) promptly
destroy all copies of the written Information in its possession and confirm
such destruction to the other party in writing, or (ii) promptly deliver to
the other party at the returning party's expense all copies of the written
Information in its possession.
5. The parties acknowledge that neither party or any of its controlling
persons within the meaning of Section 20 of the Securities Exchange Act of
1934, as amended, makes any express or implied representation or warranty
as to the accuracy or completeness of the Information furnished to the
other party, and the parties agree that no such person will have any
liability relating to the Information or for any errors therein or
omissions therefrom. The parties further agree that they are not entitled
to rely on the accuracy or completeness of the Information and that they
will be entitled to rely solely on such representations and warranties as
may be included in any definitive agreement with respect to a Transaction,
subject to such limitation and restrictions as may be contained therein.
6. The parties acknowledge that they are aware of the restrictions imposed by
the United States securities laws on the purchase or sale of securities by
any person who has received material, non-public information from the
issuer of such securities and on the communication of such information to
any other person when it is reasonably foreseeable that such other person
is likely to purchase or sell such securities in reliance upon such
information.
7. For a period of three years from the date of this agreement, neither you
nor we nor any of either of our controlled subsidiaries, will, unless
specifically invited by the other party ("party" in this paragraph 7 and in
paragraph 8 meaning either (i) Lockheed Martin Corporation or (ii) Loral
Corporation and any existing or newly organized subsidiary of Loral
Corporation the stock of which is distributed to the shareholders of Loral
Corporation, as the case may be) or its Board of Directors: (i) acquire,
offer to
2
acquire, or agree to acquire, directly or indirectly, by purchase or
otherwise, any voting securities, or direct or indirect rights to acquire
any voting securities of the other party, or any assets of the other party
or any subsidiary or division thereof or of any such successor or
controlling person; (ii) make, or in any way participate in, directly or
indirectly, any "solicitation" of "proxies" (as such terms are used in the
rules of the Securities Exchange Commission) to vote, or seek to advise or
influence any person or entity with respect to the voting of, any voting
securities of the other party; (iii) make any public announcement with
respect to, or submit a proposal for, or offer of (with or without
conditions) any extraordinary transactions involving the other party or its
securities or assets; (iv) form, join or in any way participate in a
"group" (as defined in Section 13 (d) (3) of the Securities Exchange Act of
1934, as amended) in connection with any of the foregoing. The parties
agree that for the period specified above, neither will publicly request
the other (its officers, directors, employees and agents) or publicly
disclose any request, directly or indirectly, to waive any provisions of
this paragraph.
8. Each of the parties hereto agrees that, for a period of two years from the
date of this agreement, it and its controlled subsidiaries will not,
directly or indirectly, solicit for employment any employee of the other
party or any of its subsidiaries who became known to it as a result of the
Discussions or its consideration of a Transaction or any other person with
whom a party has direct contact in the course of negotiating any
Transaction, provided, however, that any such solicitation shall not be
deemed a breach of this agreement if (i) the personnel who perform such
solicitation have no access to or knowledge of any Information or this
agreement and (ii) none of the soliciting party's personnel who have access
to the Information have actual advance knowledge of such solicitation;
provided, further that nothing contained in this paragraph 8 shall be
deemed to limit in any manner our ability to offer employment to your
employees in the event of the consummation of a Transaction between us.
The term "solicit for employment" shall not be deemed to include general
solicitations of employment not specifically directed towards employees of
a party or any of its subsidiaries.
9. Each of the signatories acknowledge that remedies at law may be inadequate
to protect it against any actual or threatened breach of this agreement
and, without prejudice to any other rights and remedies otherwise available
to them, the signatories agree that each of them shall be entitled to
equitable relief, including injunction. In the event of litigation
relating to this agreement, if a court of competent jurisdiction determines
in a final, nonappealable order that this agreement has been breached then
the breaching signatory shall reimburse the nonbreaching signatory for
costs and expenses (including, without limitation, legal fees and expenses)
incurred in connection with all such litigation.
10. No failure or delay by either signatory in exercising any right, power or
privilege hereunder will operate as a waiver thereof, nor will any single
or partial exercise thereof preclude any other or further exercise thereof
or the exercise of any right, power or privilege hereunder.
3
11. This agreement will be governed by and construed in accordance with the
laws of the State of New York.
12. Any notice or communication hereunder shall be in writing and shall be
delivered personally, telegraphed, telexed or sent by certified, registered
or express mail, postage prepaid. Any such notice shall be deemed given
when so delivered personally, telegraphed, telexed or sent by facsimile
transmissions or, if mailed, three (3) business days after the date of
deposit in the United States mail, by certified mail return receipt
requested as follows:
(i) If to us, to:
Lockheed Martin Corporation
6801 Rockledge Drive
Bethesda, Maryland 20817
Telephone: 301-897-6125
Telecopy: 301-897-6791
Attention: General Counsel
with a copy to:
O'Melveny & Myers
153 E. 53rd Street
New York, New York 10022
Telephone: (212) 326-2000
Telecopy: (212) 326-2160
Attention: Douglas C. Kranwinkle
and to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Telephone: (212) 735-3000
Telecopy: (212) 735-2001
Attention: Peter Allan Atkins
(ii) If to you, to:
Loral Corporation
600 Third Avenue
New York, New York 10016
Telephone: 212-697-1105
Telecopy: 212-682-9805
Attention: Michael B. Targoff
4
with a copy to:
Willkie Farr & Gallagher
153 E. 53rd Street
New York, New York 10022
Telephone: (212) 821-8237
Telecopy: (212) 821-8111
Attention: Bruce R. Kraus, Esq.
13. This agreement contains the entire agreement between the signatories
concerning the confidentiality of the Information and other matters covered
hereby, and no modifications of this agreement or waiver of the terms and
conditions hereof will be binding, unless approved in writing by each of
the signatories.
Executed this 4th day of December, 1995.
LOCKHEED MARTIN CORPORATION LORAL CORPORATION
By: /s/ Frank H. Menaker, Jr. By: /s/ Michael B. Targoff
------------------------- ----------------------
Its: Vice President and Its: Senior Vice President
General Counsel and Secretary
------------------------ ---------------------
5
Exhibit 99(c)(2)
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
DATED AS OF JANUARY 7, 1996
BY AND AMONG
LORAL CORPORATION,
LOCKHEED MARTIN CORPORATION
AND
LAC ACQUISITION CORPORATION
ARTICLE I
THE OFFER
Section 1.1. The Offer................................................. 2
Section 1.2. Company Actions........................................... 3
Section 1.3. Stockholder Lists......................................... 3
Section 1.4. Composition of the Board of Directors; Section 14(f)...... 3
ARTICLE II
THE MERGER
Section 2.1. The Merger................................................ 3
Section 2.2. Effective Time............................................ 4
Section 2.3. Effects of the Merger..................................... 4
Section 2.4. Certificate of Incorporation and By-Laws.................. 4
Section 2.5. Directors................................................. 4
Section 2.6. Officers.................................................. 4
Section 2.7. Conversion of Shares...................................... 4
Section 2.8. Reserved.................................................. 4
Section 2.9. Conversion of Purchaser's Common Stock.................... 4
Section 2.10. Stock Options and Stock Awards........................... 4
Section 2.11. Stockholders' Meeting..................................... 5
Section 2.12. Filing of Certificate of Merger........................... 6
ARTICLE III
DISSENTING SHARES; EXCHANGE OF SHARES
Section 3.1. Dissenting Shares......................................... 6
Section 3.2. Exchange of Shares........................................ 6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.1. Organization.............................................. 7
Section 4.2. Capitalization............................................ 7
Section 4.3. Authority Relative to this Agreement...................... 8
Section 4.4. Consents and Approvals; No Violations..................... 8
Section 4.5. Absence of Certain Changes................................ 9
Section 4.6. No Undisclosed Liabilities................................ 9
Section 4.7. Reports................................................... 9
Schedule 14D-9; Offer Documents; Form 10; Information
Section 4.8. Statement................................................. 10
Section 4.9. No Default................................................ 10
Section 4.10. Litigation; Compliance with Law........................... 11
Section 4.11. Employee Benefit Plans; ERISA............................. 11
i
Section 4.12. Assets; Intellectual Property............................... 12
Section 4.13. Reserved.................................................... 12
Section 4.14. Reserved.................................................... 12
Section 4.15. Certain Contracts and Arrangements.......................... 12
Section 4.16. Taxes....................................................... 12
Section 4.17. Retained Business FCC Licenses.............................. 14
Section 4.18. Labor Matter................................................ 14
Section 4.19. Rights Agreement............................................ 14
Section 4.20. Certain Fees................................................ 14
Section 4.21. No Additional Approvals Necessary........................... 14
Section 4.22. Materiality................................................. 14
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Section 5.1. Organization................................................ 14
Section 5.2. Authority Relative to this Agreement........................ 15
Section 5.3. Consents and Approvals; No Violations....................... 15
Section 5.4. Information Statement; Schedule 14D-9....................... 15
Section 5.5. Sufficient Funds............................................ 16
Section 5.6. Brokers..................................................... 16
ARTICLE VI
COVENANTS
Section 6.1. Conduct of Business of the Company.......................... 16
Section 6.2. Acquisition Proposals....................................... 18
Section 6.3. Access to Information....................................... 19
Section 6.4. Reasonable Efforts.......................................... 19
Section 6.5. Consents.................................................... 20
Section 6.6. Antitrust Filings........................................... 20
Section 6.7. Public Announcements........................................ 21
Section 6.8. Employee Agreements......................................... 21
Section 6.9. Employee Benefits........................................... 23
Section 6.10. Ancillary Agreements; Spin-Off.............................. 23
Section 6.11. Retained Business Financial Statements...................... 24
Section 6.12. Redemption of Rights........................................ 24
Section 6.13. Pre-Closing Consultation.................................... 24
Section 6.14. Indemnification............................................. 24
Section 6.15 Board of Directors of Parent................................ 25
Section 6.16 Standstill Provisions....................................... 25
Section 6.17 Effectiveness of Rights Agreement........................... 25
ii
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
Conditions to Each Party's Obligation to Effect the
Section 7.1. Merger.................................................... 26
Conditions to the Obligation of the Company to Effect the
Section 7.2. Merger.................................................... 26
Conditions to Obligations of Parent and Purchaser to
Section 7.3. Effect the Merger......................................... 26
Section 7.4. Exception................................................. 27
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
Section 8.1. Termination............................................... 27
Section 8.2 Effect of Termination..................................... 28
Section 8.3 Fees and Expenses......................................... 28
Section 8.4. Amendment................................................. 29
Section 8.5. Extension; Waiver......................................... 30
ARTICLE IX
MISCELLANEOUS
Section 9.1. Survival.................................................. 30
Section 9.2. Entire Agreement.......................................... 30
Section 9.3. Governing Law............................................. 30
Section 9.4. Notices................................................... 30
Section 9.5. Successors and Assigns; No Third Party Beneficiaries...... 31
Section 9.6. Counterparts.............................................. 31
Section 9.7. Interpretation............................................ 31
Section 9.8. Schedules................................................. 32
Section 9.9. Legal Enforceability...................................... 32
Section 9.10. Specific Performance...................................... 32
Section 9.11. Brokerage Fees and Commissions............................ 32
iii
EXHIBITS
Exhibit A................................................. Tax Sharing Agreement
Exhibit B................................................... Conditions to Offer
Exhibit C............................... Form of Employment Protection Agreement
Exhibit D............................................ Employment Protection Plan
Exhibit E........................................ Supplemental Severance Program
iv
TABLE OF DEFINED TERMS
TERM SECTION NO.
- ---- -----------------
1987 Plan..................................................... 2.10(b)
Active Negotiations........................................... 8.3(e)
Acquisition Proposal.......................................... 6.2(b)
Ancillary Agreements.......................................... Recitals
Antitrust Law................................................. 6.6(e)
Asset................................................. Distribution Agreement
Audit......................................................... 4.16(j)(1)
Business Day.......................................... Distribution Agreement
Certificates.................................................. 3.2(b)
Code.......................................................... 4.11(a)
Commission.................................................... 4.4
Company....................................................... Recitals
Company Bonus Employee........................................ 6.8(c)
Company Representative........................................ 6.13
Company SEC Documents......................................... 4.7(a)
Confidentiality Agreement..................................... 6.2(a)
Continuing Director........................................... 8.4
Contracting Subsidiary........................................ 4.3
Credit Agreement.............................................. 4.9
Defense Financial Statements.................................. 4.7(c)
Designated Directors.......................................... 8.4
Disclosure Schedule........................................... 4.2(a)
Dissenting Shares............................................. 3.1
Distribution Agreement........................................ Recitals
Distribution Date..................................... Distribution Agreement
EC Merger Regulations......................................... 4.4
Effective Time................................................ 2.2
Employment Agreements......................................... 6.8(a)
Employment Protection Arrangement............................. 6.8(e)
ERISA......................................................... 4.11(a)
ERISA Affiliate............................................... 4.11(a)
Exchange Act.................................................. 4.4
Exchange Agent................................................ 3.2(a)
Form 10-K..................................................... 4.5
Higher Offer.................................................. 8.3(b)
HSR Act....................................................... 4.4
IB............................................................ 8.3(b)(v)
Important Licenses............................................ 4.17
Information Statement......................................... 2.11(b)
Intellectual Property......................................... 4.12(b)
IRS........................................................... 4.11(a)
LAH........................................................... Recitals
Law................................................... Distribution Agreement
Liabilities........................................... Distribution Agreement
Lien.................................................. Distribution Agreement
Material Adverse Effect....................................... 4.1, 5.1
Merger........................................................ 2.1
Merger Price.................................................. 2.7(a)
NYBCL......................................................... 1.2
v
TERM SECTION NO.
- ---- ---------------------
Offer..................................................... 1.1(a)
Offer Documents........................................... 1.1(d)
Order..................................................... 6.6(b)
Ordinary Course Obligations............................... 6.1
Parent.................................................... Recitals
Parent Representative..................................... 6.13
PBGC...................................................... 4.11(b)
Person........................................ Distribution Agreement, 8.3(b)
Plans..................................................... 4.11(a)
Preferred Stock........................................... 4.2(a)
Public Indenture Merger Opinions.......................... 7.3(b)
Public Indentures......................................... 4.9
Purchaser................................................. Recitals
Recent SEC Documents...................................... 4.10(b)
Record Date................................... Distribution Agreement
Retained Business......................................... 4.1
Retained Business Financial Statements.................... 6.11
Retained Employees............................ Distribution Agreement
Retained Subsidiaries..................................... 4.1
Rights Agreement.......................................... 4.19
Rights Amendment.......................................... 4.19
Schedule 14D-9............................................ 1.2
SEC....................................................... 1.1(d)
Securities Act............................................ 4.4
Severance Agreements...................................... 6.8(a)
Shares.................................................... 1.1(a)
Significant Adverse Effect................................ 6.6(b)
Spin-Off.................................................. Recitals
Spinco.................................................... Recitals
Spinco Bonus Employee..................................... 6.8(c)
Spinco Business............................... Distribution Agreement
Spinco Common Stock........................... Distribution Agreement
Spinco Companies.............................. Distribution Agreement
Standstill Provisions..................................... 6.2(a)
Stock Options............................................. 2.10(a)
Stockholders' Meeting..................................... 2.11(a)
Subsidiaries.................................. Distribution Agreement
Supplemental Severance Plan............................... 6.9(a)
Surviving Corporation..................................... 2.1
Taxes..................................................... 4.16(j)(2)
Tax Returns............................................... 4.16(j)(3)
Tax Sharing Agreement..................................... Recitals
Third Party............................................... 8.3(b)
Third Party Acquisition................................... 8.3(b)
Transaction Bonus......................................... 6.8(d)
Transaction Bonus Employee................................ 6.8(d)
Vesting Date.............................................. 2.10(a)
vi
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of January 7, 1996, is among
LOCKHEED MARTIN CORPORATION, a Maryland corporation ("PARENT"), LAC
ACQUISITION CORPORATION, a New York corporation and a wholly-owned subsidiary
of Parent ("PURCHASER"), and LORAL CORPORATION, a New York corporation (the
"COMPANY").
RECITALS
WHEREAS, the Boards of Directors of the Company, Parent and Purchaser deem
it advisable and in the best interests of their respective stockholders that
Parent acquire the Company (other than certain businesses thereof) pursuant to
the terms and conditions set forth in this Agreement;
WHEREAS, as provided in the Restructuring, Financing and Distribution
Agreement dated as of the date hereof herewith among Parent, the Company,
Loral Telecommunications Acquisition, Inc. (to be renamed Loral Space &
Communications Corporation), a Delaware corporation and wholly-owned
subsidiary of the Company (including any successor in interest, "SPINCO"),
Loral Aerospace Holdings, Inc., a Delaware corporation and wholly-owned
subsidiary of the Company ("LAH"), and Loral Aerospace Corp., a Delaware
corporation and wholly-owned subsidiary of LAH (the "DISTRIBUTION AGREEMENT"),
prior to the expiration of the Offer (as defined in Section 1.1 hereof) the
Company will cause Spinco to be restructured so that as a result thereof the
Company's direct and indirect interests in Space Systems/Loral, Inc., a
Delaware corporation, Globalstar L.P., a Delaware limited partnership, K&F
Industries, Inc., a Delaware corporation, all rights to receive management and
certain (but not all) guarantee fees therefrom, several commercial satellite
and telecommunications projects in progress (including related FCC (as defined
in Section 6.5 hereof) applications), a certain portion of the Company's
leased corporate headquarters office space, the Company's corporate aircraft,
certain rights and liabilities with respect to certain litigation in which the
Company has an interest, the nonexclusive right to use certain intellectual
property of the Company, the exclusive right, subject to a limited license
granted to the Company, to the "Loral" name and such other rights and assets
as shall be deemed Spinco Assets (as defined in the Distribution Agreement),
will be owned directly or indirectly by Spinco and substantially all of the
Company's other assets, liabilities and businesses will be owned directly by
the Company or by Subsidiaries (as defined in the Distribution Agreement) of
the Company other than Spinco and Subsidiaries of Spinco; and
WHEREAS, as provided in the Distribution Agreement, the Company will make a
distribution to the Company's stockholders and to holders of Stock Options (as
defined in Section 2.10 hereof) as of the Record Date (as defined in the
Distribution Agreement), on a pro rata basis, of 100% of the shares of common
stock, par value $.01 per share, of Spinco issued and outstanding immediately
prior to such distribution (the "SPIN-OFF"); and
WHEREAS, as set forth in Section 6.10 hereof, as a condition to and in
consideration of the transactions contemplated hereby, following the date
hereof (a) the Company, Spinco and certain other parties will enter into a Tax
Sharing Agreement substantially in the form attached hereto as Exhibit A with
such changes as shall have been approved prior to the consummation of the
Offer by the Company and Parent (or, following the consummation of the Offer,
by a majority of the Continuing Directors (as defined in Section 8.4 hereof),
if any, and Parent) (the "TAX SHARING AGREEMENT" and, together with the
Distribution Agreement, hereafter are collectively referred to as the
"ANCILLARY AGREEMENTS");
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, Parent, Purchaser and the Company hereby agree as
follows:
1
ARTICLE I
THE OFFER
SECTION 1.1. THE OFFER.
(a) Subject to this Agreement not having been terminated in accordance with
the provisions of Section 8.1 hereof, Purchaser shall, and Parent shall cause
Purchaser to, as promptly as practicable, but in no event later than five
Business Days (as defined in the Distribution Agreement) from the date of the
public announcement of the terms of this Agreement, commence an offer to
purchase for cash (as it may be amended in accordance with the terms of this
Agreement, the "OFFER") all of the Company's outstanding shares of common
stock, par value $.25 per share, together with all preferred stock purchase
rights associated therewith (the "SHARES"), subject to the conditions set
forth in Exhibit B attached hereto, at a price of not less than $38.00 per
Share, net to the seller in cash. Subject only to the conditions set forth in
Exhibit B hereto and the express provisions of the Distribution Agreement, the
Purchaser shall, and Parent shall cause Purchaser to, (i) accept for payment
and pay for all Shares tendered pursuant to the terms of the Offer as promptly
as practicable following the expiration date of the Offer, and (ii) extend the
period of time the Offer is open until the first Business Day following the
date on which the conditions set forth in clause (i)(A) and clause (i)(B) of
Exhibit B hereto are satisfied or waived in accordance with the provisions
thereof; provided, that the Purchaser shall be permitted, but shall not be
obligated, to extend the period of time the Offer is open beyond June 30,
1996. Subject to the preceding sentence of this Section 1.1, neither Purchaser
nor Parent will extend the expiration date of the Offer beyond the twentieth
Business Day following commencement thereof unless one or more of the
conditions set forth in Exhibit B hereto shall not be satisfied or unless
Parent reasonably determines that such extension is necessary to comply with
any legal or regulatory requirements relating to the Offer or the Spin-Off.
Purchaser expressly reserves the right to amend the terms or conditions of the
Offer; provided, that without the consent of the Company, no amendment may be
made which (i) decreases the price per Share or changes the form of
consideration payable in the Offer, (ii) decreases the number of Shares
sought, or (iii) imposes additional conditions to the Offer or amends any
other term of the Offer in any manner materially adverse to the holders of
Shares. Upon the terms and subject to the conditions of the Offer, the
Purchaser will accept for payment and purchase, as soon as permitted under the
terms of the Offer, all Shares validly tendered and not withdrawn prior to the
expiration of the Offer.
(b) Parent will not, nor will it permit any of its affiliates to, tender
into the Offer any Shares beneficially owned by it; 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 any of its Subsidiaries
shall not be deemed to be held by Parent or an affiliate thereof regardless of
whether Parent has, directly or indirectly, the power to vote or control the
disposition of such Shares. The Company will not, nor will it permit any of
its Subsidiaries (other than Retained Subsidiaries (as defined in Section 4.1
hereof)) to, tender into the Offer any Shares beneficially owned by it;
provided, that Shares held beneficially or of record by any plan, program or
arrangement sponsored or maintained for the benefit of employees of the
Company or any of its Subsidiaries shall not be deemed to be held by the
Company regardless of whether the Company has, directly or indirectly, the
power to vote or control the disposition of such Shares.
(c) Notwithstanding anything to the contrary contained in this Agreement,
Parent and Purchaser shall not be required to commence the Offer in any
foreign country where the commencement of the Offer, in Parent's reasonable
opinion, would violate the applicable Law (as defined in the Distribution
Agreement) of such jurisdiction.
(d) On the date of the commencement of the Offer, Purchaser shall file with
the Securities and Exchange Commission (the "SEC") a Tender Offer Statement on
Schedule 14D-1 with respect to the Offer which will contain an offer to
purchase and form of the related letter of transmittal (together with any
supplements or amendments thereto, the "OFFER DOCUMENTS"). The Company and its
counsel shall be given a reasonable opportunity to review and comment on the
Offer Documents prior to the filing of such Offer Documents with the SEC.
Purchaser agrees to provide the Company and its counsel in writing with any
comments Purchaser and its counsel may receive from the SEC or its staff with
respect to the Offer Documents promptly after the receipt thereof.
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SECTION 1.2. COMPANY ACTIONS. The Company hereby consents to the Offer and
represents that its Board of Directors (at a meeting duly called and held) has
unanimously (a) determined as of the date hereof that the Offer, the Merger
(as defined in Section 2.1 hereof) and the Spin-Off are fair to the
stockholders of the Company and are in the best interests of the stockholders
of the Company and (b) resolved to recommend acceptance of the Offer and
approval and adoption of this Agreement and the Merger by the stockholders of
the Company which approval constitutes approval of each of the transactions
contemplated by this Agreement for purposes of Sections 902 and 912 of the New
York Business Corporation Law ("NYBCL"). The Company further represents that
Lazard Freres & Co. LLC has delivered to the Board of Directors of the Company
its opinion that the consideration to be received by the holders of Shares in
the Offer, the Merger and the Spin-Off is fair to the holders of the Company's
common stock from a financial point of view. The Company hereby agrees to file
a Solicitation/Recommendation Statement on Schedule 14D-9 (the "SCHEDULE 14D-
9") containing such recommendation with the SEC (and the information required
by Section 14(f) of the Exchange Act if Parent shall have furnished such
information to the Company in a timely manner) and to mail such Schedule 14D-9
to the stockholders of the Company; provided, that subject to the provisions
of Section 6.2(a) hereof, such recommendation may be withdrawn, modified or
amended. Such Schedule 14D-9 shall be, if so requested by Purchaser, filed on
the same date as Purchaser's Schedule 14D-1 is filed and mailed together with
the Offer Documents; provided, that in any event the Schedule 14D-9 shall be
filed and mailed no later than 10 Business Days following the commencement of
the Offer. Purchaser and its counsel shall be given a reasonable opportunity
to review and comment on such Schedule 14D-9 prior to the Company's filing of
the Schedule 14D-9 with the SEC. The Company agrees to provide Parent and its
counsel in writing with any comments the Company or its counsel may receive
from the SEC or its staff with respect to such Schedule 14D-9 promptly after
the receipt thereof.
SECTION 1.3. STOCKHOLDER LISTS. In connection with the Offer, at the request
of Parent or Purchaser, from time to time after the date hereof, the Company
will promptly furnish Purchaser with mailing labels, security position
listings and any available listing or computer file containing the names and
addresses of the record holders of the Shares as of a recent date and shall
furnish Purchaser with such information and assistance as Purchaser or its
agents may reasonably request in communicating the Offer to the record and
beneficial holders of Shares.
SECTION 1.4. COMPOSITION OF THE BOARD OF DIRECTORS; SECTION 14(F). In the
event that Purchaser acquires at least a majority of the Shares outstanding
pursuant to the Offer, Parent shall be entitled to designate for appointment
or election to the Company's Board of Directors, upon written notice to the
Company, such number of persons so that the designees of Parent 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. In connection therewith, the Company will mail to the stockholders
of the 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 stockholders in the Schedule 14D-9. Parent and 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 provisions
of this Section 1.4, the parties hereto shall 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 hereof) be, Continuing Directors (as defined in Section 8.4
hereof).
ARTICLE II
THE MERGER
SECTION 2.1. THE MERGER. Upon the terms and subject to the conditions
hereof, and in accordance with the NYBCL, Purchaser shall be merged (the
"MERGER") with and into the Company as soon as practicable following the
satisfaction or waiver of the conditions set forth in Article VII hereof or on
such other date as the parties
3
hereto may agree (such agreement to require the approval of a majority of the
Continuing Directors if at the time there shall be any Continuing Directors).
Following the Merger the Company shall continue as the surviving corporation
(the "SURVIVING CORPORATION") and the separate corporate existence of
Purchaser shall cease.
SECTION 2.2. EFFECTIVE TIME. The Merger shall be consummated by filing with
the New York Secretary of State a certificate of merger or, if applicable, a
certificate of ownership and merger, executed in accordance with the relevant
provisions of the NYBCL (the time the Merger becomes effective being the
"EFFECTIVE TIME").
SECTION 2.3. EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in the NYBCL. As of the Effective Time the Company shall be a wholly-
owned subsidiary of Parent.
SECTION 2.4. CERTIFICATE OF INCORPORATION AND BY-LAWS. The Restated
Certificate of Incorporation and By-Laws of the Company as in effect at the
Effective Time, shall 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 shall be amended to change the name of the Surviving Corporation
so that the word "Loral" shall be deleted therefrom.
SECTION 2.5. DIRECTORS. The directors of Purchaser at the Effective Time
shall be the initial directors 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 Law.
SECTION 2.6. OFFICERS. The officers of Purchaser at the Effective Time shall
be the initial 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 Law.
SECTION 2.7. CONVERSION OF SHARES. At the Effective Time:
(a) Each Share issued and outstanding immediately prior to the Effective
Time (other than Shares held in the treasury of the Company or held by any
Subsidiary of the Company (other than a Retained Subsidiary), and other than
Dissenting Shares (as defined in Section 3.1 hereof)) shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive $38.00 in cash, or any higher price paid per Share
in the Offer (the "MERGER PRICE"), payable to the holder thereof, without
interest thereon, upon the surrender of the certificate formerly representing
such Share (except as provided in Section 2.10(c) hereof).
(b) Each Share held in the treasury of the Company or held by any Subsidiary
of the Company (other than a Retained Subsidiary) and each Share held by
Parent or any Subsidiary of Parent immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the
holder thereof, 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 shall 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.
SECTION 2.8. RESERVED.
SECTION 2.9. CONVERSION OF PURCHASER'S COMMON STOCK. Each share of common
stock, par value $.01 per share, of Purchaser issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into and
exchangeable for one share of common stock of the Surviving Corporation.
SECTION 2.10. STOCK OPTIONS AND STOCK AWARDS.
(a) The Company shall take all actions (including, but not limited to,
obtaining any and all consents from employees to the matters contemplated by
this Section 2.10) necessary to provide that all outstanding options and other
rights to acquire Shares ("STOCK OPTIONS") granted under any stock option
plan, program or similar
4
arrangement of the Company or any Subsidiaries, each as amended (the "OPTION
PLANS"), shall become fully exercisable and vested on the date (the "VESTING
DATE") which shall 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 shall 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 Exchange Act) shall 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 shall be payable
upon consummation of the Offer, plus (2) one share of Spinco Common Stock (as
defined in the Distribution Agreement), which shall be held by an escrow agent
pending delivery on the Distribution Date. All applicable withholding taxes
attributable to the payments made hereunder or to distributions contemplated
hereby shall 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 shall 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.
(b) The Company shall take all actions (including, but not limited to,
obtaining any and all consents from employees to the matters contemplated by
this Section 2.10) 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 shall lapse, and each such
Share shall become free of restrictions as of the Vesting Date. All applicable
withholding taxes attributable to the vesting of restricted Shares shall be
withheld from the proceeds received in respect of such Shares in the Offer or
the Merger, as the case may be.
(c) Except as provided herein 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 shall 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 shall
be deleted as of the Effective Time and (ii) the Company shall 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 shall have any right thereunder to acquire any equity
securities of the Company, the Surviving Corporation or any Subsidiary
thereof.
SECTION 2.11. STOCKHOLDERS' MEETING. If required by applicable Law in order
to consummate the Merger, the Company, acting through its Board of Directors,
shall, in accordance with applicable Law, its Restated Certificate of
Incorporation and By-Laws and the rules and regulations of the New York Stock
Exchange:
(a) duly call, give notice of, convene and hold a special meeting of its
stockholders as soon as practicable following the consummation of the Offer
for the purpose of considering and taking action upon this 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 stockholders 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 of Directors
referred to in Section 1.2 hereof; 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 SEC with respect to
the Information Statement and any preliminary version thereof and cause the
Information Statement to be mailed to its stockholders following the
consummation of the Offer and (ii) obtain the necessary approvals of this
Agreement by its stockholders.
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 this Agreement.
5
SECTION 2.12. FILING OF CERTIFICATE OF MERGER. Upon the terms and subject to
the conditions hereof, as soon as practicable following the satisfaction or
waiver of the conditions set forth in Article VII hereof, the Company shall
execute and file a certificate of merger or, if applicable, a certificate of
ownership and merger, in the manner required by the NYBCL and the parties
hereto shall take all such other and further actions as may be required by Law
to make the Merger effective. Prior to the filings referred to in this Section
2.12, a closing will be held at the offices of O'Melveny & Myers, 153 East
53rd Street, New York, New York (or such other place as the parties may
agree), for the purpose of confirming all of the foregoing.
ARTICLE III
DISSENTING SHARES; EXCHANGE OF SHARES
SECTION 3.1. DISSENTING SHARES. Notwithstanding anything in this Agreement
to the contrary, Shares which are issued and outstanding immediately prior to
the Effective Time and which are held by stockholders who have not voted such
Shares in favor of the Merger and shall have delivered a written demand for
appraisal of such Shares in the manner provided in the NYBCL (the "DISSENTING
SHARES") shall not be converted into or be exchangeable for the right to
receive the consideration provided in Section 2.7 of this Agreement, unless
and until such holder shall have failed to perfect or shall have effectively
withdrawn or lost such holder's right to appraisal and payment under the
NYBCL. If such holder shall have so failed to perfect or shall have
effectively withdrawn or lost such right, such holder's Shares shall thereupon
be deemed to have been converted into and to have become exchangeable for, at
the Effective Time, the right to receive the consideration provided for in
Section 2.7(a) of this Agreement, without any interest thereon.
SECTION 3.2. EXCHANGE OF SHARES.
(a) Prior to the Effective Time, Parent shall designate a bank or trust
company to act as exchange agent in the Merger (the "EXCHANGE AGENT").
Immediately prior to the Effective Time, Parent will take all steps necessary
to enable and cause the Company to deposit with the Exchange Agent the funds
necessary to make the payments contemplated by Section 2.7 on a timely basis.
(b) Promptly after the Effective Time, the Exchange Agent shall mail to each
record holder, as of the Effective Time, of an outstanding certificate or
certificates which immediately prior to the Effective Time represented Shares
(the "CERTIFICATES") a form letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the Exchange
Agent) and instructions for use in effecting the surrender of the Certificates
for payment therefor. Upon surrender to the Exchange Agent of a Certificate,
together with such letter of transmittal duly executed, and any other required
documents, the holder of such Certificate shall be entitled to receive in
exchange therefor the consideration set forth in Section 2.7(a) hereof, and
such Certificate shall forthwith be cancelled. No interest will be paid or
accrued on the cash payable upon the surrender of the Certificates. If payment
is to be made to a person other than the person in whose name the Certificate
surrendered is registered, it shall be a condition of payment that the
Certificate so surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a person other
than the registered holder of the Certificate surrendered or establish to the
satisfaction
of the Surviving Corporation that such tax has been paid or is not applicable.
Until surrendered in accordance with the provisions of this Section 3.2, each
Certificate (other than Certificates representing Shares held by Parent or any
subsidiary of Parent, Shares held in the treasury of the Company or held by
any subsidiary of the Company and Dissenting Shares) shall represent for all
purposes only the right to receive the consideration set forth in Section
2.7(a) hereof, without any interest thereon.
(c) After the Effective Time there shall be no transfers on the stock
transfer books of the Surviving Corporation of the Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation, they shall be
cancelled and exchanged for the consideration provided in Article II hereof in
accordance with the procedures set forth in this Article III.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Purchaser as follows:
SECTION 4.1. ORGANIZATION. Each of the Company and its Subsidiaries that
will be owned, directly or indirectly, by the Company following the Spin-Off
(the "RETAINED SUBSIDIARIES") is a corporation duly organized, validly
existing and in good standing under the Laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted, except in the case of Retained Subsidiaries where the failure to be
so existing and in good standing or to have such power and authority would not
in the aggregate have a Material Adverse Effect (as defined below). For
purposes of this Agreement (except as provided in Section 5.1 hereof), (a) the
term "MATERIAL ADVERSE EFFECT" shall mean any change or effect that is
reasonably likely to be materially adverse to (i) the business, properties,
operations, prospects, results of operations or condition (financial or
otherwise) of the Retained Business (as hereinafter defined) taken as a whole,
or (ii) the ability of (A) the Company to perform its obligations under this
Agreement or the Distribution Agreement, or (B) Spinco to perform its
obligations under the Distribution Agreement; and (b) the term "RETAINED
BUSINESS" shall mean all of the businesses (and the Assets and Liabilities
thereof (each as defined in the Distribution Agreement)) of the Company and
its Subsidiaries, other than the Spinco Business (as defined in the
Distribution Agreement). Each of the Company and the Retained Subsidiaries is
duly qualified or licensed and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed and in good standing would not in the aggregate have a
Material Adverse Effect. The Company has heretofore delivered or made
available to Parent accurate and complete copies of the Certificate of
Incorporation and By-Laws (or other similar organizational documents in the
event of any entity other than a corporation), as currently in effect of the
Company and each of the Retained Subsidiaries.
SECTION 4.2. CAPITALIZATION.
(a) As of December 31, 1995, the authorized capital stock of the Company
consisted of (i) 300,000,000 Shares, of which 173,068,379 Shares were issued
and outstanding (inclusive of Shares subject to restrictions under the
Company's 1987 Restricted Stock Purchase Plan), and (ii) 2,000,000 shares of
Preferred Stock, par value $1.00 per share ("PREFERRED STOCK"), of which
250,000 shares were designated as Series A Preferred Stock, of which no shares
were issued and outstanding. All of the issued and outstanding Shares are
validly issued, fully paid and non-assessable and free of preemptive rights.
As of December 31, 1995, 11,131,234 Shares were issuable upon the exercise of
outstanding vested and non-vested Stock Options. Since December 31, 1995, the
Company has not granted any Stock Options or issued any shares of its capital
stock except as set forth on Schedule 4.2(a) of the disclosure schedule
delivered by the Company to Parent on or prior to the date hereof (the
"DISCLOSURE SCHEDULE") or except upon exercise of Stock Options or pursuant to
any existing Plan in accordance with the current terms of such Plan. Except as
set forth above and as otherwise provided for in this Agreement, there are not
now, and at the Effective Time there will not be, any shares of capital stock
of the Company issued or outstanding or any subscriptions, options, warrants,
calls, rights, convertible securities or other agreements or commitments of
any character obligating the Company to issue, transfer or sell any of its
securities other than the Rights (as defined in the Rights Agreement). Except
as permitted by this Agreement, following the Merger, the Company will have no
obligation to issue, transfer or sell any shares of its capital stock pursuant
to any employee benefit plan or otherwise.
(b) All of the outstanding shares of capital stock of, or ownership interest
in, each of the Retained Subsidiaries have been validly issued and are fully
paid and non-assessable and are owned by either the Company or another of the
Retained Subsidiaries free and clear of all Liens (as defined in the
Distribution Agreement). There are not now, and at the Effective Time there
will not be, any outstanding subscriptions, options, warrants, calls, rights,
convertible securities or other agreements or commitments of any character
relating to the issued or
7
unissued capital stock or other securities of any of the Retained
Subsidiaries, or otherwise obligating the Company or any such subsidiary to
issue, transfer or sell any such securities.
(c) There are not now, and at the Effective Time there will not be, any
voting trusts or other agreements or understandings to which the Company or
any of the Retained Subsidiaries is a party or is bound with respect to the
voting of the capital stock of the Company or any of the Retained
Subsidiaries.
SECTION 4.3. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of the Company and
each Company Subsidiary which is a party to any of the Ancillary Agreements
(each such subsidiary, a "CONTRACTING SUBSIDIARY") has full corporate power
and authority to execute and deliver this Agreement and the Ancillary
Agreements and to consummate the transactions contemplated hereby and thereby
(but only to the extent it is a party thereto). The execution and delivery of
this Agreement by the Company and of the Ancillary Agreements by the Company
and each Contracting Subsidiary (to the extent it is a party thereto) and the
consummation of the transactions contemplated hereby and thereby have been, or
with respect to Contracting Subsidiaries will be prior to the Record Date,
duly and validly authorized by the Boards of Directors of the Company and each
Contracting Subsidiary (to the extent it is a party thereto) and no other
corporate proceedings on the part of the Company or each Contracting
Subsidiary (to the extent it is a party thereto), including, without
limitation, any approval by the stockholders of the Company, are, or with
respect to Contracting Subsidiaries will be prior to the Record Date,
necessary to authorize this Agreement or the Ancillary Agreements or to
consummate the transactions contemplated hereby or thereby (other than (a)
with respect to the Merger, the approval and adoption of this Agreement by the
holders of the requisite number of the outstanding Shares and (b) the
establishment of the Record Date and the Distribution Date (each as defined in
the Distribution Agreement) by the Board of Directors of the Company). This
Agreement has been, and each of the Ancillary Agreements have been or will
prior to the Record Date be, duly and validly executed and delivered by the
Company and each Contracting Subsidiary (to the extent it is a party thereto)
and constitute or (to the extent such agreement is not being entered into as
of the date hereof) will constitute a valid and binding agreement of the
Company and each Contracting Subsidiary (to the extent it is a party thereto),
enforceable against the Company and each Contracting Subsidiary (to the extent
it is a party thereto) in accordance with its terms except to the extent that
enforcement thereof may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws, now
or hereafter in effect, relating to the creditors' rights generally and (b)
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity). The affirmative vote of the
holders of two-thirds of the Shares, determined on a fully-diluted basis, is
the only vote of the holders of any class or series of Company capital stock
necessary to approve the Merger.
SECTION 4.4. CONSENTS AND APPROVALS; NO VIOLATIONS. Except for any
applicable requirements of the Securities Exchange Act of 1934, as amended,
and all rules and regulations thereunder (the "EXCHANGE ACT"), the Securities
Act of 1933, as amended, and all rules and regulations thereunder (the
"SECURITIES ACT"), the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR ACT"), the EC Merger Regulations (as defined below), and
the Communications Act of 1934, as amended, and all rules and regulations
promulgated thereunder (the "COMMUNICATIONS ACT"), the filing and recordation
of a certificate of merger, or a certificate of ownership and merger, as
required by the NYBCL, filing with and approval of the New York Stock
Exchange, Inc. and the SEC with respect to the delisting and deregistering of
the Shares, such filings and approvals as may be required under the "takeover"
or "blue sky" Laws of various states, and as disclosed in Section 4.4 of the
Disclosure Schedule or as contemplated by this Agreement and the Ancillary
Agreements, neither the execution and delivery of this Agreement or the
Ancillary Agreements by the Company or any Contracting Subsidiary (to the
extent it is a party thereto) nor the consummation by the Company or any
Contracting Subsidiary (to the extent it is a party thereto) of the
transactions contemplated hereby or thereby will (i) conflict with or result
in any breach of any provision of the Certificate of Incorporation or By-Laws
of the Company or any Contracting Subsidiary or Retained Subsidiary (other
than those Retained Subsidiaries which, when taken together, would not be a
"significant subsidiary" within the meaning of Regulation S-X promulgated
under the Securities Act) (any such Retained Subsidiary, other than those
described in the preceding parenthetical, herein called a "SIGNIFICANT
RETAINED SUBSIDIARY"), (ii) require on the part of the Company or any
Contracting Subsidiary or a Significant Retained Subsidiary any filing with,
or the obtaining of any permit,
8
authorization, consent or approval of, any governmental or regulatory
authority or any third party, (iii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation, acceleration
or payment, or to the creation of a lien or encumbrance) under any of the
terms, conditions or provisions of any note, mortgage, indenture, other
evidence of indebtedness, guarantee, license, agreement or other contract,
instrument or obligation to which the Company, any Contracting Subsidiary or
Retained Subsidiary or any of their respective Subsidiaries is a party or by
which any of them or any of their Assets may be bound or (iv) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or any Contracting Subsidiary or Retained Subsidiary, any of their
respective Subsidiaries or any of their Assets, except for such requirements,
defaults, rights or violations under clauses (ii), (iii) and (iv) above (x)
which relate to jurisdictions outside the United States or which would not in
the aggregate have a Material Adverse Effect or materially impair the ability
of the Company or any Contracting Subsidiary to consummate the transactions
contemplated by this Agreement, or (y) which become applicable as a result of
the business or activities in which Parent or Purchaser is or proposes to be
engaged (other than the business or activities of the Retained Business to be
acquired by Purchaser, considered independently of the ownership thereof by
Parent and Purchaser) or as a result of other facts or circumstances specific
to Parent or Purchaser. For purposes of this Agreement, "EC MERGER
REGULATIONS" mean Council Regulation (EEC) No. 4064/89 of December 21, 1989 on
the Control of Concentrations Between Undertakings, OJ (1989) L 395/1 and the
regulations and decisions of the Councilor Commission of the European
Community (the "COMMISSION") or other organs of the European Union or European
Community implementing such regulations.
SECTION 4.5. ABSENCE OF CERTAIN CHANGES. Except (a) as set forth in Section
4.5 of the Disclosure Schedule, (b) as set forth in the Company's Annual
Report on Form 10-K for the year ended March 31, 1995 (the "FORM 10-K") or any
other document filed prior to the date hereof pursuant to Section 13(a) or
15(d) of the Exchange Act, or (c) as contemplated by this Agreement or any of
the Ancillary Agreements, from April 1, 1995 until the date hereof, neither
the Company nor any of its Subsidiaries has taken any of the prohibited
actions set forth in Section 6.1 (other than clause (l) thereof) hereof or
suffered any changes that, in each case, either individually or in the
aggregate, would result in a Material Adverse Effect or conducted its business
or operations in any material respect other than in the ordinary and usual
course of business, consistent with past practices.
SECTION 4.6. NO UNDISCLOSED LIABILITIES. Except (a) for Liabilities and
obligations incurred in the ordinary and usual course of business consistent
with past practice since April 1, 1995, (b) for Liabilities incurred in
connection with the Offer, the Merger and the Spin-Off and (c) as set forth in
Section 4.6 of the Disclosure Schedule, from April 1, 1995 until the date
hereof neither the Company nor any of its Subsidiaries has incurred any
Liabilities that, individually or in the aggregate, would have a Material
Adverse Effect and that would be required to be reflected or reserved against
in a consolidated balance sheet of the Company and its Subsidiaries prepared
in accordance with generally accepted accounting principles as applied in
preparing the consolidated balance sheet of the Company and its Subsidiaries
as of March 31, 1995 contained in the Form 10-K.
SECTION 4.7. REPORTS.
(a) The Company has filed all reports, forms, statements and other documents
required to be filed with the SEC pursuant to the Exchange Act since April 1,
1991 (collectively, including, without limitation, any financial statements or
schedules included or incorporated by reference therein, the "COMPANY SEC
DOCUMENTS"). Each of the Company SEC Documents, as of its filing date and at
each time thereafter when the information included therein was required to be
updated pursuant to the rules and regulations of the SEC, complied in all
material respects with all applicable requirements of the Securities Act and
the Exchange Act. None of the Company SEC Documents, as of their respective
filing dates or any date thereafter when the information included therein was
required to be updated pursuant to the rules and regulations of the SEC,
contained or will contain any untrue statement of a material fact or omitted
or will omit to state a 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. Each of the
consolidated balance sheets (including the related notes) included in the
Company SEC Documents filed prior to or after the date of this Agreement (but
prior to the date on which the Offer is consummated, and excluding the Company
SEC Documents described in Section 4.8 hereof) fairly presents or
9
will fairly present in all material respects the consolidated financial
position of the Company and its Subsidiaries as of the respective dates
thereof, and the other related statements (including the related notes)
included therein fairly present or will fairly present in all material
respects the results of operations and the cash flows of the Company and its
Subsidiaries for the respective periods or as of the respective dates set
forth therein. Each of the financial statements (including the related notes)
included in the Company SEC Documents filed prior to or after the date of this
Agreement (but prior to the date on which the Offer is consummated, and
excluding the Company SEC Documents described in Section 4.8 hereof) has been
prepared or will be prepared in all material respects in accordance with
generally accepted accounting principles consistently applied during the
periods involved, except (i) as otherwise noted therein, (ii) to the extent
required by changes in generally accepted accounting principles or (iii) in
the case of unaudited financial statements, normal recurring year-end audit
adjustments.
(b) The Company has heretofore made available or promptly will make
available to Purchaser a complete and correct copy of any amendments or
modifications, which have not yet been filed with the SEC, to agreements,
documents or other instruments which previously had been filed by the Company
with the SEC pursuant to the Exchange Act.
(c) Except as and to the extent set forth in Section 4.7(c) of the
Disclosure Schedule, the pro forma consolidated balance sheet and the pro
forma statement of operations (including the related notes) of the Retained
Business attached as Annex 1 to Section 4.7(c) of the Disclosure Schedule (the
"DEFENSE FINANCIAL STATEMENTS") fairly presents on a pro forma basis in all
material respects the consolidated financial position of the Retained Business
as of the date thereof, and fairly presents on a pro forma basis in all
material respects the consolidated results of operations of the Retained
Business for the period set forth therein, respectively. The Defense Financial
Statements have been prepared in all material respects in accordance with
generally accepted accounting principles consistently applied during the
periods involved, except as otherwise disclosed therein or in the notes
thereto.
SECTION 4.8. SCHEDULE 14D-9; OFFER DOCUMENTS; FORM 10; INFORMATION
STATEMENT. None of the information (other than information provided in writing
by Parent or Purchaser for inclusion therein) included in the Schedule 14D-9,
the Form 10 (as defined in the Distribution Agreement (or any registration
statement contemplated pursuant to Section 3.1(a) of the Distribution
Agreement) or the Information Statement or supplied by the Company for
inclusion in the Offer Documents, including any amendments thereto, will be
false or misleading with respect to any material fact or will 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 are
made, not misleading. Except for information supplied by Parent in writing for
inclusion therein, the Schedule 14D-9, the Form 10 (or any registration
statement contemplated pursuant to Section 3.1(a) of the Distribution
Agreement) and the Information Statement, including any amendments thereto,
will comply in all material respects with the Exchange Act and the Securities
Act.
SECTION 4.9. NO DEFAULT. Except as set forth in Section 4.9 of the
Disclosure Schedule, neither the Company nor any of its Subsidiaries is in
default or violation (and no event has occurred which with notice or the lapse
of time or both would constitute a default or violation) of any term,
condition or provision of (i) its charter or its by-laws, (ii) any note,
mortgage, indenture (including, without limitation, the Indenture dated
January 15, 1992 with respect to the Company's 9 1/8% Senior Debentures due
2022, the Indenture dated September 1, 1993 with respect to the Company's 7
5/8% Senior Notes due 2004, 8 3/8% Senior Debentures due 2024 and 7 5/8%
Senior Debentures due 2025, and the Indenture dated November 1, 1992 with
respect to the Company's 7% Senior Debentures due 2023 and 8 3/8% Senior
Debentures due 2023 (collectively, the "PUBLIC INDENTURES")), other evidence
of indebtedness, guarantee, license, agreement or other contract, instrument
or contractual obligation to which the Company or any of its Subsidiaries is
now a party or by which they or any of their Assets may be bound, or (iii) any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or any of its Subsidiaries, except for defaults or violations under
clause (i) (with respect to Company Subsidiaries other than the Retained
Subsidiaries), clause (ii) (other than defaults under or violations of any of
the Public Indentures or the Amended and Restated Credit Agreement dated as of
November 23, 1994 between the Company and the
10
banks party thereto (the "CREDIT AGREEMENT")), and clause (iii) above which,
(A) in the aggregate would not have a Material Adverse Effect and would not
have a material adverse effect on the ability of the Company or Spinco to
consummate the transactions contemplated by this Agreement or the Distribution
Agreement, or (B) become applicable as a result of the business or activities
in which Parent or Purchaser is or proposes to be engaged (other than the
business or activities of the Retained Business to be acquired by Purchaser,
considered independently of the ownership thereof by Parent and Purchaser) or
as a result of any other facts or circumstances specific to Parent or
Purchaser.
SECTION 4.10. LITIGATION; COMPLIANCE WITH LAW.
(a) Except as set forth in Section 4.10(a) of the Disclosure Schedule, as of
the date hereof (except as provided in the following sentence), there are no
actions, suits, claims, proceedings or investigations pending or, to the best
knowledge of the Company, threatened, involving the Company or any of its
Subsidiaries or any of their respective Assets (or any person or entity whose
liability therefrom may have been retained or assumed by the Company or any of
its Subsidiaries either contractually or by operation of Law), by or before
any court, governmental or regulatory authority or by any third party which,
either individually or in the aggregate, would have a Material Adverse Effect.
None of the Company, any of its Subsidiaries or any of their respective Assets
is subject to any outstanding order, writ, injunction or decree which, insofar
as can be reasonably foreseen, individually or in the aggregate, in the future
would have a Material Adverse Effect.
(b) Except as disclosed by the Company in the Company SEC Documents filed
since April 1, 1995 (the "RECENT SEC DOCUMENTS") or Section 4.10(b) of the
Disclosure Schedule, the Company and its Retained Subsidiaries are now being
and in the past have been operated in substantial compliance with all Laws
except for violations which individually or in the aggregate do not, and,
insofar as reasonably can be foreseen, will not, have a Material Adverse
Effect.
SECTION 4.11. EMPLOYEE BENEFIT PLANS; ERISA.
(a) Except for those matters set forth in Section 4.11(a) of the Disclosure
Schedule, (i) each "employee benefit plan" (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and
all other employee benefit, bonus, incentive, stock option (or other equity-
based), severance, change in control, welfare (including post-retirement
medical and life insurance) and fringe benefit plans (whether or not subject
to ERISA) maintained or sponsored by the Company or its Subsidiaries or any
trade or business, whether or not incorporated, that would be deemed a "single
employer" within the meaning of Section 4001 of ERISA (an "ERISA AFFILIATE"),
for the benefit of any employee or former employee of the Company or any of
its ERISA Affiliates (the "PLANS") is, and has been, operated in all material
respects in accordance with its terms and in substantial compliance (including
the making of governmental filings) with all applicable Laws, including,
without limitation, ERISA and the applicable provisions of the Internal
Revenue Code of 1986, as amended (the "CODE"), (ii) each of the Plans intended
to be "qualified" within the meaning of Section 401(a) of the Code has been
determined by the Internal Revenue Service (the "IRS") to be so qualified and
is not under audit by the IRS or the Department of Labor and the Company knows
of no fact or set of circumstances that is reasonably likely to adversely
affect such qualification prior to the Effective Time, (iii) no material
withdrawal liability with respect to any "multiemployer pension plan" (as
defined in Section 3(37) of ERISA) would be incurred by the Company and its
ERISA Affiliates if withdrawal from such plan were to occur on the Effective
Time, (iv) no "reportable event", as such term is defined in Section 4043(c)
of ERISA (for which the 30-day notice requirement to the PBGC has not been
waived), has occurred with respect to any Plan that is subject to Title IV of
ERISA, and (v) there are no material pending or, to the best knowledge of
Company, threatened claims (other than routine claims for benefits) by, on
behalf of or against any of the Plans or any trusts related thereto other than
routine benefit claim matters.
(b) (i) No Plan has incurred an "Accumulated Funding Deficiency" (as defined
in Section 302 of ERISA or Section 412 of the Code), whether or not waived,
(ii) neither the Company nor any ERISA Affiliate has incurred any Liability
under Title IV of ERISA except for required premium payments to the Pension
Benefit Guaranty Corporation ("PBGC"), which payments have been made when due,
and no events have occurred
11
which are reasonably likely to give rise to any Liability of the Company or an
ERISA Affiliate under Title IV of ERISA or which could reasonably be
anticipated to result in any claims being made against Buyer by the PBGC, and
(iii) the Company has not incurred any material withdrawal liability
(including any contingent or secondary withdrawal liability) within the
meaning of Section 4201 and 4204 of ERISA to any multiemployer plan (within
the meaning of Section 3(37) of ERISA) which has not been satisfied in full.
(c) Except as set forth in Section 4.11(c) of the Disclosure Schedule, with
respect to each Plan that is subject to Title IV of ERISA (i) the Company has
provided to Purchaser copies of the most recent actuarial valuation report
prepared for such Plan, (ii) the assets and liabilities in respect of the
accrued benefits as set forth in the most recent actuarial valuation report
prepared by the Plan's actuary fairly present the funded status of such Plan
in all material respects, and (iii) since the date of such valuation report
there has been no material adverse change in the funded status of any such
Plan.
(d) Neither the Company nor any ERISA Affiliate has failed to make any
contribution or payment to any Plan or multiemployer plan which, in either
case has resulted or could result in the imposition of a material lien or the
posting of a material bond or other material security under ERISA or the Code.
(e) Except as otherwise set forth on Section 4.11(e) of the Disclosure
Schedule or as expressly provided for in this Agreement, the consummation of
the transactions contemplated by this Agreement or the Distribution Agreement
will not (i) entitle any current or former employee or officer of the Company
or any ERISA Affiliate to severance pay, unemployment compensation or any
other payment, or (ii) accelerate the time of payment or vesting, or increase
the amount of compensation due any such employee or officer.
SECTION 4.12. ASSETS; INTELLECTUAL PROPERTY.
(a) Except as set forth in Section 4.12(a) of the Disclosure Schedule, upon
consummation of the Spin-Off, the Company and the Retained Subsidiaries will
own or have rights to use all Assets necessary to permit the Company and the
Retained Subsidiaries to conduct the Retained Business as it is currently
being conducted except where the failure to own or have the right to use such
Assets would not, individually or in the aggregate, have a Material Adverse
Effect.
(b) To the knowledge of the Company, based solely upon inquiry of the
Company's General Counsel and Chief Patent Counsel, the Company does not now
and has not in the past used Intellectual Property in the Retained Business
which conflicts with or infringes upon any proprietary rights of others except
where such conflict or infringement would not have, individually or in the
aggregate, a Material Adverse Effect. "INTELLECTUAL PROPERTY" means
trademarks, trade names, service marks, service names, mark registrations,
logos, assumed names, copyright registrations, patents and all applications
therefor and all other similar proprietary rights.
SECTION 4.13. RESERVED.
SECTION 4.14. RESERVED.
SECTION 4.15. CERTAIN CONTRACTS AND ARRANGEMENTS. During the twelve months
immediately prior to the date hereof, no significant contracts of the Retained
Business have been cancelled or otherwise terminated and during such time the
Company has not been threatened with any such cancellation or termination
except, in each case, for cancelled or terminated contracts which,
individually or in the aggregate, would not constitute a Material Adverse
Effect.
SECTION 4.16. TAXES. Except as otherwise disclosed in Section 4.16 of the
Disclosure Schedule and except for those matters which, either individually or
in the aggregate, would not result in a Material Adverse Effect:
(a) The Company and each of its Subsidiaries have filed (or have had filed
on their behalf) or will file or cause to be filed, all Tax Returns (as
defined in Section 4.16(j)(3) hereof) required by applicable Law to be filed
12
by any of them prior to the consummation of the Offer, and all such Tax
Returns and amendments thereto are or will be true, complete and correct.
(b) The Company and each of its Subsidiaries have paid (or have had paid on
their behalf) all Taxes (as defined in Section 4.16(j)(2) hereof) due with
respect to any period ending prior to or as of the expiration of the Offer),
or where payment of Taxes is not yet due, have established (or have had
established on their behalf and for their sole benefit and recourse), or will
establish or cause to be established before the consummation of the Offer, an
adequate accrual for the payment of all such Taxes which have accrued prior to
expiration of the Offer other than Taxes directly attributable to the
transactions contemplated by the Distribution Agreement.
(c) There are no Liens for any Taxes upon the Assets of the Company or any
of its Subsidiaries used primarily in the Retained Business, other than
statutory liens for Taxes not yet due and payable and Liens for real estate
Taxes being contested in good faith.
(d) No Audit (as defined in Section 4.16(j)(3)) is pending with respect to
any Taxes due from the Company or any Subsidiary. There are no outstanding
waivers extending the statutory period of limitation relating to the payment
of Taxes due from the Company or any Subsidiary for any taxable period ending
prior to the expiration of the Offer which are expected to be outstanding as
of the expiration of the Offer.
(e) Neither the Company nor any subsidiary is a party to, is bound by, or
has any obligation under, a tax sharing contract or other agreement or
arrangement for the allocation, apportionment, sharing, indemnification, or
payment of Taxes, other than the Tax Sharing Agreement.
(f) Neither the Company nor any of its Subsidiaries has made an election
under Section 341(f) of the Code.
(g) The statute of limitations for all Tax Returns of the Company and each
of its Subsidiaries for all years through 1987 have expired for all federal,
state, local and foreign tax purposes, or such Tax Returns have been subject
to a final Audit.
(h) Neither the Company nor any of its Subsidiaries has received any written
notice of deficiency, assessment or adjustment from the Internal Revenue
Service or any other domestic or foreign governmental taxing authority that
has not been fully paid or finally settled, and any such deficiency,
adjustment or assessment shown on such schedule is being contested in good
faith through appropriate proceedings and adequate reserves have been
established on the Company's financial statements therefor. To the best of
their knowledge, there are no other deficiencies, assessments or adjustments
threatened, pending or assessed with respect to the Company or any of its
Subsidiaries.
(i) Except as contemplated by this Agreement and the Ancillary Documents or
as disclosed in the Recent SEC Documents, neither the Company nor any of its
Subsidiaries is a party to any agreement, contract or other arrangement that
would result, separately or in the aggregate, in the requirement to pay any
"excess parachute payments" within the meaning of Section 280G of the Code or
any gross-up in connection with such an agreement, contract or arrangement.
(j) For purposes of this Section 4.16, capitalized terms have the following
meaning:
(1) "AUDIT" shall mean any audit, assessment or other examination of
Taxes or Tax Returns by the IRS or any other domestic or foreign
governmental authority responsible for the administration of any Taxes,
proceeding or appeal of such proceeding relating to Taxes.
(2) "TAXES" shall mean all Federal, state, local and foreign taxes, and
other assessments of a similar nature (whether imposed directly or through
withholding) including, but not limited to income, excise, property, sales,
use (or any similar taxes), gains, transfer, franchise, payroll, value-
added, withholding, Social Security, business license fees, customs, duties
and other taxes, assessments, charges, or other fees imposed by a
governmental authority, including any interest, additions to tax, or
penalties applicable thereto.
13
(3) "TAX RETURNS" shall mean all Federal, state, local and foreign tax
returns, declarations, statements, reports, schedules, forms and
information returns and any amended Tax Return relating to Taxes.
SECTION 4.17. RETAINED BUSINESS FCC LICENSES. The licenses and permits
issued to the Company or its Subsidiaries by the Federal Communications
Commission and used in connection with the Retained Business are not
individually or in the aggregate Important Licenses. "IMPORTANT LICENSES"
means licenses or permits which are important to the Retained Business and
which, if terminated, forfeited or otherwise not available to the Retained
Business after the consummation of any of the transactions contemplated by
this Agreement, would adversely affect the Retained Business in a significant
manner.
SECTION 4.18. LABOR MATTERS. Except as set forth in Section 4.18 of the
Disclosure Schedule, neither the Company nor any of the Retained Subsidiaries
has, since April 1, 1993, (i) been subject to, or threatened with, any
material strike, lockout or other labor dispute or engaged in any unfair labor
practice, the result of which could have a Material Adverse Effect, or (ii)
received notice of any pending petition for certification before the National
Labor Relations Board with respect to any material group of Retained Employees
(as defined in the Distribution Agreement) who are not currently organized.
SECTION 4.19. RIGHTS AGREEMENT. The Board of Directors of the Company has
approved a form of Rights Agreement between the Company and the Rights Agent
thereunder (the "RIGHTS AGREEMENT"), and a form of amendment thereto (the
"RIGHTS AMENDMENT"); the Rights Agreement, as amended by the Rights Amendment,
when each are executed and delivered by the Company and the Rights Agent,
shall (a) prevent this Agreement or the consummation of any of the
transactions contemplated hereby or by the 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 (as
defined in the Rights Agreement) or being deemed to be a Triggering Event (as
defined in the Rights Agreement) or a Section 13 Event (as defined in the
Rights Agreement) and (b) provide that neither Parent nor Purchaser shall be
deemed to be an Acquiring Person (as defined in the Rights Agreement) by
reason of the transactions expressly provided for in this Agreement.
SECTION 4.20. CERTAIN FEES. Except for Lazard Freres & Co. LLC and Lehman
Brothers Inc., neither the Company nor any Subsidiary has employed any
financial advisor or finder or incurred any Liability for any financial
advisory or finders' fees in connection with this Agreement or the Ancillary
Agreements or the transactions contemplated hereby or thereby.
SECTION 4.21. NO ADDITIONAL APPROVALS NECESSARY. The Board of Directors of
the Company has taken all actions necessary under the Company's Restated
Certificate of Incorporation and the NYBCL, including approving the
transactions contemplated in this Agreement, to ensure that Section 912 of the
NYBCL will not, prior to any termination of this Agreement, apply to this
Agreement, the Offer, the Merger, the Spin-Off or the transactions
contemplated hereby.
SECTION 4.22. MATERIALITY. The representations and warranties set forth in
this Article IV would in the aggregate be true and correct even without the
materiality exceptions or qualifications contained therein except for such
exceptions and qualifications which, in the aggregate for all such
representations and warranties, are not and could not reasonably be expected
to constitute a Material Adverse Effect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser represent and warrant to the Company as follows:
SECTION 5.1. ORGANIZATION. Each of Parent and Purchaser is a corporation
duly organized, validly existing and in good standing under the Laws of the
state of its incorporation and has all requisite corporate power and
14
authority to own, lease and operate its properties and to carry on its
business as now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power and authority would not,
in the aggregate, have a Material Adverse Effect (as defined below) on Parent
or Purchaser. When used in connection with Parent or Purchaser, the term
"MATERIAL ADVERSE EFFECT" means any change or effect that is materially
adverse to the business, properties, operations, prospects results of
operations or condition (financial or otherwise) of Parent and its
Subsidiaries, taken as a whole.
SECTION 5.2. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and
Purchaser has full corporate power and authority to execute and deliver this
Agreement and the Ancillary Agreements (to the extent it is a party thereto)
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the Ancillary Agreements (to the
extent it is a party thereto) and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by the
Boards of Directors of Purchaser and Parent and no other corporate or other
proceedings on the part of Parent, Purchaser or any of their affiliates are
necessary to authorize this Agreement or the Ancillary Agreements (to the
extent it is a party thereto) or to consummate the transactions so
contemplated. This Agreement has been, and each of the Ancillary Agreements
have been, or will prior to the Record Date be, duly and validly executed and
delivered by each of Parent and Purchaser (to the extent it is a party
thereto) and constitute or (to the extent such agreement is not being entered
into as of the date hereof) will constitute valid and binding agreements of
each of Parent and Purchaser, enforceable against each of Parent and Purchaser
in accordance with their respective terms, except to the extent that
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar Laws, now or hereafter in
effect, relating to creditors' rights generally and general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).
SECTION 5.3. CONSENTS AND APPROVALS; NO VIOLATIONS. Except for applicable
requirements of the Securities Act, the Exchange Act, Antitrust Laws, the
Communications Act, the filing and recordation of a certificate of merger, or
a certificate of ownership and merger, as required by the NYBCL, any filings
required by the Investment Canada Act, such filings and approvals as may be
required under the "takeover" or "blue sky" Laws of various states, and as
contemplated by this Agreement and the Ancillary Agreements, neither the
execution and delivery of this Agreement or the Ancillary Agreements by Parent
or Purchaser (to the extent it is a party thereto) nor the consummation by
Parent or Purchaser of the transactions contemplated hereby or thereby will
(i) conflict with or result in any breach of any provision of the charter or
by-laws of Parent or Purchaser, (ii) require on the part of Parent or
Purchaser any filing with, or the obtaining of any permit, authorization,
consent or approval of, any governmental or regulatory authority or any third
party, (iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation, acceleration or payment, or to
the creation of a lien or encumbrance) under any of the terms, conditions or
provisions of any note, mortgage, indenture, other evidence of indebtedness,
guarantee, license, agreement or other contract, instrument or contractual
obligation to which Parent, Purchaser or any of their respective Subsidiaries
is a party or by which any of them or any of their Assets may be bound, or
(iv) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Parent, Purchaser, any of their Subsidiaries or any of their
Assets, except for such requirements, defaults, rights or violations under
clauses (ii), (iii) and (iv) above which would not in the aggregate have a
material adverse effect on the ability of Parent or Purchaser to consummate
the Offer and the Merger.
SECTION 5.4. INFORMATION STATEMENT; SCHEDULE 14D-9. Neither the Offer
Documents nor any other document filed or to be filed by or on behalf of
Parent or Purchaser with the SEC or any other governmental entity in
connection with the transactions contemplated by this Agreement contained when
filed or will, at the respective times filed with the SEC or other
governmental entity, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements made therein, in light of the circumstances under which
they were made, not misleading; provided, that the foregoing shall not apply
to information supplied by or on behalf of the Company specifically for
inclusion or incorporation by reference in any such document. The Offer
Documents will comply as to form in all material respects with
15
the provisions of the Exchange Act. None of the information supplied by Parent
or Purchaser in writing for inclusion in the Information Statement or the
Schedule 14D-9 will, at the respective times that the Information Statement
and the Schedule 14D-9 or any amendments or supplements thereto are filed with
the SEC and are first published or sent or given to holders of Shares, and in
the case of the Information Statement, at the time that it or any amendment or
supplement thereto is mailed to the Company's shareholders, at the time of the
Shareholders' Meeting or at the Effective Time, contain any untrue statement
of a 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.
SECTION 5.5. SUFFICIENT FUNDS. Parent and its lenders are negotiating the
terms of a credit facility to provide Purchaser with financing sufficient to
permit Purchaser to consummate the Offer. Parent is highly confident that such
financing will be available and has no reason to believe that Purchaser will
not have sufficient funds available prior to the satisfaction of the
conditions to the Offer set forth in Exhibit B hereto to purchase all Shares
on a fully diluted basis at the Merger Price.
SECTION 5.6. BROKERS. Except for Bear, Stearns & Co. Inc. no broker, finder
or investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by and on behalf of Parent or Purchaser.
ARTICLE VI
COVENANTS
SECTION 6.1. CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated by
this Agreement or the Ancillary Agreements, during the period from the date of
this Agreement to the consummation of the Offer and, if Parent has made a
prompt request therefor pursuant to Section 1.4 hereof, until its Designated
Directors (as defined in Section 8.4 hereof) shall constitute in their
entirety a majority of the Company's Board of Directors, the Company and its
Subsidiaries (other than Spinco and the Spinco Companies (as defined in the
Distribution Agreement)) will each conduct its operations according to its
ordinary course of business, consistent with past practice, will use its
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 hereof (collectively, the "ORDINARY COURSE
OBLIGATIONS"); provided, that Spinco and the Spinco Companies shall 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.
Without limiting the generality of and in addition to the foregoing, and
except as otherwise contemplated by this Agreement or the Ancillary
Agreements, prior to the time specified in the preceding sentence, neither the
Company nor any of its Subsidiaries (other than Spinco and the Spinco
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 Restated Certificate of Incorporation as
contemplated by the Rights Agreement;
(b) authorize for issuance, issue, sell, deliver or agree or 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 (except by the Company in
connection with Stock Options, pursuant to the Rights Agreement as
contemplated by the Distribution Agreement or pursuant to the current terms of
any existing Plan) or amend any of the terms of any such securities or
agreements (other than such securities or agreements of any Subsidiary other
than any of the Retained Subsidiaries, or amendments of the Distribution
Agreement as permitted thereunder) outstanding on the date hereof;
16
(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 $.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 any obligations with respect to 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; (iv) 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 Section 6.1(e) of the Disclosure Schedule 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 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 (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 Section 6.1(e) of
the Disclosure Schedule, take any action to terminate or materially amend any
of its pension plans 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 Section 6.1(i) 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
17
Section 6.1(i) shall 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 this Agreement, amend, modify, or
terminate the Rights Agreement or redeem any Rights thereunder; provided, that
if the Board of Directors of the Company 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 contracts entered into after the date hereof, the Company reasonably
expects will adversely affect in a significant manner the Retained Business
after the date hereof; provided, that nothing contained in this Section 6.1(l)
shall 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.
SECTION 6.2. ACQUISITION PROPOSALS.
(a) The Company and its officers, directors, employees, representatives and
agents shall immediately cease any existing discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Proposal (as
defined in Section 6.2(b) hereof). The Company and its Subsidiaries will not,
and will use their best efforts to cause their respective officers, directors,
employees and investment bankers, attorneys, accountants or 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 in Section 8.3(b) hereof) relating to an Acquisition
Proposal (other than the transactions contemplated hereby and by the Ancillary
Agreements). Notwithstanding anything to the contrary contained in this
Section 6.2, 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 Company's Board of Directors 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 herein shall 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 shall 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 shall not enter
into any agreement with respect to any Acquisition Proposal except
concurrently with or after the termination of this Agreement (except with
respect to confidentiality and standstill agreements to the extent expressly
provided below). The Company shall 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 shall promptly inform Parent of the status and content of
any discussions regarding any Acquisition Proposal with a Third Party. In no
event shall 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
18
information. In the event that following the date hereof the Company enters
into a confidentiality agreement with any Third Party which does not include
terms and conditions which are substantially similar to the provisions of
Paragraph No. 7 (the "STANDSTILL PROVISIONS") of the letter agreement, dated
as of December 4, 1995, between the Company and Parent (the "CONFIDENTIALITY
AGREEMENT"), then Parent and its affiliates shall be released from their
obligations under such Standstill Provisions to the same extent as such third
party.
(b) For purposes of this Agreement, the term "ACQUISITION PROPOSAL" shall
mean any bona fide proposal, whether in writing or otherwise, made by a Third
Party to acquire beneficial ownership (as defined under Rule 13(d) of 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 this Agreement and the
Ancillary Agreements); provided, that the term "ACQUISITION PROPOSAL" shall
not include any transactions which relate solely to the businesses to be owned
by Spinco and the Spinco Companies following the Spin-Off and which could not
have an adverse effect on the consummation of the Offer, the Merger, the Spin-
Off or the transactions contemplated hereby.
SECTION 6.3. ACCESS TO INFORMATION.
(a) Between the date of this Agreement and the Effective Time, upon
reasonable notice and at reasonable times, and subject to any access,
disclosure, copying or other limitations imposed by applicable Law or any of
the Company's or its Subsidiaries' contracts, the Company will give Parent and
its authorized representatives reasonable access to all offices and other
facilities and to all books and records of it and its Subsidiaries, and will
permit Parent to make such inspections as it may reasonably require, and will
cause its officers and those of its Subsidiaries to furnish Parent with (i)
such financial and operating data and other information with respect to the
Company and its Subsidiaries as Parent may from time to time reasonably
request, or (ii) any other financial and operating data which materially
impacts the Company and its Subsidiaries. Parent and its authorized
representatives will conduct all such inspections in a manner which will
minimize any disruptions of the business and operations of the Company and its
Subsidiaries.
(b) Parent, Purchaser and the Company agree that the provisions of the
Confidentiality Agreement shall remain binding and in full force and effect
(subject, however, to the provisions of Section 6.2(a) hereof) and that the
terms of the Confidentiality Agreement are incorporated herein by reference.
SECTION 6.4. REASONABLE EFFORTS. Subject to the terms and conditions of this
Agreement and without limitation to the provisions of Section 6.6 hereof, each
of the parties hereto agrees 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 this 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 this 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 hereby and
thereby). In case at any time after the Effective Time any further action is
necessary to carry out the purposes of this Agreement, the proper officers and
directors of each party hereto shall use all reasonable efforts to take all
such necessary action.
19
SECTION 6.5. CONSENTS. 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 this
Agreement and the Ancillary Agreements. Each of the parties hereto will
furnish to the other party such necessary information and reasonable
assistance as such other persons may reasonably request in connection with the
foregoing.
SECTION 6.6. ANTITRUST FILINGS.
(a) In addition to and without limiting the agreements of Parent and
Purchaser contained in Section 6.5 hereof, 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 (as defined in Section 6.6(e) hereof), (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 or the Antitrust Division of the Department of
Justice pursuant to the HSR Act and from the Commission or other foreign
governmental or regulatory authority pursuant to 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 this Agreement or
the Ancillary Agreements commenced by any of the Federal Trade Commission, the
Antitrust Division of the Department of Justice, state attorneys general, the
Commission, or other foreign governmental or regulatory authorities.
(b) In furtherance and not in limitation of the covenants of Parent and
Purchaser contained in Section 6.5 and Section 6.6(a) hereof, 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 this 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 this Agreement or the Ancillary Agreements as
violative of any Antitrust Law, Parent, Purchaser and the Company shall 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
this Agreement or the Ancillary Agreements, including, without limitation, by
pursuing all reasonable avenues of administrative and judicial appeal. Parent
and Purchaser shall 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 Federal Trade Commission, the Antitrust Division of the
Department of Justice, 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 this Agreement
or the Ancillary Agreements; provided, that Parent shall 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" shall
mean 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.
20
(c) Each of the Company, Parent and Purchaser shall promptly inform the
other party of any material communication received by such party from the
Federal Trade Commission, the Antitrust Division of the Department of Justice,
the Commission or any other governmental or regulatory authority regarding any
of the transactions contemplated hereby. 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
hereby.
(d) "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.
SECTION 6.7. PUBLIC ANNOUNCEMENTS. Parent, Purchaser and the Company will
consult with each other before issuing any press release or otherwise making
any public statements with respect to the Offer, the Spin-Off or the Merger
and shall not issue any such press release or make any such public statement
prior to such consultation, except as may be required by Law or by obligations
pursuant to any listing agreement with any securities exchange.
SECTION 6.8. EMPLOYEE AGREEMENTS.
(a) Prior to the Spin-Off, the Company shall use its best efforts to, and
shall use its best efforts to cause its Subsidiaries to, assign to Spinco or
Subsidiaries of Spinco 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 hereto
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 by this Section 6.8
shall be deemed to be Spinco Liabilities (as defined in the Distribution
Agreement), with respect to which Spinco shall indemnify the Company and
Parent as provided therein.
(b) 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 hereto acknowledge and agree that all
Liabilities under or arising from such agreements with the Retained Employees
from and after the consummation of the Offer shall be deemed to be Company
Liabilities (as defined in the Distribution Agreement), with respect to which
the Company and Parent shall indemnify Spinco as provided therein.
(c) (i) 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 shall 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 shall be calculated and paid in accordance with such criteria. With
respect to bonus compensation which is wholly or partially discretionary, such
bonus compensation shall be determined and paid on a basis consistent with
past practices of the Company. Subject to Section 6.8(c)(iii), the amount of
discretionary bonus compensation to be paid to any Company Bonus Employee
shall 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 a Spinco
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.
21
(ii) Spinco agrees to pay in cash to each Spinco Bonus Employee (as
defined in this Section 6.8(c)(ii)) 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 Spinco Bonus Employee participated prior to the
consummation of the Offer or under any employment agreement. Such bonus
compensation shall 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 shall be calculated and
paid in accordance with such criteria. With respect to bonus compensation
which is wholly or partially discretionary, such bonus compensation shall
be determined and paid on a basis consistent with past practices of the
Company. Subject to Section 6.8(c)(iii), the amount of discretionary bonus
compensation to be paid to any Spinco Bonus Employee shall be determined by
Spinco. "SPINCO BONUS EMPLOYEE" means any Spinco 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
Spinco Bonus Employees, Spinco shall submit to Parent a statement showing
the individual and aggregate bonus amounts paid to Spinco Bonus Employees,
and Parent shall thereupon promptly pay to Spinco (or cause the Company to
pay to Spinco) 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 shall 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.
(iii) The aggregate amount of discretionary bonuses payable to all
Company Bonus Employees and Spinco Bonus Employees as a group for the
fiscal year ending March 31, 1996 shall not exceed a dollar amount to be
mutually agreed to by the Chief Executive Officer of Parent and the Chief
Executive Officer of Spinco; provided, that in the event the Chief
Executive Officer of Parent and the Chief Executive Officer of Spinco
cannot agree on such dollar amount, the maximum aggregate amount of
discretionary bonuses payable to Company Bonus Employees and Spinco 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.
(d) 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 shall, subject to the following
sentences of this Section 6.8(d), make a cash payment to Mr. Schwartz upon
consummation of the Offer, calculated in accordance with such agreement, less
$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 shall
not exceed $40 million; and provided further, that the Transaction Bonus
payable to any Transaction Bonus Employee shall 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.
(e) 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
22
an "Employment Protection Plan," (each substantially in the forms attached
hereto as Exhibits C and D, respectively; together, the "EMPLOYMENT PROTECTION
ARRANGEMENTS") occurring after a change in control of the Company; provided,
that (i) neither the execution of this Agreement and the Distribution
Agreement, nor any transaction contemplated thereby, shall 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 shall terminate as of the consummation of the Offer
and no rights thereunder shall continue after the consummation of the Offer.
SECTION 6.9. EMPLOYEE BENEFITS.
(a) Prior to the Effective Time, the Company shall adopt a severance plan
substantially in the form attached hereto 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.
(b) 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.
SECTION 6.10. ANCILLARY AGREEMENTS; SPIN-OFF.
(a) Simultaneously with the execution hereof, the Company and certain of its
Subsidiaries are entering into the Distribution Agreement. Immediately prior
to the Record Date, the Company, Spinco and certain other parties will enter
into the Tax Sharing Agreement. 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 herein or in the Ancillary Agreements or
in any other agreements contemplated herein or therein.
(b) 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 Spinco adopted in contemplation of the Spin-Off shall be as agreed to
by the Company and Spinco in their sole discretion; provided, that nothing in
the certificates of incorporation and by-laws shall adversely affect or
otherwise limit (i) Spinco'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.
(c) In no event shall Parent or Purchaser or any of their Subsidiaries be
entitled to receive any shares of Spinco Common Stock as a distribution with
respect to Shares purchased upon consummation of the Offer. If, for any
reason, any shares of Spinco 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 shall
convey, on behalf of the Company, such shares of Spinco to the stockholders of
the Company who would have otherwise received such shares of Spinco pursuant
to the Distribution Agreement; provided, that the foregoing provisions shall
not apply with respect to Shares held by Parent or any of its Subsidiaries
prior to the date hereof.
(d) If the Company reasonably determines that the Spin-Off may not be
effected without registering the shares of common stock of Spinco to be
distributed in the Spin-Off pursuant to the Securities Act, the Company,
23
Parent and Purchaser, as promptly as practicable, shall use their respective
best efforts to cause the shares of Spinco 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 Spinco 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.
(e) Parent shall, and shall 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 Spinco Common Stock distributed in the Spin-Off.
SECTION 6.11. RETAINED BUSINESS FINANCIAL STATEMENTS. The Company will
forthwith prepare, and retain Coopers & Lybrand L.L.P. to audit, balance
sheets for the Retained Business as at March 31, 1993, March 31, 1994, March
31, 1995 and the Effective Time, together with statements of operations and
cash flows for the periods then ended (collectively, the "RETAINED BUSINESS
FINANCIAL STATEMENTS"). The Company hereby agrees to use its best efforts to
take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable to assist and otherwise cause Coopers &
Lybrand L.L.P. to complete the audit of the Retained Business Financial
Statements as promptly as reasonably practicable, but in no event later than
45 days after the date of this Agreement; provided, that with respect to the
period ended the Effective Time, the information will be provided no later
than 15 days prior to the latest date on which Parent may file a Current
Report on Form 8-K with respect to the Merger and still be in compliance with
the regulations promulgated by the SEC under the Exchange Act. The Company
will pay the fees and expenses for auditing the Retained Business Financial
Statements. The Company also agrees to provide promptly to Parent such
quarterly unaudited financial information relating to the Retained Business
and covering the period ending December 31, 1995 and the quarterly and annual
periods following the date hereof within five days after the filing by the
Company with the SEC of its quarterly reports on Form 10-Q and Annual Report
on Form 10-K, as the case may be.
SECTION 6.12. REDEMPTION OF RIGHTS. At Parent's request, the Company will
take such action as Parent may request to effectuate the redemption, at any
time before the purchase by Purchaser pursuant to the Offer of at least a
majority of the outstanding Shares, of the Rights (as defined in the Rights
Agreement).
SECTION 6.13. PRE-CLOSING CONSULTATION. Following the date hereof and prior
to the Effective Time, the Company shall designate a senior officer of the
Company (the "COMPANY REPRESENTATIVE") to consult with an officer of Parent
designated by Parent (the "PARENT REPRESENTATIVE") with respect to major
business decisions to be made concerning the operation of the Retained
Business. Such consultation shall be made on as frequent a basis as may be
reasonably requested by Parent. The parties hereto acknowledge and agree that
the agreements set forth in this Section 6.13 shall be subject to any
restrictions or limitations required under applicable Law.
SECTION 6.14. INDEMNIFICATION.
(a) From and after the Effective Time, Parent shall cause the Surviving
Corporation to indemnify, defend and hold harmless the present and former
officers, directors, employees and agents of the Company and its Subsidiaries
(the "INDEMNIFIED PARTIES") against all losses, claims, damages, expenses or
liabilities arising out of or related to actions or omissions or alleged
actions or omissions occurring at or prior to the Effective Time to the same
extent and on the same terms and conditions (including with respect to
advancement of expenses) provided for in the Company's Restated Certificate of
Incorporation and By-Laws and agreements in effect as of December 31, 1995 (to
the extent consistent with applicable Law), which provisions will survive the
Merger and continue in full force and effect after the Effective Time. Without
limiting the foregoing, (i) Parent shall, and shall cause the Surviving
Corporation to, periodically advance expenses (including attorney's fees) as
incurred by an Indemnified Person with respect to the foregoing to the full
extent permitted under the Company's Restated Certificate of Incorporation and
By-Laws in effect on the date hereof (to the extent consistent with applicable
Law) and (ii) any determination required to be made with respect to whether an
Indemnified Party shall be
24
entitled to indemnification shall, if requested by such Indemnified Party, be
made by independent legal counsel selected by the Surviving Corporation and
reasonably satisfactory to such Indemnified Party. Parent hereby guarantees
the obligation of the Surviving Corporation provided for under this Section
6.14(a); provided, that the guarantee obligation of Parent provided for herein
shall, in the aggregate, be limited to an amount equal to the Net Worth of the
Company. "NET WORTH OF THE COMPANY" means an amount equal to (i) the aggregate
value of the consolidated assets of the Retained Business less (ii) the
aggregate value of the consolidated liabilities of the Retained Business, each
as reflected on the books and records of the Company as of the most recent
quarterly period ended prior to the date of the consummation of the Offer.
(b) For a period of six years after the Effective Time, Parent shall use
reasonable efforts to cause to be maintained in effect the current policies of
directors and officers liability insurance maintained by the Company (provided
that Parent may substitute therefor policies with reputable and financially
sound carriers of at least the same coverage and amounts containing terms and
conditions which are no less advantageous) with respect to claims arising from
or related to facts or events which occurred at or before the Effective Time;
provided, that Parent shall not be obligated to make annual premium payments
for such insurance to the extent such premiums exceed 150% of the annual
premiums paid as of the date hereof by the Company for such insurance (the
"MAXIMUM AMOUNT"). If the amount of the annual premiums necessary to maintain
or procure such insurance coverage exceeds the Maximum Amount, Parent and the
Surviving Corporation shall maintain the most advantageous policies of
directors, and officers' insurance obtainable for an annual premium equal to
the Maximum Amount.
(c) The provisions of this Section 6.14 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party, his or her heirs and
his or her representatives.
SECTION 6.15 BOARD OF DIRECTORS OF PARENT. Upon the consummation of the
Offer or as soon as practicable thereafter, Parent shall use its best efforts
and take all reasonable steps to cause (a) Bernard L. Schwartz to be appointed
a member and Vice Chairman and Frank C. Lanza to be appointed a member, of the
Board of Directors of Parent; and (b) the bylaws of Parent to be amended to
modify the eligibility requirements of directors to permit Mr. Schwartz to
continue to be eligible to serve as a director through 2001, without prejudice
or commitment with respect to any further continuation of eligibility
thereafter.
SECTION 6.16 STANDSTILL PROVISIONS. The restrictions on Parent and its
affiliates contained in the Standstill Provisions (as defined in Section
6.2(a) hereof) (the "RESTRICTIONS") are hereby waived and Parent and Purchaser
are hereby released therefrom (a) as of and after the date hereof to the
extent necessary to permit Parent and Purchaser to comply with their
respective obligations and to enable Parent and Purchaser to exercise any of
their respective rights, under or as contemplated by this Agreement; and (b)
as of and after the termination of this Agreement (other than by the Company
pursuant to Section 8.1(f) hereof) if at such time or thereafter there is
proposed a Third Party Acquisition (as defined in Section 8.3(b) hereof);
provided, that the Restrictions shall not be waived under this Section 6.16(b)
with respect to any proposal by Parent, Purchaser and their affiliates to
acquire, directly or indirectly, both the Retained Business and all or
substantially all of the Spinco Business, whether by merger, consolidation or
otherwise, unless the proposed Third Party Acquisition also contemplates a
transaction or series of transactions in which both the Retained Business and
all or substantially all of the Spinco Business would be acquired, directly or
indirectly, by the Third Party or its affiliates.
SECTION 6.17 EFFECTIVENESS OF RIGHTS AGREEMENT. On or before January 10,
1996 the Company shall execute and deliver, and cause a person qualified to be
the Rights Agent under the Rights Agreement to execute and deliver, each of
the Rights Agreement and the Rights Amendment so that each shall be valid and
binding agreements of the Company.
25
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger is subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) This Agreement shall have been adopted by the affirmative vote of the
stockholders of the Company by the requisite vote in accordance with
applicable Law, if required by applicable Law;
(b) No statute, rule, regulation, order, decree, or injunction shall 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
shall have terminated or expired and all approvals required under the
Antitrust Laws shall have been received;
(d) The Spin-Off shall have been consummated in all material respects; and
(e) The Offer shall not have been terminated in accordance with its terms
prior to the purchase of any Shares.
SECTION 7.2. CONDITIONS TO THE OBLIGATION OF THE COMPANY TO EFFECT THE
MERGER. 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 Purchaser contained in
this Agreement shall 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 Purchaser shall have performed in all material
respects its obligations under this Agreement required to be performed by it
at or prior to the Effective Time pursuant to the terms hereof.
Parent and Purchaser will furnish the Company with such certificates and
other documents to evidence the fulfillment of the conditions set forth in
this Section 7.2 as the Company may reasonably request.
SECTION 7.3. CONDITIONS TO OBLIGATIONS OF PARENT AND PURCHASER TO EFFECT THE
MERGER. The obligations of Parent and 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 this
Agreement shall be true and correct in all material respects at and as of the
Effective Time as if made at and as such time;
(b) The Company shall have delivered to Purchaser and (i) Bank of America,
Illinois (formerly known as Continental Bank, National Association), one or
more opinions of counsel acceptable to Bank of America, Illinois, stating that
the Merger complies with (A) Article IV of the Indenture dated as of January
15, 1992 between the Company and Continental Bank, National Association, as
trustee; and (B) Article Nine of the Indenture dated as of September 1, 1993
between the Company and Continental Bank, National Association, as trustee, as
supplemented by a First Supplemental Indenture dated as of June 1, 1994
between the Company and Continental Bank, National Association, as trustee;
and (ii) NationsBank of Georgia, National Association, an opinion of counsel
acceptable to NationsBank of Georgia, National Association, stating that the
Merger complies with Article Nine of the Indenture dated as of November 1,
1992 between the Company and NationsBank of Georgia, National Association, as
trustee (collectively, the "PUBLIC INDENTURE MERGER OPINIONS");
(c) The Company shall have performed in all material respects each of its
obligations under this Agreement required to be performed by it at or prior to
the Effective Time pursuant to the terms hereof.
26
The Company will furnish Parent and Purchaser with such certificates and
other documents to evidence the fulfillment of the conditions set forth in
this Section 7.3 as Parent or Purchaser may reasonably request.
SECTION 7.4. EXCEPTION. The conditions set forth in Sections 7.2 and 7.3
hereof shall cease to be conditions to the obligations of any of the parties
hereto if Purchaser shall have accepted for payment and paid for Shares
validly tendered pursuant to the Offer or if Purchaser fails to accept for
payment any Shares pursuant to the Offer in violation of the terms thereof.
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
SECTION 8.1. TERMINATION. This Agreement may be terminated and the Offer and
the Merger may be abandoned at any time (notwithstanding approval of the
Merger by the stockholders of the Company) prior to the Effective Time:
(a) by mutual written consent of Parent, 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
shall have issued a final order, decree or ruling or taken any other final
action restraining, enjoining or otherwise 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
Exhibit B hereto, Purchaser shall 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 shall not have been a material breach of any
representation, warranty, covenant or agreement on the part of the Company and
Purchaser shall have (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 shall
have made a bona fide offer that the Board of Directors of the Company 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 in Section 8.3(b) hereof); provided,
that such termination under this clause (ii) shall not be effective until
payment of the fee required by Section 8.3(a) hereof;
(e) by Parent or Purchaser prior to the purchase of Shares pursuant to the
Offer, if (i) there shall have been a breach of any representation or warranty
on the part of the Company or Spinco under either this Agreement or the
Distribution Agreement having a Material Adverse Effect or materially
adversely affecting (or materially delaying) the consummation of the Offer,
(ii) there shall have been a breach of any covenant or agreement on the part
of the Company or Spinco under either this Agreement or the Distribution
Agreement resulting in a Material Adverse Effect or materially adversely
affecting (or materially delaying) the consummation of the Offer, which shall
not have been cured prior to the earlier of (A) 10 days following notice of
such breach and (B) two Business Days prior to the date on which the Offer
expires, (iii) the Company shall engage in Active Negotiations (as defined in
Section 8.3(b) hereof) with a Third Party with respect to a Third Party
Acquisition (as defined in Section 8.3(b) hereof), (iv) the Board of Directors
of the Company shall have withdrawn or modified (including by amendment of
Schedule 14D-9) in a manner adverse to Purchaser its approval or
recommendation of the Offer, the Spin-Off, the Merger, this Agreement or the
Distribution Agreement, shall have recommended to the Company's stockholders
another offer, shall have authorized the redemption of any Rights (whether or
not in accordance with Section 6.1(k) hereof) after the Company's receipt of
an Acquisition Proposal or shall have adopted any resolution to effect any of
the foregoing or (v) there shall not have been validly tendered and not
withdrawn prior to the expiration of the Offer at least two-thirds of the
Shares, determined on a fully diluted
27
basis, and on or prior to such date an entity or group (other than Parent or
Purchaser) shall have made and not withdrawn a proposal with respect to a
Third Party Acquisition; or
(f) by the Company if (i) there shall have been a breach of any
representation or warranty in this 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 shall have been
a material breach of any covenant or agreement in this 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
shall not have been cured prior to the earliest of (A) 10 days following
notice of such breach and (B) two Business Days prior to the date on which the
Offer expires.
SECTION 8.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 8.1, this Agreement shall
forthwith become void and have no effect, without any Liability on the part of
any party hereto or its affiliates, directors, officers or shareholders, other
than the provisions of this Section 8.2 and Sections 6.3(b), 6.14, 8.3, 9.3
and 9.11 hereof. Nothing contained in this Section 8.2 shall relieve any party
from Liability for any breach of this Agreement.
SECTION 8.3 FEES AND EXPENSES.
(a) If:
(i) Parent or Purchaser terminates this Agreement pursuant to Section
8.1(e)(ii), (iii) or (v) hereof 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
hereof and prior to such termination; or
(ii) Parent or Purchaser terminates this Agreement pursuant to Section
8.1(e)(iii) or (v) hereof and, within 12 months thereafter, a Third Party
Acquisition shall occur involving a Higher Offer; or
(iii) Parent or Purchaser terminates this Agreement pursuant to Section
8.1(e)(iv) hereof; or
(iv) the Company terminates this Agreement pursuant to Section 8.1(d)(ii)
hereof;
then, in each case, the Company shall 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 Section
8.1(d)(ii), a fee, in cash, of $175 million; provided, that the Company in no
event shall be obligated to pay more than one such $175 million fee with
respect to all such agreements and occurrences and such termination.
(b) "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 Section
6.2(a) hereof 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 defined in Section
13(d)(3) of the Exchange Act) or entity other than Parent, 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
28
pursuant to the transactions contemplated by this Agreement and the Ancillary
Agreements including, without limitation, the shares of Spinco Common Stock
distributed in the Spin-Off. Prior to the termination of this Agreement by the
Company pursuant to Section 8.1(d)(ii) hereof, the Board of Directors shall
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 this Section 8.3(b) shall
prevent Parent and Purchaser from challenging, by injunction or otherwise, the
termination or attempted termination of this Agreement pursuant to Section
8.3(d)(ii) hereof.
(c) If this Agreement is terminated pursuant to Sections 8.1(e)(i) or
8.1(e)(ii) (the "DESIGNATED TERMINATION PROVISIONS") or Parent is entitled to
receive the $175 million fee under Section 8.3(a) hereof, then the Company
shall reimburse Parent, Purchaser and their affiliates (not later than one
Business Day after submission of statements therefore) 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 this
Agreement and the Distribution Agreement (including, without limitation, fees
payable to financing sources, investment bankers (including to the IB),
counsel to any of the foregoing and Accountants), whether incurred prior to or
after the date hereof. The Company shall 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.
(d) Except as specifically provided in this Section 8.3 and except as
otherwise specifically provided in the Distribution Agreement, each party
shall bear its own respective expenses incurred in connection with this
Agreement, the Offer and the Merger, including, without limitation, the
preparation, execution and performance of this Agreement and the Ancillary
Agreements and the transactions contemplated hereby and thereby, and all fees
and expenses of investment bankers, finders, brokers, agents, representatives,
counsel and accountants.
(e) Notwithstanding anything to the contrary contained in this Agreement,
upon payment by the Company of the amounts referred to in this Section 8.3(a),
the Company shall be released from all Liability hereunder, including any
Liability for any claims by Parent, Purchaser or any of their affiliates based
upon or arising out of any breach of this Agreement or any Ancillary
Agreement. The parties agree that reimbursement of Parent's expenses pursuant
to Section 8.3(c) hereof in connection with a termination of this Agreement
pursuant to any of the Designated Termination Provisions does not constitute
the payment of liquidated damages and, except to the extent of the payment
thereunder, shall not limit the Liability of the Company for any claims by
Parent, Purchaser or any of their affiliates based upon or arising out of any
breach of this Agreement or any Ancillary Agreement.
SECTION 8.4. AMENDMENT. This Agreement may be amended by action taken by the
Company, Parent and Purchaser at any time before or after adoption of the
Merger by the stockholders of the Company, if any; provided that (a) in the
event that any persons designated by Parent pursuant to Section 1.4 hereof
(such directors are hereinafter referred to as the "DESIGNATED DIRECTORS")
constitute in their entirety a majority of the Company's Board of Directors,
no amendment shall be made which decreases the cash price per Share or which
adversely affects the rights of the Company's stockholders hereunder without
the approval of a majority of the Continuing Directors (as hereafter defined)
if at the time there shall be any Continuing Directors and (b) after the date
of adoption of the Merger by the stockholders of the Company, no amendment
shall be made which decreases the cash price per Share or which adversely
affects the rights of the Company's stockholders hereunder without the
approval of such stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of the parties. For purposes hereof,
the term "CONTINUING DIRECTOR" shall mean (a) any member of the Board of
Directors of the Company as of the date hereof, (b) any member of the Board of
29
Directors of the Company who is unaffiliated with, and not a Designated
Director or other nominee of, Parent or Purchaser or their respective
Subsidiaries, and (c) any successor of a Continuing Director who is (i)
unaffiliated with, and not a Designated Director or other nominee of, Parent
or Purchaser or their respective Subsidiaries and (ii) recommended to succeed
a Continuing Director by a majority of the Continuing Directors then on the
Board of Directors.
SECTION 8.5. EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations
or other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties of the other parties contained herein or in any
document, certificate or writing delivered pursuant hereto or (c) waive
compliance with any of the agreements or conditions of the other parties
hereto contained herein; provided that (x) in the event that any Designated
Directors constitute in their entirety a majority of the Company's Board of
Directors, no extensions or waivers shall be made which adversely affect the
rights of the Company's stockholders hereunder without the approval of a
majority of the Continuing Directors if at the time there shall be any
Continuing Directors and (y) after the date of adoption of the Merger by the
stockholders of the Company, no extensions or waivers shall be made which
adversely affect the rights of the Company's stockholders hereunder without
the approval of such stockholders. Any agreement on the part of any party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. SURVIVAL. Except as otherwise expressly set forth in the
Distribution Agreement, the representations, warranties, covenants and
agreements made herein shall not survive beyond the Effective Time; provided,
that the covenants and agreements contained in Sections 2.7, 2.10, 3.1, 3.2,
6.3(b), 6.4, 6.5, 6.6, 6.8, 6.9, 6.10, 6.14, 8.2, 8.3, 8.4, 8.5, 9.3, 9.5 and
9.11 hereof shall survive beyond the Effective Time without limitation.
SECTION 9.2. ENTIRE AGREEMENT. Except for the provisions of the
Confidentiality Agreement which shall continue in full force and effect, this
Agreement (including the schedules and exhibits and the agreements and other
documents referred to herein, including, without limitation, the Ancillary
Agreements) constitutes the entire agreement among the parties with respect to
the subject matter hereof and supersedes all other prior negotiations,
commitments, agreements and understandings, both written and oral, between the
parties or any of them with respect to the subject matter hereof.
SECTION 9.3. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the Laws of the State of New York (regardless of
the Laws that might otherwise govern under applicable principles of conflicts
Law) as to all matters, including, without limitation, matters of validity,
construction, effect, performance and remedies.
SECTION 9.4. NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given upon (a) transmitter's confirmation of
a receipt of a facsimile transmission, (b) confirmed delivery by a standard
overnight carrier or when delivered by hand or (c) the expiration of five
Business Days after the day when mailed by certified or registered mail,
postage prepaid, addressed at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) If to the Parent or Purchaser, to:
Lockheed Martin Corporation
6801 Rockledge Drive
Bethesda, Maryland 20817
Telephone: (301) 897-6125
Telecopy: (301) 897-6333
Attention: General Counsel
30
with a copy to:
O'Melveny & Myers
153 E. 53rd Street
New York, New York 10022
Telephone: (212) 326-2000
Telecopy: (212) 326-2061
Attention: C. Douglas Kranwinkle, Esq.
Jeffrey J. Rosen, Esq.
and to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Telephone: (212) 735-3000
Telecopy: (212) 735-2001
Attention: Peter Allan Atkins, Esq.
Lou R. Kling, Esq.
(b) If to the Company, to:
Loral Corporation
600 Third Avenue
New York, New York 10016
Telephone: (212) 697-1105
Telecopy: (212) 661-8988
Attention: General Counsel
with a copy to:
Willkie Farr & Gallagher
153 E. 53rd Street
New York, New York 10022
Telephone: (212) 821-8000
Telecopy: (212) 821-8111
Attention: Robert B. Hodes, Esq.
Bruce R. Kraus, Esq.
SECTION 9.5. SUCCESSORS AND ASSIGNS; NO THIRD PARTY BENEFICIARIES. This
Agreement and all of the provisions hereof shall be binding upon and inure to
the benefit of the parties and their respective successors and permitted
assigns, but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by either party (whether by operation
of law or otherwise) without the prior written consent of the other party;
provided, that Parent may assign its rights and obligations hereunder or those
of Purchaser to Parent or any subsidiary of Parent, and Spinco may assign its
rights and obligations hereunder to any successor to Spinco, but in each case
no such assignment shall relieve Parent, Purchaser or Spinco, as the case may
be, of its obligations hereunder. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and except for Sections 2.7,
2.10, 6.8 and 6.10 hereof nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement.
SECTION 9.6. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same instrument.
SECTION 9.7. INTERPRETATION. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement. Except as
31
otherwise expressly provided in this Agreement, as used in this Agreement, the
term "person" shall have the meaning assigned to that term in the Distribution
Agreement.
SECTION 9.8. SCHEDULES. The Disclosure Schedule shall be construed with and
as an integral part of this Agreement to the same extent as if the same had
been set forth verbatim herein.
SECTION 9.9. LEGAL ENFORCEABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without affecting the validity or enforceability of the
remaining provisions hereof. Any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction. If any provision of this Agreement is so broad as to
be unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
SECTION 9.10. SPECIFIC PERFORMANCE. Each of the parties hereto acknowledges
and agrees that in the event of any breach of this Agreement, each non-
breaching party would be irreparably and immediately harmed and could not be
made whole by monetary damages. It is accordingly agreed that the parties
hereto (a) will waive, in any action for specific performance, the defense of
adequacy of a remedy at law and (b) shall be entitled, in addition to any
other remedy to which they may be entitled at law or in equity, to compel
specific performance of this Agreement in any action instituted in any state
or federal court sitting in New York. The parties hereto consent to personal
jurisdiction in any such action brought in any state or federal court sitting
in New York and to service of process upon it in the manner set forth in
Section 9.4 hereof.
SECTION 9.11. BROKERAGE FEES AND COMMISSIONS. Except as set forth in
Sections 4.18 and 5.6, the Company hereby represents and warrants to Parent
with respect to the Company, and Parent hereby represents and warrants to the
Company with respect to Parent and Purchaser, that no person or entity is
entitled to receive from the Company or Parent and Purchaser, respectively,
any investment banking, brokerage or finder's fee or fees for financial
consulting or advisory services in connection with this Agreement and Plan of
Merger or any of the transactions contemplated hereby.
[The remainder of this page has been left blank intentionally.]
32
IN WITNESS WHEREOF, each of the parties has caused this Agreement and Plan of
Merger to be executed on its behalf by its officers thereunto duly authorized,
all as of the day and year first above written.
Loral Corporation
By: /s/ Michael B. Targoff
----------------------------------
Name: Michael B. Targoff
Title: Senior Vice President
Lockheed Martin Corporation
By: /s/ Marcus C. Bennett
----------------------------------
Name: Marcus C. Bennett
Title: Senior Vice President
LAC Acquisition Corporation
By: /s/ Frank H. Menaker, Jr.
----------------------------------
Name: Frank H. Menaker, Jr.
Title: Vice President
33
EXHIBITS
Exhibit A............................... Tax Sharing Agreement
Exhibit B............................... Conditions to Offer
Exhibit C............................... Form of Employment Protection Agreement
Exhibit D............................... Employment Protection Plan
Exhibit E............................... Supplemental Severance Program
EXHIBIT A
Form of Tax Sharing Agreement, dated as of , 1996 by and among Loral
Corporation, Loral Telecommunications Acquisition, Inc., Lockheed Martin
Corporation and LAC Acquisition Corporation--Filed as Exhibit (C)(5) to the
Tender Offer Statement on Schedule 14D-1 dated January 12, 1996.
EXHIBIT B
CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment or pay for, and may delay the acceptance for
payment of (whether or not the Shares have theretofore been accepted for
payment), or the payment for, any Shares tendered, and may terminate or extend
the Offer and not accept for payment any Shares, if:
(i) immediately prior to the expiration of the Offer (as extended in
accordance with the terms of the Offer), (A) any applicable waiting period
under the Antitrust Laws shall not have expired or been terminated or any
approvals required under the EC Merger Regulations shall not have been
received, (B) the Record Date for the distribution of shares of Spinco
common stock to stockholders of the Company pursuant to the Distribution
Agreement shall not have been set by the Company's Board of Directors, (C)
the Public Indenture Merger Opinions shall not have been delivered to
Purchaser and the applicable Public Indenture trustees, or (D) the number
of Shares validly tendered and not withdrawn when added to the Shares then
beneficially owned by Parent does not constitute two-thirds of the Shares
then outstanding and represent two-thirds of the voting power of the Shares
then outstanding on a fully diluted basis on the date of purchase; OR
(ii) on or after the date of this Agreement and prior to the acceptance
for payment of Shares, any of the following conditions exist:
(a) any of the representations or warranties of the Company contained
in the Merger Agreement shall not have been true and correct at the
date when made or (except for those representations and warranties made
as of a particular date which need only be true and correct as of such
date) shall cease to be true and correct at any time prior to
consummation of the Offer, except where the failure to be so true and
correct would not, individually or in the aggregate, have a Material
Adverse Effect; provided, that if any such failure to be so true and
correct is curable by the Company through the exercise of its
reasonable efforts, then Purchaser may not terminate the Offer under
this subsection (a) until 10 Business Days after written notice thereof
has been given to the Company by Parent or Purchaser and unless at such
time the matter has not been cured; or
(b) any of the representations or warranties of Spinco contained in
the Distribution Agreement shall not have been true and correct at the
date when made or (except for those representations and warranties made
as of a particular date which need only be true and correct as of such
date) shall cease to be true and correct at any time prior to
consummation of the Offer, except where the failure to be so true and
correct would not individually or in the aggregate, have a Material
Adverse Effect; provided that, if any such failure to be so true and
correct is curable by Spinco through the exercise of its reasonable
efforts, then Purchaser may not terminate the Offer under this
subsection (b) until 10 Business Days after written notice thereof has
been given to the Company by Parent or Purchaser and unless at such
time the matter has not been cured; or
(c) the Company shall have breached any of its covenants or
agreements contained in the Merger Agreement, except for any such
breaches that, individually or in the aggregate, would not have a
Material Adverse Effect; provided that, if any such breach is curable
by the Company through the exercise of its reasonable efforts, then
Purchaser may not terminate the Offer under this subsection (c) until
10 Business Days after written notice thereof has been given to the
Company by Parent or Purchaser and unless at such time the breach has
not been cured; or
(d) Spinco or the Company shall have breached any of its covenants or
agreements contained in the Distribution Agreement, except for any such
breaches that, individually or in the aggregate, would not have a
Material Adverse Effect; provided, that if any such breach is curable
by Spinco or the Company through the exercise of its reasonable
efforts, then Purchaser may not terminate the Offer under this
subsection (d) until 10 Business Days after written notice thereof has
been given to the Company or Spinco, as the case may be, by Parent or
Purchaser and unless at such time the breach has not been cured; or
B-1
(e) there shall have been any statute, rule, regulation, judgment,
order or injunction promulgated, enacted, entered, enforced or deemed
applicable to the Offer, or any other legal action shall have been
taken, by any state, federal or foreign government or governmental
authority or by any U.S. court, other than the routine application to
the Offer, the Merger or the Spin-Off of waiting periods under the HSR
Act, that presents a substantial likelihood of (1) making the
acceptance for payment of, or the payment for, some or all of the
Shares illegal or otherwise prohibiting, restricting or significantly
delaying consummation of the Offer, (2) imposing material limitations
on the ability of Purchaser or Parent to acquire or hold or to exercise
any rights of ownership of the Shares, or effectively to manage or
control the Retained Business, the Company, the Retained Subsidiaries,
Purchaser or any of their respective affiliates, which individually or
in the aggregate could constitute a Significant Adverse Effect; or
(f) any fact or circumstance exists or shall have occurred that has a
Material Adverse Effect; or
(g) there shall have occurred (1) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock
Exchange, Inc., (2) the declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States
(whether or not mandatory), (3) the commencement of a war, armed
hostilities or other international or national calamity directly or
indirectly involving the United States and having a Material Adverse
Effect or materially adversely affecting (or materially delaying) the
consummation of the Offer, (4) any limitation or proposed limitation
(whether or not mandatory) by any U.S. governmental authority or
agency, or any other event, that materially adversely affects generally
the extension of credit by banks or other financial institutions, (5)
from the date of the Merger Agreement through the date of termination
or expiration of the Offer, a decline of at least 25% in the Standard &
Poor's 500 Index or (6) in the case of any of the situations described
in clauses (1) through (5) inclusive, existing at the date of the
commencement of the Offer, a material acceleration, escalation or
worsening thereof; or
(h) any person (which includes a "person" as such term is defined in
Section 13(d)(3) of the Exchange Act) other than Purchaser, any of its
affiliates, or any group of which any of them is a member shall have
acquired beneficial ownership of more than 20% of the outstanding
Shares or shall have entered into a definitive agreement or an
agreement in principle with the Company with respect to a tender offer
or exchange offer for any Shares or merger, consolidation or other
business combination with or involving the Company or any of its
Subsidiaries; or
(i) prior to the purchase of Shares pursuant to the Offer, the Board
of Directors of the Company shall have withdrawn or modified (including
by amendment of the Schedule 14D-9) in a manner adverse to Purchaser
its approval or recommendation of the Offer, this Agreement, the Merger
or the Spin-Off, shall have recommended to the Company's stockholders
another offer, shall have authorized the redemption of the Rights
(whether or not in accordance with Section 6.1(k) hereof) after the
Company has received an Acquisition Proposal or shall have adopted any
resolution to effect any of the foregoing which, in the sole judgment
of Purchaser in any such case, and regardless of the circumstances
(including any action or omission by Purchaser) giving rise to any such
condition, makes it inadvisable to proceed with such acceptance for
payment; or
(j) the Merger Agreement shall have been terminated in accordance
with its terms; or
(k) the Record Date shall not have occurred; or
(l) the conditions to the Spin-Off shall not have been satisfied or
waived; OR
(iii) Parent and Purchaser shall not have secured financing on terms
reasonably acceptable to Parent to finance the purchase of all of the
Shares at the Merger Price and to consummate the transactions contemplated
by this Agreement and the Ancillary Agreements; provided, that the
condition set forth in this clause (iii) shall be a condition to
Purchaser's obligations with respect to the Offer only if (A) the Offer has
not been consummated on or before April 30, 1996, (B) Parent has not taken
any significant action outside of the ordinary course of business, which
prevents Parent from obtaining sufficient financing to purchase all of the
Shares at the Merger Price and to consummate the transactions contemplated
by this Agreement and the Ancillary Agreements and (C) Parent and Purchaser
are in substantial compliance with their respective material obligations
under Sections 6.4, 6.5 and 6.6 of the Merger Agreement.
B-2
The foregoing conditions are for the sole benefit of Purchaser and may be
asserted by Purchaser regardless of the circumstances giving rise to such
conditions, or may be waived by Purchaser in whole or in part at any time and
from time to time in its sole discretion; provided, that the condition set
forth in clause (ii)(j) above may be waived or modified only by the mutual
consent of Purchaser and the Company.
B-3
EXHIBIT C
Form of Employment Protection Agreement of the Company--Filed as Exhibit (C)
(6) to the Tender Offer Statement on Schedule 14D-1 dated January 12, 1996.
EXHIBIT D
Employment Protection Plan of the Company--Filed as Exhibit (C)(7) to the
Tender Offer Statement on Schedule 14D-1 dated January 12, 1996.
EXHIBIT E
Supplemental Severance Program of the Company--Filed as Exhibit (C)(8) to the
Tender Offer Statement on Schedule 14D-1 dated on January 12, 1996.
Exhibit 99(c)(3)
Conformed Copy
RESTRUCTURING, FINANCING
AND DISTRIBUTION AGREEMENT
dated as of January 7, 1996
by and among
LORAL CORPORATION,
LORAL AEROSPACE HOLDINGS, INC.,
LORAL AEROSPACE CORP.,
LORAL GENERAL PARTNER, INC.,
LORAL GLOBALSTAR, L.P.,
LORAL GLOBALSTAR LIMITED,
LORAL TELECOMMUNICATIONS ACQUISITION, INC.
(TO BE RENAMED "LORAL SPACE & COMMUNICATIONS CORPORATION")
and
LOCKHEED MARTIN CORPORATION
TABLE OF CONTENTS
Page
RECITALS................................................................... 1
ARTICLE I DEFINITIONS...................................................... 2
Section 1.1. General..................................................... 2
Section 1.2. References to Time.......................................... 19
ARTICLE II THE RESTRUCTURING AND RELATED TRANSACTIONS....................... 19
Section 2.1. Transfers of Assets......................................... 19
Section 2.2. Methods of Transfer and Assumption.......................... 23
Section 2.3. Company Approval of Certain Spinco
Actions; Formation of Spinco............................... 24
Section 2.4. Issuance of Spinco Stock to the Company..................... 25
Section 2.5. Treatment of Globalstar Bank Guarantee...................... 25
Section 2.6. Transfers of Spinco Capital Stock
Subject to Rights of First Offer, Etc...................... 29
Section 2.7. Exchange of Lehman Preferred Stock.......................... 32
ARTICLE III THE DISTRIBUTION................................................. 32
Section 3.1. Cooperation Prior to the Distribution....................... 32
Section 3.2. The Distribution............................................ 35
Section 3.3. Termination of Certain Claims............................... 38
ARTICLE IV INTERCOMPANY BUSINESS RELATIONSHIPS.............................. 39
Section 4.1. Settlement of Intercompany Accounts......................... 39
Section 4.2. Settlements for Cash Collections and
Disbursements After the Distribution Date.................. 40
Section 4.3. Transition Services......................................... 41
Section 4.4. Termination of Intercompany Arrangements.................... 42
ARTICLE V SURVIVAL AND INDEMNIFICATION..................................... 43
Section 5.1. Survival of Agreements...................................... 43
Section 5.2. Spinco's Agreement to Indemnify............................. 43
Section 5.3. The Company's Agreement to Indemnify........................ 45
Section 5.4. Procedure for Indemnification............................... 47
Section 5.5. Miscellaneous Indemnification Provisions.................... 50
Section 5.6. Pending Litigation.......................................... 53
Section 5.7. Construction of Agreements.................................. 54
ARTICLE VI CERTAIN ADDITIONAL MATTERS....................................... 54
Section 6.1. Representations or Warranties; Disclaimers.................. 54
Page
----
Section 6.2. Further Assurances; Subsequent Transfers.................... 56
Section 6.3. The Spinco Board............................................ 59
Section 6.4. Use of Names................................................ 59
Section 6.5. Litigation Relating to Transaction.......................... 60
Section 6.6. Spinco Equity Arrangements.................................. 61
Section 6.7. Post-Closing Business Relationships......................... 61
Section 6.8. No Restrictions on Post-Closing
Competitive Activities..................................... 64
Section 6.9. CCD Lawsuit................................................. 65
ARTICLE VII ACCESS TO INFORMATION AND SERVICES............................... 66
Section 7.1. Provision of Corporate Records.............................. 66
Section 7.2. Access to Information....................................... 66
Section 7.3. Production of Witnesses..................................... 67
Section 7.4. Retention of Records........................................ 67
Section 7.5. Confidentiality............................................. 68
ARTICLE VIII EMPLOYEE MATTERS................................................. 69
Section 8.1. Officers and Employees...................................... 69
Section 8.2. Employee Benefits........................................... 69
Section 8.3. Other Liabilities and Obligations........................... 75
Section 8.4. Preservation of Rights to Amend or Terminate Plans.......... 76
Section 8.5. Reimbursement; Indemnification.............................. 76
Section 8.6. Actions By Spinco........................................... 76
ARTICLE IX INSURANCE........................................................ 77
Section 9.1. General..................................................... 77
Section 9.2. Certain Insured Claims...................................... 77
ARTICLE X CONDITIONS; TERMINATION; AMENDMENTS; WAIVERS..................... 78
Section 10.1. Condition to Restructuring and Distribution................. 78
Section 10.2. Termination................................................. 80
Section 10.3. Amendments; Waivers......................................... 80
ARTICLE XI MISCELLANEOUS.................................................... 80
Section 11.1. Survival of Indemnities; Release............................ 80
Section 11.2. Entire Agreement............................................ 81
Section 11.3. Fees and Expenses........................................... 82
Section 11.4. Governing Law............................................... 82
Section 11.5. Notices..................................................... 82
Section 11.6. Successors and Assigns; No Third Party Beneficiaries........ 84
Section 11.7. Counterparts................................................ 85
Section 11.8. Interpretation.............................................. 85
Page
----
Section 11.9. Schedules................................................... 85
Section 11.10. Legal Enforceability........................................ 85
Section 11.11. Consent to Jurisdiction..................................... 85
Section 11.12. Specific Performance........................................ 86
Exhibits
- --------
Exhibit A Form of Spinco Stockholders Agreement
Exhibit A-1 Globalstar Warrant Term Sheet
Exhibit B Form of Spinco Preferred Stock Certificate of Designation
Exhibit C Form of Spinco By-Laws
Exhibit D Spinco Shareholder Rights Plan
Exhibit E Spinco Employment Arrangements
RESTRUCTURING, FINANCING
AND DISTRIBUTION AGREEMENT
--------------------------
RESTRUCTURING, FINANCING AND DISTRIBUTION AGREEMENT, dated as of
January 7, 1996, by and among Loral Corporation, a New York corporation
(the "Company"), Loral Aerospace Holdings, Inc., a Delaware corporation and
a wholly-owned subsidiary of the Company ("Holdings"), Loral Aerospace
Corp., a Delaware corporation and a wholly-owned subsidiary of Holdings
("Aerospace"), Loral General Partner, Inc., a Delaware corporation and a
wholly-owned subsidiary of Aerospace ("LGP"), Loral Globalstar, L.P., a
Delaware limited partnership and a wholly-owned, indirect subsidiary of LGP
("LG"), Loral Globalstar Limited, a Cayman Islands corporation and a
wholly-owned subsidiary of LGP ("Cayman"), Loral Telecommunications
Acquisition, Inc. (to be renamed "Loral Space & Communications
Corporation"), a Delaware corporation and a wholly-owned subsidiary of the
Company ("Spinco"), and Lockheed Martin Corporation, a Maryland corporation
("Parent").
RECITALS:
--------
WHEREAS, each of the Boards of Directors of the Company,
Holdings, Aerospace, LGP and Cayman, and the general partner of LG have
determined to cause certain of the transfers and other transactions
contemplated in connection with the Restructuring (as hereafter defined);
WHEREAS, the Board of Directors of the Company has also
determined to cause the distribution of shares of Spinco Common Stock (as
hereafter defined) to the holders as of the Record Date (as hereafter
defined) of the Company Common Stock (as hereafter defined) and to the
holders of certain Cancelled Company Options (as hereafter defined);
WHEREAS, the Company and Spinco and the other parties hereto have
determined that it is desirable to set forth the principal corporate
transactions required to effect such transfers, share issuances and
distribution and to set forth certain other agreements that will govern
certain other matters prior to or following such distribution;
WHEREAS, the Company has entered into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), with Parent
and LAC Acquisition Corporation, a New York corporation and a wholly-owned
subsidiary of Parent (the "Purchaser"), providing for the Offer and the
Merger (each as hereafter defined), as a result of which the Company, as
the corporation surviving the Merger, will become a wholly-owned subsidiary
of Parent; and
WHEREAS, in order to induce the parties to enter into this
Agreement and in consideration of the Company's willingness to enter into
the Merger Agreement, the parties hereto and certain other parties are
entering or will enter into the Tax Sharing Agreement and the Stockholders
Agreement (such capitalized terms, as hereafter defined) providing for
certain ongoing relationships among the parties;
NOW, THEREFORE, in consideration of the foregoing and the
agreements, provisions and covenants contained herein, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
-----------
Section 1.1. General. For convenience and brevity, certain
terms used in various parts of this Agreement (including the Schedules) are
listed in alphabetical order and defined or referred to below (such terms
to be equally applicable to both singular and plural forms of the terms
defined or referred to):
"Action" means any action, claim, suit, arbitration, inquiry,
proceeding or investigation by or before any court, any governmental or
other regulatory or administrative agency or commission or any arbitration
tribunal.
"Adjusted GAAP" means, except as otherwise set forth in Section
1.1(a) of the Disclosure Schedule, U.S. generally accepted accounting
principles as in effect on the date hereof, applied on a basis consistent
with the Company Financial Statements.
2
"Aerospace" shall have the meaning set forth in the recitals to
this Agreement.
"Affiliate" of any specified person or entity means (x) any
director or officer of, or any person or entity that beneficially owns at
least 50% of the capital stock or other equity interests of, such specified
person or entity, or (y) any other person or entity directly or indirectly
controlling, controlled by, or under common control with, such specified
person or entity, at any time during the period for which the determination
of affiliation is being made; provided that the Company and the Retained
Subsidiaries, on the one hand, and Spinco and the Spinco Companies, on the
other hand, shall not, after giving effect to the Restructuring, be deemed
to be Affiliates of each other for purposes of this Agreement.
"Agent" means the distribution agent appointed by the Company
(subject to the prior written consent of Parent, which may not be
unreasonably withheld) to distribute shares of Spinco Common Stock pursuant
to the Distribution.
"Agreement" means this Restructuring, Financing and Distribution
Agreement, together with all exhibits and schedules hereto, as the same may
be amended from time to time in accordance with the terms hereof.
"Asset" means, with respect to any party, except as otherwise
provided herein, any and all of such party's right, title and interest in
and to all of the rights, properties, assets, claims, contracts and
businesses of every kind, character and description, whether real, personal
or mixed, whether accrued, contingent or otherwise, and wherever located,
owned or used primarily by such party and its subsidiaries, including,
without limitation, the following: (i) all cash, cash equivalents, notes
and accounts receivable (whether current or non-current); (ii) all
certificates of deposit, banker's acceptances and other investment
securities; (iii) all registered and unregistered trademarks, service
marks, service names, trade styles and trade names (including, without
limitation, trade dress and other names, marks and slogans) and all
associated goodwill; all statutory, common law and registered copyrights;
all patents; all applications for any of the foregoing together with all
rights to use all of the foregoing and all other rights
3
in, to, and under the foregoing; all know-how, inventions, discoveries,
improvements, processes, formulae (secret or otherwise), specifications,
trade secrets, whether patentable or not, licenses and other similar
agreements, confidential information, and all drawings, records, books or
other indicia, however evidenced, of the foregoing; (iv) all rights
existing under all Contracts and other business arrangements; (v) all real
estate and all plants, buildings and other improvements thereon; (vi) all
leasehold improvements and all machinery, equipment (including all
transportation and office equipment), fixtures, trade fixtures and
furniture; (vii) all office supplies, production supplies, spare parts,
other miscellaneous supplies and other tangible property of any kind;
(viii) all raw materials, work-in-process, finished goods, consigned goods
and other inventories; (ix) all computer hardware, software, computer
programs and systems and documentation relating thereto; all databases and
reference and resource materials; (x) all prepayments or prepaid expenses;
(xi) all claims, causes of action, choices in action, rights of recovery
and rights of set-off of any kind; (xii) the right to receive mail,
accounts receivable payments and other communications; (xiii) all customer
lists and records pertaining to customers and accounts, personnel records,
all lists and records pertaining to suppliers and agents, and all books,
ledgers, files and business records of every kind; (xiv) all advertising
materials and all other printed or written materials; (xv) all permits,
licenses, approvals and authorizations of governmental authorities or third
parties relating to the ownership, possession or operation of the Assets;
(xvi) all capital stock, partnership interests and other equity or
ownership interests or rights, directly or indirectly, in any subsidiary or
other entity; (xvii) all goodwill as a going concern and all other
intangible properties; and (xviii) all employee contracts, including,
without limitation, the right thereunder to restrict the employee from
competing in certain respects.
"Business Day" means any calendar day which is not a Saturday,
Sunday or public holiday under the Laws of New York.
"Cancelled Company Option" means any option or other right to
acquire shares of Company Common Stock which (i) has been granted by the
Company to any employee
4
or director of the Company or any of its Subsidiaries, (ii) is outstanding
immediately prior to, and remains unexercised as of, the Record Date, and
(iii) will be cancelled pursuant to Section 2.10 of the Merger Agreement.
"Capital Contribution" shall mean any capital or other investment
in the Spinco Business, Spinco or any Spinco Company (including, without
limitation, (x) the acquisition of any equity or other interests in Spinco
or any Spinco Company during such time period (except as otherwise
expressly contemplated pursuant to the provisions of Article II hereof),
(y) any contribution of cash, cash equivalents, marketable securities,
receivables, inventory, prepaid expenses, real or personal property or any
other assets to the Spinco Business, Spinco or any Spinco Company (except
as otherwise expressly contemplated pursuant to the provisions of Article
II hereof) and (z) the assumption of or payment by the Company or any
Company Subsidiary of any Spinco Liabilities, and any prepayment,
redemption, purchase or defeasance of Spinco Indebtedness (if any) or any
other Spinco Liabilities) by the Company or any Company Subsidiary;
provided that the term "Capital Contribution" shall not include (1) any
amounts which are transferred following the date hereof and prior to the
Offer Purchase Date and which are either (i) in connection with
administrative and other similar services which are provided to any of the
Spinco Companies in the ordinary course of the Company's business and which
are consistent with the past practices of the Company (provided that the
cost of any such services may only be allocated in a manner consistent with
the past practices of the Company), or (ii) (A) pursuant to the express
terms and conditions of any Existing Intercompany Agreement and (B) in the
ordinary course of business and in a manner consistent with past practice,
(2) the Spinco Guarantee Warrants, or (3) the DBS Investment (as defined in
the definition of Spinco Liabilities).
"Casualty Program" means collectively, the series of programs
pursuant to which various insurance carriers provide insurance coverage to
the Company and its subsidiaries in respect of claims or occurrences
relating to workers' compensation liability, general liability, products
liability, automobile liability and
5
employer's liability for all periods up to the Distribution Date.
"Cayman" shall have the meaning set forth in the recitals to this
Agreement.
"CCD Lawsuit" means the litigation entitled Loral Fairchild Corp.
vs. Sony Corporation, et al.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning set forth in the recitals to
this Agreement.
"Company Common Stock" means the common stock of the Company, par
value $0.25 per share.
"Company Financial Statements" means the audited consolidated
financial statements of the Company and its subsidiaries for the fiscal
year ending March 31, 1995 (a copy of which is set forth in the Company's
Annual Report on Form 10K for the year ended March 31, 1995).
"Confidentiality Agreement" means the confidentiality agreement
dated as of December 4, 1995 between Parent and the Company.
"Continental" means Continental Satellite Corporation, a
California corporation.
"Contract" means any contract, agreement, lease, license, sales
order, purchase order, instrument or other commitment that is binding on
any person or entity or any part of its property under applicable Law.
"Court Order" means any judgment, decree, injunction, order or
ruling of any Governmental Entity that is binding on any person or its
property under applicable Law.
"Disclosure Schedule" means the disclosure schedule dated as of
the date hereof and attached hereto. References to a particular section of
the Disclosure Schedule shall only refer or modify the specific Section of
this Agreement to which such Schedule relates (i.e.,
6
Section 6.2(c) of the Disclosure Schedule shall refer to or modify only
Section 6.2(c) of this Agreement), unless otherwise expressly set forth
herein.
"Distribution" means the distribution of the shares of Spinco
Common Stock owned by the Company to holders of Company Common Stock and to
holders of Cancelled Company Options pursuant to the provisions of this
Agreement (including, without limitation, the provisions of Section 3.2(b)
hereof).
"Distribution Conditions" means each of the conditions set forth
in clauses (i) through (ix) of Section 10.1(a) hereof.
"Distribution Date" means the date as of which the Distribution
shall be effected as determined by the Board of Directors of the Company,
subject to the terms and conditions of this Agreement (including, without
limitation, the provisions of Section 3.2(a) hereof).
"Distribution Declaration Date" means the date on which the Board
of Directors of the Company takes action to declare the Distribution and
establish the Record Date.
"Existing Intercompany Agreement" means any written Intercompany
Agreement or regular, established accounting practice, consistently
applied, which is in existence prior to December 31, 1995.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"FCC" means the U.S. Federal Communications Commission.
"Final Order" means any consent, approval or other action of the
FCC (a) relating to any of the transactions contemplated pursuant to either
this Agreement or the Merger Agreement and (b) (i) which has not been
vacated, reversed, stayed, set aside, annulled or suspended, (ii) with
respect to which no timely appeal, request for stay or petition for
rehearing, reconsideration or review by any party or by the FCC on its own
motion, is pending, (iii) as to which the time for filing any such appeal,
request, petition or other similar
7
document has expired, and (iv) as to which the time for reconsideration or
review by the FCC on its own motion under the Communications Act (as
defined in the Merger Agreement) and the rules and regulations of the FCC
has expired.
"Form 10" means the registration statement on Form 10 to be filed
by Spinco with the SEC to effect the registration of the Spinco Common
Stock pursuant to the Exchange Act.
"Globalstar" means Globalstar, L.P., a Delaware limited
partnership.
"Globalstar Bank Guarantee" means the Guarantee, dated as of
December 15, 1995, made by Loral in favor of Chemical Bank, as agent for
the lenders from time to time parties to the Globalstar Credit Agreement.
"Globalstar Credit Agreement" means the Credit Agreement, dated
as of December 15, 1995 (as amended, supplemented or otherwise modified
from time to time in accordance with the provisions of Section 2.5 hereof),
among Globalstar, Chemical Bank, as agent for the lenders from time to time
parties thereto and the other parties thereto.
"Globalstar Partners" means those Persons (or any Affiliates
thereof) holding direct or indirect partnership interests in either
Globalstar, LQSS or LQP.
"Guarantee Warrants" means those warrants to purchase shares of
common stock of GTL (or warrants to purchase partnership interests in
Globalstar, as the case may be), which warrants are to be issued in
connection with the Globalstar Bank Guarantee to the Company and, under
certain circumstances, to certain parties which hold partnership interests
in Globalstar, as more fully described in the Globalstar Warrant Memorandum
and the term sheet set forth on Exhibit A-1 attached hereto.
"Globalstar Warrant Memorandum" means the December 21, 1995
memorandum from Michael B. Targoff to Enrique Fernandez relating to, among
other things, the Globalstar Bank Guarantee and the Globalstar Credit
Agreement.
8
"Governmental Entity" means any United States or any foreign,
federal, state or local government, court, administrative agency or
commission or other governmental or regulatory body or authority.
"GTL" means Globalstar Telecommunications Limited, a company
organized under the laws of Bermuda.
"Holdings" shall have the meaning set forth in the recitals to
this Agreement.
"Indemnifiable Losses" means, with respect to any claim by an
Indemnified Party for indemnification pursuant to Articles II, V, VI or
VIII hereof, any and all damages, losses, deficiencies, Liabilities,
obligations, penalties, judgments, settlements, claims, payments, fines,
interest, costs and expenses (including, without limitation, the costs and
expenses of any and all Actions, demands, assessments, judgments,
settlements and compromises relating thereto and the costs and expenses of
attorneys', accountants', consultants' and other professionals' fees and
expenses incurred in the investigation or defense thereof or the
enforcement of rights hereunder), including direct and consequential
damages, but excluding punitive damages (other than punitive damages
awarded to any third party against an Indemnified Party) suffered by such
Indemnified Party with respect to such claim.
"Indemnified Party" means any party which is seeking
indemnification from an Indemnifying Person pursuant to the provisions of
Articles II, V, VI or VIII hereof.
"Indemnifying Party" means any party hereto from which any
Indemnified Party is seeking indemnification pursuant to the provisions of
Articles II, V, VI or VIII hereof.
"Information" shall have the same meaning as defined in Section
7.2 hereof.
"Information Statement" means the information statement to be
sent to the holders of the Company's equity securities in connection with
the Distribution.
9
"Intellectual Property Rights" means all right, title, interest
and all license and other rights, to the extent held by the Company and its
Subsidiaries immediately prior to the Restructuring, with respect to each
of the following items: all patents, patent applications, copyrights,
copyright applications, trademarks, trademark applications and trade names,
in each case as used in the business of the Company and its Subsidiaries as
conducted immediately prior to the Restructuring.
"Intercompany Agreements" means any Contracts between any
entities included within the Retained Business (including, without
limitation, the Company and the Retained Subsidiaries), on the one hand,
and any entities included within the Spinco Business (including, without
limitation, Spinco and the Spinco Companies), on the other hand.
"K&F" means K&F Industries, Inc., a Delaware corporation.
"LG" shall have the meaning set forth in the recitals to this
Agreement.
"LGP" shall have the meaning set forth in the recitals to this
Agreement.
"LQP" means Loral/QUALCOMM Partnership, L.P., a Delaware limited
partnership.
"LQSS" means Loral/QUALCOMM Satellite Services, L.P., a Delaware
limited partnership.
"Law" means any statute, law, rule, regulation, ordinance, order,
decree or judgment of any Governmental Entity, including, without
limitation, those covering environmental, energy, safety, health,
transportation, telecommunications, recordkeeping, zoning,
antidiscrimination, antitrust, wage and hour, and price and wage control
matters.
"Lehman Partnerships" means each of Shearson Lehman Brothers
Capital Partners II, L.P., Lehman Brothers Merchant Banking Portfolio
Partnership L.P., Lehman Brothers Offshore Investment Partnership L.P. and
Lehman Brothers Offshore Investment Partnership-Japan L.P.
10
"Lehman Preferred Stock" means the shares of Series S Redeemable
Preferred Stock, par value $.10 per share, of Holdings which are held by
any of the Lehman Partnerships, any of their respective transferees or any
other persons.
"Liability" means, with respect to any party, except as otherwise
expressly provided herein, any direct or indirect liability (whether
absolute, accrued, contingent, reflected on a balance sheet (or in the
notes thereto) or otherwise, and whether known or unknown), indebtedness,
obligation, expense, claim, deficiency, guarantee or endorsement of or by
any person (including, without limitation, those arising under any Law or
Action or under any award of any court, tribunal or arbitrator of any kind,
and those arising under any contract, commitment or undertaking).
"Lien" means any mortgage, pledge, lien, encumbrance, charge,
adverse claim (whether pending or, to the knowledge of the person against
whom the adverse claim is being asserted, threatened), defect of title or
restriction of any nature whatsoever on any property or property interest
(regardless of whether such property or property interest is real or
personal, tangible or intangible, or otherwise), or a security interest of
any kind, including, without limitation, any conditional sale or other
title retention agreement, any third party option or other agreement to
sell and any filing of or agreement to give, any financing statement under
the Uniform Commercial Code (or equivalent statute) of any jurisdiction
(other than a financing statement which is filed or given solely to protect
the interest of a lessor).
"Merger" shall have the meaning set forth in the Merger
Agreement.
"Merger Agreement" shall have the meaning set forth in the
recitals to this Agreement.
"NYSE" means the New York Stock Exchange, Inc.
"Offer" shall have the meaning set forth in the Merger Agreement.
11
"Offer Purchase Date" means the date on which the Purchaser accepts for
payment and pays for Shares tendered pursuant to the Offer.
"Parent" shall have the meaning set forth in the recitals to this
Agreement.
"Parent Indemnified Parties" shall have the same meaning as defined in
Section 5.2(a) hereof.
"Person" or "person" means and includes any individual, partnership, joint
venture, corporation, association, joint stock company, trust, unincorporated
organization or similar entity and any Governmental Entity.
"Purchaser" shall have the meaning set forth in the recitals to this
Agreement.
"Record Date" means the date determined by the Board of Directors of the
Company as the record date for the Distribution, subject to the terms and
conditions of this Agreement (including, without limitation, the provisions of
Section 3.2(a) hereof).
"Restructuring" means collectively, the transactions contemplated pursuant
to the provisions of Article II hereof.
"Retained Action" shall have the same meaning as defined in Section 5.6
hereof.
"Retained Assets" means all Assets of the Company and each Retained
Subsidiary (including, without limitation, (A) all shares of capital stock,
partnership interests and other equity or ownership interests or ownership
rights in all subsidiaries and other entities owned directly or indirectly by
the Company or any of the Retained Subsidiaries, (B) all rights to Assets held
by such subsidiaries and entities, (C) except as provided in Sections 4.1 and
4.2 hereof, all cash and cash equivalents held by the Company or any of the
Retained Subsidiaries, (D) the Company Names and Company Proprietary Names (such
terms, as defined in Section 6.4 hereof), (E) the Retained Actions and all other
Actions commenced by the Company or any Retained Subsidiary (to the extent such
Actions constitute Assets), and (F) the licenses of
12
Intellectual Property Rights referred to in Section 6.7 hereof to be granted to
Parent, the Company and each of their respective Affiliates), other than the
Spinco Assets.
"Retained Business" means all businesses of the Company and the Retained
Subsidiaries and all businesses included within the Retained Assets (including,
without limitation, the Company's electronic combat business, the Company's
training and simulation business, the Company's tactical weapons business, the
Company's command, control, communications and intelligence (C3I)/reconnaissance
business and the Company's systems integration business (each as described in
the Company's Annual Report on Form 10K for the year ended March 31, 1995)), as
conducted by the Company and its subsidiaries as of the Distribution Date and
all former businesses of the Company and the Retained Subsidiaries; provided
that the term "Retained Business" shall not include the Spinco Business.
"Retained Employees" shall mean all current and former officers and
employees of the Company and its subsidiaries, other than the Spinco Employees.
"Retained Liabilities" means all of the Liabilities of the Company and
each of the Retained Subsidiaries, other than the Spinco Liabilities.
"Retained Subsidiaries" means all of the Subsidiaries of the Company,
other than the Spinco Companies.
"SEC" means the U.S. Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Severance Agreement" means any Contract which provides for the payment of
any cash or other consideration to an officer, director or employee of the
Company or any of its Subsidiaries upon the consummation of either the Offer,
the Merger, the Restructuring or the Distribution.
13
"Spinco" shall have the meaning set forth in the recitals to this
Agreement.
"Spinco Assets" means all right, title and interest, to the extent held by
the Company and its Subsidiaries or any of the other Spinco Companies
immediately prior to the Restructuring, with respect to each of the following
items: (a) all shares of capital stock of and all partnership interests in (as
the case may be) the Spinco Companies, (b) the Spinco Cash Amount, (c) the
Spinco Names and Spinco Proprietary Name Rights (such terms, as defined in
Section 6.4 hereof), (d) any Actions commenced by a Spinco Company the subject
matter of which is otherwise a Spinco Asset or any Action which relates
primarily to a Spinco Asset (to the extent such Actions constitute Assets), (e)
shares of capital stock of Loral Travel Services Inc. and Loral Properties Inc.,
(f) that portion of the leasehold interest relating to the office space on not
more than two floors reasonably designated by Spinco within 30 days after the
date hereof with respect to the building located at 600 Third Avenue, New York,
New York and such existing furniture, fixtures, and office equipment located on
such floors which is reasonably designated by Spinco within thirty (30) days
after the date hereof, (g) the licenses of Intellectual Property Rights referred
to in Section 6.7 hereof to be granted to Spinco or the Spinco Companies, (h)
the CCD Lawsuit, and (i) the FCC license applications and other Assets listed on
Section 1.1(b) of the Disclosure Schedule. The term "Spinco Assets" shall also
include (A) the Cash Guarantee Fees accruing to the benefit of the Company and
(B) the number of Guarantee Warrants equal to the product of (x) the aggregate
number of Guarantee Warrants which might be issued and (y) a ratio of the Spinco
Assumed Guarantee Amount (as defined in Section 2.5(d) hereof) to the total
amount of Obligations (as defined in Section 2.5 hereof) under the Globalstar
Bank Guarantee in connection with the Globalstar Bank Guarantee, but shall not
include any other Guarantee Warrants which may be issued from time to time to
the Company.
"Spinco Balance Sheet" means the unaudited, pro forma, consolidated balance
sheet (including the related notes) of the Spinco Business as of September 30,
1995 set forth in Section 1.1(d) of the Disclosure Schedule.
14
"Spinco Business" means each business and each former business which is or
was conducted by Spinco or a Spinco Company as of the Distribution Date or which
is or was included within the Spinco Assets.
"Spinco Cash Amount" means the cash amount referred to in Section
2.1(a)(xiv) hereof.
"Spinco Common Stock" means the common stock, par value $0.01 per share, of
Spinco, together with the associated preferred stock purchase rights to be
issued pursuant to a rights agreement to be entered into between Spinco and a
rights agent to be selected by Spinco.
"Spinco Companies" means (a) each of SSL, GTL, K&F, Globalstar, LGP, LG,
Cayman, LQSS, LQP, Continental and the companies referred to in paragraph (e) of
the definition of "Spinco Assets", and (b) all Subsidiaries of any of the
entities listed in paragraph (a) above after giving effect to the Restructuring.
"Spinco Employees" means (x) those persons who are employed as officers or
employees of Spinco and the Spinco Companies or otherwise employed in the
Spinco Business immediately prior to or effective as of the Distribution Date,
and (y) all former officers and employees of Spinco, any Spinco Company or the
Spinco Business who, immediately prior to the termination of their employment,
were employed by Spinco, any Spinco Company or the Spinco Business. In the event
any person shall have been employed by Spinco or any of the Spinco Companies, as
well as by the Company or any of the Retained Subsidiaries, such person shall be
considered a Spinco Employee if at the Distribution Date such person's primary
employment shall be with Spinco, any of the Spinco Companies or the Spinco
Business.
"Spinco Indebtedness" means (a) any and all of the following items which
are incurred or entered into by Spinco or any Spinco Company or otherwise
incurred or entered into in connection with the Spinco Business: (i)
indebtedness for money borrowed, (ii) indebtedness which is evidenced by notes,
debentures, bonds or other similar instruments; (iii) any lease of any property
(whether real, personal or mixed) that, in accordance with generally accepted
accounting principles, either would be required to be classified and accounted
for as a capital
15
lease on a balance sheet or otherwise be disclosed as such in a note to any such
balance sheet; (iv) all obligations issued or assumed as the deferred purchase
price of property, all conditional sale obligations and all obligations under
any title retention agreement; and (v) all obligations for the reimbursement of
any obligor on any letter of credit, banker's acceptance or similar credit
transaction; (b) all obligations of the type referred to in clauses (i), (ii),
(iii), (iv) and (v) of paragraph (a) above of which Spinco, any Spinco Company
or the Spinco Business is responsible or liable, directly or indirectly, as
obligor, guarantor or otherwise, including any guarantees of such obligations;
and (c) all obligations of the type referred to in clauses (i), (ii), (iii),
(iv) and (v) of paragraph (a) above or referred to in paragraph (b) above, which
are secured by any Lien on any property or asset of Spinco, any Spinco Company,
any Affiliate of Spinco or the Spinco Business.
"Spinco Indemnified Parties" shall have the same meaning as defined in
Section 5.3(a) hereof.
"Spinco Liabilities" means (a) all of the Liabilities of Spinco and the
Spinco Companies to third parties and all Liabilities relating to or arising out
of the Spinco Assets or the conduct of the Spinco Business (in all cases,
whether arising before or after the date hereof); (b) all Liabilities reflected
or reserved against in the Spinco Balance Sheet and all similar Liabilities
arising after the date thereof; (c) any Actions commenced by a Spinco Company
the subject matter of which is otherwise a Spinco Asset or any Action which
relates primarily to a Spinco Asset (to the extent such Actions constitute
Liabilities); (d) except as otherwise provided in Article VIII hereof, the
Liabilities of the Company and its subsidiaries, including, without limitation,
Spinco and the Spinco Companies, in respect of Spinco Employees (in all cases,
whether arising before or after the date hereof) (excluding, however, all wages,
salary, bonus and other similar amounts accrued prior to the Distribution Date
in respect of Spinco New York Employees); (e) all Liabilities relating to or
arising out of the Spinco Assets or the conduct of the Spinco Business (in all
cases, whether arising before or after the date hereof) with respect to which
the Company or any Retained Subsidiary has agreed, prior to the Distribution
Date, to indemnify any third party in any manner with re-
16
spect thereto or has agreed to otherwise be, or is otherwise, liable with
respect thereto; (f) all Company Transfer Expenses (as defined in Section 2.6
hereof) and all other Indemnifiable Losses referred to in Section 2.6 hereof;
(g) all Spinco Excess Costs (as defined in Section 11.3 hereof); and (h) the
amount of any and all consideration paid, and any and all Liabilities incurred,
by the Company, Spinco, any Spinco Company or any Retained Subsidiary or any of
their respective Affiliates, following the date hereof but prior to the
consummation of the Restructuring, in connection with the acquisition of any
securities issued by Continental (whether held by any third party or otherwise)
or any Assets of Continental, but only to the extent that the aggregate fair
market value of such consideration and Liabilities exceeds in the aggregate
$7,500,000.00 (for purposes of this clause (h), the term "Continental" shall
include any other Person, program or business which conducts direct broadcast
satellite operations similar in nature to those operations conducted or proposed
to be conducted by Continental) (the parties hereto acknowledge and agree that,
if the Company acquires any such securities or Assets, that all amounts paid or
Liabilities incurred in connection therewith not in excess of such $7,500,000.00
threshold (the "DBS Investment"), shall not otherwise be included within the
term "Spinco Liabilities"). Notwithstanding the foregoing, the term "Spinco
Liabilities" shall not include any Liabilities of the Company arising pursuant
to the express provisions of the Globalstar Bank Guarantee (as amended pursuant
to the provisions of Section 2.5 hereof), except as otherwise expressly
provided in Section 2.5 hereof.
"Spinco New York Employees" means those Spinco Employees who are located
prior to the date hereof at the office building located at 600 Third Avenue, New
York, New York; provided that the term "Spinco New York Employees" shall not
include any employees whose primary employment is with the Spinco Business and
shall not include senior executive officers of the Company.
"Spinco Preferred Stock" means the Series A Non-Voting Convertible
Preferred Stock, par value $0.01 per share, of Spinco, having the rights,
powers, privileges and other terms set forth in the Certificate of Incorporation
of Spinco (which, pursuant to Section 2.3(a) hereof, shall be in substantially
the same form as
17
the provisions set forth on Exhibit B attached hereto (with such changes thereto
as Parent and the Company may approve prior to the Offer Purchase Date)).
"SSL" means Space Systems/Loral, Inc., a Delaware corporation.
"SSL Lawsuit" means the litigation entitled "Space Systems/Loral, Inc. v.
Martin Marietta Corporation."
"SSL Stockholders Agreements" means each of (a) the Stockholders Agreement
by and among the Company, Holdings, SSL, Aerospatiale Societe Nationale
Industrielle, Alcatel Espace and Alenia Aeritalia & Selenia S.p.A., dated as of
April 22, 1991 (as amended by Amendment No. 1, dated as of November 10 1992),
and (b) the Stockholders Agreement by and among Holdings, Aerospace, the Company
and the Lehman Partnerships, dated as of November 13, 1992.
"Stockholders Agreement" means the Stockholders Agreement to be entered
into between the Company and Spinco following the date hereof, the material
terms of which are set forth on Exhibit A to this Agreement.
"Subsidiary" or "subsidiary" of any party means (a) a corporation, a
majority of the voting or capital stock of which is as of the time in question
directly or indirectly owned by such party and (b) any other partnership, joint
venture, association, joint stock company, trust, unincorporated organization or
similar entity, in which such party, directly or indirectly, owns a majority of
the equity interest thereof or has the power to elect or direct the election of
a majority of the members of the governing body of such entity or otherwise has
control over such entity (e.g., as the managing partner of a partnership).
"Tax Sharing Agreement" means the Tax Sharing Agreement, in the form of
Exhibit A to the Merger Agreement, pursuant to which the Company and Spinco have
provided for certain tax matters, including, without limitation,
indemnification, allocation of tax benefits and filing of tax returns.
18
Section 1.2. References to Time. All references in this Agreement to times
of the day shall be to New York City time.
ARTICLE II
THE RESTRUCTURING AND RELATED TRANSACTIONS
------------------------------------------
Section 2.1. Transfers of Assets.
(a) Subject to the terms and conditions of this Agreement:
(i) prior to the Distribution Date, LG shall transfer to Cayman all of
its right, title and interest in and to all shares of capital stock owned
by LG in GTL, by means of a distribution to Cayman of such equity
securities;
(ii) immediately following the actions referred to in the immediately
preceding clause, Cayman shall transfer to LGP all of its right, title and
interest in and to all shares of capital stock of GTL owned by Cayman and
may transfer all, or a portion of, the partnership interests in LG owned by
Cayman, by means of a dividend to LGP of such equity securities;
(iii) immediately following the actions referred to in the immediately
preceding clause, LGP shall transfer to Aerospace all of its right, title
and interest in and to all shares of capital stock of Cayman and GTL owned
by LGP and may transfer all, or a portion of, the partnership interests in
LG owned by LGP, by means of a dividend to Aerospace of such equity
securities;
(iv) immediately following the actions referred to in the immediately
preceding clause, Aerospace shall transfer to Holdings all of its right,
title and interest in and to all shares of capital stock owned by Aerospace
in Cayman, GTL, LGP and SSL and all partnership interests in LG owned by
it, by means of a dividend to Holdings of such equity securities;
19
(v) immediately following the actions referred to in the immediately
preceding clause, Holdings shall transfer to the Company all of its right,
title and interest in and to (x) all shares of capital stock owned by
Holdings in Cayman, GTL, LGP and Continental, (y) 64.125 percent (64.125%)
of the shares of capital stock owned by Holdings in SSL, and (z) all
partnership interests in LG owned by Holdings, by means of a dividend of
such equity securities;
(vi) immediately following the actions referred to in the immediately
preceding clause, LGP may transfer to Spinco or to any Spinco Subsidiary
designated by Spinco, all (or any other portion thereof reasonably
designated by Spinco) of LGP's right, title and interest in the partnership
interests in LG and LQP;
(vii) immediately following the actions referred to in the preceding
clauses, the Company shall transfer to Spinco all of its right, title and
interest in and to all shares of capital stock owned by the Company in
Cayman, GTL, K&F, LGP, SSL and Continental and all partnership interests in
LG owned by the Company, in exchange for, among other things, the issuance
by Spinco to the Company of the shares of Spinco Common Stock;
(viii) immediately following the actions referred to in the
immediately preceding clause, the Company shall transfer to Spinco (and the
Company shall cause each of its subsidiaries to transfer to Spinco) all of
their right, title and interest in and to all Spinco Assets not otherwise
transferred to Spinco pursuant to the provisions of this Section 2.1(a), in
the case of assets not held directly by the Company, by a distribution to
the Company and, in each case by means of a contribution by the Company to
the capital of Spinco of such Spinco Assets (provided that the foregoing
provisions shall not be construed to constitute a transfer by the Company
to Spinco of any capital stock of Spinco owned at that time by the
Company);
(ix) immediately following the actions referred to in the immediately
preceding
20
clause, Spinco shall transfer to the Company (and Spinco shall cause each
of its Subsidiaries to transfer to the Company) all of its right, title and
interest in and to all Retained Assets not otherwise transferred to the
Company pursuant to the provisions of this Section 2.1(a) (if any), in each
case by means of a dividend of such Retained Assets (provided that the
foregoing provisions shall not be construed to constitute a transfer by the
Spinco to Company of the rights of Spinco under this Agreement);
(x) immediately following the actions referred to in the immediately
preceding clause, the Company shall assume and shall in due course pay,
perform and discharge (or shall cause to be assumed and cause in due course
to be paid, performed and discharged), all of the Retained Liabilities to
which the Spinco Business or the Spinco Assets are then subject or
otherwise liable;
(xi) immediately following the actions referred to in the immediately
preceding clause, Spinco shall assume and shall in due course pay, perform
and discharge (or shall cause to be assumed and cause in due course to be
paid, performed and discharged), all of the Spinco Liabilities to which the
Retained Business or the Retained Assets are then subject or otherwise
liable;
(xii) following, or prior to, the actions referred to in the preceding
clauses, Holdings shall transfer all its right, title and interest in its
shares of capital stock of SSL owned by it that are not transferred
pursuant to clause (v), above, either to Spinco or, pursuant to Section
2.7, to the Lehman Partnerships;
(xiii) in connection with the actions referred to in the preceding
clauses, Spinco shall issue to the Company the shares of Spinco Common
Stock referred to in Section 2.4 hereof; and
(xiv) following the actions referred to in the preceding clauses and
following Parent's acceptance for payment of Shares of Company Common Stock
in connection with the Offer, on or prior to
21
the Distribution Date and prior to the Distribution, Parent shall transfer
to the Company, as a contribution to capital, $712,400,000 in immediately
available funds, less any amount which the parties hereto have at such
time agreed is owed to Parent pursuant to the provisions of Sections
4.1(a) and 4.1(c) hereof (the aggregate of such cash amount being
hereinafter referred to as the "Spinco Cash Amount"), and the Company
shall then immediately contribute the Spinco Cash Amount to Spinco, as a
contribution to capital, of which $344,000,000.00 shall be in exchange for
the Spinco Preferred Stock and the balance shall be treated as additional
consideration for the Spinco Common Stock.
(b) Notwithstanding anything else in this Agreement to the contrary but
subject to the provisions of Section 2.6 hereof, this Agreement shall not
constitute an agreement to assign, convey or transfer any Action, Liability,
Asset or Contract or any claim or right or any benefit arising thereunder or
resulting therefrom as to which (x) a prior right of assignment, conveyance or
transfer exists (including, without limitation, a Third Party Call Right (as
defined in Section 2.6 hereof)) which has not been waived as of the Distribution
Date or (y) consent to assignment, conveyance or transfer thereof is required
but has not been obtained as of the Distribution Date (including, without
limitation, any Asset which has been pledged to any third party creditor and
with respect to which such pledge has not been released prior to the
Distribution Date). Subject to the preceding sentence and the provisions of
Section 6.2 hereof, to the extent that any such contributions and transfers
shall not have been so consummated prior to the Distribution Date, the parties
shall cooperate to effect such consummation as promptly thereafter as shall be
practicable, and as between the Company and Spinco, as of the Distribution Date,
(i) the Company shall be deemed to have contributed to Spinco, and Spinco shall
have and be deemed to have obtained, complete and sole beneficial ownership over
all of the Spinco Assets, together with all of the rights, powers and privileges
incident thereto which are held by the Company and the Retained Subsidiaries,
and Spinco shall be deemed to have assumed in accordance with the terms of this
Agreement all of the Spinco Liabilities and all of the duties, obligations and
22
responsibilities of the Company and the Retained Subsidiaries incident thereto,
whether or not all instruments of transfer and assumption shall have been
executed and delivered, and (ii) Spinco shall be deemed to have transferred to
the Company and the Retained Subsidiaries, and the Company and the Retained
Subsidiaries shall have and be deemed to have obtained, complete and sole
beneficial ownership over all of the Retained Assets which are being transferred
from Spinco and the Spinco Companies pursuant to the provisions of this Section
2.1(a), together with all of the rights, powers and privileges incident thereto
which are held by Spinco and the Spinco Companies, and the Company and the
Retained Subsidiaries shall be deemed to have assumed in accordance with the
terms of this Agreement all of the Retained Liabilities and all of the duties,
obligations and responsibilities of Spinco and the Spinco Companies incident
thereto, whether or not all instruments of transfer and assumption shall have
been executed and delivered.
Section 2.2. Methods of Transfer and Assumption. The parties hereto agree
that (a) the transfers of Assets contemplated pursuant to Section 2.1 hereof
shall be effected by delivery by Spinco to the Company, and by the Company to
Spinco, as the case may be, of (i) with respect to those Assets which are
evidenced by capital stock certificates or similar instruments, certificates
duly endorsed in blank or accompanied by stock powers or other instruments of
assignment executed in blank, (ii) with respect to any real property interest
and/or any improvements thereon, a quitclaim deed or the equivalent thereof in
accordance with local practice, and (iii) with respect to all other Assets, such
good and sufficient instruments of contribution, transfer and delivery, in form
and substance reasonably satisfactory to the Company, Parent and Spinco, as
shall be necessary to vest in the Company or Spinco, as the case may be, all of
the right, title and interest of Spinco or the Company, as the case may be, in
and to any such Assets, (b) the assumption of the Retained Liabilities
contemplated pursuant to Section 2.1(a)(x) hereof shall be effected by delivery
by the Company to Spinco of such good and sufficient instruments of assumption,
in form and substance reasonably satisfactory to the Company, Parent and Spinco,
as shall be necessary for the assumption by the Company of the Retained
Liabilities, and (c) the assumption of the Spinco Liabilities contemplated
pursuant to Section 2.1(a)(xi)
23
hereof shall be effected by delivery by Spinco to the Company of such good and
sufficient instruments of assumption, in form and substance reasonably
satisfactory to the Company, Parent and Spinco, as shall be necessary for the
assumption by Spinco of the Spinco Liabilities. Each of the parties hereto also
agrees to deliver to any other party hereto such other documents, instruments
and writings as may be reasonably requested by such other parties hereto in
connection with the transactions contemplated hereby. Notwithstanding any other
provisions of this Agreement to the contrary, (x) the instruments of transfer or
assumption referred to in this Section 2.2 shall not, without the prior written
consent of Parent, include any separate representations and warranties, and (y)
in the event and to the extent that there is any conflict between the provisions
of this Agreement and the provisions of any of the instruments of transfer or
assumption referred to in this Section 2.2, the provisions of this Agreement
shall prevail and govern.
Section 2.3. Company Approval of Certain Spinco Actions; Formation of
Spinco. Unless otherwise provided in this Agreement, the Company shall cooperate
with Spinco and the Spinco Companies in effecting, and if so requested by Spinco
the Company shall, as the sole stockholder of Spinco, ratify any actions that
are reasonably necessary or desirable to be taken by Spinco to effectuate the
transactions contemplated by this Agreement in a manner consistent with the
terms of this Agreement, including, without limitation, the following: (a)
amending the Certificate of Incorporation of Spinco so that the provisions
thereof shall at the Distribution Date have the provisions set forth on Exhibit
B attached hereto and such other terms and conditions as Parent and Spinco shall
reasonably approve (with such changes thereto as Parent and the Company may
approve prior to the Offer Purchase Date); (b) amending the By-Laws of Spinco so
that the provisions thereof shall at the Distribution Date have the provisions
set forth on Exhibit C attached hereto and such other terms and conditions as
Parent and Spinco shall reasonably approve (with such changes thereto as Parent
and the Company may approve prior to the Offer Purchase Date); (c) adopting a
shareholder rights plan of Spinco having substantially the same provisions, as
of the Distribution Date, as those set forth on Exhibit D attached hereto (with
such changes thereto as the Board of Directors of the Company may approve in its
24
reasonable discretion prior to the Offer Purchase Date); (d) adopting, preparing
and implementing appropriate plans, agreements and arrangements for Spinco
Employees and Spinco non-employee directors (including, without limitation,
employee benefit plans, agreements and arrangements substantially similar to
those set forth on Exhibit E attached hereto (with such changes thereto as the
Board of Directors of the Company may approve in its reasonable discretion prior
to the Offer Purchase Date)); and (e) electing to the Board of Directors of
Spinco those persons referred to in Section 6.3 hereof so that such persons
shall be able to serve as the sole members of Spinco's Board of Directors as of
the Distribution Date.
Section 2.4. Issuance of Spinco Stock to the Company. Spinco agrees to
issue to the Company, (a) contemporaneously with the transfers of Assets and
assumption of Liabilities contemplated in connection with the Restructuring, one
share of Spinco Common Stock for each share of Company Common Stock held of
record as of the Record Date and such number of shares of Spinco Preferred Stock
as may be necessary to satisfy the representations and warranties set forth in
Section 4.1(c) of the Stockholders Agreement (which shares of Spinco Preferred
Stock shall, in the aggregate, be convertible into such number of shares of
Spinco Common Stock as shall equal 20% of the total number of shares of Spinco
Common Stock to be outstanding on a fully-diluted basis, immediately after
giving effect to the Distribution and after giving effect to the conversion of
such Spinco Preferred Stock). In addition, Spinco agrees to issue to the Company
on or prior to the Record Date such additional shares of Spinco Common Stock as
may be required in order for the Company to fulfill its obligations pursuant to
Section 3.2 hereof.
Section 2.5. Treatment of Globalstar Bank Guarantee.
(a) Spinco shall, and prior to the Offer Purchase Date the Company shall,
use their respective reasonable efforts to amend the Globalstar Bank Guarantee
so that, following the Restructuring, (x) the provisions of Section 10 of the
Globalstar Bank Guarantee shall be deleted and shall have no force and effect
against the Company or any of its Affiliates (provided that, in the
25
event that the Globalstar Bank Guarantee is amended in the manner provided in
this Section 2.5, Parent agrees to assume the obligations of the Company as
guarantor under the Globalstar Bank Guarantee), and (y) the aggregate amount of
indebtedness being guaranteed by the Company (or Parent, as the case may be)
under the Globalstar Bank Guarantee shall not exceed $250,000,000; provided that
the amendments contemplated in this sentence shall be in such form and substance
as shall be reasonably acceptable to Parent. Notwithstanding anything to the
contrary contained in this Agreement, except as otherwise expressly provided in
this Section 2.5, neither the Company nor Spinco shall, nor shall they permit
any of their respective Affiliates to, (i) amend or in any way modify either the
Globalstar Bank Guarantee, the Globalstar Credit Agreement, the Guarantee
Warrants or any other Contract, in a manner which adversely affects any of the
benefits, rights or obligations of the Company with respect to either the
Globalstar Bank Guarantee, the Globalstar Credit Agreement or the Guarantee
Warrants, without obtaining the prior written consent of Parent (which consent
may not be unreasonably withheld), or (ii) waive or diminish any rights of
subrogation of the Company with respect to the Globalstar Bank Guarantee or take
any other action which adversely affects any of the benefits, rights or
obligations of the Company with respect to either the Globalstar Bank Guarantee,
the Globalstar Credit Agreement or the Guarantee Warrants, without obtaining the
prior written consent of Parent (provided that the consent of Parent need not be
obtained with respect to the diminution of any rights of subrogation held by the
Company and its Affiliates where (A) Globalstar determines within 90 days to
either issue to the Company subordinated indebtedness of Globalstar having an
aggregate principal amount (the repayment of which, together with interest
thereon, may be deferred for up to 3 years) equal to, or equity interests in
Globalstar having a fair market value equal to, the aggregate of the amounts
paid or incurred or Liabilities assumed by the Company or its Affiliates in
connection with the Globalstar Bank Guarantee, and (B) the Company and its
Affiliates are treated no less favorably with respect to the matters set forth
in this clause (ii) than the manner in which Spinco and those of the Globalstar
Partners who have assumed liability in connection with the Globalstar Bank
Guarantee are treated with respect to such matters.
26
(b) Spinco shall, and prior to the Offer Purchase Date the Company
shall, use its respective reasonable efforts to cause the Globalstar Partners to
assume the obligations of the Company (or Parent, as the case may be) as
guarantor under the Globalstar Bank Guarantee in an aggregate amount of up to
the Maximum Partner Assumed Guarantee Amount (as defined below), and to cause
the Company (or Parent, as the case may be) to be released in respect thereof.
The parties hereto acknowledge that the Guarantee Warrants will be initially
issued to the Company, Spinco and the Globalstar Partners in direct proportion
to the amount of liability in respect of the Globalstar Bank Guarantee for which
each such person has agreed to be liable, that is, 60% to the Company and 40% to
Spinco, and that 100% of the deferred cash fees payable in respect of the
Globalstar Bank Guarantee (the "Cash Guarantee Fee") will be initially payable
solely to Spinco, subject to reallocation to Globalstar Partners assuming such
obligations as provided in Section 2.6(d).
(c) Spinco agrees to indemnify, defend and hold harmless the Company
and each Parent Indemnified Party in accordance with the indemnification
provisions of Article V hereof, from and against any and all Indemnifiable
Losses of the Company and any such Parent Indemnified Party which both (i) arise
out of, relate to or result from the Globalstar Bank Guarantee or any failure by
Globalstar to pay when due any principal, interest or other amounts owing under
the Globalstar Credit Agreement or any failure by Globalstar to perform and
abide by all other obligations, covenants, conditions and agreements applicable
to it under such Globalstar Credit Agreement, and (ii) exceed in the aggregate
$150,000,000.00; provided that in no event shall Spinco's liability in
connection with the Globalstar Bank Guarantee exceed the Spinco Assumed
Guarantee Amount (as defined below). Spinco hereby pledges to the Company, and
grants the Company a security interest in, all Guarantee Warrants held at any
time by Spinco or its Subsidiaries (and all rights, benefits and proceeds in
respect thereof), as collateral in respect of Spinco's indemnity obligations set
forth in the immediately preceding sentence, and the Company shall be entitled
to exercise all of the rights, powers and remedies (whether arising pursuant to
this Agreement, statute, common law, equity or otherwise) for the protection and
enforcement of the Company's
27
rights under this Section 2.5. Spinco hereby agrees to deliver to the Company
all certificates representing Guarantee Warrants promptly following receipt
thereof. Upon receipt from Spinco of any certificates representing Guarantee
Warrants, the Company shall hold such certificates as pledgee thereof. The
Company shall have all rights with respect to the Guarantee Warrants owned by
Spinco and pledged to the Company hereunder as afforded a secured party under
the Uniform Commercial Code. The Company agrees to transfer to Spinco or as
Spinco shall direct and release its security interest in any Guarantee Warrants
of Spinco held by the Company which are required to be transferred pursuant to
Section 2.5(d) hereof. The Company shall also release the Guarantee Warrants
from the lien of the security interest granted hereunder at the later of (i) the
release of the Company from the Globalstar Bank Guarantee and (ii) the
satisfaction in full of Spinco's in full of Spinco's indemnification obligations
hereunder with respect to Globalstar Bank Guarantee. Upon delivery to the
Company by Spinco of the pledged Guarantee Warrants, the Company shall confirm
to Spinco in writing that the Company will be holding such Guarantee Warrants as
pledge thereof.
(d) For purposes of this Section 2.5, (i) the term "Maximum Partner
Assumed Guarantee Amount" shall mean the sum of (A) $150,000,000.00 in principal
amount of indebtedness, plus (B) sixty percent (60%) of the aggregate of all
interest amounts thereon in accordance with the Globalstar Credit Agreement
(other than unpaid principal) which are owed under the Globalstar Credit
Agreement, (ii) the term "Actual Partner Assumed Guarantee Amount" shall mean
the aggregate amount of guarantee obligations with respect to which all
Globalstar Partners have actually guaranteed pursuant to the provisions of this
Section 2.5, and (iii) the term "Spinco Assumed Guarantee Amount" shall mean the
sum of (A) $100,000,000.00 in principal amount of indebtedness, plus (B) forty
percent (40%) of the aggregate of all interest amounts and other Obligations
(such term, as defined in the Globalstar Bank Guarantee)(other than unpaid
principal) which are owed under the Globalstar Credit Agreement; provided that
the Spinco Assumed Guarantee Amount shall be reduced on a dollar-for-dollar
basis by the amount of the Actual Partner Assumed Guarantee Amount (if any)
(provided that the Spinco Assumed Guarantee Amount shall in no event be less
than zero), provided further
28
that (x) Spinco will convey to each Globalstar Partner which assumes a portion
of the Globalstar Bank Guarantee Obligation a pro rata share of the Cash
Guarantee Fees and, with respect to the first $100,000,000 of obligations so
assumed, a pro rata share of the Guarantee Warrants and (y) the Company will
convey to each such Globalstar Partner, with respect to the next $50,000,000 of
obligations so assumed, a pro rata share of the Guarantee Warrants.
Section 2.6. Transfers of Spinco Capital Stock Subject to Rights of
First Offer, Etc.
(a) Third Party Call Rights. In the event that any Spinco Assets
consist of shares of capital stock of a Spinco Company, which shares are subject
to any right of first offer, right of first refusal, call right, third party
option or other similar contractual right (including, without limitation, any
rights of first offer (if any) arising out of the SSL Stockholders Agreements)
on the part of any party (other than the Company, any Retained Subsidiary,
Spinco and any Spinco Company) (such third party, a "Third Party Transferee") to
require that such shares be sold or otherwise transferred to such Third Party
Transferee (any such right, a "Third Party Call Right", and any such shares
subject to such right, the "Restricted Spinco Shares"), then Spinco shall (x)
deliver or cause to be delivered all notice(s) which are required to be
delivered by the Company, Spinco, any Retained Subsidiary or any Spinco Company
in connection with any such Third Party Call Rights (unless delivery of such
notice(s) has been waived by the recipient(s) thereof), and (y) use its
reasonable efforts to cause each such Third Party Transferee to waive all Third
Party Call Rights held by such Third Party Transferee. In the event that Spinco
is unable to obtain any such waiver with respect to any Restricted Spinco Shares
prior to the Distribution Date, then such Restricted Spinco Shares shall not be
assigned, conveyed or transferred to Spinco pursuant to this Agreement unless
and until such Restricted Spinco Shares are no longer subject to acquisition by
any Third Party Transferee pursuant to any Third Party Call Rights (provided
that, prior to such assignment, conveyance or transfer to either the Third Party
Transferee pursuant to this Section 2.6 or to Spinco pursuant to this Agreement,
such Restricted Spinco Shares shall, to the extent applicable, be subject to the
provi-
29
sions of Section 2.1(b) hereof). In the event that a Third Party Transferee
exercises any Third Party Call Right with respect to any Restricted Spinco
Shares, then (i) such Restricted Spinco Shares shall be transferred to such
Third Party Transferee in accordance with the terms and conditions of the Third
Party Call Right relating thereto, and (ii) the Company shall turn over promptly
to Spinco all cash and other amounts if and when received by the Company or any
Retained Subsidiary from such Third Party Transferee in connection therewith.
The parties hereto acknowledge and agree that the amounts referred to in clause
(ii) of the preceding sentence shall be received and held in trust and may not
be set off or reduced by any amounts which may otherwise be owed to any of the
Parent Indemnified Parties pursuant to this Agreement.
(b) Third Party Put Rights. In the event that any party (other than
the Company, any Retained Subsidiary, Spinco and any Spinco Company) (such third
party, a "Third Party Transferor") has any put right or other similar
contractual right (including, without limitation, any put rights (if any)
arising out of the SSL Stockholders Agreements) to require that the Company or
any Retained Subsidiary acquire any shares of capital stock of a Spinco Company
which are then beneficially owned or held by such Third Party Transferor (any
such right, a "Third Party Put Right", and any such shares subject to such
right, the "Spinco Put Shares"), then Spinco shall (x) deliver or cause to be
delivered all notice(s) which are required to be delivered by the Company,
Spinco, any Retained Subsidiary or any Spinco Company in connection with any
such Third Party Put Rights (unless delivery of such notice(s) has been waived
by the recipient(s) thereof), and (y) use its reasonable efforts to cause such
Third Party Transferor to waive all Third Party Put Rights held by such Third
Party Transferor. In the event that Spinco is unable to obtain any such waiver
with respect to any Restricted Spinco Shares and any such Third Party Transferor
exercises any Third Party Put Right with respect to any Spinco Put Shares, then
(i) Spinco shall pay to the Company in immediately available funds (and without
any deductions or setoffs) prior to the date of such acquisition (but in no
event later than the third Business Day prior to the anticipated date of such
acquisition) the sum of (x) the entire amount which is required to be paid to
such Third Party
30
Transferor in connection with such Third Party Put Right, and (y) all Company
Transfer Expenses (as defined below) for which documentation evidencing such
Company Transfer Expenses has been provided to Spinco prior to such date
(except, in the case of either clause (x) or (y) above, for those amounts which
have already been paid in full by Spinco), (ii) the Company or the Retained
Subsidiary which is responsible for acquiring such Spinco Put Shares upon the
exercise of such Third Party Put Right shall acquire such Spinco Put Shares in
accordance with the terms and conditions of the Third Party Put Right relating
thereto, and (iii) following receipt of the amounts payable by Spinco to the
Company pursuant to clause (i) above and following receipt of the certificates
representing any Spinco Put Shares acquired pursuant to clause (ii) above, the
Company (or any Retained Subsidiary which received such certificates) shall
thereafter deliver promptly to Spinco (or any Spinco Company designated by
Spinco) such certificates, accompanied by such endorsements or instruments of
transfer as may be reasonably requested by Spinco.
(c) Payment of Expenses; Indemnification. Spinco agrees that it shall
reimburse the Company and all Parent Indemnified Parties promptly with respect
to all costs and expenses incurred by the Company and all other Parent
Indemnified Parties (including, without limitation, all costs and expenses of
attorneys', accountants', consultants' and other similar persons) in connection
with any Actions relating to (x) the exercise or purported exercise of any Third
Party Call Right or any Third Party Put Right or (y) the consummation of any
transactions contemplated pursuant to the provisions of this Section 2.6 (all
such costs and expenses, the "Company Transfer Expenses"). Spinco agrees that
all Indemnifiable Losses (including, without limitation, all Company Transfer
Expenses) of the Company and all Parent Indemnified Parties arising out of,
relating to or resulting from, directly or indirectly, the performance or
failure to perform by any party hereto of the provisions of this Section 2.6 or
any of the transfers in any way relating thereto (other than as a result of any
willful breach, on or after the Offer Purchase Date, on the part of the Company
or any Retained Subsidiary) shall in each case be deemed to be Spinco
Liabilities, and, in each case, shall be subject to the indemnification
provisions set forth in Article V hereof.
31
Section 2.7. Exchange of Lehman Preferred Stock. Spinco shall, and
prior to the Offer Purchase Date the Company shall, use their respective best
efforts to cause the Lehman Partnerships and all other holders of the Lehman
Preferred Stock (if any) to exchange all issued and outstanding shares of
Lehman Preferred Stock for shares of capital stock or other equity securities of
either Spinco, any Spinco Company or any Subsidiary of Spinco. Spinco agrees to
indemnify, defend and hold harmless the Company and each Parent Indemnified
Party in accordance with the indemnification provisions of Article V hereof,
from and against any and all Indemnifiable Losses of the Company and any such
Parent Indemnified Party arising out of, relating to or resulting from the
ownership of any shares of Lehman Preferred Stock by the Lehman Partnerships and
all other holders of the Lehman Preferred Stock (if any).
ARTICLE III
THE DISTRIBUTION
----------------
Section 3.1. Cooperation Prior to the Distribution. As promptly as
practicable after the date hereof and prior to the Distribution Date:
(a) Subject to the provisions of paragraph (b) below, the Company and
Spinco shall prepare an Information Statement (which shall set forth appropriate
disclosure concerning Spinco and the Spinco Companies, the Spinco Business, the
Distribution and certain other matters) and Spinco shall file with the SEC the
Form 10 (which shall include or incorporate by reference the Information
Statement). The Company and Spinco shall use their respective reasonable efforts
to cause the Form 10 to be declared effective under the Exchange Act or, if
either the Company or Parent reasonably determines that the Distribution may not
be effected without registering the Spinco Common Stock pursuant to the
Securities Act, the Company shall use its best efforts to cause the Spinco
Common Stock to be registered pursuant to the Securities Act and thereafter
effect the Distribution in accordance with the terms of this Agreement,
including, without limitation, by preparing and filing on an appropriate form of
registration statement under the Securities Act covering the Spinco Common Stock
and using its
32
best efforts to cause such registration statement to be declared effective.
Following the effectiveness of such Form 10 (or registration statement, as the
case may be), the Company shall mail the Information Statement to the holders of
the Company Common Stock.
(b) Before filing with the SEC the Form 10, or the registration
statement referred to in Section 3.1(a), as the case may be, or any amendments
or supplements thereto, the Company shall furnish to Parent (or Parent's
counsel) copies of all such documents proposed to be filed, in order to give
Parent (or Parent's counsel) sufficient time to review such documents, and such
documents may thereafter be filed subject to any timely and reasonable comments
of Parent (or Parent's counsel). On or prior to the Offer Purchase Date, the
Company shall (i) deliver to Parent (or Parent's counsel) promptly, following
the receipt thereof, copies of all written communications between the Company
and the SEC relating to either the Information Statement or the Form 10 (or the
registration statement referred to in Section 3.1(a), as the case may be), and
(ii) advise Parent (or Parent's counsel) promptly of, and provide Parent (or
Parent's counsel) with the opportunity to participate in (to the extent
reasonably practicable), all telephonic and other non-written communications
between the Company and the SEC relating to either the Information Statement or
the Form 10 (or the registration statement referred to in Section 3.1(a), as the
case may be). The Company shall respond promptly to any comments from the SEC
with respect thereto, after consultation with Parent (or Parent's counsel), and
shall take such other actions as shall be reasonably required in order to have
the Form 10 declared effective under the Exchange Act, or the registration
statement referred to in Section 3.1(a) hereof declared effective under the
Securities Act, as the case may be, as soon as reasonably practicable following
the date hereof. Before filing with the SEC the Solicitation/Recommendation
Statement on Schedule 14D-9 of the Company to be filed by the Company in
connection with the Offer, and all amendments or supplements thereto, the
Company shall furnish to Parent (or Parent's counsel) copies of all such
documents proposed to be filed, in order to give Parent (or Parent's counsel)
sufficient time to review such documents, and such documents may thereafter be
filed subject to any timely and reasonable comments of Parent (or Parent's
counsel). Following the
33
date hereof, the Company shall, and shall cause its Affiliates to, provide
promptly to Parent, Purchaser and their respective counsel all such information
as such persons may reasonably request in connection with the Tender Offer
Statement on Schedule 14D-1 of the Purchaser or Parent to be filed in connection
with the Offer.
(c) The Company and Spinco shall cooperate in preparing, filing with
the SEC and causing to become effective any registration statements or
amendments thereto which are appropriate to reflect the establishment of, or
amendments to, any employee benefit and other plans contemplated by this
Agreement.
(d) The Company and Spinco shall take all such action as may be
necessary or appropriate under state securities or "Blue Sky" Laws in connection
with the transactions contemplated by this Agreement.
(e) The Company and Spinco shall prepare, and Spinco shall file and
seek to make effective, an application to permit listing of the Spinco Common
Stock either on the NYSE or any other national securities exchange or national
market system as may be selected by Spinco in its sole discretion (to the extent
permitted pursuant to the listing requirements of such exchange or national
market system).
(f) The Company and Spinco shall prepare and file an application with
the FCC (the "FCC Application") requesting the FCC's consent to the transfer of
control of any licenses, permits, approvals or other authorizations issued by
the FCC to the Company and its Subsidiaries in connection with their
telecommunications and space systems business, including those licenses,
permits, approvals and authorizations set forth in Section 3.1(f) of the
Disclosure Schedule.
(g) In addition to the actions specifically provided for elsewhere in
this Agreement and except as otherwise expressly set forth in this Agreement,
each of the parties hereto shall use its respective best efforts to take, or
cause to be taken, all actions, and, to execute and deliver, or cause to be
executed and delivered, such additional documents and instruments, and to do,
or cause to be done, all things, reasonably necessary, proper or advisable under
applicable Laws and
34
agreements to consummate and make effective the transactions contemplated by
this Agreement, including, without limitation, using its best efforts to obtain
the consents and approvals, to enter into any amendatory agreements and to make
the filings and applications necessary or desirable to have been obtained,
entered into or made in order to consummate the transactions contemplated by
this Agreement. Without limiting the generality of the foregoing sentence, each
of the parties hereto shall use its respective best efforts to ensure that the
conditions set forth in Article X hereof are satisfied (insofar as such matters
are within the control of such party). Notwithstanding any other provisions set
forth in this Agreement (including, without limitation, the provisions of this
Section 3.1(g)), neither the Company, nor Spinco nor any of their respective
Affiliates shall, without first obtaining the prior written consent of the
Parent, take or commit to take any action, in connection with obtaining any
consent, waiver or approval or effecting any of the transactions contemplated in
connection with the Closing or otherwise, (i) except as otherwise expressly
provided in this Agreement, that would result in the payment of any funds (other
than normal and usual filing fees) or the incurrence of any liability by the
Company or any Retained Subsidiary, (ii) that would result in the divestiture or
holding separate of any assets, businesses or operations of the Company or any
of the Retained Subsidiaries, (iii) that might materially limit or impair
Parent's or the Company's or any Retained Subsidiary's freedom of action with
respect to, or its ability to retain or exercise control over, any assets,
businesses or operations of the Company or any Retained Subsidiaries (other than
any limitations or restrictions expressly set forth in the Merger Agreement, the
Tax Sharing Agreement, the Stockholders Agreement or any other agreement to be
entered into pursuant to this Agreement or the Merger Agreement prior to the
Offer Purchase Date), or (iv) that might otherwise adversely affect Parent, or,
following the Offer Purchase Date, either the Company or any Retained
Subsidiary.
Section 3.2. The Distribution.
(a) Subject to the terms and conditions of this Agreement, the
Company's Board of Directors (or any duly appointed committee thereof) shall in
its reasonable discretion establish the Record Date and the
35
Distribution Date and any appropriate procedures in connection with the
Distribution (subject in each case to the provisions of applicable Law) as soon
as reasonably practicable following the date hereof or on such other dates as
Parent may reasonably request; provided that (x) the Record Date may not be
earlier than the twentieth day following the date on which the Offer is
commenced and also may not be earlier than the tenth day following the
Distribution Declaration Date and (y) the parties hereto shall use their
reasonable efforts to cause the Record Date to be established so as to occur
immediately prior to the acceptance for payment by the Purchaser of the shares
of Common Stock pursuant to the Offer (provided that in no event shall the
Record Date be established so as to occur as of or at any time after the
acceptance for payment by the Purchaser of the shares of Common Stock pursuant
to the Offer); provided further that if all conditions to the Offer have been
satisfied or waived prior to the date on which all of the Distribution
Conditions have been satisfied (or waived, to the extent expressly permitted by
the provisions of Section 10.1 hereof), then the Purchaser shall be permitted,
but not required, to accept for payment at such time the shares of Common Stock
pursuant to the Offer notwithstanding the fact that the Distribution Conditions
have not been satisfied or waived (provided that prior to such acceptance for
payment Purchaser first obtains the consent of the Company, which consent may
not be unreasonably withheld) (as further described in clause (a)(iii) below).
The parties hereto acknowledge and agree that payment of the Distribution shall
be conditioned on (x) the satisfaction (or waiver, to the extent expressly
permitted by the provisions of Section 10.1 hereof) of each of the Distribution
Conditions on a date which is prior to the fiftieth (50th) day following the
Record Date and (y) Parent and Purchaser not having taken any action, on or
after the Distribution Declaration Date, to extend or delay the expiration of
the Offer to a date which is later than the Record Date. The parties hereto
further acknowledge and agree that:
(i) if the Distribution Conditions are satisfied (or waived,
to the extent expressly permitted by the provisions of Section 10.1
hereof) prior to the fiftieth (50th) day following the Record Date,
the conditions to the Distribution shall be deemed to have been
satisfied and, if such
36
date is on or prior to the Offer Purchase Date, the Record Date shall
be deemed to have occurred immediately prior to the time at which the
Purchaser has accepted for payment the shares of Company Common Stock
pursuant to the Offer and the Distribution shall occur one Business
Day thereafter;
(ii) if the Offer Purchase Date has not yet occurred and the
Distribution Conditions are not satisfied or waived prior to the
fiftieth (50th) day following the Record Date, (A) the Distribution
shall not be paid, the declaration of the Distribution shall be null
and void, and no holder of Company Common Stock shall have any rights
whatsoever to receive any part of the Distribution, and (B) the
Company's Board of Directors shall establish a new Record Date in a
manner consistent with the provisions of the first sentence of this
Section 3.2(a); and
(iii) if the Offer Purchase Date has already occurred and
the Distribution Conditions are not expected to be satisfied or waived
prior to the fiftieth (50th) day following the Record Date, the
parties hereto agree to use their respective best efforts to
restructure the Distribution in a manner which shall permit the
holders of Company Common Stock of record immediately prior to the
consummation of the Offer to participate in a distribution of shares
of Spinco capital stock in order to preserve for such holders the
material economic benefits of the Distribution; provided that, in
connection with any such restructuring of the Distribution, the
parties hereto must first obtain the prior consent (which consent may
not be unreasonably withheld of a majority of the remaining
Continuing Directors (such term, as defined in Section 8.4 of the
Merger Agreement), if any (it being understood and agreed that the
consent of the remaining Continuing Directors may be reasonably
withheld by such remaining Continuing Directors in the event that
counsel to such remaining Continuing Directors advises such persons
that, in such counsel's reasonable opinion, any such restructuring of
the Distribution would adversely affect in any material respect the
holders of Company Common Stock of record immediately prior to the
consummation of the Offer
37
with respect to the income tax or securities law consequences of the
Distribution).
(b) Subject to Section 10.1 hereof, following the declaration by
the Company's Board of Directors of the Record Date but prior to the
Distribution Date, the Company shall deliver to the Agent one or more share
certificates representing all of the outstanding shares of Spinco Common Stock
(or other Spinco capital stock if necessary in the circumstances set forth in
paragraph (a)(iii) above) to be distributed in the Distribution and shall
instruct the Agent to distribute on the Distribution Date, (i) one share of
Spinco Common Stock (or other Spinco capital stock if necessary in the
circumstances set forth in paragraph (a)(iii) above) for each share of Company
Common Stock owned to holders of record of Company Common Stock on the Record
Date (subject to the provisions of any restricted stock or other benefit plan of
the Company) and (ii) one share of Spinco Common Stock (or other Spinco capital
stock if necessary in the circumstances set forth in paragraph (a)(iii) above)
for each share of Company Common Stock subject to a Cancelled Company Option to
the respective holders of such Cancelled Company Options (provided that the
Agent shall not distribute the shares referred to in the preceding clause (ii)
until promptly after the effective time of the Merger). Spinco agrees to provide
all share certificates that the Agent shall require in order to effect the
Distribution. All shares of Spinco Common Stock issued in the Distribution shall
be duly authorized, validly issued, fully paid, non-assessable and free of
preemptive rights.
(c) Each of the parties hereto agrees that, immediately upon
consummation of the Distribution, the Company shall not hold or beneficially own
directly or indirectly any shares of Spinco Common Stock.
Section 3.3. Termination of Certain Claims. Following the Distribution
Date, Spinco shall have no claims against the Company, any Retained Subsidiary
or any Affiliate of either based on any breach by the Company, and Retained
Subsidiary or any of their respective Affiliates of any obligations under this
Agreement that occurred on or prior to the Offer Purchase Date, all of such
claims being hereby irrevocably waived and terminated as of the Offer Purchase
Date; provided that the fore-
38
going shall not limit the Company's liability for any breach by the Company or
any Retained Subsidiary of any of their respective obligations under this
Agreement that occurs following the Offer Purchase Date.
ARTICLE IV
INTERCOMPANY BUSINESS RELATIONSHIPS
-----------------------------------
Section 4.1. Settlement of Intercompany Accounts.
(a) Except as expressly provided for in this Article IV, all
intercompany and interdivisional receivables, payables, loans, cash overdrafts
and other accounts in existence as of the Distribution Date between Spinco and
the Spinco Companies, on the one hand, and the Company and the Retained
Subsidiaries, on the other hand, under the Company's cash management program or
otherwise (other than accounts, if any, which (x) are owed to or by any Spinco
Company which is not an Affiliate of Spinco or the Company, (y) arose pursuant
to the express terms and conditions of any Existing Intercompany Agreement and
(z) are not yet payable pursuant to the provisions of such Intercompany
Agreement), shall be settled by payment in full of such amounts effective
immediately prior to the Restructuring. Following the date hereof, (i) no such
intercompany transactions shall be entered into except (x) pursuant to the
express terms and conditions of any Existing Intercompany Agreement and (y) in
the ordinary course of business and in a manner consistent with past practice,
and (ii) except with the prior written consent of the Parent, neither the
Company, any Retained Subsidiary, Spinco or any Spinco Company shall enter into
any Intercompany Agreement following the date hereof and prior to the Offer
Purchase Date, except for any Intercompany Agreement which (x) is on terms and
conditions entered into in the ordinary course of business and in a manner
consistent with past practices and (y) is not otherwise significantly adverse to
(i) the business, properties, operations, prospects, results of operations or
condition (financial or otherwise) of the Company, any Retained Subsidiary or
the Retained Business or (ii) the ability of the Company or any of the Retained
Subsidiaries to perform their respective obligations under this
39
Agreement, the Tax Sharing Agreement or the Stockholders Agreement.
(b) Following the Distribution Date, each of the Company and
Spinco shall give the other party and any independent auditors of such other
party full access at all reasonable times to the books and records of the
Company and Spinco (and each of their respective Subsidiaries) relating to
periods prior to the Distribution Date for purposes of verifying the amounts to
be paid immediately prior to the Restructuring pursuant to Section 4.1(a) above
and for resolving any disputes related thereto. The amounts settled shall, to
the extent applicable, be calculated in accordance with Adjusted GAAP.
(c) Except as otherwise expressly provided in Section 2.1(a)
hereof, the Company and Spinco covenant and agree that no Capital Contributions
may be made following the date hereof and prior to the Offer Purchase Date;
provided that the Company may make a Capital Contribution at any time after (i)
the Company notifies Parent in writing of the details of such Capital
Contribution, and (ii) the parties hereto agree to reduce the Spinco Cash Amount
otherwise payable by Parent as a result of such Capital Contribution (which
shall include interest thereon (calculated at a compounded rate of interest
equal to the commercial paper rate available to the Company as of the date
hereof) following the date of such Capital Contribution) and (iii) the parties
agree at such time as to the appropriate amount of such reduction in the event
of a Capital Contribution which is in a form other than cash.
Section 4.2. Settlements for Cash Collections and Disbursements After
the Distribution Date.
(a) For each calendar month commencing with the month in which
the Distribution Date occurs and, unless sooner terminated by agreement of the
parties, continuing for a period of two (2) years thereafter, (i) within 10
Business Days of the end of the month in question, the Company shall prepare,
and Spinco shall fully cooperate in preparing, a statement of transactions which
shall reflect a complete analysis of any cash collections and cash disbursements
by the Company and the Retained Subsidiaries on behalf of Spinco and the Spinco
Companies (including those relating to the Spinco Business) during
40
the relevant month and (ii) within 10 Business Days of the end of the month in
question, Spinco shall prepare, and the Company shall fully cooperate in
preparing, a statement of transactions which shall reflect a complete analysis
of any cash collections and cash disbursements by Spinco and the Spinco
Companies on behalf of the Company and the Retained Subsidiaries during the
relevant month (including those relating to the Retained Business); provided in
each case that, with respect to the first such monthly period such statement
shall not reflect any cash collections or disbursements occurring prior to the
Distribution Date.
(b) Not later than five Business Days following delivery of each
such monthly statement, Spinco shall pay to the Company or the Company shall pay
to Spinco, as the case may be, in cash an amount necessary to eliminate the
account balance as reflected in each such statement. Payments made pursuant to
this Section 4.2 shall not, for any purposes of this Agreement, constitute
Indemnifiable Losses or be set off against any other payments to be made,
Liabilities asserted or claims made pursuant to this Agreement, including but
not limited to Article V hereof, unless the Company and Spinco otherwise agree
in writing.
(c) Following the end of the two-year period referred to in
Section 4.2(a) above (or such earlier period as the parties hereto may agree),
(i) the Company shall promptly turn over to Spinco all cash and other similar
amounts received by the Company and the Retained Subsidiaries which properly
constitute Assets attributable to the Spinco Business and (ii) Spinco shall
promptly turn over to the Company all cash and other similar amounts received by
Spinco and the Spinco Companies which properly constitute Assets attributable to
the Retained Business.
Section 4.3. Transition Services. Following the Distribution Date and
ending on the later of (i) the sixth month anniversary of the Distribution Date
and (ii) December 31, 1996 (such period, the "Transition Services Period"), the
Company shall provide to Spinco, at such times and in such amounts as may be
reasonably requested by Spinco, those data processing, procurement support,
travel support, communications, tax, accounting, legal, insurance, employee
benefits and similar services which
41
have been customarily provided by the Company and the Retained Subsidiaries to
the Spinco Business during the twelve months prior to the date hereof
(collectively, the "Transition Services"). The Transition Services shall be
provided at a cost calculated in accordance with the cost the Company currently
assesses to the Spinco Companies and the Spinco Business for the same or similar
services. Following the end of the calendar month in which any such Transition
Services are performed, the Company shall provide to Spinco an invoice (the
"Transition Services Invoice") setting forth in summary detail the Transition
Services which were provided during such calendar month and the appropriate cost
thereof. Spinco shall pay to the Company in cash in immediately available funds,
in a reasonably prompt manner following the delivery by the Company of a
Transition Services Invoice, the amounts due with respect to the Transition
Services reflected on such Transition Services Invoice. The Transition Services
Period may be extended for up to two six-month periods in the event that Spinco
notifies the Company at least 30 days prior to the expiration of the then-
current Transition Services Period of its intention to so extend the Transition
Services Period.
Section 4.4. Termination of Intercompany Arrangements. Each of the
parties hereto agrees that, except as otherwise expressly provided in this
Article IV, all Existing Intercompany Agreements in effect immediately prior to
the Distribution Date shall not be deemed altered, amended or terminated as a
result of this Agreement or the consummation of the transactions contemplated
hereby and shall otherwise remain in effect immediately after giving effect to
the Restructuring (provided that nothing contained in this Agreement shall be
deemed to limit any party's ability to terminate any such Intercompany Agreement
following the Distribution Date in accordance with the provisions of such
Intercompany Agreement).
42
ARTICLE V
SURVIVAL AND INDEMNIFICATION
----------------------------
Section 5.1. Survival of Agreements. The obligations under this
Article V of each of Spinco and the Spinco Companies, on the one hand, and the
Company and the Retained Subsidiaries, on the other hand, shall survive the sale
or other transfer by it of any Assets or businesses or the assignment by it of
any Liabilities. To the extent that Spinco or any of the Spinco Companies
transfers directly or indirectly to any other person all or substantially all of
the Spinco Assets or the Spinco Business, Spinco will cause the transferee of
such SpincoAssets or Spinco Business to assume specifically its obligations
under this Agreement with respect thereto and will cause such transferee to
fulfill its obligations related to such Spinco Liabilities. Such assumption will
not relieve Spinco of its obligations in respect thereof. To the extent that the
Company or any of the Retained Subsidiaries transfers directly or indirectly to
any other person all or substantially all of the Retained Assets or the Retained
Business the Company will cause the transferee of such Retained Assets or
Retained Business to assume specifically its obligations under this Agreement
with respect thereto and will cause such transferee to fulfill its obligations
related to such Retained Liabilities. Such assumption will not relieve the
Company of its obligations in respect thereof. Spinco, on the one hand, and the
Company, on the other hand, agree that such transferee may exercise all of
Spinco's or the Company's rights hereunder, as the case may be, with respect to
such Assets or businesses.
Section 5.2. Spinco's Agreement to Indemnify.
(a) In addition to any indemnification required by Articles II,
VI and VIII hereof, subject to the terms and conditions set forth in this
Agreement, from and after the Distribution Date, Spinco shall indemnify, defend
and hold harmless the Company, each Retained Subsidiary, the Purchaser and
Parent and each of their respective directors, officers, employees,
representatives, advisors, agents and Affiliates (collectively, the "Parent
Indemnified Parties") from, against and in respect of any and all Indemnifiable
Losses of the Parent Indemnified Parties arising out of, relating to or re-
43
sulting from, directly or indirectly, (i) any misrepresentation or breach of
warranty made by or on behalf of Spinco or, on or prior to the Offer Purchase
Date, made by or on behalf of the Company, which misrepresentation or breach of
warranty is contained in this Agreement or the Stockholders Agreement, (ii) any
breach of any agreement or covenant under this Agreement or the Stockholders
Agreement on the part of Spinco or, on or prior to the Offer Purchase Date, on
the part of the Company, (iii) any and all Spinco Liabilities, (iv) the conduct
of the Spinco Business or any part thereof on, prior to or following the
Distribution Date, (v) any transfer of Spinco Assets to, or assumption of Spinco
Liabilities by, Spinco or any Spinco Company in accordance with this Agreement
or otherwise in connection with the Restructuring (other than any costs and
expenses which have been expressly assumed by the Company pursuant to the
provisions of this Agreement), (vi) any Indemnifiable Loss resulting from any
claims that any statements or omissions relating to or describing, directly or
indirectly, Spinco, any Spinco Company, the Spinco Business, any Spinco Asset or
any Spinco Liability, and which occur on or prior to the Offer Purchase Date (A)
in the Information Statement, the Form 10 or in any registration statement filed
pursuant to Section 3.1 hereof (in each case other than with respect to any
statements or omissions made in reliance upon and in conformity with information
furnished in writing by Parent, the Purchaser or their Affiliates,
representatives or advisors and other than any statements or omissions which
relate solely to the Merger Agreement and this Agreement and the transactions
contemplated thereby and hereby), or (B) in any document(s) filed with the SEC
by Spinco or any Spinco Company after the date hereof pursuant to either the
Securities Act or the Exchange Act (in each case other than with respect to any
statements or omissions which relate solely to the Merger Agreement and this
Agreement and the transactions contemplated thereby and hereby), which, in the
case of either clause (A) or (B) above, are false or misleading with respect to
any material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, (vii) the failure of
the Company or Spinco to obtain any Final Order or other consent or approval of
the FCC with respect to any of the transactions contemplated pursuant to either
this Agreement or the Merger Agreement and (viii)
44
any Excluded Indemnifiable Losses (as defined below). Notwithstanding the
foregoing, Spinco's indemnification obligations pursuant to this Section 5.2
shall not in any event include any Indemnifiable Losses arising out of or
relating to Transaction Suits (as defined in Section 6.5), except to the extent
of any Indemnifiable Losses (such Indemnifiable Losses, the "Excluded
Indemnifiable Losses") which the Company is able to demonstrate resulted
directly from (a) any statement or omission on the part of Spinco or any of its
Affiliates in the documents referred to in Section 5.2(a)(vi) above or (b) any
business activities, Assets or Liabilities of Spinco, any of the Spinco
Companies or the Spinco Business.
(b) Notwithstanding Spinco's obligations to indemnify Parent
Indemnified Parties pursuant to Section 5.2(a) hereof, Spinco shall be obligated
to indemnify the Parent Indemnified Parties only for those Indemnifiable Losses
under clauses (i), (ii) or (vi) of Section 5.2(a) hereof as to which the Parent
Indemnified Parties have given Spinco written notice thereof on or prior to the
third anniversary of the Distribution Date (it being understood that there shall
be no corresponding time limitation with respect to any Indemnifiable Losses
arising under clauses (iii), (iv), (v), (vii) and (viii) of Section 5.2(a)
hereof); provided further that claims with respect to breaches of covenants and
agreements set forth in this Agreement or the Stockholders Agreement shall
survive for the applicable statute of limitations period. Notwithstanding the
foregoing, if on or before the expiration of such indemnification period any
Parent Indemnified Party has given notice to Spinco pursuant to Section 5.4
hereof of any matter which would be the basis for a claim of indemnification by
such Parent Indemnified Party pursuant to Section 5.2(a), such Parent
Indemnified Party shall have the right after the expiration of such
indemnification period to assert or to continue to assert such claim and to be
indemnified with respect thereto.
Section 5.3. The Company's Agreement to Indemnify.
(a) In addition to any indemnification required by Articles II,
VI and VIII hereof, subject to the terms and conditions set forth in this
Agreement, from and after the Distribution Date, the Company shall indemnify,
defend and hold harmless Spinco, each Spinco
45
Company and each of their respective directors, officers, employees,
representatives, advisors, agents and Affiliates (collectively, the "Spinco
Indemnified Parties") from, against and in respect of any and all Indemnifiable
Losses of the Spinco Indemnified Parties arising out of, relating to or
resulting from, directly or indirectly, (i) any breach of any agreement or
covenant set forth in this Agreement or in the Stockholders Agreement on the
part of Parent or the Purchaser or, following the Offer Purchase Date, on the
part of the Company, (ii) any and all Retained Liabilities, (iii) the conduct of
the Retained Business or any part thereof on, prior to or following the
Distribution Date, (iv) any Indemnifiable Loss resulting from any claims that
any statements or omissions (A) relating to or describing, directly or
indirectly, Parent or the Purchaser, and which occur on or prior to the Offer
Purchase Date in any Solicitation/Recommendation Statement on Schedule 14D-9 of
the Company filed in connection with the Offer, the Information Statement, the
Form 10 or in any registration statement filed pursuant to Section 3.1 or
Section 3.3 hereof (in each case only to the extent of any statements or
omissions made in reliance upon and in conformity with information furnished in
writing by Parent, the Purchaser or their Affiliates, representatives or
advisors), (B) in any Tender Offer Statement on Schedule 14D-1 of the Purchaser
or Parent filed in connection with the Offer (other than any statements or
omissions made in reliance upon and in conformity with information furnished in
writing by the Company, any Retained Subsidiary, Spinco, any Spinco Company or
any of their respective Affiliates, representatives or advisors), or (C) in any
other document(s) filed after the date hereof by Parent or the Purchaser with
the SEC pursuant to either the Securities Act or the Exchange Act (e.g.,
statements or omissions made in a Current Report on Form 8-K filed by either
Parent or the Purchaser after the date hereof pursuant to the Exchange Act),
which, in the case of either clauses (A), (B) or (C) above, are false or
misleading with respect to any material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (v) any Indemnifiable Loss arising out of or resulting from
Transaction Suits (other than Excluded Indemnifiable Losses). Notwithstanding
the foregoing and anything to the contrary in this Agreement or any other
agreement to
46
be entered into pursuant to this Agreement, the Company shall not be required to
indemnify, defend and hold harmless any Spinco Indemnified Party from and
against any Indemnifiable Loss resulting from any claims that the statements
included in the Information Statement, the Form 10 or in any registration
statement filed pursuant to Section 3.1 or Section 3.3 hereof (in each case
other than statements or omissions made in reliance upon and in conformity with
information furnished in writing by Parent, the Purchaser or their Affiliates,
representatives or advisors expressly for use therein) are false or misleading
with respect to any material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(b) Notwithstanding the Company's obligations to indemnify the
Spinco Indemnified Parties pursuant to Section 5.3(a) hereof, the Company shall
be obligated to indemnify the Spinco Indemnified Parties only for those
Indemnifiable Losses under Sections 5.3(a)(i) and 5.3(a)(iv) hereof as to which
the Spinco Indemnified Parties have given the Company written notice thereof on
or prior to the expiration of any applicable statute of limitations period (it
being understood that there shall be no corresponding time limitation with
respect to any Indemnifiable Losses arising under clauses (ii) and (iii) of
Section 5.3(a) hereof). Notwithstanding the foregoing, if on or before the
expiration of such indemnification period any Spinco Indemnified Party has given
notice to the Company pursuant to Section 5.4 hereof of any matter which would
be the basis for a claim of indemnification by such Spinco Indemnified Party
pursuant to Section 5.3(a), such Spinco Indemnified Party shall have the right
after the expiration of such indemnification period to assert or to continue to
assert such claim and to be indemnified with respect thereto.
Section 5.4. Procedure for Indemnification. All claims for
indemnification under this Article V shall be asserted and resolved as follows:
(a) In the event that any claim or demand, or other circumstance
or state of facts which could give rise to any claim or demand, for which an
Indemnifying Party may be liable to an Indemnified Party hereunder
47
is asserted against or sought to be collected by a third party (an "Asserted
Liability"), the Indemnified Party shall promptly notify the Indemnifying Party
in writing of such Asserted Liability, specifying the nature of such Asserted
Liability and the amount or the estimated amount thereof to the extent then
feasible (which estimate shall not be conclusive of the final amount of such
claim or demand) (the "Claim Notice"); provided that no delay on the part of the
Indemnified Party in giving any such Claim Notice shall relieve the Indemnifying
Party of any indemnification obligation hereunder unless (and then solely to the
extent that) the Indemnifying Party is materially prejudiced by such delay. The
Indemnifying Party shall have 20 days (or less if the nature of the Asserted
Liability requires) from its receipt of the Claim Notice (the "Notice Period")
to notify the Indemnified Party whether or not the Indemnifying Party desires,
at the Indemnifying Party's sole cost and expense and by counsel of its own
choosing, which shall be reasonably satisfactory to the Indemnified Party, to
defend against such Asserted Liability; provided that if, under applicable
standards of professional conduct a conflict on any significant issue between
the Indemnifying Party and any Indemnified Party exists in respect of such
Asserted Liability, then the Indemnifying Party shall reimburse the Indemnified
Party for the reasonable fees and expenses of one additional counsel to be
retained in order to resolve such conflict, promptly upon presentation by the
Indemnified Party of invoices or other documentation evidencing such amounts to
be reimbursed. If the Indemnifying Party undertakes to defend against such
Asserted Liability, the Indemnifying Party shall control the investigation,
defense and settlement thereof; provided that (i) the Indemnifying Party shall
use its reasonable efforts to defend and protect the interests of the
Indemnified Party with respect to such Asserted Liability, (ii) the Indemnified
Party, prior to or during the period in which the Indemnifying Party assumes
control of such matter, may take such reasonable actions as the Indemnified
Party deems necessary to preserve any and all rights with respect to such
matter, without such actions being construed as a waiver of the Indemnified
Party's rights to defense and indemnification pursuant to this Agreement, and
(iii) the Indemnifying Party shall not, without the prior written consent of the
Indemnified Party, consent to any settlement which (A) imposes any Liabilities
on the Indemnified Party (other than those Liabili-
48
ties which the Indemnifying Party agrees to promptly pay or discharge), and (B)
with respect to any non-monetary provision of such settlement, would be likely,
in the Indemnified Party's reasonable judgment, to have an adverse effect on
the business operations, assets, properties or prospects of Parent, the Company
or the Retained Business (in the case of a Parent Indemnified Party), Spinco or
the Spinco Business (in the case of a Spinco Indemnified Party), or such
Indemnified Party. Notwithstanding the foregoing, the Indemnified Party shall
have the right to control, pay or settle any Asserted Liability which the
Indemnifying Party shall have undertaken to defend so long as the Indemnified
Party shall also waive any right to indemnification therefor by the Indemnifying
Party. If the Indemnifying Party undertakes to defend against such Asserted
Liability, the Indemnified Party shall cooperate fully with the Indemnifying
Party and its counsel in the investigation, defense and settlement thereof. If
the Indemnified Party desires to participate in any such defense it may do so at
its sole cost and expense. If the Indemnifying Party does not undertake within
the Notice Period to defend against such Asserted Liability, then the
Indemnifying Party shall have the right to participate in any such defense at
its sole cost and expense, but the Indemnified Party shall control the
investigation, defense and settlement thereof (provided that the Indemnified
Party may not settle any such Asserted Liability without obtaining the prior
written consent of the Indemnifying Party (which consent shall not be
unreasonably withheld by the Indemnifying Party; provided that in the event that
the Indemnifying Party is in material breach at such time of the provisions of
this Section 5.4, then the Indemnified Party shall not be obligated to obtain
such prior written consent of the Indemnifying Party) at the reasonable cost and
expense of the Indemnifying Party (which shall be paid by the Indemnifying Party
promptly upon presentation by the Indemnified Party of invoices or other
documentation evidencing the amounts to be indemnified). The Indemnified Party
and the Indemnifying Party agree to make available to each other, their counsel
and other representatives, all information and documents available to them which
relate to such claim or demand (subject to the confidentiality provisions of
Section 7.5 hereof); provided that no party hereto shall be obligated to
disclose any information which would result in the waiver of any attorney-
client, attorney work product or other
49
similar privileges, if the disclosure of such information would be materially
prejudicial to such disclosing party. The Indemnified Party and the Indemnifying
Party and the Company and its employees also agree to render to each other such
assistance and cooperation as may reasonably be required to ensure the proper
and adequate defense of such claim or demand.
(b) In the event that an Indemnified Party should have a claim
against the Indemnifying Party hereunder which does not involve a claim or
demand being asserted against or sought to be collected from it by a third
party, the Indemnified Party shall send a Claim Notice with respect to such
claim to the Indemnifying Party. The Indemnifying Party shall have 20 days from
the date such Claim Notice is delivered during which to notify the Indemnified
Party in writing of any good faith objections it has to the Indemnified Party's
Claim Notice or claims for indemnification, setting forth in reasonable detail
each of the Indemnifying Party's objections thereto. If the Indemnifying Party
does not deliver such written notice of objection within such 20-day period, the
Indemnifying Party shall be deemed to have accepted responsibility for the
prompt payment of the Indemnified Party's claims for indemnification, and shall
have no further right to contest the validity of such indemnification claims. If
the Indemnifying Party does deliver such written notice of objection within such
20-day period, the Indemnifying Party and the Indemnified Party shall attempt
in good faith to resolve any such dispute within 30 days of the delivery by the
Indemnifying Party of such written notice of objection. If the Indemnifying
Party and the Indemnified Party are unable to resolve any such dispute within
such 30-day period, then either the Indemnifying Party or the Indemnified Party
shall be free to pursue any remedies which may be available to such party under
applicable Law.
Section 5.5. Miscellaneous Indemnification Provisions.
(a) The Indemnifying Party agrees to indemnify any successors of
the Indemnified Party to the same extent and in the same manner and on the same
terms and conditions as the Indemnified Party is indemnified by the Indemnifying
Party under this Article V. In the event that any claim for indemnification
under either
50
Articles II, V, VI or VIII hereof meets the criteria of more than one of the
types of claims for which indemnification is provided for under such provisions,
the Indemnified Party, in its sole discretion, shall classify such claim and
only be required to include such claim, and the recoveries for indemnification
therefrom, in one of such categories. No investigation made by any party hereto
shall affect any representation or warranty of the other party's hereto
contained in this Agreement or in the Schedules attached hereto or any
certificate, document or other instrument delivered in connection herewith. The
consummation by Parent of the Offer pursuant to the terms and conditions of the
Merger Agreement, either with or without knowledge of a breach of warranty or
covenant or misrepresentation by any party hereto, shall not constitute a waiver
of any claim by any Parent Indemnified Party for Indemnifiable Losses with
respect to such breach or misrepresentation. In determining the amount of
Indemnifiable Losses to which a Parent Indemnified Party or Spinco Indemnified
Party (as the case may be) is entitled to indemnification hereunder, an
arbitration panel, court or tribunal may take into consideration, where
appropriate and without duplication, any diminution in the aggregate value of
the Retained Business or the Spinco Business (as the case may be).
Notwithstanding anything to the contrary contained in this Agreement, the
assignment of any party's rights hereunder to any other person or entity shall
not limit, affect or prejudice the ability of the assigning party to continue to
enforce any rights of indemnification hereunder or other rights hereunder in
accordance with the terms and conditions of this Agreement.
(b) In determining the amount of any indemnity payable under this
Article V, such amount shall be reduced by (x) any related tax benefits if and
when actually realized or received (but only after taking into account any tax
benefits (including, without limitation, any net operating losses or other
deductions) to which the Indemnified Party would be entitled without regard to
such item), except to the extent such recovery has already been taken into
account in determining the amount of any indemnity payable under Articles II, V,
VI or VIII hereof, and (y) any insurance recovery if and when actually realized
or received, in each case in respect of such Asserted Liability. Any such
recovery shall be promptly repaid by the Indemnified Party to the Indemni-
51
fying Party following the time at which such recovery is realized or received
pursuant to the previous sentence, minus all reasonably allocable costs, charges
and expenses incurred by the Indemnified Party in obtaining such recovery.
Notwithstanding the foregoing, if (x) the amount of Indemnifiable Losses for
which the Indemnifying Party is obligated to indemnify the Indemnified Party is
reduced by any tax benefit or insurance recovery in accordance with the
provisions of the previous sentence, and (y) the Indemnified Party subsequently
is required to repay the amount of any such tax benefit or insurance recovery or
such tax benefit or insurance recovery is disallowed, then the obligation of the
Indemnifying Party to indemnify with respect to such amounts shall be reinstated
immediately and such amounts shall be paid promptly to the Indemnified Party in
accordance with the provisions of this Agreement.
(c) In the event that a dispute between any Indemnifying Party
and any Indemnified Party concerning the existence of a right or obligation to
indemnity under this Agreement is determined by any arbitration panel or any
court or tribunal, the reasonable fees and expenses of the attorneys for the
party which is principally prevailing in such action shall be paid by the party
which is not principally prevailing in such action.
(d) All amounts owing under this Article V shall bear interest at
a fluctuating rate of interest equal to the rate of interest from time to time
announced by Citibank, N.A. in New York, New York as its prime lending rate,
computed from the time such Damage, cost or expense was incurred or suffered to
the date of payment therefor.
(e) The remedies provided by this Article V shall be the parties'
sole and exclusive remedies for the recovery of any Indemnifiable Losses
resulting, from or arising out of or related to misrepresentations, breaches of
warranties, and non-fulfillment of obligations under this Agreement, except
those arising from or arising out of or related to fraud; provided that the
provisions of this Section 5.5(e) shall not limit the ability of any party to
seek injunctive or similar relief pursuant to Section 11.11 hereof.
52
(f) The parties hereto agree that, notwithstanding any other
provision in this Agreement to the contrary, in the event of any breach of
the representation and warranty set forth in Section 6.1(c)(i) hereof, in
addition to the indemnities provided for in this Article V, Spinco shall
either (a) secure the prompt release of the Company, the Retained
Companies, the Retained Business and any affected Parent Indemnified Party
from all obligations and Liabilities relating to those Spinco Liabilities
or Spinco Indebtedness for which the Company, the Retained Companies, the
Retained Business or any affected Parent Indemnified Party is or has become
liable, directly or indirectly, as borrower, surety, guarantor or otherwise
(or with respect to which any of the Retained Assets is or has become bound
by or subject to) or (b) promptly prepay, redeem, purchase or defease
(pursuant to a trust arrangement reasonably acceptable to Parent) in full
all such Spinco Liabilities or Spinco Indebtedness. Spinco shall take or
cause to be taken all actions, execute such agreements, documents or
instruments, and do or cause to be done all things, necessary, proper or
advisable under the terms of the agreements governing the Spinco Liability
or Spinco Indebtedness in question and under the provisions of applicable
Law, or as Parent may otherwise reasonably request, in connection with the
fulfillment of Spinco's obligations under this Section 5.5(f).
Section 5.6. Pending Litigation. Following the Distribution
Date, (a) Spinco shall have exclusive authority and control over the
investigation, prosecution, defense and appeal of all pending Actions
relating primarily to the Spinco Business, the Spinco Assets or the Spinco
Liabilities (each, a "Spinco Action"), and may settle or compromise, or
consent to the entry of any judgment with respect to, any such Action
without the consent of the Company, and (b) the Company shall have
exclusive authority and control over the investigation, prosecution,
defense and appeal of all pending Actions relating primarily to the
Retained Business, the Retained Assets or the Retained Liabilities (each, a
"Retained Action"), and may settle or compromise, or consent to the entry
of any judgment with respect to, any such Action without the consent of
Spinco; provided that if both the Company and Spinco are named as parties
to any Spinco Action or Retained Action, neither the Company nor Spinco
(nor any of their respective Subsidiaries) may settle or
53
compromise, or consent to the entry of any judgment with respect to, any
such Action without the prior written consent of the other party (which
consent may not be unreasonably withheld) if such settlement, compromise or
consent to such judgment includes any form of injunctive relief binding
upon such other party. Spinco shall indemnify, defend and hold harmless
each of the Parent Indemnified Parties, and the Company shall indemnify and
hold harmless each of the Spinco Indemnified Parties, in the manner
provided in this Article V, from and against all Indemnifiable Losses
arising out of or resulting from each such Action over which such
indemnifying party has authority and control pursuant to this Section 5.6.
Section 5.7. Construction of Agreements. Notwithstanding any
other provision in this Agreement to the contrary, in the event and to the
extent that there shall be a conflict between the provisions of this
Article V and the provisions of any other part of this Agreement or any
exhibit or schedule hereto, the provisions of this Article V shall control,
and in the event and to the extent that there shall be a conflict between
the provisions of this Agreement (including, without limitation, the
provisions of this Article V) and the provisions of the Tax Sharing
Agreement, the provisions of the Tax Sharing Agreement shall control.
ARTICLE VI
CERTAIN ADDITIONAL MATTERS
--------------------------
Section 6.1. Representations or Warranties; Disclaimers.
(a) It is the explicit intent of each party hereto that no party
to this Agreement or to the Merger Agreement is making any representation
or warranty whatsoever, express or implied, in this Agreement, the Merger
Agreement, the Tax Sharing Agreement or the Stockholders Agreement or in
any other agreement contemplated hereby or thereby, except those
representations and warranties expressly set forth in this Agreement.
Each of the parties hereto agrees, to the fullest extent permitted by Law,
that none of them nor any of their Affiliates, agents or representatives
shall have any liability or responsibility whatsoever to any such other
party
54
hereto or such other party's Affiliates, agents or representatives on any
basis (including, without limitation, in contract or tort, under federal or
state securities laws or otherwise) based upon any information provided or
made available, or statements made, to any such other party or such other
party's Affiliates, agents or representatives (or any omissions therefrom),
including, without limitation, in respect of the specific representations
and warranties set forth in this Agreement and the Merger Agreement and the
covenants and agreements set forth in the Merger Agreement, except (i) as
and only to the extent expressly set forth in the indemnification
provisions of Article V hereof and as otherwise expressly set forth herein
(subject to the limitations and restrictions contained herein), and (ii)
with respect to breaches of the covenants and agreements set forth in this
Agreement.
(b) Without limiting the generality of the foregoing, it is
understood and agreed (a) that neither Parent, the Company nor any of the
Retained Subsidiaries is, in this Agreement or in any other agreement or
document contemplated by this Agreement, representing or warranting in any
way as to the value or freedom from encumbrance of, or any other matter
concerning, any Spinco Assets, (b) that the Spinco Assets are being
transferred "as is, where is" and (c) that, subject to the obligations of
the Company set forth in Sections 2.1(b) and 6.2 hereof, Spinco shall bear
the risk that any conveyances of the Spinco Assets might be insufficient or
that Spinco's or any of the Spinco Company's title to any Retained Assets
shall be other than good and marketable and free from encumbrances.
Similarly, it is understood and agreed that neither Parent, the Company nor
any of the Retained Subsidiaries is, in this Agreement or in any other
agreement or document contemplated by this Agreement, representing or
warranting to Spinco or any Spinco Indemnified Party in any way that the
obtaining of the consents and approvals, the execution and delivery of any
amendatory agreements and the making of the filings and applications
contemplated by this Agreement shall satisfy the provisions of any or all
applicable agreements or the requirements of all applicable Laws or
judgments.
(c) Spinco represents and warrants to the Company that (i) except
as expressly provided in the
55
Globalstar Bank Guarantee (as amended pursuant to the provisions of Section
2.5 hereof), neither the Company nor any of the Retained Subsidiaries will,
after giving effect to the Restructuring, be liable directly or indirectly,
as borrower, surety, guarantor, indemnitor or otherwise, with respect to
(and that none of the Retained Assets shall be bound by or subject to) any
of the Spinco Liabilities or any Spinco Indebtedness, (ii) there are no
Intercompany Agreements in effect as of the date hereof, which, either
individually or in the aggregate, are materially adverse to (i) the
business, properties, operations, prospects, results of operations or
condition (financial or otherwise) of the Retained Business or (ii) the
ability of the Company or any of the Retained Subsidiaries to perform their
respective obligations under this Agreement, the Tax Sharing Agreement or
the Stockholders Agreement, (iii) there are no Spinco Assets which have
been used within the Retained Business within one year prior to the date
hereof, other than those Spinco Assets which are listed on Section 6.2(c)
of the Disclosure Schedule, (iv) except as set forth in Section 6.1(c)(iv)
of the Disclosure Schedule, neither Spinco nor any Spinco Company shall,
immediately after giving effect to the Restructuring and the Distribution,
own, hold or lease, in whole or in part, any of the assets, properties,
licenses and rights which are reasonably necessary to carry on the Retained
Business as presently conducted, and (v) prior to, on or shortly after the
Distribution Date, GTL or Globalstar (as the case may be) will issue to the
Company the Guarantee Warrants described in the Globalstar Warrant
Memorandum and the term sheet set forth on Exhibit A-1 attached hereto,
which warrants will be on the terms and conditions described in the
Globalstar Warrant Memorandum and shall otherwise be on such terms and
conditions as are customary to transactions of a similar nature.
Section 6.2. Further Assurances; Subsequent Transfers.
(a) To the extent that any of the transfers, distributions and
deliveries required to be made pursuant to Article II shall not have been
so consummated prior to the Distribution Date, the parties shall cooperate
and use their best efforts to effect such consummation as promptly
thereafter as reasonably practicable. Each of the parties hereto will
execute and deliver such
56
further instruments of transfer and distribution and will take such other
actions as any party hereto may reasonably request in order to effectuate
the purposes of this Agreement and to carry out the terms hereof. Without
limiting the generality of the foregoing, at any time and from time to time
after the Distribution Date, at the request of Spinco or any of its
Subsidiaries, each party hereto will, and will cause each of its
Subsidiaries to, execute and deliver such other instruments of transfer and
distribution, and take such action as any party hereto may reasonably
request in order to more effectively transfer, convey and assign to such
requesting party or to the Subsidiaries of such requesting party and to
confirm the right, title or interest held by such requesting party or any
of the Subsidiaries of such requesting party, in the Assets to be
transferred to such requesting party (or its Subsidiaries) pursuant to this
Agreement, to put such requesting party and its Subsidiaries in actual
possession and operating control thereof and to permit such requesting
party and its Subsidiaries to exercise all rights with respect thereto
(including, without limitation, rights under contracts and other
arrangements as to which the consent of any third party to the transfer
thereof shall not have previously been obtained) and to properly assume and
discharge the related Liabilities.
(b) Each of the parties hereto agrees to use its respective best
efforts, at the Company's reasonable expense, to obtain any consents
required to transfer and assign to (i) Spinco all agreements, leases,
licenses and other rights of any nature whatsoever relating to the Spinco
Assets, and (ii) the Company all agreements, leases, licenses and other
rights of any nature whatsoever relating to the Retained Assets. In the
event and to the extent that any party hereto or any of its Subsidiaries is
unable to obtain any such required consents, (i) such party (or any
Subsidiary that is a party to such agreements, leases, licenses and other
rights, as the case may be) shall continue to be bound thereby (such
person, the "Record Holder") and (ii) the party to which such Asset would
otherwise be transferred pursuant to this Agreement (the "Beneficial
Holder") shall pay, perform and discharge fully all the obligations of the
Record Holder thereunder from and after the Distribution Date and indemnify
such Record Holder for all Indemnifiable Losses arising out of such
performance by
57
such Record Holder. The Record Holder shall, without further consideration
therefor, pay, assign and remit to the Beneficial Holder promptly all
monies, rights and other consideration received in respect of such
performance. The Record Holder shall exercise or exploit its rights and
options under all such agreements, leases, licenses and other rights and
commitments referred to in this Section 6.2(b) only as reasonably directed
by the Beneficial Holder and at the Beneficial Holder's expense. If and
when any such consent shall be obtained or such agreement, lease, license
or other right shall otherwise become assignable, the Record Holder shall
promptly assign all its rights and obligations thereunder to the
Beneficial Holder without payment of further consideration and the
Beneficial Holder shall, without the payment of any further consideration
therefor, assume such rights and obligations.
(c) In the event that, subsequent to the Distribution Date, the
Company or any of the Retained Subsidiaries shall either (i) receive
written notice from Spinco or any of the Spinco Companies that certain
specified Assets of the Company or any of the Retained Subsidiaries which
properly constitute Spinco Assets were not transferred to it on or prior to
the Distribution Date or (ii) determine that certain Assets of the Company
or any of the Retained Subsidiaries which constitute Spinco Assets were not
transferred to Spinco or any of the Spinco Companies on or prior to the
Distribution Date, then as promptly as practicable thereafter, the Company
shall, and shall cause its Subsidiaries to, take all steps reasonably
necessary to transfer and deliver any and all of such Assets to Spinco or
its Subsidiaries at the recipient's reasonable expense. In the event that,
subsequent to the Distribution Date, Spinco or any of the Spinco Companies
shall either (i) receive written notice from the Company or any of the
Retained Subsidiaries that certain specified Assets were transferred to
Spinco or its Subsidiaries which properly constitute Retained Assets, or
(ii) determine that certain Assets of Spinco or the Spinco Companies which
constitute Retained Assets were transferred to Spinco or the Spinco
Companies, then as promptly as practicable thereafter, Spinco shall, and
shall cause the Spinco Companies to, take all steps reasonably necessary
to transfer and deliver any and all of such Assets to the Company or the
Company's Subsid-
58
iaries at the recipient's reasonable expense without the payment by the
Company of any consideration therefor.
Section 6.3. The Spinco Board. Spinco and the Company shall
take all actions which may be required to elect or otherwise appoint, on or
prior to the Distribution Date, those individuals that the Board of
Directors of the Company (as in effect prior to the consummation of the
Offer) may designate as directors of Spinco.
Section 6.4. Use of Names. Following the Distribution Date,
Spinco and each of the Spinco Companies shall have the sole and exclusive
ownership of and right to use, as between the Company and each of the
Retained Subsidiaries, on the one hand, and Spinco and each of the Spinco
Companies, on the other hand, the "Loral" name and each of the names used
(or formerly used) in the Spinco Business (the "Spinco Names"), and each of
the trade marks, trade names, service marks and other proprietary rights
related to such Spinco Names as set forth on Section 6.4 of the Disclosure
Schedule (the "Spinco Proprietary Name Rights"); provided that the Company,
the Retained Business and each of the Retained Subsidiaries is hereby
granted a perpetual, fully paid-up, worldwide, non-exclusive license with
respect to such Spinco Names and Spinco Proprietary Name Rights to the
extent necessary to enable the Company, the Retained Business and each of
the Retained Subsidiaries to continue to use such rights in their
respective businesses with respect to (x) those governmental Contracts of
the Retained Business (and any programs thereunder) in existence as of the
Offer Purchase Date or those governmental programs for which a bid has been
submitted prior to the Offer Purchase Date, and (y) those products and
services of the type manufactured or sold by them on the date hereof or at
any time during the last five years or under current development by them as
of the date hereof. Following the Distribution Date, the Company and each
of the Retained Subsidiaries shall have the sole and exclusive ownership of
and right to use, as between Spinco and each of the Spinco Companies, on
the one hand, and the Company and each of the Retained Subsidiaries, on the
other hand, all names used (or formerly used) by the Company or any of the
Retained Subsidiaries as of such date other than the Spinco Names (the
"Company Names"), and all other trade marks, trade names, service marks and
other proprietary rights owned or used by the Company or any of the Retai-
59
ned Subsidiaries as of such date other than the Spinco Proprietary Name
Rights (the "Company Proprietary Name Rights"). Notwithstanding the
foregoing, following the Distribution Date, (x) the Company shall, and
shall cause its Subsidiaries and other Affiliates to, take all action
reasonably necessary to cease using, and change as soon as commercially
practicable (including by amending any charter documents), any corporate or
other names which are the same as or confusingly similar to any of the
Spinco Names or any of the Spinco Proprietary Name Rights, and (y) Spinco
shall, and shall cause its Subsidiaries and other Affiliates to, take all
action reasonably necessary to cease using, and change as soon as
commercially practicable (including by amending any charter documents), any
corporate or other names which are the same as or confusingly similar to
any of the Company Names or any of the Company Proprietary Name Rights.
Section 6.5. Litigation Relating to Transaction.
(a) Following the date hereof, in the event that any Action is
commenced against the Company or any of its Subsidiaries challenging either
the Merger Agreement, this Agreement, the Tax Sharing Agreement or the
Stockholders Agreement or any of the transactions contemplated therein or
herein (any such Action, a "Transaction Suit"), then the Company shall
provide promptly to Parent copies of all material pleadings sent or
received after the date hereof by the Company or its counsel with respect
to any such Transaction Suit(s).
(b) Parent shall be entitled to participate in the defense of
each Transaction Suit and to employ counsel at its own expense to assist
in the handling of each such Transaction Suit. The Company shall not
settle or compromise any Transaction Suit or consent to the entry of any
judgment with respect to any such Transaction Suit, without the prior
written consent of Parent (which consent shall not be unreasonably
withheld).
(c) Following the Distribution Date, Spinco shall be entitled to
participate in the defense of each Transaction Suit to which it or any of
its Affiliates is a party, and to employ counsel at its own expense to
assist in the handling of each such Transaction Suit.
60
Following the Distribution Date, the Company shall not settle or compromise
any Transaction Suit to which Spinco or any of its Affiliates is a party or
consent to the entry of any judgment with respect to any such Transaction
Suit, without the prior written consent of Spinco (which consent shall not
be unreasonably withheld).
Section 6.6. Spinco Equity Arrangements. On or prior to the
Offer Purchase Date, Spinco, the Company and each Retained Subsidiary which
will be a holder of Spinco Preferred Stock immediately after giving effect
to the Restructuring, shall each execute and deliver to the other
counterparts of a stockholders agreement with respect to such Spinco
Preferred Stock in substantially the form set forth in Exhibit A hereto.
Section 6.7. Post-Closing Business Relationships.
(a) License of Existing Intellectual Property Rights. The
Company and the Retained Subsidiaries hereby grant to each of Spinco and
the Spinco Companies, effective as of the Distribution Date, a perpetual,
fully paid-up, worldwide, non-exclusive license with respect to the
Intellectual Property Rights to the extent necessary to enable Spinco and
the Spinco Companies to continue to use the Intellectual Property Rights in
their respective businesses with respect to those products and services
thereof of the type manufactured or sold by them on the date hereof or at
any time during the last five years or under current development by them as
of the date hereof; provided that neither Spinco nor any of the Spinco
Companies shall be permitted to sublicense or otherwise transfer any of the
Intellectual Property Rights referred to in this Section 6.7(a) to any
Person other than an Affiliate of Spinco. Each of Spinco and the Spinco
Companies acknowledges and agrees that neither the Company nor the Retained
Subsidiaries nor any of their respective Affiliates is making any
representations or warranties with respect to the ownership, validity,
efficacy or other matters relating to any of the Intellectual Property
Rights referred to in this Section 6.7(a).
(b) License of Certain Other Intellectual Property Rights.
During the period commencing after the Distribution Date and ending on the
third anniversary
61
thereof, the Company and the Retained Subsidiaries shall, at the request of
Spinco or any Spinco Company, grant to Spinco or such Spinco Company a non-
exclusive license for those applications reasonably related to the Spinco
Business with respect to any Intellectual Property Rights not already
covered by paragraph (a) above, which grant shall be made on terms and
conditions no less favorable than those terms and conditions which may from
time to time be extended generally by Parent to third parties with respect
to similar products, services or applications; provided that neither the
Company nor any of the Retained Subsidiaries shall be obligated to license
to Spinco or any Spinco Company any of the Intellectual Rights referred to
in this Section 6.7(b) if such Intellectual Property Rights relate to any
product or service which competes with or will compete with those products
or services of the type manufactured or sold by Parent, any Subsidiary of
Parent, the Company or any of the Retained Subsidiaries on the date thereof
or at any time during the previous five years or under current development
by them as of the date thereof.
(c) Certain General Licensing Provisions. The license of
Intellectual Property Rights granted pursuant to this Section 6.7 shall
not affect the rights of the Company or any of the Retained Subsidiaries to
use, disclose or otherwise freely deal with any Intellectual Property
Rights licensed hereunder and shall be subject to and limited by (x) all
Contracts and obligations, entered into prior to the date on which the
license in question was granted, in any way affecting the Company's ability
to license the Intellectual Property Rights and (y) the provisions of
applicable Law. Spinco agrees to indemnify, defend and hold harmless the
Company and each Parent Indemnified Party in accordance with the
indemnification provisions of Article V hereof, from and against any and
all Indemnifiable Losses of the Company and any such Parent Indemnified
Party arising out of, relating to or resulting from the license of any
Intellectual Property Rights to Spinco or any Spinco Company pursuant to
the provisions of Section 6.7(a) above or any failure by Spinco or any
Spinco Company to perform and abide by all obligations, restrictions,
conditions and agreements applicable to the Intellectual Property Rights
licensed to Spinco or any Spinco Company pursuant to the provisions of
Section 6.7(a) above.
62
(d) Technical Services. During the period commencing after the
Distribution Date and ending on the third anniversary thereof (and for
successive periods of three years provided that Spinco notifies the Company in
writing, no less than six months nor more than nine months prior to the end of
the three-year period in question, of Spinco's intention to continue seeking the
services set forth in this Section 6.7(d) during the following three-year
period), and subject to existing commitments, obligations and availability, and
upon reasonable notice, Parent and its Subsidiaries shall use their reasonable
efforts to make available to Spinco and the Spinco Companies those personnel and
facilities reasonably designated by Parent or the Company to provide such
research and development, technological and technical consulting and support
services and other similar consulting and support services (such services, the
"Technical Services"), to the extent reasonably requested by Spinco or the
Spinco Companies from time to time. The Technical Services shall be provided at
a cost calculated in accordance with the "fully-allocated" cost (which shall
include all direct and indirect expenses of Parent or the Company or any of
their respective Subsidiaries or any other entity which is providing the
Technical Services in question, and which shall be allocated in a manner
consistent with the Parent's or the Company's past practices (as the case may
be) with respect to the allocation of costs to its Subsidiaries. Following the
end of the calendar month in which any such Technical Services are performed,
the Company shall provide to Spinco or the Spinco Subsidiary in question an
invoice (the "Technical Services Invoice") setting forth in summary detail the
Technical Services which were provided during such calendar month and the
appropriate cost thereof. Spinco or the Spinco Subsidiary in question shall pay
to the Company in cash in a reasonably prompt manner following the delivery by
the Company of a Technical Services Invoice, the amounts due with respect to the
Technical Services reflected on such Technical Services Invoice. The parties
hereto acknowledge and agree that (x) the specific terms and conditions of the
Technical Services to be provided hereunder (to the extent not otherwise
specified and to the extent not inconsistent with the provisions of this Section
6.7(d)) shall be on terms and conditions similar to those terms and conditions
which may from time to time be extended generally by or to Parent to or from
third parties with respect to similar services (except as
63
the parties may otherwise mutually agree) and (y) any Intellectual Property
Rights created primarily in connection with the delivery of Technical Services
to Spinco or the Spinco Subsidiary (as the case may be) shall be the property of
Spinco or the Spinco Subsidiary (as the case may be); provided that Parent, the
Company and each of their respective Affiliates are hereby granted a perpetual,
fully paid-up, worldwide, non-exclusive license with respect to all such
Intellectual Property Rights (provided further that neither Parent nor any of
its Affiliates shall be permitted to sublicense or otherwise transfer any of the
Intellectual Property Rights referred to in this Section 6.7(d) to any Person
other than an Affiliate of such party). Notwithstanding anything to the contrary
contained in this Section 6.7(d), SSL shall not be entitled to request or to
receive, either directly or indirectly, any Technical Services or any
Intellectual Property Rights relating thereto (nor may Spinco, nor any Affiliate
of either Spinco or SSL, request or receive any such Technical Services or
Intellectual Property Rights on behalf of SSL) unless and until SSL shall have
entered into an unconditional release (which shall be in form and substance
reasonably acceptable to Parent) in favor of Parent and its Affiliates with
respect to any and all Liabilities relating to the SSL Lawsuit (provided that
in the event that SSL delivers to Parent a release which satisfies the
provisions of this sentence, Parent agrees to promptly deliver to SSL a similar
release with respect to such SSL Lawsuit).
Section 6.8. No Restrictions on Post-Closing Competitive
Activities. It is the explicit intent of each of the parties hereto that the
provisions of this Agreement shall not include any non-competition or other
similar restrictive arrangements with respect to the range of business
activities which may be conducted by the parties hereto. Accordingly, each of
the parties hereto acknowledges and agrees that nothing set forth in this
Agreement shall be construed to create any explicit or implied restriction or
other limitation on (a) the ability of any party hereto to engage in any
business or other activity which competes with the business of any other party
hereto, or (b) the ability of any party to engage in any specific line of
business or engage in any business activity in any specific geographic area.
64
Section 6.9. CCD Lawsuit.
(a) The parties hereto acknowledge and agree that prior to the
Distribution Date, the Company shall have complete and exclusive control and
management over the CCD Lawsuit. On the Distribution Date, immediately prior to
the Distribution, Spinco shall acquire an interest in the CCD lawsuit pursuant
to the transfers set forth in Section 2.1(a)(viii), which transfers shall be
effected by the Company and its Subsidiaries, with the consent of Parent (which
shall not be unreasonably withheld), entering into any agreements or
stipulations, including, but not limited to, an assignment of the action to
Spinco, as may reasonably be required to (i) grant to Spinco complete and
exclusive control and management of the CCD Lawsuit (including, but not limited
to, the prosecution, defense or settlement of such action) and (ii) grant to
Spinco the exclusive right to any and all proceeds or awards resulting or
derived from the CCD Lawsuit; provided that Spinco shall pay all fees and
expenses relating to the CCD Lawsuit and Spinco hereby agrees to indemnify,
defend and hold harmless the Company and each Parent Indemnified Party in
accordance with the indemnification provisions of Article V hereof, from and
against any and all Indemnifiable Losses of the Company and any such Parent
Indemnified Party with respect to the CCD Lawsuit (including, without
limitation, with respect to any countersuit relating thereto). The Company
agrees that it shall provide reasonable cooperation to Spinco in connection with
the CCD Lawsuit, including, but not limited to, reasonable access to such
books, records and employees of the Company as may be reasonably necessary in
order for Spinco to prosecute or defend the CCD Lawsuit or any other Action
related thereto.
(b) Notwithstanding anything to the contrary contained in this
Section 6.9, Spinco shall not, without the prior written consent of Parent,
consent to any settlement which (A) imposes any Liabilities on Parent (other
than those Liabilities which Spinco agrees to promptly pay or discharge), and
(B) with respect to any non-monetary provision of such settlement, would be
likely, in Parent's reasonable judgment, to have an adverse effect on the
business operations, assets, properties or prospects of Parent, the Company or
the Retained Business. Nothing in this Section 6.9 shall be construed in any
manner to vitiate any of the collective
65
rights of the Company, the Retained Subsidiaries and Spinco under the CCD
Lawsuit and the rights being asserted thereunder in relation to any third
party, and the parties hereto shall take all reasonable actions necessary
to ensure the foregoing.
ARTICLE VII
ACCESS TO INFORMATION AND SERVICES
----------------------------------
Section 7.1. Provision of Corporate Records. Except as provided
in the following sentence, on the Distribution Date, the Company shall
deliver to Spinco all corporate books and records (including all active
agreements, active litigation files and government filings) which are
corporate records of Spinco or any of the Spinco Companies and which relate
primarily to the Spinco Assets, the Spinco Business or the Spinco
Liabilities, including, without limitation, original corporate minute
books, stock ledgers and certificates and corporate seals of each
corporation the capital stock of which is included in the Spinco Assets.
Notwithstanding the foregoing, the Company shall have the right to retain
the original copies of any such documents which also relate to the Retained
Assets, the Retained Business or the Retained Liabilities, provided that
it provides Spinco with copies of, and reasonable access to, such materials
after the Distribution Date. Also on the Distribution Date, the Company
shall provide to Spinco lists of trademarks, patents, copyrights and other
intellectual property set forth in clause (iii) of the definition of
"Assets" herein included in the Spinco Assets.
Section 7.2. Access to Information. Subject to the
confidentiality provisions of Section 7.5 hereof, from and after the
Distribution Date (i) Spinco shall afford to the Company and its authorized
accountants, counsel and other designated representatives reasonable access
(including, without limitation, using reasonable efforts to give access to
persons or firms possessing Information (as defined below)) and duplicating
rights during normal business hours to all records, books, contracts,
instruments, computer data and other data and information (collectively,
"Information") within Spinco's possession relating to the Spinco Assets,
the Spinco Business and the Spinco Liabilities, insofar as such
66
access is reasonably required by the Company, and (ii) the Company shall
afford to Spinco and its authorized accountants, counsel and other
designated representatives reasonable access (including, without
limitation, using reasonable efforts to give access to persons or firms
possessing Information) and duplicating rights during normal business hours
to all Information within the Company's possession relating to the
Retained Assets, the Retained Business and the Retained Liabilities,
insofar as such access is reasonably required by Spinco. Information may
be requested under this Article VII for, without limitation, audit,
accounting, claims, litigation and tax purposes, as well as for purposes of
fulfilling disclosure and reporting obligations.
Section 7.3. Production of Witnesses. From and after the
Distribution Date, each party shall use reasonable efforts to make
available to the other party, upon written request, its officers,
directors, employees and agents as witnesses to the extent that any such
person may reasonably be required in connection with any legal,
administrative or other proceedings in which the requesting party may from
time to time be involved.
Section 7.4. Retention of Records. Except as otherwise required
by Law or agreed to in writing, Spinco and the Company shall each retain,
for a period of at least seven years following the Distribution Date, all
significant Information relating to (i) in the case of the Company, the
Spinco Business and (ii) in the case of Spinco, the Retained Business.
Notwithstanding the foregoing, either Spinco or the Company may destroy or
otherwise dispose of any of such Information at any time, provided that,
prior to such destruction or disposal, (a) Spinco or the Company, as the
case may be, shall provide no less than 90 or more than 120 days' prior
written notice to the other party, specifying the Information proposed to
be destroyed or disposed of and (b) if the other party shall request in
writing prior to the scheduled date for such destruction or disposal that
any of the Information proposed to be destroyed or disposed of be delivered
to the other party, Spinco or the Company, as the case may be, shall
promptly arrange for the delivery of such of the Information as was
requested, at the expense of the other party.
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Section 7.5. Confidentiality.
(a) Each party shall hold, and shall cause its officers,
employees, agents, consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or, in
the reasonable opinion of its counsel, by other requirements of Law, all
confidential, proprietary or other non-public information or trade secrets
concerning the other party (or such other party's business operations or
the business operations of such other party's Affiliates) which is
furnished it by such other party or its representatives pursuant to either
the Merger Agreement, this Agreement or the Confidentiality Agreement
(collectively, the "Confidential Information"). None of the parties hereto
nor any of their respective Affiliates shall use for their own benefit or
purposes, or release or disclose to any other person or entity, any such
Confidential Information (except, to the extent reasonably required, for
disclosure to those of such party's auditors, attorneys and other
representatives who agree to be bound by the provisions of this Section
7.5). Notwithstanding the foregoing, in the event any party hereto is
requested to disclose any Confidential Information to any third party
pursuant to any judicial or administrative process or, in the reasonable
opinion of its counsel, any other requirements of Law, the party from whom
such disclosure is sought shall (x) notify the other parties hereto as soon
as reasonably practicable of such request for disclosure, (y) disclose only
that portion of the Confidential Information which it reasonably believes,
following the advice of counsel, is necessary in order to comply with such
judicial or administrative process or other requirements of Law, and (z)
cooperate with the other parties hereto in seeking to narrow the scope of
any such third party request for disclosure).
(b) Notwithstanding the foregoing, the term "Confidential
Information" shall not include information (a) which is or becomes
generally available to the public other than as a result of disclosure of
such information by the disclosing party or any of its Affiliates or
representatives, (b) becomes available to the recipient of such information
on a non-confidential basis from a source which is not, to the recipient's
knowledge, bound by a confidentiality or other similar agreement, or by any
other legal, contractual or fiduciary obligation
68
which prohibits disclosure of such information to the other party hereto,
or (c) which can be demonstrated to have been developed independently by
the representatives of such recipient which representatives have not had
any access to any information which would otherwise be deemed to be
"Confidential Information" pursuant to the provisions of this Section 7.5.
ARTICLE VIII
EMPLOYEE MATTERS
----------------
Section 8.1. Officers and Employees. Except as otherwise
specified by Spinco prior to the Offer Purchase Date, the executive
officers of the Company shall be the executive officers of Spinco on and
after the Distribution Date. Effective as of the Distribution Date, (a)
those Retained Employees who are employed by the Company or any of its
subsidiaries immediately prior to the Distribution Date shall become
employees of the Company in the same capacities as then held by such
employees (or in such other capacities as the Company shall determine in
its sole discretion) and (b) those Spinco Employees, together with those
persons whose primary employment is with the Spinco Business, who are
employed by the Company or any of its subsidiaries immediately prior to the
Distribution Date shall become employees of Spinco in the same capacities
as then held by such employees (or in such other capacities as Spinco
shall determine in its sole discretion).
Section 8.2. Employee Benefits.
(a) As soon as practicable after, and in any event within 90
days after, and effective as of, the Distribution Date, Spinco shall
establish a defined benefit pension plan and trust intended to qualify
under Section 401(a) and Section 501(a) of the Code (the "Spinco Pension
Plan"). The Company shall, within 180 days following the Distribution
Date, but in no event prior to the receipt by the Company of written
evidence of the adoption of the Spinco Pension Plan and the trust
thereunder by Spinco and either (A) the receipt by the Company of a copy of
a favorable determination letter issued by the IRS with respect to the
Spinco Pension Plan or (B) an opinion, satisfactory to the Company's
counsel,
69
of Spinco's counsel to the effect that the terms of the Spinco Pension Plan
and its related trust qualify under Section 401(a) and Section 501(a) of
the Code, direct the Trustees of the Loral Corporation Pension Plan and the
Retirement Plan of Loral Aerospace Corp. (the "Company Pension Plans") to
transfer in cash or in kind, as agreed to by the Company and Spinco, from
the trusts under the Company Pension Plans to the trust under the Spinco
Pension Plan, an amount determined by the certified actuary of the Company
Pension Plans (the "Company Actuary") which shall be equal to, with respect
to each such Company Pension Plan, (A) the product of (i) the fair market
value of the assets held under such Company Pension Plan as of the last day
of the month prior to the month in which the transfer occurs (the
"Valuation Date") and (ii) a fraction, the numerator of which is equal to
the present value of all accrued benefits under such Company Pension Plan
as of the Distribution Date in respect of Spinco Employees and the
denominator of which is equal to the present value of all accrued benefits
under such Company Pension Plan less (B) the payments made by such Company
Pension Plan between the Distribution Date and the date of transfer in
respect of Spinco Employees. From the Valuation Date to the date of
transfer, the assets to be transferred will be credited with interest at
the interest rate available on a 30-day treasury note at the auction date
on or immediately preceding the Valuation Date.
The calculation of the present value of such benefits shall be in
accordance with Section 414(1) of the Code and the regulations promulgated
thereunder and in all cases utilizing the assumptions used by the Company
for reporting accrued benefit obligations under FAS No. 87 in its 1995
Annual Report. For purposes of this calculation, the present value of
accrued benefits shall be determined on a termination basis in accordance
with the standards of Section 414(l) of the Code. The determination by the
Company Actuary shall be final and binding, provided, however, that the
Company Actuary shall provide the actuary selected by Spinco with all the
documentation reasonably necessary for Spinco to verify such determination;
provided, further, that if the Spinco actuary certifies, in writing within
60 days of receiving such supporting documentation, that he disagrees with
the Company Actuary then, first the chief financial officers of the Company
and Spinco shall negotiate, in good faith,
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to resolve such dispute, and if unable to come to an agreement, then the
Company and Spinco shall agree upon and engage an impartial actuary, who
shall be entitled to the privileges and immunities of an arbitrator, to
resolve any disagreement and whose determination as to any such
disagreement (if not contrary to ERISA) shall be conclusive, final and
binding. The parties shall share equally all costs and fees of such
impartial actuary. At the time of transfer of the amount set forth in this
Section 8.2, Spinco and the Spinco Pension Plan shall assume all
liabilities for all accrued benefits under the Company Pension Plans in
respect of Spinco Employees and each of the Company and the Company Pension
Plans shall be relieved of all liabilities for such benefits. As soon as
practicable after, and in any event within 90 days after, and effective as
of, the Distribution Date, Spinco shall cause SSL to establish a trust
intended to qualify under Section 501(a) of the Code ("Spinco SSL Trust")
and intended to hold the assets of the Retirement Plan of SSL (the "SSL
Plan"). The Company shall, within 180 days following the Distribution Date,
but in no event prior to the receipt by the Company of written evidence of
the adoption of the Spinco SSL Trust, direct the Trustees of the Loral
Master Pension Trust (the "Master Trust") to transfer in cash or in kind as
agreed to by SSL and the Company from the Master Trust to the Spinco SSL
Trust, the assets held by the Master Trust under the SSL Plan. Upon the
transfer of assets in accordance with this Section 8.2(a), Spinco agrees to
indemnify and hold harmless the Company, its officers, directors,
employees, agents and affiliates from and against any and all Indemnifiable
Losses arising out of or related to the Spinco Pension Plan and the SSL
Plan, including all benefits accrued by Spinco Employees prior to the
Distribution Date under the Company Pension Plans and the SSL Plan. Spinco
and the Company shall provide each other with such records and information
as may be necessary or appropriate to carry out their obligations under
this Section or for the purposes of administration of the Spinco Pension
Plan and the SSL Plan, and they shall cooperate in the filing of documents
required by the transfer of assets and liabilities described herein.
Notwithstanding anything contained herein to the contrary, no such transfer
shall take place until the 31st day following the filing of all required
Forms 5310-A in connection therewith.
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(b) Individual Account Plan. As soon as practicable after the
Distribution Date, but in no event later than 90 days after the
Distribution Date, Spinco shall establish a defined contribution plan and
trust intended to qualify under Section 401(a) and Section 501(a) of the
Code (the "Spinco Savings Plan"). The Company shall, within 180 days
following the Distribution Date, but in no event prior to the receipt by
the Company of written evidence of the adoption of the Spinco Savings Plan
and the trust thereunder by Spinco and either (A) the receipt by the
Company of a copy of a favorable determination letter issued by the IRS
with respect to the Spinco Savings Plan or (B) an opinion, satisfactory to
the Company's counsel, of Spinco's counsel to the effect that the terms of
the Spinco Savings Plan and its related trust qualify under Section 401(a)
and Section 501(a) of the Code, direct the trustee of the Loral Master
Savings Plan and the Loral Aerospace Savings Plan (the "Company Savings
Plans") to transfer to the trustee of the Spinco Savings Plan the account
balances under the Company Savings Plans as of the date of transfer in
respect of Spinco Employees in cash or in kind, as agreed to by the Company
and Spinco; provided, however, all outstanding loans shall be transferred
in kind. Upon such transfer, the Spinco Savings Plan shall assume all
liabilities for all accrued benefits under the Company Savings Plans in
respect of Spinco Employees that are transferred to the Spinco Savings Plan
and the Company Savings Plans shall be relieved of all liabilities for such
accrued benefits. The Company and Spinco shall cooperate in the filing of
documents required by the transfer of assets and liabilities described
herein. Notwithstanding anything contained herein to the contrary, no such
transfer shall take place until the 31st day following the filing of all
required Forms 5310-A in connection therewith. Upon the transfer of assets
in accordance with this section 8.2(b), Spinco agrees to indemnify and hold
harmless the Company, its officers, directors, employees, agents and
affiliates from and against any and all Indemnifiable Losses arising out of
or relating to the Spinco Savings Plan, including all benefits accrued by
Spinco Employees prior to the Distribution Date.
(c) Welfare Benefit Plans. As of the Distribution Date, Spinco
Employees shall cease to participate in the employee welfare benefit plans
(as such term
72
in defined in ERISA) maintained or sponsored by the Company (the "Prior
Welfare Plans") and shall commence to participate in welfare benefit plans
of Spinco (the "Replacement Welfare Plans") which Replacement Welfare Plans
shall, in the case of any such plan that is subject to the requirements of
Section 4980B of the Code, provide for substantially identical benefits on
substantially identical terms and conditions that were provided by Prior
Welfare Plans immediately prior to the Distribution Date. Spinco will, (i)
waive all limitations as to pre-existing condition exclusions and waiting
periods with respect to participation and coverage requirements applicable
to Spinco Employees under the Replacement Welfare Plans, other than
limitations or waiting periods that were in effect with respect to such
employees under the Prior Welfare Plans and that have not been satisfied as
of the Distribution Date, and (ii) provide each Spinco Employee with credit
for any co-payments and deductibles paid prior to the Distribution Date in
satisfying any deductible or out-of-pocket requirements under the
Replacement Welfare Plans. After the Distribution Date, Spinco shall be
responsible for any claims by Spinco Employees for benefits relating to
claims incurred but not reported prior to the Distribution Date. The
Company shall use its best efforts to ensure that, except as provided
otherwise in the Merger Agreement or Distribution Agreement, the
consummation of the transactions contemplated by this Distribution
Agreement shall not entitle any employee to severance benefits under any
severance plan or arrangement of the Company or any of its Subsidiaries.
(d) Collective Bargaining Agreements. As of the Distribution
Date, with respect to those collective bargaining agreements to which the
Company or any of its Affiliates is a party and which cover Spinco
Employees, Spinco shall assume all liabilities and obligations of the
Company and each of its Affiliates thereunder, but only to the extent that
such liabilities and obligations relate to any Spinco Employees.
(e) Certain Liabilities. Spinco hereby agrees to indemnify the
Company and its Affiliates against, and agrees to hold them harmless from
any and all Indemnifiable Losses incurred or suffered as a result of any
claim by any Spinco Employee which arises under federal, state or local
statute (including, without
73
limitation, Title VII of the Civil Rights Act of 1964, the Civil Rights Act
of 1991, the Age Discrimination in Employment Act of 1990, the Equal Pay
Act, the Americans with Disabilities Act of 1990, the Employee Retirement
Income Security Act of 1974 and all other statutes regulating the terms and
conditions of employment), regulation or ordinance, under the common law or
in equity (including any claims for wrongful discharge or otherwise), or
under any policy, agreement, understanding or promise, written or oral,
formal or informal, between the Company and the Spinco Employee, whether
arising out of actions, events or omissions that occurred (or, in the case
of omissions, failed to occur) prior to, or after, the Distribution Date.
The Company hereby agrees to indemnify Spinco and its Affiliates against,
and agrees to hold it harmless from any and all Indemnifiable Losses
incurred or suffered as a result of any claim by any Retained Employee
which arises under federal, state or local statute (including, without
limitation, Title VII of the Civil Rights Act of 1964, the Civil Rights Act
of 1991, the Age Discrimination in Employment Act of 1990, the Equal Pay
Act, the Americans with Disabilities Act of 1990, the Employee Retirement
Income Security Act of 1974 and all other statutes regulating the terms and
conditions of employment), regulation or ordinance, under the common law or
in equity (including any claims for wrongful discharge or otherwise), or
under any policy, agreement, understanding or promise, written or oral,
formal or informal, between the Company and the Retained Employee, whether
arising out of actions, events or omissions that occurred (or, in the case
of omissions, failed to occur) prior to, or after, the Distribution Date.
The indemnification provided for in this Section 8.2 shall be subject to
the terms and conditions of the indemnification provisions of Article V
hereof.
(f) As of the Distribution Date, with respect to any employee
liabilities or obligations arising under the Company's (i) split dollar
life insurance arrangements with certain executives, (ii) the Loral
Supplemental Executive Retirement Plan (the "SERP"), and (iii) retiree
welfare plans (including retiree medical plans), (all such liabilities in
(i), (ii) and (iii), "Enumerated Liabilities"):
(A) On or prior to the Distribution Date, the Company
shall establish one or
74
more grantor rabbi trusts (the "SERP Trust") of which the
participants in the SERP shall be the beneficiaries and
shall contribute to such trust an amount equal to the
present value of all accrued benefits under the SERP as of
the Distribution Date (the parties hereto acknowledge that
such amount shall not exceed $11 million).
(B) The Company shall retain and be solely responsible
for all liabilities and obligations whatsoever of both the
Retained Business and the Spinco Business for all
Enumerated Liabilities with respect to Retained Employees
and shall retain any assets relating to such liabilities.
(C) Spinco shall assume and be solely responsible for
all liabilities and obligations whatsoever of both the
Retained Business and the Spinco Business for all Enumerated
Liabilities with respect to Spinco Employees and the Company
shall transfer, or allocate, as applicable, to Spinco as
soon as practicable following the Distribution Date any
assets relating to such liabilities. The assets held in the
SERP Trust shall be allocated, to the extent practicable, in
accordance with the principles set forth in Section 8.2(a).
Section 8.3. Other Liabilities and Obligations. As of the
Distribution Date, with respect to claims relating to any employee
liability or obligation not otherwise provided for in this Agreement or
the Merger Agreement, including, without limitation, accrued holiday,
vacation and sick day benefits, (a) the Company shall assume and be solely
responsible for all liabilities and obligations whatsoever of both the
Retained Business and the Spinco Business for all such claims made by
Retained Employees and (b) Spinco shall assume and be solely responsible
for all liabilities and obligations whatsoever of both the Retained
Business and the Spinco Business for all such claims made by all Spinco
Employees. Notwithstanding the foregoing, wages and salary accrued prior
to the Distribution Date in respect of
75
Spinco New York Employees and deferred directors' fees shall be the sole
responsibility of the Retained Business.
Section 8.4. Preservation of Rights to Amend or Terminate Plans.
No provision of this Agreement, shall be construed as a limitation on the
right of the Company or Spinco to amend any plan or terminate its
participation therein which the Company or Spinco would otherwise have
under the terms of such plan or otherwise, and no provision of this
Agreement shall be construed to create a right in any employee or
beneficiary of such employee under a plan that such employee or beneficiary
would not otherwise have under the terms of such plan itself.
Section 8.5. Reimbursement; Indemnification. Spinco and the
Company acknowledge that the Company, on the one hand, and Spinco, on the
other hand, may incur costs and expenses (including, without limitation,
contributions to plans and the payment of insurance premiums) pursuant to
any of the employee benefit or compensation plans, programs or arrangements
which are, as set forth in this Agreement, the responsibility of the other
party. Accordingly, the Company and Spinco agree to reimburse each other,
as soon as practicable but in any event within 30 days of receipt from the
other party of appropriate verification, for all such costs and expenses
reduced by the amount of any tax reduction or recovery of tax benefit
realized by the Company or Spinco, as the case may be, in respect of the
corresponding payment made by it. All Liabilities retained, assumed or
indemnified by Spinco pursuant to this Article VIII shall in each case be
deemed to be Spinco Liabilities, and all Liabilities retained, assumed or
indemnified by the Company pursuant to this Article VIII shall in each case
be deemed to be Retained Liabilities, and, in each case, shall be subject
to the indemnification provisions set forth in Article V hereof.
Section 8.6 Actions By Spinco. Any action required to be
taken under this Article VIII may be taken by a Subsidiary of Spinco, the
Spinco Companies, or a Subsidiary of the Spinco Companies.
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ARTICLE IX
INSURANCE
---------
Section 9.1. General. Except as otherwise agreed in writing between
the parties, the Company shall maintain until the Distribution Date all policies
of liability, fire, extended coverage, fidelity, fiduciary, workers'
compensation and other forms of insurance in effect as of the date hereof
insuring the products, properties, Assets and operations contemplated to be
transferred to Spinco and each of the Spinco Companies.
Section 9.2. Certain Insured Claims. The Company shall (a) use
reasonable efforts, upon Spinco's written request and at Spinco's sole expense,
to continue to maintain and renew for the benefit of Spinco and each of the
Spinco Companies the insurance policies under the Casualty Program with respect
to claims having an occurrence date (as the term "occurrence date" is
customarily defined) prior to the Distribution Date, relating to, or arising out
of the conduct of, the Spinco Business, the Spinco Assets or the Spinco
Liabilities, and (b) use reasonable efforts and cooperate with Spinco, upon
Spinco's written request and at Spinco's sole expense, to obtain coverage,
recoveries and other benefits under such policies for the benefit of Spinco and
each of the Spinco Companies, including, without limitation, by filing and
pursuing claims with respect to obtaining such coverage, recoveries and other
benefits; provided that in no event shall the Company be obligated to litigate
or pursue any other extra-contractual remedies against any insurer; provided
further that all claims pursuant to this Section 9.2 shall be submitted,
investigated, processed and paid in accordance with the claims handling
procedures used by the Company and its Affiliates from time to time with respect
to other like claims. The Company will reimburse Spinco and each of the Spinco
Companies for any recovery obtained by it pursuant to such claims. The Company
shall make available to Spinco such of its employees as Spinco may reasonably
request as witnesses or deponents in connection with Spinco's pursuit of claims.
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ARTICLE X
CONDITIONS; TERMINATION;
AMENDMENTS; WAIVERS
------------------------
Section 10.1. Condition to Restructuring and Distribution.
(a) The obligations of each of the Company, Holdings, Aerospace
LGP, LG, Cayman and Spinco to effect the Restructuring and the Distribution
(other than those obligations which are normally expected to precede the
Restructuring or the Distribution) shall be subject to the satisfaction of the
following conditions: (i) the Purchaser shall have notified the Company that it
is prepared to immediately accept for payment shares of Company Common Stock
pursuant to the terms and conditions of the Offer as set forth in the Merger
Agreement, (ii) the Record Date shall have been set by the Company's Board of
Directors, (iii) the Form 10 (or the registration statement referred to in
Section 3.1(a) hereof) shall have been declared effective by the SEC, (iv) the
Spinco Common Stock shall have been accepted for listing or quotation in
accordance with Section 3.1(e) hereof, (v) no Court Order or Law shall have been
enacted, promulgated, issued or entered against any of the parties hereto which
(x) prohibits or materially restricts consummation of any of the transactions
contemplated by this Agreement and (y) remains in effect as of the date on which
the satisfaction of this condition is determined, (vi) the Company and the
Retained Subsidiaries (other than Spinco and the Spinco Companies) shall have
obtained all consents required to be obtained by the Company as a result of or
in connection with the transactions contemplated by this Agreement in order to
avoid a material Default under any material Contract to or by which the Company,
Spinco or any of their respective Subsidiaries is a party or may be bound, or
otherwise necessary to permit the Company and each of the Retained Subsidiaries
to conduct their business in a manner consistent with its past practices, (vii)
all consents and approvals of, and notices to and filings with, any Governmental
Entity or any other person or entity arising out of or relating to the
consummation of the transactions contemplated by this Agreement, shall have been
obtained or made (as the case may be), (viii) the Globalstar Bank Guarantee
shall have been amended pursuant to Section 2.5 hereof so that the provisions
78
thereof shall, following the Restructuring, be amended in the manner
contemplated by Section 2.5 hereof (with such changes thereto as Parent and the
Company may approve prior to the Offer Purchase Date), and (ix) the Lehman
Partnerships and all other holders of the Lehman Preferred Stock (if any) shall
have exchanged all issued and outstanding shares of Lehman Preferred Stock for
shares of capital stock or other equity securities of either Spinco, any Spinco
Company or any Subsidiary of Spinco pursuant to Section 2.7 hereof.
(b) The parties hereto acknowledge and agree that (x) Parent may
waive, on behalf of all parties hereto, the conditions set forth in clauses
(viii) and (ix) of Section 10.1(a) above, (y) Parent may waive, on behalf of all
parties hereto, the condition set forth in clauses (v), (vi) and (vii) of
Section 10.1(a) above so long as (1) Parent reasonably believes that
consummation of the Distribution at such time will have no material adverse
effect on Spinco or the Spinco Business and (2) Parent agrees to indemnify
Spinco pursuant to the provisions of Article V hereof with respect to any
Indemnifiable Losses which result from any material adverse effect on Spinco or
the Spinco Business which results directly from such waiver, and (z) the Company
may not waive any of the conditions set forth in Sections 10.1(a)(i) through
10.1(a)(ix) above without first obtaining the prior written consent of Parent
(which may not be unreasonably withheld). In the event that all of the
Distribution Conditions have been satisfied (or waived, to the extent expressly
permitted by the provisions of the preceding sentence), the Company, Holdings,
Aerospace and Spinco shall consummate the Restructuring and the Distribution,
and all other transactions related thereto, on the date on the date on which
such Distribution Conditions have been so satisfied or waived (or as soon as
practicable following such date in the event that such parties are unable to
consummate the Restructuring and the Distribution, and all other transactions
related thereto, on such date). The respective obligations of each party hereto
to perform those of its obligations which are to be performed following
consummation of the Restructuring and the Distribution, shall be conditioned on
the consummation of the Restructuring and the Distribution in accordance with
the provisions of this Agreement.
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Section 10.2. Termination. This Agreement (i) may be terminated and
the Distribution abandoned at any time prior to the Offer Purchase Date by the
mutual written agreement of each of the parties hereto or (ii) shall be
terminated automatically and the Distribution abandoned upon any termination of
the Merger Agreement in accordance with the terms and conditions thereof. In the
event that this Agreement shall be terminated pursuant to this Section 10.2, all
obligations of the parties hereto under this Agreement shall terminate without
further liability or obligation of any party hereto to the other parties hereto
under this Agreement or otherwise, except (i) for any breach by such party of
the terms and provisions of this Agreement prior to the date of such termination
and (ii) as stated in Section 11.3 hereof.
Section 10.3. Amendments; Waivers. This Agreement may be amended,
modified or supplemented only by written agreement of each of the parties
hereto. Any term or provision of this Agreement may be waived at any time by the
party entitled to the benefit thereof by a written instrument executed by such
party. Except as provided in the preceding sentence, no action taken pursuant to
this Agreement, including, without limitation, any investigation by or on behalf
of any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants, agreements
or conditions contained herein. The waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any preceding or succeeding breach and no failure by any party to exercise any
right or privilege hereunder shall be deemed a waiver of such party's rights or
privileges hereunder or shall be deemed a waiver of such party's rights to
exercise the same at any subsequent time or times hereunder.
ARTICLE XI
MISCELLANEOUS
-------------
Section 11.1. Survival of Indemnities; Release. The representations
and warranties made in Section 6.1 of this Agreement shall survive for a period
of three years from the Distribution Date, but shall not survive any termination
of this Agreement; provided that
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claims with respect to breaches of covenants and agreements set forth in this
Agreement shall survive for the applicable statute of limitations period. Except
as otherwise expressly provided in this Agreement (including, without
limitation, the indemnification provisions of Article V hereof), each of the
parties (a) agrees that no claims or causes of action may be brought against the
Company, Holdings, Aerospace, Spinco, Parent or the Purchaser or any of their
Affiliates, agents or representatives based upon, directly or indirectly, any of
the representations and warranties contained in this Agreement after three years
following the Distribution Date (other than causes of actions commenced after
such three-year period to seek recourse for claims asserted during such three-
year period that are not resolved by the parties), and (b) hereby waives and
releases all other claims and causes of action, that may be asserted or brought
against the Company, Holdings, Aerospace, Spinco, Parent or the Purchaser or any
of their Affiliates, agents or representatives directly or indirectly based upon
or arising under this Agreement or the Merger Agreement, or the transactions
contemplated hereby or thereby. Notwithstanding the foregoing, this Section 11.1
shall not limit any covenant or agreement of the parties in this Agreement, the
Merger Agreement, the Tax Sharing Agreement or the Stockholders Agreement which
contemplates performance after the Distribution Date (including, without
limitation, the covenants and agreements set forth in Sections 2.1(b) and 6.2
hereof), except for the covenants and agreements in the Merger Agreement to the
extent of their performance prior to the Distribution Date.
Section 11.2. Entire Agreement. This Agreement (including the
schedules and exhibits and the agreements and other documents referred to
herein, including, without limitation, the Merger Agreement, the Tax Sharing
Agreement and the Stockholders Agreement) constitutes the entire agreement among
the parties with respect to the subject matter hereof and supersedes all other
prior negotiations, commitments, agreements and understandings, both written and
oral, between the parties or any of them with respect to the subject matter
hereof (including, without limitation, the provisions of the Confidentiality
Agreement).
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Section 11.3. Fees and Expenses. Except as otherwise provided in this
Agreement, the Merger Agreement, the Tax Sharing Agreement or the Stockholders
Agreement, and subject to the proviso below, all costs and expenses incurred by
the Company and each of the Retained Subsidiaries and by Spinco in connection
with (x) the preparation, execution and delivery of this Agreement, the Merger
Agreement, the Tax Sharing Agreement and the Stockholders Agreement and (y)
consummating such party's obligations hereunder and thereunder (including,
without limitation, investment banking, legal, accounting, audit and printing
costs and expenses), shall be paid by the Company, upon the submission to the
Company of appropriate documentation detailing such costs and expenses);
provided that the investment banking costs and expenses incurred by the Company
(including any legal or other costs and expenses but excluding any
indemnification-related costs and expenses) incurred by the Company relating to
the provision of such investment banking services) in connection with the
transactions contemplated by this Agreement and the Merger Agreement which
exceed $12,000,000 (such excess amount of such investment banking costs and
expenses, the "Spinco Excess Costs"), shall not be considered to be expenses of
the Company, but shall be deemed to be Spinco Liabilities and shall be paid by
Spinco on or promptly after the Distribution Date.
Section 11.4. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF
NEW YORK, WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES THEREOF.
Section 11.5. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given upon (a) transmitter's
confirmation of a receipt of a facsimile transmission, (b) confirmed delivery by
a standard overnight carrier or when delivered by hand or (c) the expiration of
five Business Days after the day when mailed by certified or registered mail,
postage prepaid, addressed at the following addresses (or at such other address
for a party as shall be specified by like notice):
82
(a) If to the Company, or Aerospace, to:
Loral Corporation
600 Third Avenue
New York, NY 10016
Telephone: (212) 697-1105
Telecopy No.: (212) 602-9805
Attention: General Counsel
with a copy to:
Lockheed Martin Corporation
6801 Rockledge Drive
Bethedsa, MD 20817
Telephone: (301) 897-6125
Telecopy No.: (301) 897-6333
Attention: General Counsel
and to:
Skadden, Arps, Slate, Meagher
& Flom
919 Third Avenue
New York, New York 10022
Telephone: (212) 735-3000
Telecopy No.: (212) 735-2000
Attention: Peter Allan Atkins, Esq.
Lou R. Kling, Esq.
and to:
O'Melveny & Myers
153 E. 53rd Street
New York, New York 10022
Telephone: (212) 326-2000
Telecopy No.: (212) 326-2160
Attention: C. Douglas Kranwinkle, Esq.
Jeffrey J. Rosen, Esq.
(b) If to Spinco, to:
Loral Space & Communications Corporation
600 Third Avenue
New York, New York 10016
Telephone: (212) 697-1105
Telecopy No.: (212) 602-9805
Attention: General Counsel
83
with a copy to:
Willkie Farr & Gallagher
153 E. 53rd Street
New York, New York 10022
Telephone: (212) 821-8000
Telecopy No.: (212) 821-8111
Attention: Robert B. Hodes, Esq.
Bruce R. Kraus, Esq.
Section 11.6. Successors and Assigns; No Third Party
Beneficiaries. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any party
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties hereto (which consent may not be unreasonably
withheld), except that any party shall have the right, without the consent
of any other party hereto, to assign all or a portion of its rights,
interests and obligations hereunder to one or more direct or indirect
subsidiaries, but no such assignment of obligation shall relieve the
assigning party from its responsibility therefor. Notwithstanding the
foregoing, Spinco shall be permitted to assign its rights and obligations
under this Agreement to one of its Affiliates (the "Spinco Transferee")
prior to the Record Date so long as (x) such assignment shall not relieve
Spinco from its joint responsibility therefor and (y) such assignment does
not adversely affect any of the rights, benefits or obligations of Parent
or any of the Parent Indemnified Parties under this Agreement or the Merger
Agreement; provided that in the event of any such assignment to the Spinco
Transferee, all references to Spinco shall be automatically deemed to be
references to Spinco. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and, except for the provisions
of Sections 8.1 hereof, nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement;
provided, however, that the Indemnified Parties are intended to be third
party beneficiaries of the provisions of Article V hereof, and shall have
the right to enforce such provisions as if they were parties hereto.
84
Section 11.7. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
Section 11.8. Interpretation. The descriptive headings herein
are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement.
Section 11.9. Schedules. The Disclosure Schedule shall be
construed with and as an integral part of this Agreement to the same extent
as if the same had been set forth verbatim herein.
Section 11.10. Legal Enforceability. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without affecting the validity or enforceability of the
remaining provisions hereof. Any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, the provision shall be interpreted to be
only so broad as is enforceable.
Section 11.11. Consent to Jurisdiction. Each of the parties
hereto irrevocably and unconditionally (a) agrees that all suits, actions
or other legal proceedings arising out of this Agreement or any of the
transactions contemplated hereby (a "Suit") shall be brought and
adjudicated solely in the United States District Court for the Southern
District of New York, or, if such court will not accept jurisdiction, in
any court of competent civil jurisdiction sitting in New York City, New
York, (b) submits to the non-exclusive jurisdiction of any such court for
the purpose of any such Suit and (c) waives and agrees not to assert by way
of motion, as a defense or otherwise in any such Suit, any claims that it
is not subject to the jurisdiction of the above courts, that such Suit is
brought in an inconvenient forum or that the venue of such Suit is
improper. Each of the parties hereto also irrevocably and unconditionally
consents to the service of any process, summons, pleadings, notices or
other papers in a manner permitted by the notice
85
provisions of Section 11.5 hereof and agrees that any such form of service
shall be effective in connection with any such Suit; provided that nothing
contained in this Section 11.11 shall affect the right of any party to
serve process, pleadings, notices or other papers in any other manner
permitted by applicable Law.
Section 11.12. Specific Performance. Each of the parties hereto
acknowledges and agrees that in the event of any breach of this Agreement,
each non-breaching party would be irreparably and immediately harmed and
could not be made whole by monetary damages. It is accordingly agreed that
the parties hereto (a) will waive, in any action for specific performance,
the defense of adequacy of a remedy at law and (b) shall be entitled, in
addition to any other remedy to which they may be entitled at law or in
equity, to compel specific performance of this Agreement in any action
instituted in any court referred to in Section 11.11 hereof.
86
IN WITNESS WHEREOF, each of the parties has caused this
Restructuring, Financing and Distribution Agreement to be executed on its
behalf by its officers thereunto duly authorized, all as of the day and
year first above written.
LORAL CORPORATION
/s/ MICHAEL B. TARGOFF
By:_____________________________
Name: Michael B. Targoff
Title: Senior Vice President
and Secretary
LORAL AEROSPACE HOLDINGS,
INC.
/s/ MICHAEL B. TARGOFF
By:______________________________
Name: Michael B. Targoff
Title: Senior Vice President
LORAL AEROSPACE CORP.
/s/ MICHAEL B. TARGOFF
By:______________________________
Name: Michael B. Targoff
Title: Senior Vice President
LORAL TELECOMMUNICATIONS
ACQUISITION, INC.
/s/ MICHAEL B. TARGOFF
By:______________________________
Name: Michael B. Targoff
Title: Senior Vice President
and Secretary
LOCKHEED MARTIN CORPORATION
/s/ MARCUS C. BENNETT
By:______________________________
Name: Marcus C. Bennett
Title: Senior Vice President
LORAL GLOBALSTAR LIMITED
/s/ MICHAEL B. TARGOFF
By:______________________________
Name: Michael B. Targoff
Title: Senior Vice President
LORAL GENERAL PARTNER, INC.
/s/ MICHAEL B. TARGOFF
By:______________________________
Name: Michael B. Targoff
Title: Vice President
LORAL GLOBALSTAR, L.P.
/s/ MICHAEL B. TARGOFF
By:______________________________
Name: Michael B. Targoff
Title: Senior Vice President
and Secretary
Exhibit A
Form of Stockholders Agreement dated as of , 1996 by and among Loral
Corporation and Loral Space & Communications Corporation -- Filed as Exhibit
C(4) to the Tender Offer Statement on Schedule 14D-1 dated January 12, 1996.
EXHIBIT A-1
-----------
GLOBALSTAR WARRANT - SUMMARY TERM SHEET - PRINCIPAL TERMS
---------------------------------------------------------
Reference is hereby made to (x) the Restructuring, Financing and
Distribution Agreement dated as of January 8, 1996 (the "Restructuring
Agreement") among Lockheed Martin Corporation, Loral Corporation, Spinco and the
other parties thereto, and (y) the Globalstar Warrant Memorandum (as defined in
the Restructuring Agreement). All capitalized terms which are not otherwise
defined herein shall have the meanings ascribed to such terms in the
Restructuring Agreement.
Issuer: Globalstar Telecommunications Limited or, if not available, Globalstar
L.P. (the "Company").
Issued To: Guarantors
No. of Shares: As set forth in the Globalstar Warrant Memorandum, subject to
adjustment based on the antidilution provisions described below. (If issuer is
Globalstar L.P., the term "shares" will refer to L.P. interests.)
Warrant Exercise Price: As set forth in the Globalstar Warrant Memorandum,
subject to adjustment based on the antidilution provisions described below.
Acceleration of Vesting: In the event the Company merges with or into another
company (unless the warrants continue to represent the rights to purchase equity
in the surviving company on the same terms, except for equitable adjustment of
price and number of shares purchasable), sells all or substantially all of its
assets, liquidates, etc., the Company must give notice to the holder prior to
the consummation of the transaction and must give the holder the option of
exercising the warrant prior to consummation of such transaction.
Antidilution Events:
. Stock Splits, Recaps, etc. - will result in increased number of
Warrant Shares (unless reverse split, etc.)
. Rights, Options, Warrants, Convertible Securities - will result in
increased number of Warrant Shares pursuant to a prescribed
formula, but only to the extent that such shares, rights, options,
warrants or convertible securities are issued or distributed
generally to all holders of the Common Stock.
. Issuance of Common Stock at Lower Values - if shares are issued
below the then current fair market value of such shares,
adjustment will be made on a proportionate basis pursuant to a
prescribed formula, but only to the extent that such shares,
rights, options, warrants or
convertible securities are issued or distributed generally to all
holders of the Common Stock.
. Extraordinary Distributions/Stock Dividends -extraordinary cash
dividends (over 10% of current market value on record date),
distributions of properties, assets, etc. in partial liquidation
and stock dividends will result in adjustment.
. Distributions of Debt - Warrant Shares subject to adjustment in
accordance with a prescribed formula.
. Distributions includes repurchases and redemptions.
Registration Rights on Warrant Shares: Customary
-2-
EXHIBIT B
---------
WF&G Draft
1/8/96
CERTIFICATE OF DESIGNATION
OF
SERIES A NON-VOTING CONVERTIBLE PREFERRED STOCK
OF
LORAL TELECOMMUNICATIONS ACQUISITION, INC.
Pursuant to Section 151(g) of the
General Corporation Law of the State of Delaware
The undersigned, Senior Vice President of Loral Telecommunications
Acquisition, Inc., a Delaware corporation (the "Corporation"), in accordance
with the provisions of Section 151 of the General Corporation Law of the State
of Delaware, hereby certifies that pursuant to authority vested in the Board of
Directors of the Corporation by the provisions of its Certificate of
Incorporation, the Board of Directors has duly adopted the following resolution
creating a series of Preferred Stock of the Corporation designated as the Series
A Non-Voting Convertible Preferred Stock:
WHEREAS, the Certificate of Incorporation of the Corporation authorizes
__________ shares of capital stock, of which 1,000 shares are authorized as
Common Stock, $.01 par value per share ("Common Stock"), and __________ shares
are authorized as Preferred Stock, $.01 par value per share ("Preferred Stock");
and
WHEREAS, the Certificate of Incorporation of the Corporation authorizes the
Board of Directors to provide for the issuance of shares of Preferred Stock in
series and to establish from time to time the number of shares to be included in
each such series and to fix the designation, powers, preferences and rights of
the shares of each such series and the qualifications, limitations and
restrictions thereof;
NOW, THEREFORE, BE IT RESOLVED, that, pursuant to the Certificate of
Incorporation, the Board of Directors hereby fixes the designation and
preferences and relative rights, qualifications, limitations and restrictions of
a series of Preferred Stock.
RESOLVED, that each share of Preferred Stock described herein shall rank
equally in all respects and shall be subject to the following provisions:
(1) Number and Designation. ______ shares of Preferred Stock of the
Corporation shall be designated as Series
A Non-Voting Convertible Preferred Stock (the "Series A Preferred Stock").
(2) Dividends and Distributions. (a) Subject to paragraphs (2)(b)
and (4) below, the Corporation shall pay, and the holders of shares of Series A
Preferred Stock shall be entitled to receive, and to share equally and ratably,
share for share with the Common Stock, in such dividends and distributions on
the Common Stock or the Series A Preferred Stock as may be declared from time to
time by the Board of Directors, whether payable in cash, property or securities
of the Corporation. The record date for determining the holders of Series A
Preferred Stock entitled to receive dividends and distributions shall be the
same as the record date for determining the holders of Common Stock entitled to
receive dividends and distributions. Dividends and distributions shall be paid
to the holders of Series A Preferred Stock entitled to receive such dividends
and distributions at the close of business on the date on which such dividends
and distributions are paid or made by the Corporation in respect of the Common
Stock.
(b) In the event that the Corporation declares and pays a dividend or
makes any distribution on its Common Stock in the form of (x) shares of
additional Common Stock, (y) options, warrants or rights to acquire Common Stock
or (z) other securities of the Corporation convertible into or exchangeable for
Common Stock, the holders of the Series A Preferred Stock shall receive in lieu
of such securities: (1) an equal number of shares of additional Series A
Preferred Stock, in the case of clause (x) above; (2) options, warrants or
rights to acquire an equal number of additional shares of Series A Preferred
Stock on terms otherwise identical to such options, warrants or rights
distributed to the holders of Common Stock, in the case of clause (y) above; and
(3) securities convertible into or exchangeable for an equal number of shares of
Series A Preferred Stock on terms otherwise identical to the convertible or
exchangeable securities distributed to the holders of Common Stock, in the case
of clause (z) above.
(c) All dividends or distributions paid with respect to shares of the
Series A Preferred Stock shall be paid pro rata to the holders entitled thereto.
(d) Each fractional share of Series A Preferred Stock outstanding
shall be entitled to a ratable proportionate amount of all dividends and other
distributions accruing, paid or made with respect to each outstanding share of
Series A Preferred Stock and all such dividends and other distributions with
respect to such outstanding fractional shares shall be payable in the same
manner and at such times as provided for in paragraphs (2)(a), (2)(b) and (4)
hereof with respect to dividends and other distributions on each outstanding
share of Series A Preferred Stock.
-2-
(3) Voting Rights. (a) Except as otherwise set forth herein and as
otherwise provided by law, the holders of the Series A Preferred Stock shall not
be entitled to vote on any matter relating to the business or affairs of the
Corporation and shall not be included in determining the number of Shares voting
or entitled to vote on any such matters.
(b) Notwithstanding the foregoing, each issued and outstanding share
of Series A Preferred Stock shall be entitled to one vote for each share of
Common Stock into which such share of Series A Preferred Stock is convertible,
and shall be included as aforesaid in the number of shares voting and entitled
to vote with respect to the following matters presented to the stockholders of
the Corporation for their action or consideration:
i) any amendment to or modification or repeal of any provision of the
Corporation's Certificate of Incorporation or By-laws (or similar organizational
documents);
ii) any merger, consolidation, corporate reorganization or similar
transaction involving the Corporation;
iii) any sale, lease, exchange, transfer or other disposition,
directly or indirectly, in a single transaction or series of related
transactions, of all or substantially all of the assets of the Corporation or
any of its Affiliates;
iv) any plan or proposal for the liquidation or dissolution of the
Corporation or any assignment by the Corporation for the benefit of creditors,
or any filing by the Corporation of a petition in bankruptcy; or
v) any restructuring, extension, modification, substitution,
refinancing or amendment of any indebtedness of the Corporation.
Except as otherwise provided herein or by law, the holders of the Series A
Preferred Stock shall vote together with the holders of the Common Stock as a
single class.
(c) In addition to the voting rights set forth above, the consent of
the holders of at least a majority of the shares of the Series A Preferred Stock
at the time outstanding, voting together as a single class, shall be necessary
for any amendment to the Certificate of Incorporation or By-laws of the
Corporation, if such amendment would adversely affect the rights, powers,
privileges or preferences of the Series A Preferred Stock.
(4) Rights on Liquidation. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of the shares of the Series A Preferred Stock then outstanding shall
be entitled
-3-
to receive, prior and in preference to any distribution of any of the assets of
the Corporation to the holders of the Common Stock by reason of their ownership
thereof, an amount equal to $.01 per share for each outstanding share of Series
A Preferred Stock. If upon the occurrence of such event the assets thus
distributed among the holders of the Series A Preferred Stock shall be
insufficient to permit the payment to such holders of the full preferential
amount, the entire assets of the Corporation legally available for distribution
shall be distributed ratably among the holders of the Series A Preferred Stock.
After the payment or distribution to the holders of the Series A Preferred Stock
of such preferential amount, the holders of the Series A Preferred Stock and the
Common Stock then outstanding shall be entitled to receive ratably (based, in
the case of the Series A Preferred Stock, on the number of shares of Common
Stock into which such Series A Preferred Stock was last convertible) all
remaining assets of the Corporation to be distributed.
(5) Conversion. (a) Each share of Series A Preferred Stock may be
converted, at the option of the holder thereof, at any time (i) after the HSR
Clearance Date or (ii) upon the transfer (in accordance with the provisions of
the Stockholders Agreement) of such share of Series A Preferred Stock to a
Person other than a Stockholder or any Affiliate thereof, in the manner
hereinafter provided, into one (subject to any adjustment required below) fully
paid and nonassessable share of Common Stock; provided, however, that on any
liquidation of the Corporation, the right of conversion shall terminate at the
close of business on the business day immediately preceding the date fixed for
the payment of any amounts distributable on liquidation to the holders of the
Series A Preferred Stock.
(b) Each conversion of shares of Series A Preferred Stock into shares of
Common Stock shall be effected by the prior written notice thereof by the holder
of the Series A Preferred Stock and the surrender of the certificates
representing the shares to be converted at the principal office of the
Corporation (or such other office or agency of the Corporation as the
Corporation may designate by notice in writing to the holders of the Series A
Preferred Stock as shown on the books of the Corporation) at any time during
normal business hours. Such notice shall state the name or names (with
addresses) and denominations in which the certificate or certificates for such
shares of Common Stock are to be issued and shall include instructions for
reasonable delivery thereof. Each conversion shall be deemed to have been
effected as of the close of business on the date on which such certificates have
been surrendered and such notice has been received. At such time, the rights of
the holder of the surrendered Series A Preferred Stock as such holder shall
cease, and the Person in whose name the certificates for shares of Common Stock
will be issued upon such conversion shall be deemed to have become the holder of
record of the Common Stock represented thereby.
-4-
(c) Promptly after the surrender of the certificates and the receipt of
written notice, the Corporation shall issue and deliver in accordance with the
surrendering holder's instructions (i) the certificates for the shares of Common
Stock issuable upon such conversion and (ii) certificates representing any
surrendered shares of Series A Preferred Stock which were delivered to the
Corporation in connection with such conversion but which were not requested to
be converted and, therefore, were not converted.
(d) The issuance of certificates for Common Stock upon conversion of
Series A Preferred Stock shall be made without charge to the holders of such
shares for any issuance tax in respect thereof or other cost incurred by the
Corporation in connection with such conversion and the related issuance of
shares of Common Stock; provided that the Corporation shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the holder
of the Series A Preferred Stock being converted.
(e) The Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose of
issuance upon the conversion of the Series A Preferred Stock, such number of
shares of Common Stock issuable upon conversion of all outstanding Series A
Preferred Stock. All shares of Common Stock which are so issuable shall, when
issued, be duly and validly issued fully paid and nonassessable and free from
all taxes, liens and charges. The Corporation shall take all such actions as
may be necessary to assure that all such shares of Common Stock may be so issued
without violation of any applicable law or governmental regulation or any
requirement of any domestic securities exchange upon which shares of Common
Stock may be listed (except for official notice of issuance which shall be
immediately transmitted by the Corporation upon issuance).
(f) The Corporation shall not close its books against the transfer of
shares of Series A Preferred Stock in any manner which would interfere with the
timely conversion of any shares of Series A Preferred Stock. The Corporation
shall assist and cooperate with any holder of Series A Preferred Stock required
to make any governmental filings or obtain any governmental approval prior to or
in connection with any conversion of Series A Preferred Stock hereunder
(including, without limitation, making any filings required to be made by the
Corporation).
(6) Stock Splits; Adjustments. (a) If the Corporation shall in any manner
subdivide (by stock split, stock dividend or otherwise) or combine (by reverse
stock split or otherwise) the outstanding shares of Common Stock, the
outstanding shares of the Series A Preferred Stock shall be proportionately
subdivided or combined, as the case may be, and effective provision shall be
made for the protection of all
-5-
conversion and voting rights of the Series A Preferred Stock hereunder.
(b) If the Corporation shall issue any shares of its capital stock in
a reclassification of the Common Stock (including any such reclassification in
connection with a merger, consolidation or other business combination involving
the Corporation), or in any other similar transaction affecting the Corporation
or the number or value of Common Stock outstanding, effective provision shall be
made for the protection of all conversion and voting rights of the Series A
Preferred Stock hereunder.
(7) General Provisions. (a) The term "Affiliate" as used herein shall
have the meaning set forth in the Stockholders Agreement.
(b) The term "Antitrust Authority" as used herein shall have the
meaning set forth in the Stockholders Agreement.
(c) The terms "HSR Clearance Date" and "HSR Act" as used herein shall
have the meanings set forth in the Stockholders Agreement.
(d) The term "Person" as used herein means an individual or a
corporation, partnership, association, trust or any other entity or
organization.
(e) The term "outstanding," when used herein with reference to shares
of stock, shall mean issued shares, excluding shares held by the Corporation.
(f) The term "Stockholders Agreement" as used herein means that
certain Stockholders Agreement, dated as of _________, 1996, by and among Loral
Corporation, Loral Aerospace Holdings, Inc., Loral Aerospace Corp. and Loral
Telecommunications Acquisition, Inc.
(g) The term "Stockholders" as used herein shall have the meaning set
forth in the Stockholders Agreement.
(h) The headings of the paragraphs, subparagraphs, clauses and
subclauses of this Certificate of Designation are for convenience of reference
only and shall not define, limit or affect any of the provisions hereof.
(i) Subject to Section 3 hereof, any right, preference, privilege or
power of, or restriction provided for the benefit of, the Series A Preferred
Stock set forth herein may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively) with the written consent of the Corporation and the consent of
the holders of not less than a majority of the shares of Series A Preferred
Stock then outstanding, and any
-6-
amendment or waiver so effected shall be binding upon the Corporation and all
holders of Series A Preferred Stock.
IN WITNESS WHEREOF, the undersigned, Senior Vice President of Loral
Telecommunications Acquisition, Inc., has signed this Certificate of Designation
this ___ day of ____________, 1996 and affirms under penalties of perjury that
it is the act and deed of the Corporation and that the facts stated herein are
true.
LORAL TELECOMMUNICATIONS
ACQUISITION, INC.
By:____________________________
Michael B. Targoff
Senior Vice President
-7-
EXHIBITS B & C
--------------
1. Broad indemnification provisions
2. Limitations on and methods for changing size of the board
3. Limitations on shareholder rights to:
A. act by written consent
B. call special meetings
C. fill board vacancies
D. nominate directors
E. propose actions that would facilitate change of
control
F. remove directors
4. Lock-ins (supermajority provisions for amending charter and by-
laws)
5. Shareholder rights plan (Poison pill)
6. Staggered board
EXHIBIT D
---------
A shareholder rights plan substantially identical to that of the
shareholder rights plan adopted by Loral (as submitted to and approved by the
Board of Directors of Loral prior to the date hereof) except that Loral and its
affiliates and its associates shall not be deemed to be an "Acquiring Person"
unless Loral and its affiliates become the beneficial owner of 25% or more of
the outstanding shares of common stock (including securities convertible or
exercisable into common stock) of the Company, together with such other changes
to the shareholder rights plan as the parties may reasonably agree.
EXHIBIT E TO DISTRIBUTION AGREEMENT
-----------------------------------
1. The Company Pension Plans
2. The Company Savings Plans
3. The Prior Welfare Plans
4. The SERP
Exhibit 99(c)(4)
----------------
STOCKHOLDERS AGREEMENT
dated as of _________, 1996
by and among
LORAL CORPORATION,
and
LORAL SPACE & COMMUNICATIONS CORPORATION
STOCKHOLDERS AGREEMENT
----------------------
STOCKHOLDERS AGREEMENT, dated as of ________, 1996 (the "Agreement"),
by and among Loral Corporation, a New York corporation ("Loral"), and Loral
Space & Communications Corporation, a __________ corporation (the "Company").
Loral and those of its Affiliates who are transferees with respect to any of the
Equity Securities (as defined below), are sometimes collectively referred to
herein as the "Stockholders".
RECITALS:
--------
WHEREAS, the Company, Lockheed Martin Corporation, a Maryland
corporation ("LMC"), Loral and certain subsidiaries of Loral entered into a
Restructuring, Financing and Distribution Agreement, dated as of January 7, 1996
(the "Restructuring Agreement"; all capitalized terms used in this Agreement but
not otherwise defined herein, shall have the respective meanings assigned to
such terms in the Restructuring Agreement), pursuant to which, after giving
effect to the Restructuring and the Distribution, Loral acquired _______ shares
of Series A Non-Voting Convertible Preferred Stock, par value $0.01 per share,
of the Company (the "Preferred Stock"); and
WHEREAS, the Company and Loral desire to establish in this Agreement
certain conditions with respect to the relationship between the Stockholders and
the Company;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and in the Restructuring Agreement, the parties
hereto agree as follows:
ARTICLE I
STANDSTILL AND VOTING PROVISIONS
Section 1.1. Restrictions on Certain Actions by the Stockholders.
(a) During the Term (as defined in Article V below), each Stockholder will not,
and will cause each of its Affiliates (such term, as used in this Agreement, as
defined in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act) not to, singly or as part of a partnership, limited partnership, syndicate
or other group (as those terms are used in Section 13(d)(3) of the Exchange
Act), directly or indirectly:
(i) acquire, offer to acquire, or agree to acquire, by purchase,
gift or otherwise, any Equity Securities (as defined below in Section
1.1(c)), except pursuant to a stock split, stock dividend, rights offering,
recapitalization, reclassification, merger, consolidation, corporate
reorganization or similar transaction; provided that at any time in which
the Stockholders hold, in the aggregate, less than twenty percent (20%) of
the Total Voting Power, then the Stockholders may acquire Equity Securities
so that the Stockholders hold, in the aggregate, up to twenty percent (20%)
of the Total Voting Power;
(ii) make, or in any way actively participate in, any
"solicitation" of "proxies" to vote (as such terms are defined in Rule 14a-
1 under the Exchange Act), solicit any consent or communicate with or seek
to advise or influence any third party with respect to the voting of any
Equity Securities or become a "participant" in any "election contest" (as
such terms are defined or used in Rule 14a-11 under the Exchange Act), in
each case with respect to the Company;
(iii) form, join or encourage the formation of, any "person"
within the meaning of Section 13(d)(3) of the Exchange Act with respect to
any Equity Securities; provided that this Section 1.1(a)(iii) shall not
prohibit any such arrangement solely among the Stockholders and any of
their respective Affiliates;
2
(iv) deposit any Equity Securities into a voting trust or
subject any such Equity Securities to any arrangement or agreement with
respect to the voting thereof; provided that this Section 1.1(a)(iv) shall
--------
not prohibit any such arrangement solely among the Stockholders and any of
their respective Affiliates;
(v) initiate, propose or otherwise solicit stockholders for the
approval of one or more stockholder proposals with respect to the Company
as described in Rule 14a-8 under the Exchange Act, or induce or attempt to
induce any other third party to initiate any stockholder proposal;
(vi) except as otherwise contemplated or permitted by this
Agreement (including, without limitation, pursuant to Section 1.2 hereof),
seek to place a representative on the Board of Directors of the Company or
seek the removal of any member of the Board of Directors of the Company,
except with the approval of the Board of Directors or management of the
Company;
(vii) except with the approval of the Board of Directors or
management of the Company, call or seek to have called any meeting of the
stockholders of the Company;
(viii) except through its representatives on the Board of
Directors (or any committee thereof) of the Company (if any) and except as
otherwise contemplated by this Agreement or the Restructuring Agreement
(including the agreements and other documents referred to therein,
including, without limitation, the Tax Sharing Agreement), otherwise act to
seek to control the management or policies of the Company, except with the
approval of the Board of Directors or management of the Company;
(ix) sell or otherwise transfer in any manner any Equity
Securities to any "person" (within the meaning of Section 13(d)(3) of the
Exchange Act) who, immediately following such sale or transfer, would, to
the best of the Stockholder's knowledge, own more than four percent (4%) of
any class of Equity Securities or who, without the approval of
3
the Board of Directors of the Company, (A) has publicly proposed a business
combination or similar transaction with, or a change of control of, the
Company or who has publicly proposed a tender offer for Equity Securities
or (B) who has discussed with Loral or any of its respective Affiliates the
possibility of proposing a business combination or similar transaction
with, or a change in control of, the Company;
(x) sell or otherwise transfer in any manner to any person (as
defined in clause (ix) above) in any single transaction or series of
related transactions more than 2% of the outstanding Equity Securities;
(xi) solicit, seek to effect, negotiate with or provide any
information to any other party with respect to, or make any statement or
proposal, whether written or oral, to the Board of Directors of the Company
or any director or officer of the Company or otherwise make any public
announcement or proposal whatsoever with respect to, any form of business
combination transaction involving the Company, including, without
limitation, a merger, exchange offer or liquidation of the Company's
assets, or any corporate reorganization or similar transaction with respect
to the Company, except in each case with the approval of the Board of
Directors or management of the Company; or
(xii) instigate or encourage any third party to do any of the
foregoing.
Notwithstanding clauses (ix) and (x) above, the Stockholders may
effect any transaction contemplated by Article III hereof.
(b) Notwithstanding the provisions of this Section 1.1, nothing
herein shall apply with respect to any Equity Securities acquired from any
person other than a Stockholder (x) held by any pension, retirement or other
benefit plan managed by any Stockholder or any of its subsidiaries or other
Affiliates or (y) held in any account managed for the benefit of another person,
by any subsidiary or other Affiliate of any of the Stockholders which is engaged
in the financial services business. In
4
addition, notwithstanding the provisions of this Section 1.1, nothing herein
shall prohibit or restrict any transfer of Equity Securities to or among any of
the subsidiaries or other Affiliates of any of the Stockholders (provided that
such subsidiary or Affiliate agrees to be bound to the provisions of this
Agreement, upon which such subsidiary or Affiliate shall be entitled to all
rights and benefits, and shall be subject to all obligations, of a Stockholder
under this Agreement).
(c) For the purposes of this Agreement, (i) the term "Equity
Securities" shall mean the Preferred Stock and any securities entitled to vote
generally in the election of directors of the Company, or any direct or indirect
rights or options to acquire any such securities or any securities convertible
or exercisable into or exchangeable for such securities (provided that, in the
event that the Guaranty Warrants (as defined below) become warrants to acquire
Equity Securities, such Guaranty Warrants and any securities issued pursuant to
the exercise of such Guaranty Warrants, shall not (so long, in each case, as
they are held by the Stockholder) constitute Equity Securities for purposes of
determining the appropriate number of shares of Common Equity Securities which
Loral is entitled to acquire hereunder, including in connection with the
determination of the Target Percentage pursuant to Section 1.4(a) hereof), (ii)
the term "Voting Power" shall mean the voting power in the general election of
directors of the Company, (iii) the term "Total Voting Power" shall mean the
total combined Voting Power of all the Equity Securities then outstanding,
including, without limitation, the Preferred Stock, and, insofar as the
Preferred Stock is concerned, it is deemed to have Voting Power equal to that of
the Common Stock into which it is convertible, (iv) the term "Change of Control"
shall mean the occurrence of any of the following events: (A) any "person" or
"group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act)
is or becomes the beneficial owner of Equity Securities which represent at least
forty percent (40%) of the Total Voting Power, or (B) during any one-year
period, individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election by such
Board of Directors or whose nomination for election by the shareholders of the
Company was approved by a vote of a majority of the directors of the Company
then still in office who were
5
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company then in office, (v) the term
"beneficial owner", and terms having similar import, shall mean any direct or
indirect "beneficial owner", as such term is defined in Rules 13d-3 and 13d-5
under the Exchange Act, and (vi) the term "Guaranty Warrants" shall mean those
warrants which accrue to the benefit of the Company in connection with the
Globalstar Bank Guarantee, as described in the Globalstar Warrant Memorandum.
Section 1.2. HSR Clearance.
(a) At any time after the date hereof (but subject to the provisions
of Section 1.2(b) below), following a written request by Loral to the Company
(such request, the "HSR Notice"), the Company and the Stockholders will (i) take
promptly all actions necessary to make the filings required of the Stockholders,
the Company or any of their respective Affiliates under the HSR Act (as defined
in the Merger Agreement) with respect to the right to convert Preferred Stock
and continue to own the securities so received, the ownership and voting of
Equity Securities by the Stockholders, any of the transactions contemplated by
this Agreement or any other similar matters (all such exercise, ownership,
voting, transaction and other similar matters, the "Filing Matters"), (ii)
comply at the earliest practicable date with any request for additional
information or documentary material received by the Company or the Stockholders
or any of their Affiliates from any of the Federal Trade Commission, the
Antitrust Division of the Department of Justice, state attorneys general, the
Commission, or other governmental or regulatory authorities (all such
authorities, the "Antitrust Authorities"), and (iii) cooperate with each other
in connection with any of the filings referred to in clause (i) above and in
connection with resolving any investigation or other inquiry commenced by any of
the Antitrust Authorities. To the extent reasonably requested by Loral, the
Company shall use all reasonable efforts to resolve such objections, if any, as
may be asserted with respect to the Filing Matters. If any administrative,
judicial or legislative action or proceeding is instituted (or threatened to be
instituted)
6
challenging any aspect of the Filing Matters as violative of any Antitrust Law,
each of the Stockholders and the Company shall cooperate with each other 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) that is in effect and that restricts,
prevents or prohibits the exercise by the Stockholders of the right to convert
Preferred Stock and continue to own the securities so received, or the exercise
by Loral of its rights with respect to the ownership and voting of Equity
Securities or any of the transactions contemplated by this Agreement (any such
decree, judgment, injunction or other order is hereafter referred to as an
"Order"), including, without limitation, by pursuing all reasonable avenues of
administrative and judicial appeal, provided that nothing contained in this
Section 1.2(a) shall be construed to require any party hereto to hold separate
or divest any of their respective assets or businesses or agree to any
substantive restriction thereon or on the conduct thereof. Each of the Company
and Loral shall promptly inform the other party of any material communication
received by such party from any Antitrust Authority regarding any of the Filing
Matters or any of the other transactions contemplated hereby. For the purposes
of this Agreement, the term "HSR Clearance Date" shall mean the first date on
which (x) any applicable waiting period under the HSR Act with respect to the
Filing Matters shall have expired or been terminated, (y) there shall not be
pending any Action commenced by any Antitrust Authority relating to any of the
Filing Matters or any of the other transactions contemplated hereby, and (z)
there shall not be in effect any Order.
(b) Notwithstanding the provisions of Section 1.2(a) above, in the
event that Loral delivers the HSR Notice to the Company, the Company shall be
entitled to postpone for a reasonable period of time (but in no event later than
45 days), any filing referred to in Section 1.2(a)(i) above if the Company
determines in its reasonable judgment and in good faith that such filing would
delay the obtaining of any approval from an Antitrust Authority with respect to
any announced or imminent material acquisition or disposition which would
require a filing by the Company under the HSR Act. In the event of such
postponement, Loral shall have the right to withdraw
7
its HSR Notice and may deliver any such HSR Notice at any time thereafter.
Section 1.3. Voting.
(a) General Voting Provisions. Subject to the provisions of Section
1.3(b) below, prior to the HSR Clearance Date, no Stockholder shall have the
right to convert Preferred Stock into common stock or the right to vote any
Equity Securities with respect to the election of directors of the Company or on
any other matters submitted to a vote of the stockholders of the Company (other
than those matters set forth in Section 1.3(b) below). Following the HSR
Clearance Date, each Stockholder shall have the right to vote its Equity
Securities to the extent permitted by the terms thereof on any matters submitted
to a vote of the stockholders of the Company (including, without limitation,
those matters set forth in Section 1.3(b) below); provided that following the
HSR Clearance Date any Stockholder shall have the right to vote any Equity
Securities to the extent permitted by the terms thereof with respect to the
election of directors of the Company only (i) as recommended by the Board of
Directors or management of the Company or (ii) in the same proportions as the
holders of Equity Securities (other than Stockholders) vote their Securities.
On each matter with respect to which a Stockholder is entitled to vote pursuant
to this Section 1.3, each such Stockholder shall be present, in person or
represented by proxy, at all such stockholder meetings of the Company so that
all Equity Securities beneficially owned by it shall be counted for the purpose
of determining the presence of a quorum at such meetings. For purposes of this
Section 1.3, all references to the term "vote" shall include the execution and
delivery of any written consent with respect to the taking of any stockholder
action in lieu of a meeting of stockholders.
(b) Exceptions to General Voting Provisions. Notwithstanding anything
to the contrary contained in this Agreement, each Stockholder shall have the
right to vote freely, in any manner in which they determine, with respect to any
of the following matters:
(i) any amendment to or modification or repeal of any provision
of the Company's Certificate of Incorporation including any of the
provisions of
8
any certificate of designation or By-laws (or similar organizational
documents);
(ii) any merger, consolidation, corporate reorganization or
similar transaction involving the Company;
(iii) any sale, lease, exchange, transfer or other disposition,
directly or indirectly, in a single transaction or series of related
transactions, of all or substantially all of the assets of the Company or
any of its Affiliates;
(iv) any plan or proposal for the liquidation or dissolution of
the Company or any assignment by the Company for the benefit of creditors,
or any filing by the Company of a petition in bankruptcy; or
(v) any restructuring, extension, modification, substitution,
refinancing or amendment of any indebtedness of the Company.
(c) Company Call. If, within one year following the date hereof, the
Stockholders vote against any Call Event Triggering Transaction (as defined
below), the Company shall have the right, for 10 days following the date on
which such vote is held, to purchase, and the Stockholders shall be required to
sell to the Company, all, but not less than all, of the Equity Securities held
by the Stockholders at a per share cash price equal to the Call Event Trigger
Price (as defined below). The Company may exercise such right by delivering to
each Stockholder, within such 10-day period, a written notice stating that the
Company has irrevocably agreed to purchase in cash all (but not less than all)
of the Equity Securities held by the Stockholders at the Call Event Trigger
Price upon the terms and conditions set forth in this Section 1.3(c). The
closing with respect to the purchase of Equity Securities by the Company
pursuant to this Section 1.3(c) shall be on a mutually determined closing date
which shall not be more than 15 days after the date on which the Company's
written notice referred to above is delivered to the Stockholders. The closing
shall be held at 10:00 A.M., local time, at the principal office of the Company,
or at such other time or place as the parties mutually agree. On such closing
date, each
9
Stockholder shall deliver (i) certificates representing the shares of Equity
Securities being sold, free and clear of any lien, claim or encumbrance, and
(ii) such instruments of transfer and evidence of ownership and authority as the
Company may reasonably request. The purchase price shall be paid by the Company
to each Stockholder by wire transfer of immediately available funds no later
than 2:00 P.M. on the closing date to the account(s) designated by the
Stockholders prior to such closing date. For purposes of this Section 1.3(c),
(i) the term "Call Event Triggering Transaction" shall mean any transaction
described in Sections 1.3(b)(ii) and 1.3(b)(iii) between the Company, on the one
hand, and any Spinco Company (or any other Subsidiary of either the Company or a
Spinco Company), on the other; provided that the term "Call Event Triggering
Transaction" shall not include any transaction involving any party which is not
a Spinco Company (or any other Subsidiary of either the Company or a Spinco
Company), (ii) the term "Call Event Trigger Price" shall mean the sum of (x)
$344,000,000.00, plus (y) all amounts expended by the Stockholders following the
date hereof in connection with the acquisition of Equity Securities other than
acquisitions from another Stockholder following the date hereof, minus (z) any
net sales proceeds received by the Stockholders following the date hereof in
connection with the sale of Equity Securities (other than sales to another
Stockholder) following the date hereof.
Section 1.4. Loral Option.
(a) General Provisions Relating to Loral Option. If, within one year
following the date hereof, any Option Event Triggering Transaction (as defined
below) occurs, Loral shall have the right, within 90 days after the consummation
of the Option Event Triggering Transaction, to purchase, and the Company (for
purposes of this Section 1.4, all references to the "Company" shall be deemed to
include the Surviving Corporation (as defined below), shall be required to sell
to Loral, a number of shares of Preferred Stock which would cause Loral to own
Equity Securities with Voting Power equal to the Target Percentage (as defined
below) of the Total Voting Power immediately after giving effect to the
consummation of the Option Event Triggering Transaction, at a per share cash
price equal to the Option Event Trigger Price (as defined below). Loral may
exercise such right by deliv-
10
ering to the Company, within such 90-day period, a written notice stating that
Loral (or any Subsidiary of Loral designated by Loral; for purposes of this
Section 1.4, all references to "Loral" shall be deemed to include such
designated Subsidiary) has irrevocably agreed to purchase in cash the number of
shares of Preferred Stock specified in the preceding sentence, at the Option
Event Trigger Price, upon the terms and conditions set forth in this Section
1.4. The closing with respect to the purchase of Preferred Stock by the Company
pursuant to this Section 1.4 shall be on a mutually determined closing date
which shall not be more than 15 days after the date on which Loral's written
notice referred to above is delivered to the Company. The closing shall be held
at 10:00 A.M., local time, at the principal office of the Company, or at such
other time or place as the parties mutually agree. On such closing date, the
Company shall issue to Loral certificates representing the shares of Preferred
Stock being sold, which shall be validly issued, fully paid and non-assessable
and free and clear of any lien, claim or encumbrance. The purchase price shall
be paid by Loral to the Company by wire transfer of immediately available funds
no later than 2:00 P.M. on the closing date to the account designated in writing
by the Company prior to such closing date. For purposes of this Section 1.4,
(i) the term "Option Event Triggering Transaction" shall mean any transaction
described in clauses (ii), (iii) or (iv) of Section 1.3(b) hereof, involving as
parties, among others, the Company or any of its Affiliates (other than GTL and
Globalstar), on the one hand, and either GTL or Globalstar or any of their
respective Subsidiaries, on the other, (ii) the term "Option Event Trigger
Price" shall mean a $6.00 per share cash purchase price, subject to adjustment
pursuant to the provisions of Section 1.4(b) hereof, (iii) the term "Surviving
Corporation" shall mean any successor to the rights and obligations of the
Company as a result of or in connection with any Option Event Triggering
Transaction, and (v) the term "Target Percentage" shall mean a percentage amount
equal to the percentage of the Total Voting Power represented by the Equity
Securities held by the Stockholders immediately prior to the closing of the
Option Event Triggering Transaction; provided, however, that if there has
occurred within the five days preceding such closing an event that diluted the
Voting Power of the Equity Securities held by the Stockholders, the Target
Percentage
11
shall be determined as of the date five days prior to the closing of such Option
Event Triggering Transaction.
(b) Adjustment of Loral Option Event Trigger Price. The Option Event
Trigger Price shall be equitably adjusted from time to time after the date
hereof to take into account of any of the following events: (i) if the Company
shall pay a dividend or make any other distribution with respect to any Equity
Securities which is payable in the form of Equity Securities or in the form of
any other Asset (other than normal, periodic cash dividends of the Company),
(ii) if the Company shall subdivide its outstanding common stock, (iii) if the
Company shall combine its outstanding common stock into a smaller number of
shares, (iv) if the Company shall issue any shares of its capital stock in a
reclassification of the Common Stock (including any such reclassification in
connection with a merger, consolidation or other business combination involving
the Company), or (v) in any other similar transaction affecting the Company or
the number or value of the outstanding Equity Securities. The parties
acknowledge and agree that each such equitable adjustment shall preserve for
Loral the economic benefits of the Loral option set forth in Section 1.4(a)
above.
Section 1.5. Globalstar Warrant Put Option. In the event of any of
the following transactions (each such transaction, a "Warrant Trigger Event"):
(i) any merger, consolidation, corporate reorganization or similar
transaction involving Globalstar or GTL;
(ii) any sale, lease, exchange, transfer or other disposition,
directly or indirectly, of all or substantially all of the assets of
Globalstar or GTL; or
(iii) any liquidation or dissolution of Globalstar or GTL;
in which it is proposed that the Globalstar Warrants be converted into cash or
the right to receive cash, or any other interest (or the right to receive any
other interest) in Globalstar other than common stock thereof the Stockholders
shall have the right (the "Limited Warrant Put") to require the Company to
purchase the Globalstar
12
Warrants for a price equal to their Option Privilege Value (as defined below).
The Stockholders may exercise the Limited Warrant Put by delivering to the
Company, at least 10 days prior to the scheduled closing of the Warrant Trigger
Event, a notice to such effect accompanied by appropriate documentation or
certificates evidencing the Globalstar Warrants. The Option Privilege Price
shall be payable by the Company 10 days after the determination thereof. As
used herein, the term "Option Privilege Price" means the greater of (x) the
consideration payable in respect of the Globalstar Warrants in the Warrant
Trigger Event and (y) the hypothetical fair market value that would be assigned
to the Globalstar Warrants at the date of the Warrant Trigger Event assuming (1)
that no Warrant Trigger Event were to occur then or at any time prior to the
expiration of the Globalstar Warrants, (2) that the Globalstar Warrants would
remain outstanding until such expiration in accordance with their terms,
exercisable for shares of or interests in the issuer thereof, and (3) that such
issuer would remain a public company during such period. The Option Privilege
Price shall be determined by an investment banking firm of national standing
selected by agreement of the Company and the Stockholders or, failing such
agreement, by agreement of Bear Stearns Co. Inc. and Lehman Brothers. Such
investment banking firm shall, in determining the Option Privilege Price, give
full effect to (i) the spread between the exercise price and the fair market
value of the securities into which the Globalstar Warrants are exercisable and
(ii) the value of the "option privilege" in the Globalstar Warrants (that is,
the value of the right, without risking any capital, to speculate on and benefit
from appreciation in the underlying securities).
ARTICLE II
TRANSFER RESTRICTIONS
2.1. Certain Transactions. Notwithstanding anything contained in this
Agreement to the contrary, a Stockholder may without restriction:
(i) assign, pledge, mortgage, hypothecate, or otherwise encumber
or transfer all or any of its
13
Equity Securities in connection with any bona fide financing arrangement entered
into by such person or otherwise in connection with any indebtedness owed by
such Stockholder; provided that in the event that the Stockholder in question
defaults, the creditor's rights and obligations with respect to the voting and
transfer of such Equity Securities and the registration thereof shall be the
same as the Stockholder in question had under the provisions of this Agreement
and the creditor in question shall be deemed to be a Stockholder under this
Agreement for such purposes;
(ii) transfer any Equity Securities to another Stockholder or
any subsidiary or other Affiliate thereof (provided that such subsidiary or
Affiliate agrees to be bound to the provisions of this Agreement, upon which
such subsidiary or Affiliate shall be entitled to all rights and benefits, and
shall be subject to all obligations, of a Stockholder under this Agreement);
(iii) transfer any Equity Securities pursuant to any registered
public offering in connection with the provisions of Article III hereof or
pursuant to the provisions of Rule 144 (or any similar provision then in force)
under the Securities Act provided that such transfer under Rule 144 or any
similar provision meets the volume restrictions set forth in Rule 144 as in
effect on the date hereof; or
(iv) transfer any Equity Securities pursuant to any merger,
consolidation, corporate reorganization, restructuring or any other similar
transaction affecting the Company or pursuant to any involuntary transfer.
Section 2.2. Rights Pursuant to a Tender Offer. Each Stockholder
(any such Stockholder shall, for purposes of this Section 2.2, be referred to as
a "Tendering Stockholder") shall have the right to sell or exchange all its
Equity Securities pursuant to a tender or exchange offer for the Equity
Securities (an "Offer"). However, during the Term, prior to such sale or
exchange, the Tendering Stockholder shall give the Company the opportunity to
purchase such Equity Securities in the following manner:
14
(i) The Tendering Stockholder shall give notice (the "Tender Notice")
to the Company in writing of its intention to sell or exchange Equity
Securities in response to an Offer no later than three calendar days prior
to the latest time (including any extensions) by which Equity Securities
must be tendered in order to be accepted pursuant to such Offer, specifying
the amount of Equity Securities proposed to be tendered by the Tendering
Stockholder (the "Tendered Shares") and the purchase price per share
specified in the Offer at the time of the Tender Notice.
(ii) If the Tender Notice is given, the Company shall have the right
to purchase all, but not less than all, of the Tendered Shares exercisable
by giving written notice (an "Exercise Notice") to the Tendering
Stockholder at least two calendar days prior to the latest time after
delivery of the Tender Notice by which Equity Securities must be tendered
in order to be accepted pursuant to the Offer (including any extensions
thereof) and depositing in any escrow or similar arrangement reasonably
acceptable to the Tendering Stockholder, a sum in cash sufficient to
purchase all Tendered Shares at the price then being offered in the Offer,
without regard to any provision thereof with respect to proration or
conditions to the offeror's obligation to purchase. The delivery by the
Company of an Exercise Notice and deposit of funds as provided above will,
except as provided below, constitute an irrevocable agreement by the
Company to purchase, and the Tendering Stockholder to sell, the Tendered
Shares in accordance with the terms of this Section 2.2, whether or not the
Offer or any other tender or exchange offer (a "Competing Tender Offer")
for Equity Securities that was outstanding during the Offer is consummated.
(iii) The purchase price to be paid by the Company for any Equity
Securities purchased by it pursuant to this Section 2.2 shall be the
highest price offered or paid in the Offer or in any Competing Tender
Offer. For purposes hereof, the price offered or paid in a tender or
exchange offer for Voting Shares shall be deemed to be the price offered or
paid pursuant thereto, without regard to
15
any provisions thereof with respect to proration or conditions to the
offeror's obligation to purchase. If the purchase price per share
specified in the Offer includes any property other than cash (the "Offer
Noncash Property"), the purchase price per share at which the Company shall
be entitled to purchase all, but not less than all, of the Equity
Securities specified in the Tender Notice shall be (y) the amount of cash
per share, if any, specified in such Offer (the "Cash Portion"), plus (z)
an amount of cash per share equal to the value of the Offer Noncash
Property per share (the "Cash Value of Offer Noncash Property"), as
determined in good faith by the mutual agreement of the parties hereto, or
if the parties cannot agree, by an independent, nationally recognized
investment banking firm selected by the Tendering Stockholders and
reasonably acceptable to the Company. If the Company exercises its right
of first refusal by giving an Exercise Notice, the closing of the purchase
of the Equity Securities with respect to such right (the "Closing") shall
take place at 3:00 p.m., local time (or, if earlier, two hours before the
latest time by which Equity Securities must be tendered in order to be
accepted pursuant to the Offer), on the last day on which Equity Securities
must be tendered in order to be accepted pursuant to the Offer (including
any extensions thereof) (the "Last Tender Date"), and the Company shall pay
the purchase price for the Equity Securities specified above. The
Tendering Stockholder shall be entitled to rescind its Tender Notice at any
time prior to the Last Tender Date by notice in writing to the Company;
provided that if on or before the Last Tender Date, the Company publicly
announces that the Company has approved, proposed or entered into an
agreement with respect to (either individually or together with any other
persons) a recapitalization, reorganization or business combination with
respect to the Company or all or substantially all of its assets, or a
self-tender offer, the Tendering Stockholder shall be entitled to rescind
its Tender Notice by notice in writing to the Company at any time prior to
the Closing on the Last Tender Date. If the Tendering Stockholder rescinds
its Tender Notice pursuant to the immediately preceding sentence, the
Company's Exercise Notice with respect to such Offer shall be
16
deemed to be immediately rescinded and the Tendering Stockholder's
disposition of its Equity Securities in response to the Offer with respect
to which the Tender Notice is rescinded or any other Offer shall again be
subject to all of the provisions of this Section 2.2.
(iv) If the Company does not exercise its right of first refusal set
forth in this Section 2.2 within the time specified for such exercise by
giving an Exercise Notice, then the Tendering Stockholder shall be free to
accept, for all its Equity Securities, the Offer with respect to which the
Tender Notice was given or any Competing Tender Offer (including any
increases and extensions thereof).
ARTICLE III
REGISTRATION RIGHTS
Section 3.1. Registration Upon Request.
(a) At any time commencing on the date hereof and continuing
thereafter, each Stockholder (any such Stockholder, whether registering
securities pursuant to this Section 3.1 or Section 3.2, shall be referred to as
a "Registering Stockholder") shall have the right to make written demand upon
the Company, on not more than five separate occasions (subject to the provisions
of this Section 3.1), to register under the Securities Act, any common stock or
other securities of the Company held by it (the securities subject to such
demand hereunder or subject to the provisions of Section 3.2 being referred to
in each case as the "Subject Securities"), and the Company shall use its best
efforts to cause such securities to be registered under the Securities Act as
soon as reasonably practicable so as to permit the sale thereof promptly;
provided that each such demand shall cover at least ________ shares of Common
Stock (subject to adjustment for stock splits, reverse stock splits, stock
dividends and similar events after the date hereof). In connection therewith,
the Company shall prepare, and as soon as reasonably practicable but in no event
later than 90 days of the receipt of the request, file, on Form S-3 if permitted
or otherwise on the appropriate form, a
17
registration statement under the Securities Act to effect such registration.
Such registration shall be effected in accordance with the intended method or
methods of disposition specified by the Registering Stockholders (including, but
not limited to, an offering on a delayed or continuous basis pursuant to Rule
415 (or any successor rule to similar effect) promulgated under the Securities
Act). Each Registering Stockholder agrees to provide all such information and
materials and to take all such action as may be reasonably required in order to
permit the Company to comply with all applicable requirements of the Securities
Act and the SEC and to obtain any desired acceleration of the effective date of
such registration statement. If the offering to be registered is to be
underwritten, the managing underwriter shall be selected by the Registering
Stockholders and shall be reasonably satisfactory to the Company.
Notwithstanding the foregoing, the Company (i) shall not be obligated to prepare
or file more than one registration statement other than for purposes of a stock
option or other employee benefit or similar plan during any twelve-month period,
(ii) shall be entitled to postpone for a reasonable period of time (but in no
event later than 60 days), the filing of any registration statement otherwise
required to be prepared and filed by the Company if (A) the Company is, at such
time, conducting or about to conduct an underwritten public offering of
securities and is advised by its managing underwriter or underwriters in writing
(with a copy to the Registering Stockholders), that such offering would, in its
or their opinion, be materially adversely affected by the registration so
requested, or (B) the Company determines in its reasonable judgment and in good
faith that the registration and distribution of the Subject Securities would
interfere with any announced or imminent material financing, acquisition,
disposition, corporate reorganization or other material transaction of a similar
type involving the Company. In the event of such postponement, the Registering
Stockholders shall have the right to withdraw the request for registration by
giving written notice to the Company within 20 days after receipt of the notice
of postponement (and, in the event of such withdrawal, such request shall not be
counted for purposes of determining the number of registrations to which the
Registering Stockholders are entitled pursuant to this Section 3.1).
18
(b) The Company shall not grant to any other holder of its
securities, whether currently outstanding or issued in the future, any
incidental or piggyback registration rights with respect to any registration
statement filed pursuant to a demand registration under this Section 3.1 and
without the prior consent of the Registering Stockholders, the Company will not
itself, and will not permit any other holder of its securities to, participate
in any offering made pursuant to a demand registration under this Section 3.1.
The Company may grant to other holders of its securities incidental or piggyback
registration rights on a primary offering by the Company which are no more
favorable to such holders than the provisions set forth in Section 3.2 are to
the Stockholders. If the Registering Stockholders consents to the inclusion of
offers and sales of any other securities in a registration pursuant to this
Section 3.1 and the underwriter(s) retained in connection with such registration
subsequently advise the Registering Stockholders that such offering would be
adversely affected by the inclusion of such other securities, the Registering
Stockholders may in their sole discretion exclude all or some of such securities
from such registration.
(c) Any registration requested by any Registering Stockholder
pursuant to this Section 3.1 shall not be deemed to have been effected (and,
therefore, not requested for purposes of this Section 3.1), (i) unless it has
become effective, (ii) if after it has become effective such registration is
interfered with by any stop order, injunction or other order or requirement of
the SEC or other governmental agency or court for any reason other than a
misrepresentation or an omission by the Registering Stockholders and, as a
result thereof, the Subject Securities requested to be registered cannot be
completely distributed in accordance with the plan of distribution set forth in
the related registration statement or (iii) if the closing pursuant to the
purchase agreement or underwriting agreement entered into in connection with
such registration does not occur. Any registration effected pursuant to Section
3.2 shall not be deemed to have been requested by a Registering Stockholder for
purposes of this Section 3.1.
Section 3.2. Incidental Registration Rights. If the Company proposes
to register any of its Equity Securities under the Securities Act for its own
account
19
(other than (i) pursuant to Section 3.1 hereof, (ii) securities to be issued
pursuant to a stock option or other employee benefit or similar plan, and (iii)
securities proposed to be issued in exchange for securities or assets of, or in
connection with a merger or consolidation with, another corporation), the
Company shall, as promptly as practicable, give written notice to the
Registering Stockholders of the Company's intention to effect such registration.
If, within 15 days after receipt of such notice, a Registering Stockholder
submits a written request to the Company specifying the amount of Equity
Securities that it proposes to sell or otherwise dispose of in accordance with
this Section 3.2, the Company shall use its best efforts to include the
securities specified in the Registering Stockholder's request in such
registration. If the offering pursuant to such registration statement is to be
made by or through underwriters, the managing underwriters shall be chosen by
the Company and shall be reasonably satisfactory to the Registering Stockholders
and the Company, and the Registering Stockholders and such underwriter shall
execute an underwriting agreement in customary form. If the managing
underwriter reasonably determines in good faith and advises the Registering
Stockholders in writing that the inclusion in the registration statement of all
the Equity Securities proposed to be included would interfere with the
successful marketing of the securities proposed to be registered, then the
Company and the Registering Stockholders shall negotiate in good faith to agree
upon an equitable adjustment in the number or amount of securities of each to be
included in such underwriting (provided that in the event that the Company and
the Registering Stockholders are unable to agree upon an equitable adjustment in
the number or amount of securities of each to be included in such underwriting,
then the number of securities which the Company and the Registering Stockholders
propose to register shall be reduced pro rata (based upon the respective market
values of each party's respective share of the total number of securities
proposed to be registered). No registration effected under this Section 3.2
shall relieve the Company of its obligation to effect any registration upon
request under Section 3.1. If the Registering Stockholders are permitted to
participate in a proposed offering pursuant to this Section 3.2, the Company
thereafter may determine either not to file a registration statement relating
thereto, or to withdraw such registration statement, or otherwise not
20
to consummate such offering, without any liability hereunder. Any underwriters
participating in a distribution of the Subject Securities pursuant to Sections
3.1 and 3.2 hereof shall use all reasonable efforts to effect as wide a
distribution as is reasonably practicable, and in no event shall any sale of
Subject Securities be made knowingly to any person (including its Affiliates and
any group in which that person or its Affiliates shall be a member, or the
Registering Stockholders or the underwriters know of the existence of such a
group or Affiliate) that, immediately prior to giving effect to any such sale,
beneficially owned Equity Securities representing five percent (5%) or more of
the Total Voting Power. The Registering Stockholders and the Company shall use
all reasonable efforts to secure the agreement of the underwriters, in
connection with any underwritten offering of its Equity Securities, to comply
with the foregoing.
Section 3.3. Registration Mechanics. (a) In connection with any
offering of Subject Securities registered pursuant to Section 3.1 or 3.2 herein,
the Company shall (i) furnish to the Registering Stockholders such number of
copies of any prospectus (including preliminary and summary prospectuses) and
conformed copies of the registration statement (including amendments or
supplements thereto and, in each case, all exhibits) and such other documents as
any Registering Stockholder may reasonably request; (ii)(A) use its best efforts
to register or qualify the Subject Securities covered by such registration
statement under such blue sky or other state securities laws for offer and sale
as the Registering Stockholders shall reasonably request and (B) keep such
registration or qualification in effect for so long as the registration
statement remains in effect; provided that the Company shall not be obligated to
qualify to do business as a foreign corporation under the laws of any
jurisdiction in which it shall not then be qualified or to file any general
consent to service of process in any jurisdiction in which such a consent has
not been previously filed or subject itself to taxation in any jurisdiction
wherein it would not otherwise be subject to tax but for the requirements of
this Section 3.3; (iii) use its best efforts to cause all Subject Securities
covered by such registration statement to be registered with or approved by such
other federal or state government agencies or authorities as may be necessary,
in the opinion of counsel to the Registering Stockholders, to enable the
21
Registering Stockholders to consummate the disposition of such Subject
Securities; (iv) notify the Registering Stockholders any time when a prospectus
relating thereto is required to be delivered under the Securities Act upon
discovery that, or upon the happening of any event as a result of which, the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, in the light of the circumstances under which they were made, and
(subject to the good faith determination of the Company's Board of Directors as
to whether to permit sales under such registration statement), at the request of
any Registering Stockholder promptly prepare and furnish to it a reasonable
number of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such securities,
such prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading, in light of the circumstances under which
they were made; (v) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC; (vi) use its best efforts to list the Subject
Securities covered by such registration statement on the New York Stock Exchange
or on any other Exchange on which the Subject Securities are then listed, if
required by the rules of any such Exchange; (vii) use its best efforts to obtain
a "cold comfort" letter from the independent public accountants for the Company
in customary form and covering matters of the type customarily covered by such
letters as may be reasonably requested by the Registering Stockholders, in the
event of a registration effected pursuant to Section 3.1 hereof; (viii) execute
and deliver all instruments and documents (including in an underwritten offering
an underwriting agreement in customary form) and take such other actions and
obtain such certificates and opinions as the Registering Stockholders reasonably
request in order to effect an underwritten public offering; and (ix) before
filing any registration statement or any amendment or supplement thereto, and as
far in advance as is reasonably practicable, furnish to each Registering
Stockholder and its counsel copies of such documents. In connection with any
offering of Subject Securities registered pursuant to Section 3.1 or 3.2, the
Company shall (x) furnish to the
22
underwriter, if any, unlegended certificates representing ownership of the
Subject Securities being sold in such denominations as requested and (y)
instruct any transfer agent and registrar of the Subject Securities to release
any stop transfer orders with respect to such Subject Securities. Upon any
registration becoming effective pursuant to Section 3.1, the Company shall use
its best efforts to keep such registration statement current for a period of 60
days (or 90 days, if the Company is eligible to use a Form S-3, or successor
form) or such shorter period as shall be necessary to effect the distribution of
the Subject Securities.
(b) Before filing with the SEC any registration statement referred to
herein or any amendments or supplements thereto, the Company shall furnish to
the Registering Stockholders or their respective counsel copies of all such
documents proposed to be filed, in order to give the Registering Stockholders or
their respective counsel sufficient time to review such documents, and such
documents may thereafter be filed subject to any timely and reasonable comments
of the Registering Stockholders or their respective counsel. The Company shall
(i) deliver promptly to the Registering Stockholders or their respective counsel
copies of all written communications between the Company and the SEC relating to
the registration statement, and (ii) advise the Registering Stockholders or
their respective counsel promptly of, and provide the Registering Stockholders
or their respective counsel with the opportunity to participate in (to the
extent reasonably practicable), all telephonic and other non-written
communications between the Company and the SEC relating to such registration
statement. The Company shall respond promptly to any comments from the SEC with
respect thereto, after consultation with the Registering Stockholders or their
respective counsel, and shall take such other actions as shall be reasonably
required in order to have each such registration statement declared effective
under the Securities Act as soon as reasonably practicable following the date
hereof.
(c) Each Registering Stockholder agrees that upon receipt of any
notice from the Company of the happening of any event of the kind described in
subdivision (iv) of this Section 3.3, it will forthwith discontinue its
disposition of Subject Securities pursuant to the registration statement
relating to such Subject Securi-
23
ties until its receipt of the copies of the supplemented or amended prospectus
contemplated by subdivision (iv) of this Section 3.3 and, if so directed by the
Company, will deliver to the Company all copies (other than permanent file
copies) then in its possession of the prospectus relating to such Subject
Securities current at the time of receipt of such notice. If any Registering
Stockholder's disposition of Subject Securities is discontinued pursuant to the
foregoing sentence unless the Company thereafter extends the effectiveness of
the registration statement to permit dispositions of Subject Securities by the
Registering Stockholder for an aggregate of 60 days (or 90 days, if the Company
is eligible to use a Form S-3, or successor form), whether or not consecutive,
the registration statement shall not be counted for purposes of determining the
number of registrations to which the Registering Stockholders are entitled
pursuant to Section 3.1.
Section 3.4. Expenses. The Registering Stockholders shall pay all
agent fees and commissions and underwriting discounts and commissions related to
Subject Securities being sold by the Registering Stockholders and the fees and
disbursements of its counsel and accountants and the Company shall pay all fees
and disbursements of its counsel and accountants in connection with any
registration pursuant to this Article III. All other fees and expenses in
connection with any registration statement (including, without limitation, all
registration and filing fees, all printing costs, all fees and expenses of
complying with securities or blue sky laws) shall (i) in the case of a
registration pursuant to Section 3.1, be borne equally by the Registering
Stockholders and the Company and (ii) in the case of a registration pursuant to
Section 3.2, be shared pro rata based upon the respective market values of the
securities to be sold by theCompany, the Registering Stockholders and any other
holders participating in such offering; provided that the Registering
Stockholders shall not be obligated to pay any expenses relating to work that
would otherwise be incurred by the Company including, but to limited to, the
preparation and filing of periodic reports with the SEC.
Section 3.5. Indemnification and Contribution. (a) In the case of
any offering registered pursuant to this Article III, the Company agrees to
indemnify and hold each Registering Stockholder, each underwriter, if
24
any, of the Subject Securities under such registration and each person who
controls any of the foregoing within the meaning of Section 15 of the Securities
Act, and any officer, employee or partner of the foregoing, harmless against any
and all losses, claims, damages, or liabilities (including reasonable legal fees
and other reasonable expenses incurred in the investigation and defense thereof)
to which they or any of them may become subject under the Securities Act or
otherwise (collectively "Losses"), insofar as any such Losses shall arise out of
or shall be based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in the registration statement relating to the sale of
such Subject Securities (as amended if the Company shall have filed with the SEC
any amendment thereof), or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading or (ii) any untrue statement or alleged untrue statement
of a material fact contained in the prospectus relating to the sale of such
Subject Securities (as amended or supplemented if the Company shall have filed
with the SEC any amendment thereof or supplement thereto), or the omission or
alleged omission to state therein a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided that the indemnification contained in this Section 3.5
shall not apply to such Losses which shall arise primarily out of or shall be
based primarily upon any such untrue statement or alleged untrue statement, or
any such omission or alleged omission, which shall have been made in reliance
upon and in conformity with information furnished in writing to the Company by
the Registering Stockholders or any such underwriter, as the case may be,
specifically for use in connection with the preparation of the registration
statement or prospectus contained in the registration statement or any such
amendment thereof or supplement therein.
(b) In the case of each offering registered pursuant to this Article
III, the Registering Stockholders and each underwriter, if any, participating
therein shall agree, substantially in the same manner and to the same extent as
set forth in the preceding paragraph, severally to indemnify and hold harmless
the Company and each person, if any, who controls the Company within the meaning
of Section 15 of the Securities Act, and the
25
directors and executive officers of the Company, with respect to any statement
in or omission from such registration statement or prospectus contained in such
registration statement (as amended or as supplemented, if amended or
supplemented as aforesaid) if such statement or omission shall have been made in
reliance upon and in conformity with information furnished in writing to the
Company by the Registering Stockholders or such underwriter, as the case may be,
specifically for use in connection with the preparation of such registration
statement or prospectus contained in such registration statement or any such
amendment thereof or supplement thereto.
(c) Each party indemnified under this Section 3.5 shall, promptly
after receipt of notice of the commencement of any claim ("Claim") against such
indemnified party in respect of which indemnity may be sought hereunder, notify
the indemnifying party in writing of the commencement thereof. The failure of
any indemnified party to so notify an indemnifying party shall not relieve the
indemnifying party from any liability in respect of such Claim which it may have
to such indemnified party on account of the indemnity contained in this Section
3.5, unless (and only in the event) the indemnifying party was materially
prejudiced by such failure, and in no event shall such failure relieve the
indemnifying party from any other liability which it may have to such
indemnified party. In case any Claim in respect of which indemnification may be
sought hereunder shall be brought against any indemnified party and it shall
notify an indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate therein and, to the extent that it may desire,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof through counsel reasonably satisfactory to the indemnified party
by notifying the indemnified party in writing of such election within 10 days
after receipt of the indemnified party's initial notice of the Claim, and after
such notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under this Section 3.5 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof, other than reasonable costs of investigation (unless such
indemnified party reasonably objects to such assumption on the
26
grounds that there may be defenses available to it which are different from or
in addition to those available to such indemnifying party in which event the
indemnified party shall be reimbursed by the indemnifying party for the
reasonable expenses incurred in connection with retaining separate legal
counsel). If the indemnifying party undertakes to defend against such Claim
within such 10-day period, the indemnifying party shall control the
investigation, defense and settlement thereof; provided that (i) the
indemnifying party shall use its reasonable efforts to defend and protect the
interests of the indemnified party with respect to such Claim, (ii) the
indemnified party, prior to or during the period in which the indemnifying party
assumes control of such matter, may take such reasonable actions as the
indemnified party deems necessary to preserve any and all rights with respect to
such matter, without such actions being construed as a waiver of the indemnified
party's rights to defense and indemnification pursuant to this Agreement, and
(iii) the indemnifying party shall not, without the prior written consent of the
indemnified party, consent to any settlement which (A) imposes any Liabilities
on the indemnified party (other than those Liabilities which the indemnifying
party agrees to promptly pay or discharge), and (B) with respect to any non-
monetary provision of such settlement, would be likely, in the indemnified
party's reasonable judgment, to have an adverse effect on the business
operations, assets, properties or prospects of any Stockholder (in the event
that a Registering Stockholder or any of its Affiliates is the indemnified
party), or the Company (in the event that the Company is an indemnified party),
or such indemnified party. If the indemnifying party does not undertake within
such 10-day period to defend against such Claim, then the indemnifying party
shall have the right to participate in any such defense at its sole cost and
expense, but the indemnified party shall control the investigation, defense and
settlement thereof (provided that the indemnified party may not settle any such
Claim without obtaining the prior written consent of the indemnifying party
(which consent shall not be unreasonably withheld by the indemnifying party;
provided that in the event that the indemnifying party is in material breach at
such time of the provisions of this Section 3.5, then the indemnified party
shall not be obligated to obtain such prior written consent of the indemnifying
party) at the reasonable cost and expense of the indemnifying party
27
(which shall be paid by the indemnifying party promptly upon presentation by the
indemnified party of invoices or other documentation evidencing the amounts to
be indemnified). In addition to the foregoing, no indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which the
indemnified party could have been a party and indemnity could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability arising out
of such claim or proceeding.
(d) If the indemnification provided for in this Section 3.5 is
unavailable to an indemnified party or is insufficient to hold such indemnified
party harmless from any Losses in respect of which this Section 3.5 would
otherwise apply by its terms (other than by reason of exceptions provided
herein), then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall have a joint and several obligation to contribute to
the amount paid or payable by such indemnified party as a result of such Losses,
in such proportion as is appropriate to reflect the relative benefits received
by and fault of the indemnifying party, on the one hand, and such indemnified
party, on the other hand, in connection with the offering to which such
contribution relates as well as any other relevant equitable considerations.
The relative benefit shall be determined by reference to, among other things,
the amount of proceeds received by each party from the offering to which such
contribution relates. The relative fault shall be determined by reference to,
among other things, each party's relative knowledge and access to information
concerning the matter with respect to which the claim was asserted, and the
opportunity to correct and prevent any statement or omission. The amount paid
or payable by a party as a result of any Losses shall be deemed to include any
legal or other fees or expenses incurred by such party in connection with any
investigation or proceeding, to the extent such party would have been
indemnified for such expenses if the indemnification provided for in this
Section 3.5 was available to such party.
(e) The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 3.5 were determined by pro rata
allocation or by
28
any other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
Section 3.6. Rule 144. The Company covenants that it will file
the reports required to be filed by it under the Securities Act and the Exchange
Act and the rules and regulations adopted by the Commission thereunder (or, if
the Company is not required to file such reports, it will, upon the request of
any Stockholder, make publicly available other information), and it will take
such further action as any Stockholder may reasonably request, all to the extent
required from time to time to enable such Stockholder to sell Subject Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (i) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (ii) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any Stockholder, the Company
will deliver to such Stockholder a written statement as to whether it has
complied with such requirements.
SECTION 3.7. Holdback Agreement. The Company agrees that it and its
Affiliates will not effect any sale, offer for sale, or grant any option to
purchase any shares of common stock (or securities convertible into or
exchangeable or exercisable for common stock) (collectively, "Sales") during the
10-day period prior to, and the 90-day period (or such longer period, not to
exceed 120 days, as the managing underwriter(s) therefor determines) beginning
on the effective date of a registration statement filed pursuant to Section 3.1
without the consent of such managing underwriter(s). The Stockholders agree not
to effect any Sales during the 10-day period prior to, and the 90-day period (or
such longer period, not to exceed 120 days, as the managing underwriter(s)
therefor determines) beginning on the effective date of a registration statement
relating to a primary offering (other than one described in clauses (i), (ii) or
(iii) of the first sentence of Section 3.2 hereof) without the consent of such
managing underwriter(s); provided that this sentence shall be of no force and
29
effect if the Company effects a Sale or files any registration statement for the
benefit of any other party during such 120-day period.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Representations and Warranties of the Company. The Company
hereby represents and warrants to each of the Stockholders as follows:
(a) The execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the transactions
contemplated by this Agreement are within its corporate powers and have
been duly authorized by all necessary corporate action on its part. This
Agreement constitutes a legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, (i) except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally, including the effect of statutory and other
laws regarding fraudulent conveyances and preferential transfers, and (ii)
subject to the limitations imposed by general equitable principles
(regardless of whether such enforceability is considered in a proceeding at
law or in equity).
(b) The execution, delivery and performance of this Agreement by the
Company does not and will not contravene or conflict with or constitute a
default under the Company's Certificate of Incorporation or By-laws or any
of its material Contracts.
(c) Immediately after giving effect to both the Restructuring and the
Distribution (including, without limitation, after giving effect to the
distribution of shares of Spinco Common Stock to the holders of common
stock of Loral and the holders of options with respect to common stock of
Loral, who or which may be entitled to receive shares of Spinco Common
Stock pursuant to or in connection with the Distribution Agreement, the
Merger Agreement or
30
otherwise), (i) the Company's authorized capital stock shall consist of
________ shares of Spinco Common Stock and ________ shares of Preferred
Stock, of which ________ shares of Spinco Common Stock and ________ shares
of Preferred Stock shall be issued and outstanding, (ii) Loral will be the
record and beneficial owner of _______ shares of Preferred Stock, all of
which will be validly issued and fully paid and nonassessable and all of
which will be free of all Liens, (iii) except for the shares of Spinco
Common Stock and the shares of Preferred Stock specified in clause (i)
above, there will be no other Equity Securities, and (iv) the Wing
Stockholders will hold, in the aggregate, at least twenty percent (20%) of
the Total Voting Power.
ARTICLE V
TERM
Section 5.1. Term. The term (the "Term") of this Agreement shall
commence on the date hereof and shall continue until the earlier of (x) the date
on which the Voting Power of the Equity Securities, on a fully diluted basis,
beneficially owned by Loral and its Affiliates shall represent less than five
percent (5%) of the Total Voting Power, (y) the seventh anniversary of the date
hereof, or (z) a Change of Control (as defined in Section 1.1(c) above). Upon
expiration of the Term, the provisions of this Agreement shall terminate, and be
of no further force or effect, automatically without any further action on the
part of any parties hereto; provided that the provisions of Articles III and VI
shall continue without regard to the term limitation set forth in this sentence;
provided further that no such termination shall relieve any party of any
liability to the other parties hereto, to the extent such liability is incurred
prior to the expiration of the Term.
31
ARTICLE VI
MISCELLANEOUS
Section 6.1. Certain Restrictions. The Company shall not take or
recommend to its stockholders any action, including any amendment of its
Certificate of Incorporation, By-laws or stockholder rights plan, if any, which
would impose restrictions applicable to Loral and not to other securityholders
generally based upon the size of Loral' security holdings, the business in which
it is engaged or other considerations applicable to it and not to
securityholders generally. In addition, the Company shall not take or recommend
to its stockholders any action, including any amendment of its Certificate of
Incorporation, By-laws or stockholder rights plan, if any, which would likely
adversely affect in any material respect, either directly or indirectly, any of
the rights or obligations of the Stockholders under the provisions of this
Agreement.
The Stockholders agree that the Company may adopt a stockholders
rights plan similar to the stockholders rights plan adopted by Loral except that
Loral (and its Affiliates and associates) shall not be deemed to be an
"Acquiring Person" unless Loral and its Affiliates become the beneficial owner
of 25% or more of the outstanding shares of common stock of the Company.
Section 6.2. Entire Agreement. This Agreement and the Restructuring
Agreement (including the schedules and exhibits and the agreements and other
documents referred to therein, including, without limitation, the Tax Sharing
Agreement and the Transition Services Agreements) constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all other prior negotiations, commitments, agreements and
understandings, both written and oral, between the parties or any of them with
respect to the subject matter hereof.
Section 6.3. Fees and Expenses. Except as otherwise provided in this
Agreement, all costs and expenses incurred by the Stockholders and the Company
in connection with consummating such party's obligations
32
hereunder or otherwise shall be paid by the party incurring such cost or
expense.
Section 6.4. Access to Information. During the Term, the Company
shall provide to each Stockholder reasonable access to the books and records of
the Company and its subsidiaries during the regular business hours of the
Company and such subsidiaries, following the Company's receipt of a written
notice from such Stockholder requesting such access; provided that the Company
shall not be required to provide any confidential information if the Company
reasonably determines that the providing of such information would result in (x)
a violation of applicable antitrust laws or (y) create a substantial likelihood
of a significant adverse effect on the Company; provided, further, that the
Stockholder shall keep confidential any confidential information disclosed to it
except as required by law, service of process, interrogatories, or similar legal
process, and except for any such information which becomes publicly available
through no fault of the Stockholder.
Section 6.5. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF
NEW YORK WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES THEREOF (EXCEPT
IN THOSE CIRCUMSTANCES WHERE THE CORPORATE LAW OF THE COMPANY'S JURISDICTION OF
ORGANIZATION REQUIRES THE APPLICATION OF THE LAW OF THE COMPANY'S JURISDICTION
OF ORGANIZATION WITH RESPECT TO A PARTICULAR MATTER).
Section 6.6. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given upon (a) transmitter's
confirmation of a receipt of a facsimile transmission, (b) confirmed delivery by
a standard overnight carrier or when delivered by hand or (c) the expiration of
five Business Days after the day when mailed by certified or registered mail,
postage prepaid, addressed at the following addresses (or at such other address
for a party as shall be specified by like notice):
33
(a) If to any of the Stockholders, to:
Loral Corporation
c/o Lockheed Martin Corporation
6801 Rockledge Drive
Bethesda, MD 20817
Telephone: (301) 897-6125
Telecopy No.: (301) 897-6333
Attention: General Counsel
and to:
Skadden, Arps, Slate, Meagher
& Flom
919 Third Avenue
New York, New York 10022
Telephone: (212) 735-3000
Telecopy No.: (212) 735-2000
Attention: Peter Allan Atkins, Esq.
Lou R. Kling, Esq.
and to:
O'Melveny & Myers
153 E. 53rd Street
New York, New York 10022
Telephone: (212) 326-2000
Telecopy No.: (212) 326-2160
Attention: C. Douglas Kranwinkle, Esq.
Jeffrey J. Rosen, Esq.
(b) If to the Company, to:
Loral Space & Communications Corporation
600 Third Avenue
New York, New York
Telephone: (212) 697-1105
Telecopy No.: (212) 602-9805
Attention: General Counsel
34
with a copy to:
Willkie Farr & Gallagher
153 E. 53rd Street
New York, New York 10022
Telephone: (212) 821-8000
Telecopy No.: (212) 821-8111
Attention: Robert B. Hodes, Esq.
Bruce R. Kraus, Esq.
In addition to providing any notice required to be given by the
Company pursuant to its Certificate of Incorporation in the manner specified
therein, the Company shall send to each Stockholder by telecopy in accordance
with this Section 6.6 a copy of each such notice.
Section 6.7. Successors and Assigns; Reclassifications; No Third
Party Beneficiaries. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any party hereto
(whether by operation of law or otherwise) without the prior written consent of
the other parties hereto (which consent may not be unreasonably withheld),
except that any party shall have the right, without the consent of any other
party hereto, to assign all or a portion of its rights, interests and
obligations hereunder to one or more direct or indirect subsidiaries, but no
such assignment of obligation shall relieve the assigning party from its
responsibility therefor. In the event of any recapitalization or
reclassification of any Equity Securities, or any merger, consolidation or other
transaction with like effect, the securities issued in replacement or exchange
for such Equity Securities shall be deemed Equity Securities hereunder. This
Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and nothing in this Agreement, express or implied, is intended to or
shall confer upon any other person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement; provided that the
indemnified parties referred to in Section 3.5 hereof are intended to be third
party beneficiaries of the provisions of Section 3.5 hereof, and shall have the
right to enforce such provisions as if they were parties hereto.
35
Section 6.8. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 6.9. Further Assurances. Each party hereto or person subject
hereto shall do and perform or cause to be done and performed all such further
acts and things and shall execute and deliver all such other agreements,
certificates, instruments and documents as any other party hereto or person
subject hereto may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
Section 6.10. Interpretation. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement. Unless otherwise
specified in this Agreement, all references in this Agreement to "days" shall be
deemed to be references to calendar days.
Section 6.11. Legal Enforceability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without affecting the validity or enforceability of the
remaining provisions hereof. Any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
Section 6.12. Consent to Jurisdiction. Each of the parties hereto
irrevocably and unconditionally (a) agrees that all suits, actions or other
legal proceedings arising out of this Agreement or any of the transactions
contemplated hereby (a "Suit") shall be brought and adjudicated solely in the
United States District Court for the District of Delaware, or, if such court
will not accept jurisdiction, in the Delaware Chancery Court or any court of
competent civil jurisdiction sitting in New Castle County, Delaware, (b) submits
to the non-exclusive jurisdiction of any such court for the purpose of any
36
such Suit and (c) waives and agrees not to assert by way of motion, as a defense
or otherwise in any such Suit, any claims that it is not subject to the
jurisdiction of the above courts, that such Suit is brought in an inconvenient
forum or that the venue of such Suit is improper. Each of the parties hereto
also irrevocably and unconditionally consents to the service of any process,
summons, pleadings, notices or other papers in a manner permitted by the notice
provisions of Section 6.6 hereof and agrees that any such form of service shall
be effective in connection with any such Suit; provided that nothing contained
in this Section 6.12 shall affect the right of any party to serve process,
pleadings, notices or other papers in any other manner permitted by applicable
Law.
Section 6.13. Specific Performance. Each of the parties hereto
acknowledges and agrees that in the event of any breach of this Agreement, each
non-breaching party would be irreparably and immediately harmed and could not be
made whole by monetary damages. It is accordingly agreed that the parties
hereto (a) will waive, in any action for specific performance, the defense of
adequacy of a remedy at law and (b) shall be entitled, in addition to any other
remedy to which they may be entitled at law or in equity, to compel specific
performance of this Agreement in any action instituted in any court referred to
in Section 6.12 hereof.
37
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the day and year first above written.
LORAL CORPORATION
By:______________________________
Name:
Title:
LORAL SPACE & COMMUNICATIONS
CORPORATION
By:______________________________
Name:
Title:
38
Exhibit 99(c)(5)
TAX SHARING AGREEMENT
TAX SHARING AGREEMENT ("the Agreement") dated as of _____________,
1996 by and among Loral Corporation, a New York corporation (the "Company"),
Loral Telecommunications Acquisition, Inc., a Delaware corporation and a wholly-
owned subsidiary of the Company ("Spinco"), Lockheed Martin Corporation, a
Maryland corporation ("Parent") and LAC Acquisition Corporation, a New York
corporation and a wholly-owned subsidiary of Parent (the "Purchaser").
WHEREAS, in connection with the restructuring of the Company pursuant
to the Restructuring, Financing and Distribution Agreement, dated as of January
7, 1996 (the "Distribution Agreement"), the Company, Spinco and certain of the
Retained Subsidiaries have agreed to certain intercompany distributions,
assignments, transfers and contributions of the Spinco Assets and the assumption
of certain liabilities by Spinco, as more fully described in Section 2.1 of the
Distribution Agreement (the "Transfer");
WHEREAS, the Company will retain its stock in all of its subsidiaries
other than the Spinco Subsidiaries (the "Retained Subsidiaries");
WHEREAS, in accordance with the terms of the Agreement and Plan of
Merger dated as of January 7, 1996 (the "Merger Agreement"), the Purchaser will
commence and consummate the Offer and the Company will complete the Transfer;
WHEREAS, immediately after the consummation of the Offer and the Form
10 or registration statement, as the case may be, having been declared effective
by the SEC, the Company will distribute the Spinco Common Stock to the Company
shareholders and the Company will retain its Spinco Preferred Stock;
WHEREAS, pursuant to the Merger Agreement, and in accordance with New
York law, the Purchaser will merge with and into the Company after certain
conditions are satisfied at the Effective Time (the "Merger"), whereby each
share of common stock of the Company issued and outstanding immediately prior to
the Effective Time will be converted into the right to receive cash and, as a
result of such Merger, the Company, as the surviving corporation, will become
wholly-owned by Parent;
WHEREAS, at the end of the day on which the Distribution occurs (the
"Distribution Date"), Spinco's taxable year shall close for U.S. federal income
tax purposes;
WHEREAS, the parties hereto wish to provide for the payment of tax
liabilities and entitlement to refunds, allocate responsibility and provide for
cooperation in the filing of tax returns, provide for the realization and
payment of tax benefits arising out of adjustments to the tax returns of the
parties and provide for certain other matters;
NOW, THEREFORE, in consideration of the premises and the
representations, covenants and agreements herein contained, and intending to be
legally bound hereby, the Company, Spinco, Parent, and the Purchaser hereby
agree as follows:
1. Certain Definitions. The following terms used herein shall have
the meanings set forth below (such terms to be equally applicable to the
singular and plural forms of the terms defined or referred to below):
"Aerospace" shall have the meaning set forth in the Distribution Agreement.
"Agreement" shall have the meaning set forth in the recitals to this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning set forth in the recitals to this
Agreement.
"Company Group" means the Retained Subsidiaries, together with the Company.
"Consolidated Group" or "consolidated group" means an affiliated group of
corporations filing a consolidated federal income tax return, as defined in
Treasury Regulation Section 1.1502-1(h).
2
"Continental" shall have the meaning set forth in the Distribution
Agreement.
"Distribution" shall have the meaning set forth in the Distribution
Agreement.
"Distribution Agreement" shall have the meaning set forth in the recitals
to this Agreement.
"Distribution Date" shall have the meaning set forth in the recitals to
this Agreement.
"Effective Time" shall have the meaning set forth in the Merger Agreement.
"Form 10" shall have the meaning set forth in the Distribution Agreement.
"Holdings" shall have the meaning set forth in the Distribution Agreement.
"Income Taxes" means any and all taxes based upon or measured by net income
(including, without limitation, any alternative minimum tax under Section 55 of
the Code) imposed by or payable to the U.S., or any state, county, local or
foreign government or any subdivision or agency thereof, and such term shall
include any interest (whether paid or received), penalties or additions to tax
attributable thereto.
"Income Tax Liabilities" means all liabilities for Income Taxes.
"Indemnified Party" means the party that is entitled to indemnification by
another party pursuant to this Agreement.
"Indemnifying Party" means the party that is required to indemnify another
party pursuant to this Agreement.
"Independent Accounting Firm" means a "big six" independent accounting
firm, jointly selected by the parties; or, if the parties cannot agree on such
accounting firm, Spinco and Parent shall each submit the name of a "big six"
independent accounting firm that does not at the time and has not in the prior
two years provided
3
services to any member of the Spinco Group or the Parent Group, and the
"Independent Accounting Firm" shall mean the firm selected by lot from these two
firms.
"Independent Law Firm" means a nationally-recognized independent law firm,
jointly selected by the parties; or, if the parties cannot agree on such law
firm, Spinco and Parent shall each submit the name of a nationally-recognized
independent law firm that does not at the time and has not in the prior two
years provided services to any member of the Spinco Group or the Parent Group,
and the "Independent Law Firm" shall mean the firm selected by lot from these
two firms.
"Information Return" means any report, return, declaration or other
information or filing (other than a Tax Return) required to be supplied to any
taxing authority or jurisdiction.
"K&F" shall have the meaning set forth in the Distribution Agreement.
"LGP" shall have the meaning set forth in the Distribution Agreement.
"Merger" shall have the meaning set forth in the recitals to this
Agreement.
"Merger Agreement" shall have the meaning set forth in the recitals to this
Agreement.
"Offer" shall have the meaning set forth in the Merger Agreement.
"Old Company Group" means the consolidated group of corporations of which
the Company is the "common parent" within the meaning of Section 1504 of the
Code and the Treasury Regulations promulgated under Section 1502 of the Code and
any Subsidiary of a member of such consolidated group.
"Other Taxes" means any and all taxes, levies or other like assessments,
charges or fees, other than Income Taxes, including, without limitation, any
excise, real or personal property, gains, sales, use, license, real estate or
personal property transfer, net worth, stock transfer, payroll, ad valorem and
other governmen-
4
tal taxes and any withholding obligation imposed by or payable to the U.S., or
any state, county, local or foreign government or subdivision or agency thereof,
and any interest (whether paid or received), penalties or additions to tax
attributable thereto.
"Overpayment Rate" means the rate specified under Section 6621(a)(1) of the
Code for overpayments of tax.
"Parent" shall have the meaning set forth in the recitals to this
Agreement.
"Parent Group" means the consolidated group of which Parent or any
successor is the "common parent" within the meaning of Section 1504 of the Code
and the Treasury Regulations promulgated under Section 1502 of the Code and any
Subsidiary of a member of such consolidated group.
"Proceeding" means any audit or other examination, judicial or
administrative proceeding relating to liability for or refunds or adjustments
with respect to Other Taxes or Income Taxes.
"Purchaser" shall have the meaning set forth in the recitals to this
Agreement.
"Refund" means any refund of Income Taxes or Other Taxes, including any
reduction in liabilities for such taxes.
"Retained Subsidiaries" shall have the meaning set forth in the recitals to
this Agreement.
"SEC" means the Securities and Exchange Commission.
"Spinco" shall have the meaning set forth in the recitals to this
Agreement.
"Spinco Assets" shall have the meaning set forth in the Distribution
Agreement.
"Spinco Common Stock" shall have the meaning set forth in the Distribution
Agreement.
"Spinco Companies" shall have the meaning set forth in the Distribution
Agreement.
5
"Spinco Group" means the Spinco Companies, Spinco and any Subsidiary
thereof (including any successors thereto).
"Spinco Preferred Stock" shall have the meaning set forth in the
Distribution Agreement.
"SSL" shall have the meaning set forth in the Distribution Agreement.
"Subsidiary" or "subsidiary" shall have the meaning set forth in the
Distribution Agreement.
"Tax Benefit" means, in the case of separate state, local or other Income
Tax Returns, the sum of the amount by which the tax liability (after giving
effect to any alternative minimum or similar tax and adjusted for the loss of
any federal tax benefit) of a person to the appropriate taxing authority is
reduced (including, without limitation, by deduction, entitlement to refund,
credit or otherwise, whether available in the current taxable year, as an
adjustment to taxable income in any other taxable year or as a carryforward or
carryback, as applicable) plus any interest from such government or jurisdiction
relating to such tax liability, and in the case of a consolidated federal Income
Tax Return or similar state, local or other Income Tax Return, the sum of the
amount by which the tax liability of the consolidated group or other relevant
group of corporations to the appropriate government or jurisdiction is reduced
(including, without limitation, by deduction, entitlement to refund, credit or
otherwise, whether available in the current taxable year, as an adjustment to
taxable income in any other taxable year or as a carryforward or carryback, as
applicable) plus any interest from such government or jurisdiction relating to
such tax liability, less the amount by which the tax liability to another taxing
authority is increased as a result of the reduction in tax liabilities to
another taxing authority (unless such increase has already been taken into
account under the provisions of Section 5 hereof) and less any increase in tax
liability as a result of the receipt of interest as described above.
"Tax Return" means any report, return, declaration or other information or
filing required to be supplied to any taxing authority or jurisdiction with
respect to
6
Income Taxes or Other Taxes, including, without limitation, any documents with
respect to or accompanying payments of estimated Income Taxes or Other Taxes, or
with respect to or accompanying requests for the extension of time in which to
file any such report, return, declaration or other document.
"Transfer" shall have the meaning set forth in the recitals to this
Agreement.
"Treasury Regulation" means any final, temporary or proposed regulation
promulgated under the Code.
"U.S." means the United States of America.
2. Cooperation; Maintenance and Retention of Records. Parent and
Spinco shall, and shall cause the members of the Parent Group and the Spinco
Group, respectively, to, provide the requesting party with such assistance and
documents, without charge, as may be reasonably requested by such party in
connection with (i) the preparation of any Tax Return or any Information Return,
(ii) the conduct of any Proceeding (iii) any matter relating to Income Taxes,
Other Taxes or Information Returns of any member of the Old Company Group, the
Company Group, the Spinco Group or the Parent Group and (iv) any other matter
that is a subject of this Agreement. Such cooperation and assistance shall be
provided to the requesting party promptly upon its request. Parent and the
Company, on the one hand, and Spinco, on the other hand, shall retain or cause
to be retained all Tax Returns, Information Returns, schedules and workpapers,
and all material records or other documents relating thereto, until the
expiration of the statute of limitations (including any waivers or extensions
thereof) of the taxable years to which such Tax Returns, Information Returns,
and other documents relate or until the expiration of any additional period that
any party reasonably requests, in writing, with respect to specific material
records or documents. A party intending to destroy any material records or
documents shall provide the other party with advance notice and the opportunity
to copy or take possession of such records and documents. The parties hereto
will notify each other in writing of any waivers or extensions of the applicable
statute of limitations that may affect the period for which the foregoing
records or other documents must be retained.
7
3. Timing of Distribution Date; Reporting of Certain Transactions.
(a) The parties hereby agree that, for federal income tax
purposes (and, to the extent permissible under applicable law, for state, local
and other tax purposes), Spinco's taxable year shall end at the close of the
Distribution Date, in accordance with the rule of Treasury Regulation Section
1.1502-76(b)(1).
(b) The Parent Group hereby agrees to report each of the
transactions set forth in Section 2.1 of the Distribution Agreement for all
foreign, federal, state and local Income Tax purposes in a manner consistent
with the form and chronology described therein, including (i) in the case of any
distribution of a Spinco Asset by any member of the Old Company Group that is a
corporation, as a distribution of property under Section 311(b) of the Code and
any comparable provision of state or local law; (ii) in the case of any such
distribution between members of the Old Company Group filing a consolidated Tax
Return, as an "intercompany transaction" within the meaning of Treasury
Regulations Section 1.1502-13(b) and any comparable provision of state or local
law; and (iii) in the case of any transfer subject to Treasury Regulations
Section 1.1502-13(d) and any comparable provision of state or local law, by
applying the rules described therein. The parties hereby agree to negotiate in
good faith to determine the fair market values of Spinco and the material items
of the Spinco Assets for purposes of reporting the transactions described in
this subsection (b) for all foreign, federal, state and local Income Tax
purposes, and the parties shall report all Income Taxes in a manner consistent
with such fair market values.
4. Filing of Tax Returns and Information Returns; Payment of Taxes.
(a) Old Company Group. To the extent not filed before the
Distribution Date, Parent shall prepare and file or cause to be prepared and
filed all Tax Returns of the Old Company Group and any member thereof, other
than Tax Returns involving only the Spinco Group (or any members thereof) for
which Spinco is responsible pursuant to subsection (c) hereof, and Parent shall
pay or cause to be paid all Income Taxes shown to be due and
8
payable by any member of the Old Company Group on such Tax Returns.
(b) Company Group; Parent Group. Parent shall prepare and file or
shall cause to be prepared and filed all Tax Returns of the Company Group and
the Parent Group and any member of either the Company Group or the Parent Group
(other than Tax Returns of Spinco or any of its Subsidiaries for taxable periods
beginning after the Distribution Date) and shall pay or cause to be paid all
Income Taxes shown to be due and payable by any member of the Company Group or
the Parent Group on such Tax Returns.
(c) Spinco Group. Spinco shall prepare and file or cause to be
prepared and filed (i) all Tax Returns of the Spinco Group for all taxable
periods beginning after the Distribution Date and (ii) all Tax Returns
involving only one or more members of the Spinco Group for all taxable periods,
and Spinco shall pay or cause to be paid all Income Taxes shown to be due and
payable by any member of the Spinco Group on such Tax Returns.
(d) Information Returns. Spinco shall file all Information
Returns required to be filed by any member of the Spinco Group after the
Distribution Date and all Information Returns involving only the Spinco Group
(or any members thereof) for all taxable periods. Except as provided in the
preceding sentence, to the extent not filed before the Distribution Date, Parent
shall file all Information Returns required to be filed by any member of the Old
Company Group, the Parent Group or the Company Group. Any party required to file
any Information Return pursuant to this Section 4 shall pay any fees or charges
required in connection with such filing and shall indemnify and hold the other
party harmless against any penalties, fees or other charges resulting from the
failure to pay such fees or charges or the failure to file such Information
Returns in a correct or timely fashion, unless such failure results from the
failure of the other party to provide correct information.
5. Indemnification for Taxes.
(a) Spinco Group Income Taxes. The Spinco Group shall pay, and
shall indemnify and hold the
9
Parent Group harmless against, (i) all Income Tax Liabilities of any member of
the Spinco Group for all taxable periods (including taxable periods or portions
thereof during which any member of the Spinco Group was a member of the Old
Company Group or the Parent Group but excluding all Income Tax Liabilities
arising from the Transfer and Distribution (other than amounts described in
clause (iii) hereof); (ii) all Income Tax Liabilities incurred pursuant to
Treasury Regulation Section 1.1502-6 or any comparable state, local or other
provision providing for joint and several liability as a result of any member of
the Spinco Group having been a member of any consolidated, combined, unitary or
other group (other than the Old Company Group and the Parent Group); and (iii)
the excess, if any, of (A) all Income Tax Liabilities arising, directly or
indirectly, from the transactions set forth in Section 2.1(a) of the
Distribution Agreement and the Distribution minus (B) the hypothetical amount of
all Income Tax Liabilities that would have arisen, directly or indirectly, from
a distribution by Aerospace to Holdings of all of the shares of capital stock
owned by Aerospace in LGP and SSL, followed by a distribution by Holdings to the
Company of all of the shares of capital stock owned by Holdings in LGP, SSL and
Continental, followed by a transfer by the Company to Spinco of all of the
shares of capital stock owned by the Company in LGP, SSL, K&F and Continental
and the transfer to Spinco of the other Spinco Assets described in Section
2.1(a)(viii) of the Distribution Agreement, followed by the Distribution. For
purposes of clause (i) of this subsection (a), the Income Tax Liabilities of any
member or members of the Spinco Group for any taxable period during which such
member or members joined with members of the Old Company Group, the Parent
Group, or any other group in the filing of a consolidated, unitary, combined or
other group Tax Return shall be determined as if each of such Spinco Group
member or members filed its Tax Returns for such period on a stand-alone basis.
(b) Old Company Group and Parent Group Income Taxes. The Parent
Group shall pay, and shall indemnify and hold the Spinco Group harmless against,
(i) all Income Tax Liabilities of any member of the Old Company Group or the
Parent Group (other than Income Tax Liabilities of any member of the Spinco
Group for any taxable period); (ii) all Income Tax Liabilities incurred pursuant
to Treasury Regulation Section 1.1502-6 or any
10
comparable state, local or other provision providing for joint and several
liability as a result of any member of the Old Company Group or the Parent Group
(other than any member of the Spinco Group) having been a member of any
consolidated, combined, unitary or other group; and (iii) any Income Tax
Liabilities arising from the Transfer and the Distribution (other than amounts
described in subsection (a)(iii) hereof), regardless of when recognized.
(c) Other Taxes. The Parent Group shall pay, and shall indemnify
and hold the Spinco Group harmless against, all liabilities for all Other Taxes
attributable to the income, property or activities of any member of the Old
Company Group or the Parent Group (other than, in both cases, a member of the
Spinco Group), including all Other Taxes, if any, arising from the Transfer and
the Distribution. Except as provided in the preceding sentence, the Spinco Group
shall pay, and shall indemnify and hold the Parent Group harmless against, all
liabilities for all Other Taxes attributable to the income, property or
activities of any member of the Spinco Group. Without limiting the generality of
the foregoing, and notwithstanding any other provision of this Agreement, the
Company shall prepare and file, or cause to be prepared and filed, any Tax
Return required under the New York Real Property Transfer Gains Tax, the New
York Real Property Transfer Tax and the New York City Real Property Transfer Tax
in connection with the Offer, the Merger, or the Transfer (other than amounts
described in clause (iii) of subsection (a) hereof) and the Parent Group shall
timely pay and indemnify the Spinco group against any taxes due and payable on
such returns; and Spinco shall prepare and file, or cause to be prepared and
filed, any Tax Return required under the New York Real Property Transfer Gains
Tax, the New York Real Property Transfer Tax and the New York City Real Property
Transfer Tax in connection with the Distribution and the Spinco Group shall
timely pay and indemnify the Parent group against any taxes due and payable on
such returns.
(d) To the extent that the Indemnifying Party is required to
indemnify another party pursuant to this Section 5, the Indemnifying Party shall
pay to the Indemnified Party, no later than 10 days prior to the due date of the
relevant Tax Return or estimated Tax Return or 10 days after the Indemnifying
Party receives the Indemnified Party's calculations, whichever occurs later,
11
the amount that the Indemnifying Party is required to pay the Indemnified Party
under this Section 5. The Indemnified Party shall submit its calculations of
the amount required to be paid pursuant to this Section 5, showing such
calculations in sufficient detail so as to permit the Indemnifying Party to
understand the calculations. If the Indemnifying Party disagrees with such
calculations, it must notify the Indemnified Party of its disagreement in
writing within 15 days of receiving such calculations. Any dispute regarding
such calculations shall be resolved in accordance with Section 8 of this
Agreement.
6. Carryovers. In the event that any member of the Spinco Group
realizes any loss or credit for tax purposes for any taxable period beginning on
or after the Distribution Date, such member may elect to carry back such loss or
credit only with the written consent of Parent (which consent shall not be
unreasonably withheld).
7. Refunds of Income Taxes or Other Taxes. The Spinco Group shall be
entitled to all Refunds attributable to the Spinco Group, and the Parent Group
shall be entitled to all Refunds attributable to the Company Group or the Old
Company Group (other than those attributable to the Spinco Group).
Notwithstanding the foregoing, the Parent Group shall be entitled to Refunds
attributable to the Spinco Group that result from the carryback of a tax
attribute by the Company Group, and the Spinco Group shall be entitled to
Refunds attributable to the Company Group that result from the carryback of a
tax attribute by the Spinco Group. A party receiving a Refund to which another
party is entitled pursuant to this Agreement shall pay the amount to which such
other party is entitled within ten days after the receipt of the refund. The
amount of any Refund attributable to the Spinco Group shall be determined
according to the principles set forth in the last sentence of Section 5(a)
hereof.
8. Disputes. If the parties disagree as to the amount of any payment
to be made under, or any other matter arising out of, this Agreement, the
parties shall attempt in good faith to resolve such dispute, and any agreed-upon
amount shall be paid to the appropriate party. If such dispute is not resolved
within 15 days, the parties shall jointly retain the Independent Accoun-
12
ting Firm to resolve the dispute. If and to the extent that the dispute
presents legal issues, the Independent Accounting Firm shall have the authority
to consult the Independent Law Firm. The fees of the Independent Accounting
Firm and the Independent Law Firm shall be borne equally by the Spinco Group and
the Parent Group, and the decision of such Independent Accounting Firm and
Independent Law Firm shall be final and binding on all parties. Following the
decision of the Independent Accounting Firm and/or the Independent Law Firm, the
parties shall each take or cause to be taken any action that is necessary or
appropriate to implement such decision of the Independent Accounting Firm and
the Independent Law Firm, including, without limitation, the prompt payment of
underpayments or overpayments, with interest calculated on such overpayments and
underpayments at the Overpayment Rate from the date such payment was due through
the date such underpayment or overpayment is paid or refunded.
9. Control of Proceedings. In the case of any Proceeding with
respect to Income Taxes or Other Taxes for which a party is or may be liable
pursuant to this Agreement, Parent or Spinco, as the case may be, shall promptly
give notice to the other party, informing such other party of the Proceeding in
reasonable detail, and Parent or Spinco, as the case may be, shall execute or
cause to be executed any powers of attorney or other documents necessary to
enable the party that may be so liable to take all actions desired by such party
with respect to such Proceeding. Such party shall have the right to control any
such Proceeding and, to initiate any claim for refund, file any amended return
or take any other action that it deems appropriate with respect to such Income
Taxes or Other Taxes, provided, however, that if such Proceeding relates to a
Tax Return for which the other party is Responsible, the Responsible party shall
have the right, within a reasonable time after such notice is given, to deny the
non-Responsible party control of such Proceeding. In the event that a
Responsible party denies control of a Proceeding to a non-Responsible party, the
parties shall agree upon the amount of such Income Taxes of Other Taxes for
which the non-Responsible party is liable pursuant to this Agreement or, if the
parties cannot so agree, shall submit the amount of such liability to
arbitration for resolution (in a manner consistent with the procedures set forth
in Section 8 hereof), which resolution shall determine the amount of
13
the payment to be made pursuant to this Agreement, taking into account the risks
of litigation and the other practical considerations associated with the
settlement of such a Proceeding, and the Responsible party shall have the sole
discretion to defend, settle or take any action that it deems appropriate with
respect to such Proceeding. For purposes of this Section 9, a party is
Responsible for any Tax Return that it is required to file pursuant to Section 4
hereof, and Parent is Responsible for any Tax Returns of any member of the Old
Company Group (excluding Tax Returns involving solely members of the Spinco
Group).
10. Timing Adjustment.
(a) If an audit or other examination of any Income Tax Return of
the Parent Group or a Proceeding for any period for which Parent is responsible
shall result (by settlement or otherwise) in any adjustment that (A) decreases
deductions, losses or tax credits or increases income, gains or recapture of tax
credits for such period and (B) will permit the Spinco Group to increase
deductions, losses or tax credits or decrease income, gains or recapture of tax
credits that would otherwise (but for such adjustment) have been taken or
reported with respect to the Spinco Group for one or more taxable periods,
Parent shall notify Spinco (Parent and Spinco, for purposes of this subsection
(a), shall be deemed to include, where appropriate, the affiliated, unitary,
combined or other group of which such party is a member) and provide it with
adequate information so that it can reflect on the Income Tax Returns of the
Spinco Group such increases in deductions, losses or tax credits or decreases in
income, gains, or recapture of tax credits. With respect to such increases or
decreases on Income Tax Returns, Spinco shall, and shall cause the Spinco Group
to, pay to Parent the amounts of any Tax Benefits that result therefrom, within
ten days of the date on which such Tax Benefits are realized.
(b) If an audit or other examination of any Income Tax Return of
the Spinco Group or a Proceeding for any period for which Spinco is responsible
shall result (by settlement or otherwise) in any adjustment that (A) decreases
deductions, losses or tax credits or increases income, gains or recapture of tax
credits for such period, and (B) will permit the Parent Group to in-
14
crease deductions, losses or tax credits or decrease income, gains or recapture
of tax credits that would otherwise (but for such adjustment) have been taken or
reported with respect to the Parent Group for one or more taxable periods,
Spinco will notify Parent (Spinco and Parent, for purposes of this subsection
(b), shall be deemed to include, where appropriate, the affiliated, unitary,
combined or other group of which such party is a member) and provide it with
adequate information so that it can reflect on the Income Tax Returns of the
Parent Group such increases in deductions, losses or tax credits or decreases in
income, gains, or recapture of tax credits. With respect to such increases or
decreases on Income Tax Returns, Parent shall, and shall cause the Parent Group
to, pay to Spinco the amounts of any Tax Benefits that result therefrom, within
ten days of the date such Tax Benefits are realized.
(c) No later than 30 days after the date on which Spinco or
Parent, as the case may be, receives notice pursuant to subsections (a) or (b)
that a Tax Benefit may be available to the Spinco Group or Parent Group,
respectively, Spinco or Parent, as the case may be, shall, and shall cause such
members of the Parent Group or the Spinco Group or, in the case of Spinco, such
members of the Old Company Group, as the case may be, to, as promptly as
practicable, take such steps (including, without limitation, the filing of
amended returns or claims for refunds where the amount of the Tax Benefit for
any company in the aggregate exceeds $100,000) necessary or appropriate to
obtain such Tax Benefit. Thereafter, Spinco or Parent, as the case may be,
shall, and shall cause the Parent Group or the Spinco Group or, in the case of
Spinco, the Old Company group, as the case may be, to, file all Income Tax
Returns to obtain at the earliest possible time such Tax Benefit to the maximum
extent available. Notwithstanding anything to the contrary in this Section 10,
either party may, at its election, pay the amount of any Tax Benefit to the
other party rather than filing amended returns or otherwise reflecting
adjustments or taking positions on its Tax Returns. If such an election is made
by a party, the party will be treated as having realized a Tax Benefit at the
time such Tax Benefit would have been realized if such party had chosen to file
amended returns or otherwise to reflect adjustments or to take positions on its
Tax Returns; provided, however, that such party shall pay
15
to the other party, no later than 20 days after such party receives notice from
the other party that a Tax Benefit may be available, the amount of Tax Benefit
that such party would have obtained if such party had filed an amended Tax
Return. Notwithstanding the foregoing, a party shall not be required to take
steps to obtain a Tax Benefit or to pay the other party, if, in the opinion of
such party's counsel, which counsel shall be reasonably acceptable to the other
party, there is not substantial authority to seek such Tax Benefit.
(d) For purposes of this Agreement, a Tax Benefit shall be deemed
to have been realized at the time any refund of Taxes is received or applied
against other Taxes due, or at the time of filing of an Income Tax Return
(including any relating to estimated Taxes) on which a loss, deduction or credit
is applied in reduction of Taxes which would otherwise be payable; provided,
however, that, where a party has other losses, deductions, credits or similar
items available to it, deductions, credits or items for which the other party
would be entitled to a payment under this Agreement shall be treated as the last
items utilized to produce a Tax Benefit. In accordance with the provisions of
this subsection (d), Spinco and Parent agree that where a Tax Benefit may be
realized that may result in a payment to, or reduce a payment by, the other
party hereto, each party will as promptly as practicable take or cause its
affiliate to take such reasonable or appropriate steps (including, without
limitation, the filing of an amended return or claim for refund) to obtain at
the earliest possible time any such reasonably available Tax Benefit. In the
event that after payment of a Tax Benefit under this subsection (d), such Tax
Benefit is reduced or eliminated because of a final decree or agreement of a
taxing authority or the carryback of losses or credits, then the party to whom
the Tax Benefit was paid shall pay to the other party the amount by which the
Tax Benefit was reduced or eliminated plus interest on the amount returned at
the Overpayment Rate from the date of payment to the date of repayment.
11. Payments.
(a) Any payment required by this Agreement that is not made on or
before the date provided hereunder shall bear interest after such date at the
16
Overpayment Rate. In the case of any payment required hereunder to be made
"promptly," such payment shall be considered late for purposes of this Agreement
if not made 20 days after notice that such payment is due is provided. All
payments made pursuant to this Agreement shall be made in immediately available
funds.
(b) All payments made pursuant to this Agreement shall be treated
as an adjustment (increase or decrease) in the amount contributed by Parent to
the Company and by the Company to Spinco, and the parties shall not file any Tax
Returns or Information Returns inconsistent with this position.
12. Termination of Prior Tax Sharing Agreements. This Agreement
shall take effect on the Distribution Date and shall replace all other
agreements, whether or not written, in respect of any Income Taxes or Other
Taxes between or among any members of the Old Company Group, or their respective
predecessors or successors, other than any such agreements made exclusively
between or among any members of the Spinco Group. All such replaced agreements
shall be cancelled as of the Distribution Date, and any rights or obligations
existing thereunder thereby shall be fully and finally settled without any
payment by any party thereto.
13. Notices. All notices, requests, demands and other communications
required or permitted under this Agreement will be made in the manner provided
in Section 11.5 of the Distribution Agreement.
14. Construction. The provisions of this Agreement shall be
construed such that no increase or decrease in Income Taxes or Other Taxes or
Tax Benefit is taken into account more than once.
15. Entire Agreement; Amendments. This Agreement constitutes the
entire agreement of the parties concerning the subject matter hereof and
supersedes all prior agreements, whether or not written, concerning such subject
matter. This Agreement may not be amended except by an agreement in writing,
signed by the parties.
16. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York regardless of the laws that
might
17
otherwise govern under applicable New York principles of conflicts of law.
17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which shall
constitute together the same document.
18. Effective Date. This Agreement shall become effective only
upon the occurrence of the Distribution Date and shall terminate and be null and
void and of no force and effect upon any termination of the Merger Agreement.
19. Successors and Assigns. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties and their
respective successors and permitted assigns.
18
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
LORAL CORPORATION
By:_______________________________
Name:
Title:
LORAL TELECOMMUNICATIONS
ACQUISITION, INC.
By:_______________________________
Name:
Title:
LOCKHEED MARTIN CORPORATION
By:_______________________________
Name:
Title:
LAC ACQUISITION CORPORATION
By:________________________________
Name:
Title:
19
Exhibit 99(c)(6)
[FORM OF]
EMPLOYMENT PROTECTION AGREEMENT
-------------------------------
THIS AGREEMENT between Loral Corporation, a New York corporation (the
"Company"), and ______________________ (the "Executive"), dated as of this 7th
day of January 1996.
W I T N E S S E T H :
-------------------
WHEREAS, the Company and the Executive have agreed to enter into an
agreement providing the Company and the Executive with certain rights upon the
occurrence of a Change of Control (as defined below) to assure the Company of
continuity of management;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is hereby agreed by and between the Company and the
Executive as follows:
1. Effective Date; Term. This Agreement shall be effective as of
January 7, 1996. The Company may terminate this Agreement upon five (5) days
advance written notice to the Executive; except that if this Agreement is in
effect immediately prior to the date of a Change of Control (the "Effective
Date"), it shall remain in effect for at least three (3) years following such
Change of Control, and such additional time as may be necessary to give effect
to the terms of this Agreement. This Agreement may also terminate as provided
in Section 2(b) hereof.
2. Change of Control. (a) Except as provided in Section 2(b)
hereof, for purposes of this Agreement, a "Change of Control" shall be deemed to
have occurred if: (i) any person (as defined in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended from time to time (the "Exchange
Act"), and as used in Sections 13(d) and 14(d) thereof)), excluding the Company,
any majority owned subsidiary of the Company (a "Subsidiary") and any employee
benefit plan sponsored or maintained by the Company or any Subsidiary (including
any trustee of such plan acting as trustee), but including a "group" as defined
in Section 13(d)(3) of the Exchange Act (a "Person"), becomes the beneficial
owner of shares of the Company having at least 50% of the total number of votes
that may be cast for the election of directors of the Company (the "Voting
Shares") provided, however, that such an event shall not constitute a Change of
Control if such acquisition has been approved by a majority of the Incumbent
Directors (as defined in subsection 2(a)(iii)); (ii) the shareholders of the
Company shall approve
any merger or other business combination of the Company, sale of the Company's
assets or combination of the foregoing transactions (a "Transaction") other than
a Transaction involving only the Company and one or more of its Subsidiaries, a
Transaction approved by a majority of the Incumbent Directors, or a Transaction
immediately following which the shareholders of the Company immediately prior to
the Transaction, excluding for this purpose any shareholder owning directly or
indirectly more than 10% of the shares of the other company involved in the
Transaction, continue to have a majority of the voting power in the resulting
entity, or (iii) within any 24-month period beginning on or after January 7,
1996, the persons who were directors of the Company immediately before the
beginning of such period (the "Incumbent Directors") shall cease (for any reason
other than death) to constitute at least a majority of the Board of Directors of
the Company (the "Board") or the board of directors of any successor to the
Company, provided that any director who was not a director as of January 7, 1996
shall be deemed to be an Incumbent Director if such director was elected to the
Board by, or on the recommendation of or with the approval of, at least two-
thirds of the directors who then qualified as Incumbent Directors either
actually or by prior operation of this subsection 2(a)(iii).
(b) This Agreement shall terminate upon, and no Change of Control shall be
deemed to occur as a result of, the successful consummation of the "Offer" (as
defined in Section 1.1(a) of the Agreement and Plan of Merger Dated as of
January 7, 1996 By and Among the Company, Lockheed Martin Corporation and LAC
Acquisition Corporation), or upon the successful consummation of any transaction
which is approved by the Incumbent Directors and as a result of which Lockheed
Martin Corporation or a wholly owned subsidiary thereof acquires substantially
all of the Company's voting securities or substantially all of the Company's
defense businesses.
3. Retention Period. If the Executive is employed on the Effective
Date, the Company agrees to continue the Executive in its employ, and the
Executive agrees to remain in the employ of the Company, for the period (the
"Retention Period") commencing on the Effective Date and ending on the earliest
to occur of (i) the third anniversary of the Effective Date, and (ii) the date
of any termination of the Executive's employment in accordance with Section 6 of
this Agreement.
Position and Duties. (a) No Reduction in Position. During the
Retention Period, the Executive's position (including titles), authority and
responsibilities shall be at least commensurate with the highest of those held
or exercised by him at any time during the 90-day period immediately preceding
the Effective Date.
(b) Business Time. During the Retention Period, the Executive
shall devote his full business time during normal
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business hours to the business and affairs of the Company and use his best
efforts to perform faithfully and efficiently the responsibilities assigned to
him hereunder, to the extent necessary to discharge such responsibilities,
except for
(i) reasonable time spent in serving on corporate, civic or
charitable boards or committees of the nature similar to those on which the
Executive served prior to the Change of Control, or otherwise approved by
the Board, in each case only if and to the extent not substantially
interfering with the performance of such responsibilities, and
(ii) periods of vacation and sick leave to which he is entitled.
It is expressly understood and agreed that the Executive's continuing to serve
on any boards and committees on which he is serving or with which he is
otherwise associated immediately preceding the Effective Date shall not be
deemed to interfere with the performance of the Executive's services to the
Company.
5. Compensation. (a) Base Salary. During the Retention Period, the
Executive shall receive a base salary ("Base Salary") at a monthly rate at least
equal to the monthly salary paid to the Executive by the Company and any of its
affiliated companies immediately prior to the Effective Date. The Base Salary
shall be reviewed at least once each year after the Effective Date, and may be
increased (but not decreased) at any time and from time to time by action of the
Board or any committee thereof or any individual having authority to take such
action in accordance with the Company's regular practices. Neither payment of
the Base Salary nor payment of any increased Base Salary after the Effective
Date shall serve to limit or reduce any other obligation of the Company
hereunder. For purposes of the remaining provisions of this Agreement, the term
"Base Salary" shall mean Base Salary as defined in this Section 5(a) or, if
increased after the Effective Date, the Base Salary as so increased.
(b) Annual Bonus. In addition to the Base Salary, the Executive shall
be awarded for each fiscal year of the Company ending during the Retention
Period an annual bonus (either pursuant to a bonus plan or program of the
Company or otherwise) in cash at least equal to the greater of the two most
recent fiscal year bonuses (annualized, if awarded in respect of a partial year)
awarded to the Executive prior to the Effective Date under the bonus program of
the Company applicable to such Executive ("Annual Bonus"). If a fiscal year of
the Company begins, but does not end, during the Retention Period, the Executive
shall receive an amount with respect to such fiscal year at least equal to the
amount of the Annual Bonus multiplied by a fraction, the numerator of which is
the number of days in
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such fiscal year occurring during the Retention Period and the denominator of
which is 365. Each amount payable in respect of the Executive's Annual Bonus
shall be paid not later than 90 days after the fiscal year next following the
fiscal year for which the Annual Bonus (or pro-rated portion) is earned or
awarded, unless electively deferred by the Executive pursuant to any deferral
programs or arrangements that the Company may make available to the Executive,
in which event such deferred amount shall be payable in accordance with the
terms of such deferral program or arrangement. Neither the Annual Bonus nor any
bonus amount paid in excess thereof after the Effective Date shall serve to
limit or reduce any other obligation of the Company hereunder.
(c) Incentive and Savings Plans and Retirement Programs. In addition
to the Base Salary and Annual Bonus payable as hereinabove provided, during the
Retention Period, the Executive shall be entitled to participate in all
incentive and savings plans and programs, including stock option plans and other
equity based compensation plans, and in all retirement plans, on a basis
providing him with the opportunity to receive compensation (without duplication
of the amount payable as an Annual Bonus) and benefits equal to those provided
by the Company to the Executive on an annualized basis under such plans and
programs as in effect at any time during the 90-day period immediately preceding
the Effective Date. With respect to participation in stock option plans,
Executive shall receive annual grants during the Retention Period at least equal
to the average annual grants made to Executive during the two fiscal years
immediately preceding the Effective Date.
(d) Benefit Plans. During the Retention Period, the Executive and his
family shall be entitled to participate in or be covered under all welfare
benefit plans and programs of the Company and its affiliated companies,
including all medical, dental, disability, group life, accidental death and
travel accident insurance plans and programs, as in effect at any time during
the 90-day period immediately preceding the Effective Date.
(e) Expenses. During the Retention Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the policies and procedures of the Company as
in effect at any time during the 90-day period immediately preceding the
Effective Date.
(f) Vacation and Fringe Benefits. During the Retention Period, the
Executive shall be entitled to paid vacation and fringe benefits in accordance
with the policies of the Company as in effect at any time during the 90-day
period immediately preceding the Effective Date.
C-4
(g) Office and Support Staff. During the Retention Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to secretarial and other assistance, at
least equal to the most favorable of the foregoing provided to the Executive at
any time during the 90-day period immediately preceding the Effective Date.
6. Termination. (a) Death or Disability. The Executive's employment
shall terminate automatically upon his death. The Company may terminate
Executive's employment during the Retention Period, after having established the
Executive's Disability, by giving the Executive written notice of its intention
to terminate his employment, and his employment with the Company shall terminate
effective on the 90th day after receipt of such notice if, within 90 days after
such receipt, the Executive shall fail to return to full-time performance of his
duties. For purposes of this Agreement, "Disability" means disability which,
after the expiration of more than 26 weeks after its commencement, is determined
to be total and permanent by a physician selected by the Company or its insurers
and acceptable to the Executive or his legal representatives (such agreement to
acceptability not to be withheld unreasonably).
(b) Voluntary Termination. Notwithstanding anything in this Agreement
to the contrary, the Executive may, upon not less than 30 days' written notice
to the Company, voluntarily terminate employment during the Retention Period
for any reason, provided that any termination by the Executive pursuant to
Section 6(d) of this Agreement on account of Good Reason (as defined therein)
shall not be treated as a voluntary termination under this Section 6(b).
(c) Cause. The Company may terminate the Executive's employment during
the Retention Period for Cause. For purposes of this Agreement, "Cause" means
(i) gross misconduct on the Executive's part which is demonstrably willful and
deliberate and which results in material damage to the Company's business or
reputation or (ii) repeated material violations by the Executive of his
obligations under Section 4 of this Agreement which violations are demonstrably
willful and deliberate.
(d) Good Reason. The Executive may terminate his employment during the
Retention Period for Good Reason. For purposes of this Agreement, "Good Reason"
means
(i) a good faith determination by the Executive that, without his
prior written consent, the Company or any of its officers has taken or failed
to take any action (including, without limitation, (A) exclusion of the
Executive from consideration of material matters within his area of
responsibility, other than an insubstantial or inadvertent exclusion remedied
by the Company promptly after receipt of notice thereof from the Executive, (B)
statements
C-5
or actions which undermine the Executive's authority with respect to
persons under his supervision or reduce his standing with his peers, other
than an insubstantial or inadvertent statement or action which is remedied
by the Company promptly after receipt of the notice thereof from the
Executive, (C) a pattern of discrimination against or harassment of the
Executive or persons under his supervision and (D) the subjection of the
Executive to procedures not generally applicable to other similarly
situated executives) which changes the Executive's position (including
titles), authority or responsibilities under Section 4 of this Agreement or
reduces the Executive's ability to carry out his duties and
responsibilities under Section 4 of this Agreement;
(ii) any failure by the Company to comply with any of the
provisions of Section 5 of this Agreement, other than an insubstantial or
inadvertent failure remedied by the Company promptly after receipt of
notice thereof from the Executive;
(iii) the Company's requiring the Executive to be employed at any
location more than 35 miles further from his principal residence than the
location at which the Executive was employed immediately preceding the
Effective Date; or
(iv) any failure by the Company to obtain the assumption of and
agreement to perform this Agreement by a successor as contemplated by
Section 14(b) of this Agreement.
(e) Notice of Termination. Any termination by the Company for Cause or
by the Executive for Good Reason during the Retention Period shall be
communicated by Notice of Termination to the other party hereto given in
accordance with Section 15(c) of this Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice given, in the case
of a termination for Cause, within 10 business days of the Company's having
actual knowledge of all of the events giving rise to such termination, and in
the case of a termination for Good Reason, within 180 days of the Executive's
having actual knowledge of the events giving rise to such termination, and
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated, and (iii) if the termination date is other than the
date of receipt of such notice, specifies the termination date of this
Agreement (which date shall be not more than 15 days after the giving of such
notice). The failure by the Executive to set forth in the Notice of Termination
any fact or circumstance which contributes to a showing of Good Reason shall
not waive any right of the Executive hereunder or preclude the Executive from
asserting such fact or circumstance in enforcing his rights hereunder.
C-6
(f) Date of Termination. For purposes of this Agreement, the term
"Date of Termination" means (i) in the case of a termination for which a Notice
of Termination is required, the date of receipt of such Notice of Termination
or, if later, the date specified therein and (ii) in all other cases, the actual
date on which the Executive's employment terminates during the Retention Period.
7. Obligations of the Company upon Termination. (a) Death. If the
Executive's employment is terminated during the Retention Period by reason of
the Executive's death, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this Agreement other
than those obligations accrued hereunder at the date of his death, including,
for this purpose (i) the Executive's full Base Salary through the Date of
Termination, (ii) the product of the Annual Bonus and a fraction, the numerator
of which is the number of days in the current fiscal year of the Company through
the Date of Termination, and the denominator of which is 365 (the "Pro-rated
Bonus Obligation"), (iii) any compensation previously deferred by the Executive
(together with any accrued earnings thereon) and not yet paid by the Company and
(iv) any other amounts or benefits owing to the Executive under the then
applicable employee benefit plans or policies of the Company (such amounts
specified in clauses (i), (ii), (iii) and (iv) are hereinafter referred to as
"Accrued Obligations"). Unless otherwise directed by the Executive (or, in the
case of any employee benefit plan qualified (a "Qualified Plan") under Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), as may be
required by such plan), all such Accrued Obligations shall be paid to the
Executive's legal representatives in a lump sum in cash within 30 days of the
Date of Termination. Anything in this Agreement to the contrary notwithstanding,
the Executive's family shall be entitled to receive benefits at least equal to
the most favorable level of benefits available to surviving families of
executives of the Company and its affiliates under such plans, programs and
policies relating to family death benefits, if any, of the Company and its
affiliates in effect at any time during the 90-day period immediately preceding
the Effective Date.
(b) Disability. If the Executive's employment is terminated by reason
of the Executive's Disability, the Executive shall be entitled, after the Date
of Termination until the date when the Retention Period would otherwise have
terminated, to continue to participate in or be covered under the benefit plans
and programs referred to in Section 5(d) of this Agreement or, at the Company's
option, to receive equivalent benefits by alternate means at least equal to
those provided in accordance with Section 5(d) of this Agreement. Unless
otherwise directed by the Executive (or, in the case of any Qualified Plan, as
may be required by such plan), the Executive shall also be paid all Accrued
Obligations in a lump sum in cash within 30 days of the
C-7
Date of Termination. Anything in this Agreement to the contrary notwithstanding,
the Executive shall be entitled to receive disability and other benefits at
least equal to the most favorable level of benefits available to disabled
employees and/or their families in accordance with the plans, programs and
policies maintained by the Company or its affiliates relating to disability at
any time during the 90-day period immediately preceding the Effective Date.
(c) Cause and Voluntary Termination. If, during the Retention Period,
the Executive's employment shall be terminated for Cause or voluntarily
terminated by the Executive (other than on account of Good Reason), the Company
shall pay the Executive the Accrued Obligations other than the Pro-rated Bonus
Obligation. Unless otherwise directed by the Executive (or, in the case of any
Qualified Plan, as may be required by such plan), the Executive shall be paid
all such Accrued Obligations in a lump sum in cash within 30 days of the Date of
Termination and the Company shall have no further obligations to the Executive
under this Agreement.
(d) Termination by Company other than for Cause or Disability and
Termination by Executive for Good Reason. (i) Lump Sum Payment. If, during the
Retention Period, the Company terminates the Executive's employment other than
for Cause or Disability, or the Executive terminates his employment for Good
Reason, the Company shall pay to the Executive in a lump sum in cash within 15
days after the Date of Termination the aggregate of the following amounts:
(A) if not theretofore paid, the Executive's Base Salary through the
Date of Termination at the rate specified in Section 5(a) of this Agreement;
(B) a cash amount equal to three times the sum of
(1) the Executive's annual Base Salary at the rate specified in
Section 5(a) of this Agreement;
(2) the Annual Bonus; and
(3) an amount equal to the average annual compensation received by
the Executive (determined as the sum of the amount includable as
current income to the Executive for tax purposes plus any amount which
would have been so includable but for a deferral election) under the
Company's restricted stock plan over the three fiscal years prior to
the Change of Control; and
(4) the present value, calculated using the annual federal short-
term rate as determined under Section 1274(d) of the Code, of (without
duplication) (x) the annual cost to the Company (based on the
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premium rates or other costs to it) of obtaining coverage equivalent
to the coverage under the plans and programs described in Section 5(d)
of this Agreement, and (y) the annualized value of the fringe benefits
described under Section 5(f) of this Agreement;
provided, however, that with respect to the life and medical insurance
coverage referred to in Section 5(d) of this Agreement, at the Executive's
election made prior to the Date of Termination, the Company shall use its
best efforts to secure conversion coverage and shall pay the cost of such
coverage in lieu of paying the lump sum amount attributable to such life or
medical insurance coverage; and
(C) a cash amount equal to any amounts (other than amounts
payable to the Executive under any Qualified Plans) described in Sections
7(a)(iii) and (iv) of this Agreement.
(ii) Discharge of Company's Obligations. Subject to the performance of
its obligations under this Section 7(d), the Company shall have no further
obligations to the Executive in respect of any termination by the Executive for
Good Reason or by the Company other than for Cause or Disability, except to the
extent expressly provided under any of the plans referred to in Section 5(c) or
5(d) of this Agreement.
8. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any benefit,
bonus, incentive or other plan or program provided by the Company or any of its
affiliated companies and for which the Executive may qualify, nor shall anything
herein limit or otherwise prejudice such rights as the Executive may have under
any stock option or other plans or agreements with the Company or any of its
affiliated companies. Amounts which are vested benefits or which the Executive
is otherwise entitled to receive under any plan or program of the Company or any
of its affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan or program.
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9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the Company
to or for the benefit of the Executive (whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of
the Code (or any successor provision) or any interest or penalties are incurred
by the Executive with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes with respect to the Gross-Up Payment (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by
Coopers & Lybrand or such other nationally recognized accounting firm then
auditing the accounts of the Company (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company. In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, or is unwilling or unable to
perform its obligations pursuant to this Section 9, the Executive shall appoint
another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, determined pursuant to
this Section 9, shall be paid by the Company to the Executive within five days
of the receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a
result of the potential uncertainty in the application of Section 4999 of the
Code (or any successor provision) at the time of the initial determination by
the Accounting Firm hereunder, it is possible that Gross-Up Payments which will
not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company
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exhausts its remedies pursuant to Section 9(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than 20 business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which he gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by
the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing provisions of
this Section 9(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate
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courts, as the Company shall determine; provided, however, that if the Company
directs the Executive to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to the Executive, on an interest-free basis,
and shall indemnify and hold the Executive harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that any extension of
the statute of limitations relating to payment of taxes for the taxable year of
the Executive with respect to which such contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, the Company's control
of the contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Executive shall be entitled to settle
or contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 9(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 9(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Executive or others whether by reason of the
subsequent employment of the Executive or otherwise. In no event shall the
Executive be obligated to seek other employment by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement,
and no amount payable under this Agreement shall be reduced on account of any
compensation received by the Executive from other employment. In the event that
the Executive shall in good faith give a Notice of Termination for Good Reason
and it shall thereafter be determined by mutual consent of the Executive and the
Company or by a tribunal having jurisdiction over the matter that Good Reason
did not exist, the employment of the Executive shall, unless the Company and the
Executive shall otherwise
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mutually agree, be deemed to have terminated, at the date of giving
such purported Notice of Termination, by mutual consent of the Company and the
Executive and, except as provided in the last preceding sentence, the Executive
shall be entitled to receive only those payments and benefits which he would
have been entitled to receive at such date otherwise than under this Agreement.
11. Disputes; Legal Fees and Expenses. (a) Any dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively and finally by expedited arbitration, conducted before a single
arbitrator in New York, New York, in accordance with the rules governing
employment disputes then in effect of the American Arbitration Association and
the procedures set forth on Exhibit A hereto. The arbitrator shall be approved
by both the Company and the Executive. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
(b) In the event that any claim by the Executive under this
Agreement is disputed, the Company shall pay all reasonable legal fees and
expenses incurred by the Executive in pursuing such claim, provided that the
Executive is successful as to at least part of the disputed claim by reason of
arbitration, settlement or otherwise.
12. Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, (i) obtained by the Executive during
his employment by the Company or any of its affiliated companies and (ii) not
otherwise public knowledge (other than by reason of an unauthorized act by the
Executive). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company,
unless compelled pursuant to an order of a court or other body having
jurisdiction over such matter, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those designated by it.
In no event shall an asserted violation of the provisions of this Section 12
constitute a basis for deferring or withholding any amounts otherwise payable to
the Executive under this Agreement.
13. Employment Contract or Severance Benefits. Notwithstanding
anything else in this Agreement to the contrary, any amount payment to the
Executive hereunder on account of his termination of employment shall be reduced
on a dollar for dollar basis by each dollar actually paid to the Executive with
respect to such termination under the terms of any employment contract between
the Executive and the Company or under any severance program or policy
applicable to the Executive. Nothing in this Agreement shall be construed to
require duplication of any compensation, benefits or other entitlements provided
to the
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Executive by the Company under the terms of any employment contract which may
address similar matters.
14. Successors. (a) This Agreement is personal to the Executive
and, without the prior written consent of the Company, shall not be assignable
by the Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors. The Company shall require any successor to
all or substantially all of the business and/or assets of the Company, whether
direct or indirect, by purchase, merger, consolidation, acquisition of stock, or
otherwise, by an agreement in form and substance satisfactory to the Executive,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent as the Company would be required to perform if no such
succession had taken place.
15. Miscellaneous. (a) Applicable Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
applied without reference to principles of conflict of laws.
(b) Amendments. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
(c) Notices. All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive: at the address listed below
(with a copy to )
--------------
If to the Company: _____________________________
_____________________________
_____________________________
Attention: Secretary
(with a copy to the attention
of the General Counsel)
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
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(d) Tax Withholding. The Company may withhold from any amounts
payable under this Agreement such Federal, State or local taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(e) Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
(f) Captions. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and the
Company has caused this Agreement to be executed in its name on its behalf, and
its corporate seal to be hereunto affixed and attested by its Corporate Counsel,
all as of the day and year first above written.
LORAL CORPORATION
By
----------------------
Name:
Title:
EXECUTIVE:
-------------------------
Address:
-------------------------
-------------------------
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EXHIBIT 99(c)(7)
LORAL CORPORATION
EMPLOYMENT PROTECTION PLAN
(EFFECTIVE JANUARY 7, 1996)
LORAL CORPORATION
EMPLOYMENT PROTECTION PLAN
(Effective January 7, 1996)
Loral Corporation (the "Company") believes that the best interests
of the Company and its shareholders will be served if certain key employees of
the Company are provided with certain rights upon a Change of Control (as
hereinafter defined). Accordingly, the Company hereby establishes this "Loral
Corporation Employment Protection Plan" (the "Plan") for the benefit of such key
employees.
SECTION 1. DEFINITIONS
----------------------
In addition to the terms defined in the preceding paragraph, the
following definitions shall apply for purposes of the Plan.
1.1. "Annual Bonus" means the greater of the two most recent fiscal year
bonuses (annualized, if awarded in respect of a partial year) awarded to an
Eligible Employee prior to a Change of Control under the bonus program of any
Loral Company applicable to such Executive.
1.2. "Annual Salary" means an Eligible Employee's annual rate of regular
salary as in effect immediately prior to the Change of Control.
1.3. "Board" means the Board of Directors of the Company.
1.4. "Cause" means any of the following, other than due to an Eligible
Employee's Permanent Disability or death:
(a) an Eligible Employee's gross misconduct which is demonstrably
willful and deliberate and which results in material damage to the Company's
business or reputation; or
(b) an Eligible Employee's repeated willful and deliberate
neglect of, or refusal to perform, the duties required or associated with the
Eligible Employee's employment.
1.5. "Change of Control" means the occurrence of any of the following
events: (i) any person (as defined in Section 3(a)(9) of the Securities Exchange
Act of 1934, as amended from time to time (the "Exchange Act"), and as used in
Sections 13(d) and 14(d) thereof)), excluding the Company, any majority owned
subsidiary of the Company (a "Subsidiary") and any employee benefit plan
sponsored or maintained by the Company or any Subsidiary (including any trustee
of such plan acting as trustee), but including a "group" as defined in Section
13(d)(3) of the Exchange Act (a "Person"), becomes the beneficial owner of
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shares of the Company having at least 50% of the total number of votes that may
be cast for the election of directors of the Company (the "Voting Shares")
provided, however, that such an event shall not constitute a Change of Control
if such acquisition has been approved by a majority of the Incumbent Directors
(as defined in subsection 1.4 (iii)); (ii) the shareholders of the Company shall
approve any merger or other business combination of the Company, sale of the
Company's assets or combination of the foregoing transactions (a "Transaction")
other than a Transaction involving only the Company and one or more of its
Subsidiaries, a Transaction approved by a majority of the Incumbent Directors,
or a Transaction immediately following which the shareholders of the Company
immediately prior to the Transaction, excluding for this purpose any shareholder
owning directly or indirectly more than 10% of the shares of the other company
involved in the Transaction, continue to have a majority of the voting power in
the resulting entity, or (iii) within any 24-month period beginning on or after
January 7, 1996, the persons who were directors of the Company immediately
before the beginning of such period (the "Incumbent Directors") shall cease (for
any reason other than death) to constitute at least a majority of the Board or
the board of directors of any successor to the Company, provided that any
director who was not a director as of January 7, 1996 shall be deemed to be an
Incumbent Director if such director was elected to the Board by, or on the
recommendation of or with the approval of, at least two-thirds of the directors
who then qualified as Incumbent Directors either actually or by prior operation
of this subsection 1.4 (iii); provided, however, that no Change of Control shall
be deemed to occur as a result of the successful consummation of the "Offer" (as
defined in Section 1.1(a) of the Agreement and Plan of Merger Dated as of
January 7, 1996 By and Among the Company, Lockheed Martin Corporation and LAC
Acquisition Corporation), or upon the successful consummation of any transaction
which is approved by the Incumbent Directors and as a result of which Lockheed
Martin Corporation or any wholly owned subsidiary thereof acquires substantially
all of the Company's defense businesses (the "Lockheed Martin Merger").
1.6. "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
1.7. "Committee" means the Compensation Committee of the Board.
1.8. "Common Stock" means the common stock of the Company, $.25 par value
per share.
1.9. "Company" means the Loral Corporation and any successor or successors
thereto.
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1.10. "Eligible Employee" means each full-time employee of either the
Company or another Loral Company whose name appears on Schedule A hereto.
1.11. "Eligible Termination" means an involuntary termination of
employment without Cause, or a resignation for Good Reason, which occurs as of
or within the three-year period following a Change of Control; provided,
however, that the transfer of employment to another employer that is a member of
the Loral Companies shall not in itself constitute an Eligible Termination (but
any such transfer will not preclude another or accompanying event or reason from
constituting or causing an Eligible Termination, and the protections of the Plan
and corresponding obligations of the Company will remain in effect following any
such transfer of employment).
1.12. "Good Reason" means any one or more of the following events, which
occurs without an Eligible Employee's express prior written consent or approval,
other than due to an Eligible Employee's Permanent Disability or death:
(i) a good faith determination by the Eligible Employee that the
Company or any of its officers has taken or failed to take any action
(including, without limitation, (A) exclusion of the Eligible Employee from
consideration of material matters within his area of responsibility, other
than an insubstantial or inadvertent exclusion remedied by the Company
promptly after receipt of notice thereof from the Eligible Employee, (B)
statements or actions which undermine the Eligible Employee's authority
with respect to persons under his supervision or reduce his standing with
his peers, other than an insubstantial or inadvertent statement or action
which is remedied by the Company promptly after receipt of the notice
thereof from the Eligible Employee, (C) a pattern of discrimination against
or harassment of the Eligible Employee or persons under his supervision and
(D) the subjection of the Eligible Employee to procedures not generally
applicable to other similarly situated executives) which changes the
Eligible Employee's position (including titles), authority or
responsibilities under Section 4 of this Agreement or reduces the Eligible
Employee's ability to carry out his duties and responsibilities under
Section 4 of this Agreement;
(ii) any reduction in an Eligible Employee's Annual Salary or
any material reduction in his annual bonus opportunity or employee benefits
from the level in effect immediately prior to the Change of Control, other
than an insubstantial or inadvertent failure remedied by the Company
promptly after receipt of notice thereof from the Eligible Employee; or
(iii) the Company's requiring the Eligible Employee to be
employed at any location more than 35 miles further
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from his principal residence than the location at which the Eligible
Employee was employed immediately preceding the Effective Date.
1.13. "Permanent Disability" means an Eligible Employee's inability, by
reason of any physical or mental impairment, to substantially perform the
significant aspects of his or her regular duties, which inability is reasonably
contemplated to continue for at least one (1) year from its incurrence.
1.14. "Plan" means the Loral Corporation Employment Protection Plan, as
set forth herein and as amended from time to time.
1.15. "Severance Period" means the period commencing on the date of an
Eligible Employee's Eligible Termination and continuing for a period of
twenty-four months.
1.16. "Loral Companies" means the Company and its subsidiaries and
affiliates, and any successor or successors thereto.
SECTION 2. EFFECT OF AN ELIGIBLE TERMINATION
2.1. If an Eligible Employee incurs an Eligible Termination, the Eligible
Employee shall be entitled to all applicable benefits provided hereafter in this
Section 2 or as otherwise set forth in this Plan.
(a) Salary and Bonus: Within two (2) business days after the date of his
or her Eligible Termination, the Company shall pay or cause to be paid to the
Eligible Employee a single lump sum amount, in cash, equal to two times the sum
of
(1) the Eligible Employee's Annual Salary,
(2) the Eligible Employee's Annual Bonus, and
(3) an amount equal to the average annual compensation received
by the Eligible Employee (determined as the sum of the amount
includable as current income to the Eligible Employee for tax
purposes plus any amount which would have been so includable
but for a deferral election) under the Company's restricted
stock plan over the three fiscal years prior to the Change of
Control.
(b) Continued Welfare Benefits: Until the earlier of the end of an
Eligible Employee's Severance Period or the date on which such Eligible
Employee becomes employed by a new employer, the Company shall, at its expense,
provide such Eligible Employee with medical, dental, life insurance, disability
and accidental death and dismemberment benefits at the highest level provided to
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such Eligible Employee during the period beginning immediately prior to the
Change of Control and ending on the date of such Eligible Employee's Eligible
Termination; provided, however, that if the Eligible Employee becomes employed
by a new employer which maintains a major medical plan (or its equivalent) that
either (i) does not cover the Eligible Employee with respect to a pre-existing
condition which was covered under the Company's major medical plan, or (ii) does
not cover the Eligible Employee for a designated waiting period, the Eligible
Employee's coverage under the Company's major medical plan shall continue (but
shall be limited in the event of noncoverage due to a preexisting condition, to
the preexisting condition itself) until the earlier of the end of the applicable
period of noncoverage under the new employer's plan or the end of the Severance
Period. Following such Severance Period or the date of new employment, if
earlier, the regular rights of an Eligible Employee to continuation of benefits
under COBRA coverage, if any, shall apply.
(c) Payment of Accrued But Unpaid Amounts: Within two (2) business days
after the date of his or her Eligible Termination, the Company shall pay the
Eligible Employee (i) any unpaid portion of the Eligible Employee's bonus
accrued with respect to the full calendar year ended prior to the date of the
Eligible Termination, and (ii) all compensation earned or previously deferred by
such Eligible Employee but not yet paid (including cash compensation for
vacation days accrued but not taken as of the date of the Eligible Termination,
based on the Annual Salary amount converted to a per diem equivalent in
accordance with the Company's normal payroll practices as in effect prior to
the change of Control).
(d) Payment for Other Reduced Severance Benefits. The amounts payable to an
Eligible Employee under this Section 2 are supplemental to any other severance
benefits to which the Eligible Employee is entitled under any severance plan or
Plan of the Loral Companies in effect as of the Change of Control (collectively,
"Other Severance Benefits"). In the event that an Eligible Employee's Other
Severance Benefits are reduced or eliminated after the Change of Control, the
amount otherwise payable to an Eligible Employee hereunder upon an Eligible
Termination shall be increased by the amount of such reduction or elimination.
2.2. Maximum Benefits: Anything in Section 2.1 to the contrary
notwithstanding, payments under Section 2.1 shall not exceed the maximum amount
which can be paid to an Eligible Employee without causing such payments to be
treated as "excess parachute payments" for purposes of Section 280G of the Code
taking into account all payments made to the Eligible Employee which constitute
"parachute payments" for purposes of Section 280G.
2.3. Mitigation: An Eligible Employee shall not be required to mitigate
damages or the amount of any payment provided for
D-6
under this Plan by seeking other employment or otherwise, and compensation
earned from such employment or otherwise shall not reduce the amounts otherwise
payable under this Plan. No amounts payable under this Plan shall be subject to
reduction or offset in respect of any claims which the Company or any member of
the Loral Companies (or any other person or entity) may have against the
Eligible Employee.
2.4. Withholding: The Company may, to the extent required by law, withhold
applicable federal and state income, employment and other taxes from any
payments due to any Eligible Employee hereunder.
SECTION 3. LIMITS ON AMENDMENT OR TERMINATION; EFFECT ON
OTHER PLANS
3.1. This Plan shall terminate automatically and without further action by
the Board upon the successful consummation of the Lockheed Martin Merger.
3.2. The Board may amend or terminate this Plan at any time; provided,
however, that upon occurrence of a Change of Control, this Plan (expressly
including, but not limited to, this Section 3) shall remain in effect, and may
not be altered or amended in any way which would adversely affect the rights of
any Eligible Employee hereunder, for at least three (3) years following the
Change of Control, and for such additional time as may be necessary to give
effect to the terms of the Plan as in effect at the Change of Control.
Thereafter, the Board may amend or terminate this Plan in any manner which does
not adversely affect the rights of any Eligible Employee who has incurred an
Eligible Termination.
3.3 An Eligible Employee shall, after the date of his or her Eligible
Termination, retain all rights (to the extent any such rights existed at any
time prior to the Change of Control) to indemnification under applicable law or
under the applicable Loral Companies' Certificate of Incorporation or By-Laws,
as they may be amended or restated from time to time. In addition, to the extent
coverage had been otherwise available to the Eligible Employee prior to the
Change of Control, the Company shall maintain Director's and Officer's liability
insurance on behalf of the Eligible Employee, at the level in effect immediately
prior to the date of his or her Eligible Termination.
SECTION 4. ADMINISTRATION OF THE PLAN
4.1 The Committee shall be the Administrator of this Plan and shall have
the exclusive right, power and authority to:
(a) interpret, in its sole discretion, any and all of the
provisions of the Plan;
D-7
(b) establish a claims review procedure, if necessary and
advisable; and
(c) consider and decide conclusively any questions (whether of
fact or otherwise) arising in connection with the administration
of the Plan or any claim for a benefit arising under the Plan.
Any decision or action of the Committee pursuant to this Section 4.1 shall be
conclusive and binding.
4.2. The Company shall pay all costs and expenses, including attorneys'
fees and disbursements, at least monthly, of any Eligible Employee in connection
with any legal proceeding (including arbitration), whether or not instituted by
a member of the Loral Companies or an Eligible Employee, relating to the
interpretation or enforcement of any provision of this Plan, except that if such
Eligible Employee instituted the proceeding and the judge, arbitrator or other
individual presiding over the proceeding affirmatively finds that the Eligible
Employee instituted the proceeding in bad faith, the Eligible Employee shall pay
all costs and expenses, including attorney's fees and disbursements, of such
Eligible Employee.
SECTION 5. MISCELLANEOUS
---------- -------------
5.1 Neither the establishment of the Plan nor any action of the Company,
any other member of the Loral Companies, the Committee, or any fiduciary shall
be held or construed to confer upon any person any legal right to continued
employment with the Company or with any member of the Loral Companies.
Nothing in the Plan shall be construed to prevent the Company or any member
of the Loral Companies from terminating an Eligible Employee's employment for
Cause. If an Eligible Employee is terminated for Cause, the Company shall have
no obligation to make any payments under this Plan, except for payments that
may otherwise be payable under then existing Employee benefit plans, Plans and
arrangements of the Company or of any other member of the Loral Companies.
5.2. Benefits payable under the Plan shall be paid out of the general
assets of the Company. The Company is not required to fund the benefits payable
under this Plan; provided, however, nothing in this Section 5.2 shall be
interpreted as precluding the Company from funding or setting aside amounts in
anticipation of paying any such benefits.
5.3. Benefits payable under the Plan shall not be subject to assignment,
alienation, transfer, pledge, encumbrance, commutation or anticipation by any
Eligible Employee. Any attempt to assign, alienate, transfer, pledge, encumber,
commute or anticipate Plan benefits shall be void. In addition, no rights or
interest under the Plan shall be in any manner subject
D-8
to levy, attachment or other legal process to enforce payment of any claim
against any Eligible Employee except to the extent required by law.
5.4. Except as otherwise provided herein, this Plan shall be binding upon,
inure to the benefit of and be enforceable by the Company and the Eligible
Employees and their respective heirs, legal representatives, successors and
assigns. If the Company shall be merged into or consolidated with another
entity, the provisions of this Plan shall be binding upon and inure to the
benefit of the entity surviving such merger or resulting from such
consolidation, and such provisions shall also be binding upon and inure to the
benefit of any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of the Company, and such successor shall assume and perform the
obligations, responsibilities and liabilities to which the Company or any member
of the Loral Companies is subject under this Plan in the same manner and to the
same extent that the Company or any member of the Loral Companies would be
required to perform if no such succession had taken place. The provisions of
this Section 5.4 shall continue to apply to each subsequent employer of any
Eligible Employee in the event of any subsequent merger, consolidation or
transfer of assets of any such subsequent employer.
5.5. This Plan shall be governed by and construed in accordance with the
laws of the State of New York (without reference to rules relating to conflicts
of laws), except to the extent superseded by applicable federal law.
5.6. Any action required or permitted to be taken by the Company under this
Plan shall be taken by the Board or by the Committee, or any designee of the
Committee pursuant to Section 4, in each case subject to the limits on amendment
and termination contained in Section 3 hereof.
5.7. Entitlement to any benefits under this Plan is expressly subject to
and conditioned upon the Eligible Employee agreeing to and signing (i) a
customary exit letter that may contain confidentiality, future cooperation and
other provisions, if requested, and (ii) the Company's standard form general
release of employment and other claims that the Eligible Employee may have.
D-9
Exhibit 99(c)(8)
LORAL CORPORATION
SUPPLEMENTAL SEVERANCE PROGRAM
(EFFECTIVE JANUARY 7, 1996)
LORAL CORPORATION
SUPPLEMENTAL SEVERANCE PROGRAM
(Effective January 7, 1996)
Loral Corporation (the "Company") believes that the best interests of the
Company and its shareholders will be served if certain key employees who have
historically been engaged in or associated with the operations of the Company
are encouraged to remain with the Company after the consummation of the Offer
for the Common Stock of the Company pursuant to the Agreement and Plan of Merger
Dated as of January 7, 1996 By and Among the Company, Lockheed Martin
Corporation and LAC Acquisition Corporation (the "Merger Agreement").
Accordingly, the Company hereby establishes this "Loral Corporation
Supplemental Severance Program" (the "Program") for the benefit of such key
employees.
SECTION 1. DEFINITIONS
In addition to the terms defined in the preceding paragraph, the following
definitions shall apply for purposes of the Program.
1.1. "Annual Salary" means an Eligible Employee's annual rate of base
salary as in effect immediately prior to the Effective Date.
1.2. "Board" means the Board of Directors of Lockheed Martin.
1.3. "Cause" means any of the following, other than due to an Eligible
Employee's Permanent Disability or death:
(a) an Eligible Employee's continuing willful neglect of, or refusal to
perform, the duties required or associated with the Eligible Employee's
employment;
(b) an Eligible Employee's willful disclosure of confidential information
or trade secrets of Lockheed Martin which results in material harm to the
business or reputation of Lockheed Martin;
(c) conviction of a felony, or a misdemeanor involving dishonesty, fraud,
theft, larceny, or embezzlement, or any Federal offense of the type described in
Article 14 of the Administrative Agreement between Lockheed Martin and the
United States Air Force dated June, 1995; or
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(d) a violation of Lockheed Martin's Standards of Conduct and Code of
Ethics, which shall be provided to each Eligible Employee.
1.4. "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
1.5. "Committee" means the Committee of the Board designated to
administer the Plan.
1.6. "Company" means the Loral Corporation and any successor or
successors thereto.
1.7. "Company Board" means the Board of Directors of the Company.
1.8. "Effective Date" means the date of the successful consummation of
the Offer as set forth in the Merger Agreement.
1.9. "Eligible Employee" means each full-time employee of either the
Company or another Loral Company selected by the Company Board prior to the
Effective Date for participation in the Program.
1.10. "Eligible Termination" means an involuntary termination of
employment without Cause (other than by reason of Permanent Disability or
death), or a resignation for Good Reason, which occurs on or within the two-year
period following the Effective Date; provided, however, that the transfer of
employment to another employer that is a member of the Lockheed Martin Companies
shall not in itself constitute an Eligible Termination (but any such transfer
will not preclude another or accompanying event or reason from constituting or
causing an Eligible Termination, and the protections of the Program and
corresponding obligations of the Company will remain in effect following any
such transfer of employment).
1.11. "Good Reason" means any one or more of the following actions,
without an Eligible Employee's express prior written consent or approval, other
than due to an Eligible Employee's Permanent Disability or death:
(a) any removal of the Eligible Employee from any of the positions he or
she holds immediately prior to a Change of Control or an elimination of any such
positions, when the effect of such removal or elimination is a material
diminution of status, responsibilities or duties, or any lowering of job grade,
excluding for this purpose a removal from responsibility for, or involvement
with, U.S. Government business affairs which removal is mandated by reason of an
indictment, suspension or proposed debarment of the type described in Article 14
of the
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Administrative Agreement between Lockheed Martin and the United States Air Force
dated June, 1995; or
(b) any reduction of an Eligible Employee's Annual Salary.
1.12. "Permanent Disability" means an Eligible Employee's inability, by
reason of any physical or mental impairment, to substantially perform the
significant aspects of his or her regular duties, which inability is reasonably
contemplated to continue for at least one (1) year from its incurrence.
1.13. "Offer" means the Offer as defined in Section 1.1(a) of the Merger
Agreement.
1.14. "Program" means the Loral Corporation Supplemental Severance
Program, as set forth herein and as amended from time to time.
1.15. "Severance Period" means the period commencing on the date of an
Eligible Employee's Eligible Termination and continuing for a period of twelve
months.
1.16. "Lockheed Martin" means Lockheed Martin Corporation.
1.17. "Lockheed Martin Companies" means Lockheed Martin and its
subsidiaries and affiliates, and any successor or successors thereto.
1.18. "Target Bonus" means the annual bonus which would be payable to an
Eligible Employee for the calendar year in which an Eligible Termination occurs,
calculated on the assumption that the Eligible Employee and one or more Loral
Companies or the Lockheed Martin Companies (or those entities or business units
within the Loral Companies or the Lockheed Martin Companies) on whose
performance the eligible Employee's bonus depends achieve the applicable target
performance goals established under the applicable bonus plan with respect to
that year. If no target performance goals for the year in which the Eligible
Termination occurs have been set prior to the Eligible Termination, the Target
Bonus shall be determined by substituting, in the previous sentence, the highest
annual bonus paid to the Eligible Employee during the three years immediately
preceding the year in which an Eligible Termination occurs.
1.19. "Loral Companies" means the Company and its subsidiaries and
affiliates, and any successor or successors thereto.
E-4
SECTION 2. EFFECT OF AN ELIGIBLE TERMINATION
2.1. If an Eligible Employee incurs an Eligible Termination, the Eligible
Employee shall be entitled to all applicable benefits provided hereafter in
this Section 2 or as otherwise set forth in this Program.
(a) Payment of Salary Amount: Within twenty (20) business days after the
date of his or her Eligible Termination, the Company shall pay or cause to be
paid to the Eligible Employee a single lump sum amount, in cash, equal to the
sum of (i) the Eligible Employee's Annual Salary, and (ii) the Eligible
Employee's Target Bonus.
(b) Welfare Benefits: Within thirty (30) days after the date of his or her
Eligible Termination, the Company shall pay to the Eligible Employee a single
lump amount equal to the full cost of coverage for such Eligible Employee
(taking into account any special medical or other conditions applicable to such
Eligible Employee) during the Severance Period (or, if the Eligible Employee
is provided with such coverage at no additional cost to him or her under any
other severance plan or arrangement, for the period from the date such coverage
terminates until the end of the Severance Period) for medical, dental, life
insurance, disability and accidental death and dismemberment benefits at the
level provided to such Eligible Employee immediately prior to such Eligible
Termination.
(c) Payment of Accrued But Unpaid Amounts: Within twenty (20) business days
after the date of his or her Eligible Termination, the Company shall pay the
Eligible Employee any unpaid portion of the Eligible Employee's bonus accrued
with respect to the full calender year ended prior to the date of the Eligible
Termination and all compensation earned by such Eligible Employee but not yet
paid (including cash compensation for vacation days accrued but not taken as of
the date of the Eligible Termination, based on the Annual Salary amount
converted to a per diem equivalent in accordance with the Company's normal
payroll practices as in effect prior to the Effective Date), except that any
compensation deferred by the Eligible Employee under any qualified or
non-qualified deferred compensation plans shall be paid in accordance with the
terms and provisions of such plans.
(d) Payment for Other Reduced Severance Benefits. The amounts payable to an
Eligible Employee under this Section 2 are supplemental to any other severance
benefits to which the Eligible Employee is entitled under any severance plan or
program of the Loral Companies in effect as of the Effective Date (collectively,
"Other Severance Benefits"). In the event that an Eligible Employee's Other
Severance Benefits are reduced or eliminated after the Effective Date without
his or her written
E-5
consent, the amount otherwise payable to an Eligible Employee hereunder upon an
Eligible Termination shall be increased by the amount of such reduction or
elimination.
2.2. Maximum Benefits: Anything in Section 2.1 to the contrary
notwithstanding, payments under Section 2.1 shall not exceed the maximum amount
which can be paid to an Eligible Employee without causing such payments to be
treated as "excess parachute payments" for purposes of Section 280G of the Code
taking into account all payments made to the Eligible Employee which constitute
"parachute payments" for purposes of Section 280G.
2.3. Mitigation: An Eligible Employee shall not be required to mitigate
damages or the amount of any payment provided for under this Program by seeking
other employment or otherwise, and compensation earned from such employment or
otherwise shall not reduce the amounts otherwise payable under this Program. No
amounts payable under this Program shall be subject to reduction or offset in
respect of any claims which the Company or any member of the Loral Companies (or
any other person or entity) may have against the Eligible Employee.
2.4. Withholding: The Company may, to the extent required by law, withhold
applicable federal and state income, employment and other taxes from any
payments due to any Eligible Employee hereunder.
SECTION 3. LIMITS ON AMENDMENT OR TERMINATION; EFFECT ON OTHER PLANS
3.1. The Company Board may terminate this Program prior to the Effective
Date. As of the Effective Date, this Program (expressly including, but not
limited to, this Section 3) shall remain in effect, and may not be altered or
amended in any way which would adversely affect the rights of any Eligible
Employee hereunder, for at least two (2) years following the Effective Date, and
for such additional time as may be necessary to give effect to the terms of the
Program as in effect at the Effective Date. Thereafter, the Company may amend or
terminate this Program in any manner which does not adversely affect the rights
of any Eligible Employee who has incurred an Eligible Termination.
3.2. An Eligible Employee shall, after the date of his or her Eligible
Termination, retain all rights (to the extent any such rights existed at any
time prior to the Effective Date) to indemnification under applicable law or
under the applicable Loral Companies' Certificate of Incorporation or By-laws,
as they may be amended or restated from time to time. In addition, to the extent
coverage had been otherwise available to the Eligible
E-6
Employee prior to the Effective Date, the Company shall maintain Director's and
Officer's liability insurance on behalf of the Eligible Employee, at the level
in effect immediately prior to the date of his or her Eligible Termination.
SECTION 4. ADMINISTRATION OF THE PROGRAM
4.1. The Committee shall be the Administrator of this Program and shall
have the exclusive right, power and authority to:
(a) interpret, in its sole discretion, any and all of the provisions of
the Program;
(b) establish a claim review procedure, if necessary and advisable; and
(c) consider and decide conclusively any questions (whether of fact or
otherwise) arising in connection with the administration of the Program or any
claim for a benefit arising under the Program.
Any decision or action of the Committee pursuant to this Section 4.1 shall be
conclusive and binding.
SECTION 5. MISCELLANEOUS
5.1. Neither the establishment of the Program nor any action of the
Company, any other member of the Loral Companies or the Lockheed Martin
Companies, the Committee, or any fiduciary shall be held or construed to confer
upon any person any legal right to continued employment with the Company or with
any member of the Loral Companies or the Lockheed Martin Companies.
Nothing in the Program shall be construed to prevent the Company or any
member of the Loral Companies or the Lockheed Martin Companies from terminating
an eligible Employee's employment for Cause. If an Eligible Employee is
terminated for Cause, the Company shall have no obligation to make any payments
under this Program, except for payments that may otherwise be payable under then
existing employee benefit plans, programs and arrangements of the Company or of
any other member of the Loral Companies or the Lockheed Martin Companies.
5.2 Benefits payable under the Program shall be paid out of the general
assets of the Company. The Company is not required to fund the benefits payable
under this Program; provided, however, nothing in this Section 5.2 shall be
interpreted as
E-7
precluding the Company from funding or setting aside amounts in anticipation of
paying any such benefits.
5.3. Benefits payable under the Program shall not be subject to assignment,
alienation, transfer, pledge, encumbrance, commutation or anticipation by any
Eligible Employee. Any attempt to assign, alienate, transfer, pledge, encumber,
commute or anticipate Program benefits shall be void. In addition, no rights or
interest under the Program shall be in any manner subject to levy, attachment or
other legal process to enforce payment of any claim against any Eligible
Employee except to the extent required by law.
5.4. Except as otherwise provided herein, this Program shall be binding
upon, inure to the benefit of and be enforceable by the Company and the Eligible
Employees and their respective heirs, legal representatives, successors and
assigns. If the Company shall be merged into or consolidated with another
entity, the provisions of this Program shall be binding upon and inure to the
benefit of the entity surviving such merger or resulting from such
consolidation, and such provisions shall also be binding upon and inure to the
benefit of any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of the Company, and such successor shall assume and perform the
obligations, responsibilities and liabilities to which the Company or any member
of the Loral Companies is subject under this Program in the same manner and to
the same extent that the Company or any member of the Loral Companies would be
required to perform if no such succession had taken place. The provisions of
this Section 5.4 shall continue to apply to each subsequent employer of any
Eligible Employee in the event of any subsequent merger, consolidation or
transfer of assets of any such subsequent employer.
5.5 This Program shall be governed by and construed in accordance with the
laws of the State of New York (without reference to rules relating to conflicts
of laws), except to the extent superseded by applicable federal law.
5.6. Any action required or permitted to be taken by the Company under this
Plan shall be taken by the Company Board, the Board or by the Committee, or any
designee of the Committee pursuant to Section 4, in each case subject to the
limits on amendment and termination contained in Section 3 hereof.
5.7. Entitlement to any benefits under this Program is expressly subject to
and conditioned upon the Eligible Employee agreeing to and signing (i) a
customary exit letter that may contain confidentiality, future cooperation and
other provisions, if requested, and (ii) the Company's standard form general
E-8
release of employment and other claims that the Eligible Employee may have.
E-9
Exhibit 99(c)(9)
LORAL CORPORATION SUPPLEMENTAL BONUS PROGRAM
Purpose
The purpose of the Loral Corporation Supplemental Bonus Program (the "Program")
is to provide supplemental bonus compensation to selected key executives of
Loral Corporation (the "Company") in recognition of their dedication, service
and contributions to the Company's business. Bonuses will be paid under the
Program in connection with the successful consummation of the offer (the
"Offer") described in Section 1.1(a) of the Agreement and Plan of Merger dated
as of January 7, 1996 By and Among Loral Corporation, Lockheed Martin
Corporation and LAC Acquisition Corporation.
Participation
Key employees of the Company and its subsidiaries who are selected by the
Company's Chief Executive Officer (the "CEO") or his designee ("Eligible
Employees") shall be eligible to receive bonuses under the Program. The CEO
shall not be paid a bonus under the Program.
Amount of Bonus
The amount of bonus compensation to be paid to an Eligible Employee (the "Bonus
Award") shall be determined by the CEO. The aggregate amount of Bonus Awards
payable pursuant to the Program shall not exceed the difference between (i) $40
million, and (ii) the cash amount actually paid to the CEO pursuant to Section 5
of 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.
Obligation to Pay Bonuses
Effective as of the successful consummation of the Offer, the Company shall have
a binding obligation to pay Bonus Awards to the Eligible Employees who have been
selected for participation in the Program, in the amounts determined by the CEO.
Such obligation shall be binding upon any successor of the Company. Bonus Awards
shall be paid to Eligible Employees immediately prior to, contemporaneously
with, or as soon as practicable after, the successful consummation of the Offer;
provided, that, the Board of Directors may approve arrangements for the deferral
of such payments in its discretion.
Effective Date
The Program is effective as of January 7, 1996.
Amendment and Termination
Prior to the successful consummation of the Offer, the Board of Directors of the
Company may amend or terminate the Program in any respect, with or without the
consent of any Eligible Employee; provided, however, that as of the successful
consummation of the Offer, the Program may not be amended or terminated in any
manner which would reduce or otherwise
adversely affect the Bonus Award payable to any Eligible Employee without such
Eligible Employee's express written consent.
-2-
EXHIBIT 99(c)(10)
LORAL SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN
Informally Known As
The Loral SERP
Effective April 1, 1995
Table of Contents
Page
INTRODUCTION.......................................................... iii
Article I -- Definitions.............................................. 1
1.1 Annuity Starting Date........................... 1
1.2 Basic Plan...................................... 2
1.3 Basic Plan Benefit.............................. 2
1.4 Beneficiary..................................... 2
1.5 Board........................................... 2
1.6 Code............................................ 2
1.7 Committee....................................... 2
1.8 ERISA........................................... 3
1.9 Loral........................................... 3
1.10 Participant..................................... 3
1.11 Plan............................................ 3
1.12 Proper Application.............................. 3
1.13 QDRO or Qualified Domestic Relations Order...... 4
1.14 Trust Agreement or Trust........................ 4
1.15 Trustee......................................... 4
Article II -- Benefits................................................ 5
2.1 Amount of Benefits.............................. 5
2.1.1 Formula Benefit................................. 5
2.1.2 Actual Benefit.................................. 5
2.2 Post-Retirement Death Benefits.................. 6
2.3 Pre-Retirement Death Benefits................... 6
2.4 Special Rules................................... 6
2.4.1 Small Benefit Cashout........................... 7
2.4.2 Lump Sum Benefit Limitation..................... 7
2.4.3 No Insured Death Benefit........................ 7
2.5 Benefits under Multiple Qualified Plans......... 8
2.5.1 Different Annuity Starting Dates................ 8
2.5.2 Same Annuity Starting Dates..................... 8
2.5.3 Death Benefits.................................. 9
Article III -- Administration; Accrued Benefits; Right to Amend....... 10
3.1 Committee's Discretionary Power to Interpret and
Administer the Plan............................. 10
3.1.1 Appointment..................................... 10
3.1.2 Role under ERISA................................ 10
3.1.3 Committee establishes Plan procedures........... 10
3.1.4 Role of Human Resource and Benefits Personnel... 10
3.1.5 Discretionary Power to Interpret Plan........... 11
3.2 Rules of the Committee.......................... 11
3.3 Claims Procedure................................ 13
3.4 QDRO Claim...................................... 15
i
3.5 Indemnification of Committee Members............ 16
3.6 Power to Execute Plan and Other Documents....... 16
3.7 Conclusiveness of Records....................... 16
3.8 No Personal Liability........................... 17
3.9 How Plan Benefit are Accrued.................... 17
3.10 Right to Amend.................................. 17
3.10.1 General Power to Amend.......................... 17
3.10.2 No Cut-Back of Accrued Benefits................. 18
Article IV -- Vesting and Forfeiture.................................. 19
4.1 Vesting......................................... 19
4.2 Dismissed for Cause............................. 20
4.3 Forfeiture after Plan Benefits have Commenced... 20
4.4 Determinations by Committee..................... 20
Article V -- General Provisions....................................... 21
5.1 No Assignment or Alienation of Benefits......... 21
5.2 Withholding Taxes............................... 21
5.3 No Right to Continue Employment................. 21
5.4 Unfunded Plan................................... 22
5.5 Governing Law................................... 22
5.6 Payment of Benefits............................. 22
5.7 Section Headings................................ 22
5.8 Payment to a Minor or Incompetent............... 23
5.9 Doubt as to Right to Payment.................... 24
5.10 Missing Payees.................................. 24
5.11 Mistaken Payments............................... 25
5.12 Receipt and Release for Payments................ 25
5.13 Illegality of Particular Provisions............. 26
5.14 Discharge of Liability.......................... 26
ii
INTRODUCTION
In response to certain limitations under the Internal Revenue Code, as
amended, on the maximum amount of compensation that can be taken into account
and the maximum amount of benefits that can be paid from a qualified benefit
plan, Loral Corporation ("Loral") has adopted this Plan effective April 1, 1995
to permit employees and their beneficiaries to be able to enjoy the benefits
that would have been provided to them but for these limitations. The Plan shall
be known as the Loral Supplemental Executive Retirement Plan, or the Loral
SERP, and reads as follows:
iii
Article I -- Definitions
The following terms shall have the designated meaning, unless a different
meaning is clearly required by the context:
1.1 Annuity Starting Date.
Subject to Section 2.5, "Annuity Starting Date" shall mean:
(a) generally, the "Annuity Starting Date" defined in the Basic Plan,
provided that the Participant is fully vested under Article IV, and
Proper Application has been made.
(b) With respect to any lump sum, the first day of the month coincident
with or next following the date as of which the Participant is both
(1) eligible to receive Plan payment and (2) has completed his Proper
Application.
(c) With respect to any one of a series of payments over the life or life
expectancy of one or more distributees, the first day of the month for
which the Plan benefit is paid, even if this date is not the date of
actual payment.
(d) The term "Annuity Starting Date" shall be determined with respect to
Plan payments made to the Participant, rather than with respect to
any survivor benefit payments.
(e) The term "Annuity Starting Date" shall, in all events, be defined by
Code Regulation Section
1.401(a)-20.
1.2 Basic Plan.
The qualified defined benefit pension plan sponsored by Loral (or its
subsidiaries or affiliates) in which an employee participates. If an employee
has an interest in more than one such plan, then the term "Basic Plan" shall
refer to such plans collectively except as the context shall otherwise require.
1.3 Basic Plan Benefit.
The amount accrued by a Participant from a Basic Plan.
1.4 Beneficiary.
Beneficiary means the person, trust, estate, or other entity entitled to
receive benefits (if any) after the Participant's death under the Plan, which
Beneficiary shall be the same as the Participant's beneficiary under the Basic
Plan.
1.5 Board.
The Board of Directors of Loral Corporation or the Executive Committee
thereof.
1.6 Code.
The Internal Revenue Code of 1986, as amended from time to time, and all
appropriate regulations and administrative guidance.
1.7 Committee.
The administrative Committee appointed to administer the Plan pursuant to
Article III.
2
1.8 ERISA.
--- -----
The Employee Retirement Income Security Act of 1974, as amended, and all
appropriate regulations and administrative guidance.
1.9 Loral.
--- -----
Loral Corporation, and depending on the context, its subsidiaries or
affiliates. Loral shall act by resolution of the Board.
1.10 Participant.
---- -----------
A Participant in a Basic Plan who accrues benefits thereunder on or after
April 1, 1995 and whose Basic Plan Benefit is limited by (S) 415 of the Code or
whose compensation for purposes of calculating a Basic Plan Benefit is limited
by (S) 401(a)(17) of the Code. As context demands, the term "Participant" shall
also include a former Participant.
1.11 Plan.
---- ----
This Loral Supplemental Executive Retirement Plan, as amended, and as from
time to time in effect.
1.12 Proper Application.
---- ------------------
For all Plan purposes, making any election, granting any consent, giving
any notice or information, and making any communication whatsoever to the
Committee or its delegates, in compliance with all Plan procedures, on forms
provided by the Committee, and providing all information required by the
3
Committee. A Proper Application will be deemed to have been made only if it is
properly completed, as determined by the Committee.
1.13 QDRO or Qualified Domestic Relations Order.
---- ------------------------------------------
A QDRO shall mean an order as defined in Code Section 414(p) and ERISA
Section 206(d)(3), and shall be subject to all administrative rules established
under the Basic Plan. The Committee shall have full discretionary authority to
determine whether any court order is a QDRO.
1.14 Trust Agreement or Trust.
---- ------------------------
The document executed by Loral and by the Trustee fixing the rights and
liabilities of each with respect to holding assets to be used to pay Plan
benefits, should any such assets be held in the Trust. The Trust is established
pursuant to Loral's intention that the Plan shall be an unfunded plan, as
detailed in Section 5.4.
1.15 Trustee.
---- -------
The trustee or trustees that may, from time to time, be in office, pursuant
to the Trust Agreement.
4
Article II - Benefits
2.1 Amount of Benefits.
The benefit payable from this Plan shall be in the form of a monthly
annuity equal to the amount determined under Section 2.1.1 minus the amount
determined under Section 2.1.2. Subject to Section 2.2, such benefit shall be
payable as of the Participant's Annuity Starting Date and continue for the
remainder of the Participant's life.
2.1.1. Formula Benefit. The benefit that would be payable to a
Participant under the Basic Plan, in the form elected by the Participant
pursuant to the provisions of the Basic Plan, irrespective of any
limitations imposed by (S) 415 or (S) 401(a)(17) of the Code.
2.1.2 Actual Benefit. The Basic Plan Benefit actually paid to the
Participant in whichever form he elects, after compliance with (S)(S) 415
and 401(a)(17) of the Code, plus any additional benefits paid to the
Participant under any non-qualified defined benefit plan (besides this
Plan) sponsored by Loral or any of its subsidiaries or affiliates.
If benefits under the Basic Plan are increased as a result of an increase in the
limitations under Code (S)(S) 415 or 401(a)(17) (or corresponding provisions of
applicable law), benefits under this Plan shall be reduced by the amount of any
such increase.
5
2.2 Post-Retirement Death Benefits.
Upon the death of the Participant after his Annuity Starting Date, benefits
will continue to be paid to such Participant's Beneficiary in an amount equal to
the benefit determined under Section 2.1 multiplied by a fraction, the numerator
of which is the benefit payable from the Basic Plan after the Participant's
death, and the denominator of which is the benefit payable from the Basic Plan
immediately before the Participant's death. No amount will be paid after the
Participant's death under this Plan if no such benefits are paid under the Basic
Plan.
2.3 Pre-Retirement Death Benefits.
Upon the death of the Participant prior to his Annuity Starting Date, his
Beneficiary shall receive a benefit equal to the difference between the benefit
received by such Beneficiary under the Basic Plan and the benefit that would
have been paid under the Basic Plan irrespective of any limitations imposed by
(S)(S) 415 or 401 (a)(17) of the Code. No amount will be paid under this Plan on
account of the Participant's death prior to his Annuity Starting Date unless
such benefits are paid under the Basic Plan.
2.4 Special Rules.
The following rules shall apply notwithstanding any other provision of this
Plan.
6
2.4.1 Small Benefit Cashout. If the actuarial present value
(utilizing the assumptions set forth in the small benefit cashout
provisions of the Basic Plan) of a Participant's benefit under Section 2.1
or a Beneficiary's benefit under Section 2.3 is $3,500 or less, payment
will be made from this Plan in a single lump sum as soon as practicable
after the Annuity Starting Date (with respect to a benefit paid pursuant to
Section 2.1) and the death of the Participant (with respect to a benefit
paid pursuant to Section 2.3).
2.4.2 Lump Sum Benefit Limitation. Unless special approval of the
Committee is obtained, and except for benefits paid pursuant to Section
2.4.1, no benefits under this Plan shall be paid in a lump sum.
Accordingly, if any benefits are paid under the Basic Plan to a Participant
in a lump sum, the amount payable under this Plan pursuant to the
methodology set forth in Section 2.1 shall nevertheless be paid in the form
of a straight life annuity for the Participant, beginning on the Annuity
Starting Date and ending with the payment for the month in which the
Participant dies.
2.4.3 No insured Death Benefit. No benefit pursuant to Section 2.3
shall be paid with respect to any death benefit under the Basic Plan which
is provided by insurance, to the extent that such benefit exceeds the
minimum benefit required to be provided under the Basic Plan
7
under Code (S) 401(a)(11).
2.5 Benefits under Multiple Qualified Plans.
The following rules shall apply if a Participant has a benefit under more
than one Basic Plan:
2.5.1 Different Annuity Starting Dates. Benefits under this Plan
shall be payable as of the Participant's earliest Annuity Starting Date
under all such Basic Plans. In the event that the Participant has benefits
payable under different Basic Plans, with different Annuity Starting Dates,
then the amount of his benefit under this Plan shall initially be
determined based only on the Basic Plans for which the Participant's
Annuity Starting Date has occurred, as though such Plans were the only
Basic Plans in which the Participant had accrued a benefit. When benefits
later begin under the other Basic Plans, benefits hereunder shall be
increased to reflect the intent of this Plan to fully make up to the
Participant the benefits he had not received under all Basic Plans, as a
result of the Code's limitations.
2.5.2 Same Annuity Starting Dates. If a Participant's Annuity
Starting Date is the same under all Basic Plans, then benefits under this
Plan shall generally be payable as of such date, provided the Participant
is fully vested under Article IV, and that Proper Application has been
made.
8
2.5.3 Death Benefits. If benefits are paid under the Basic Plans in
different forms, the death benefits pursuant to Section 2.2 shall be
determined with respect to each individual plan.
9
Article III--Administration; Accrued Benefits; Right to Amend
3.1 Committee's Discretionary Power to Interpret and Administer the Plan
3.1.1 Appointment. The Committee shall be appointed from time to
time by the Board to serve at its pleasure. Any member of the Committee may
resign by delivering his written resignation to the Board.
3.1.2 Role under ERISA. The Committee is the "named fiduciary" for
operation and administration of the Plan, and the "administrator" under
ERISA. The Committee is designated as agent for service of legal process.
3.1.3 Committee establishes Plan procedures. The Committee and its
delegates shall from time to time establish rules and procedures for the
administration and interpretation of the Plan and the transaction of its
business.
3.1.4 Role of Human Resource and Benefits Personnel. Employees of
Loral and its subsidiaries and affiliates who are human resources personnel
or benefits representatives are the Committee's delegates and shall, under
the authority of the Committee, perform the routine administration of the
Plan, such as distributing and collecting forms and providing information
about Plan procedures. They shall also establish Plan rules and procedures.
10
3.1.5 Discretionary Power to Interpret Plan.
3.1.5.1 The Committee has complete discretionary and final
authority to (1) determine all questions concerning eligibility,
elections, contributions, and benefits under the Plan, (2) construe
all terms under the Plan and the Trust, including any uncertain terms,
and (3) determine all questions concerning Plan administration. All
administrative decisions made by the Committee, and all its
interpretations of the Plan documents, shall be given full deference
by any court of law.
3.1.5.2 Information that concerns an interpretation of the Plan
or a discretionary determination, can be properly provided only by
the Committee, and not by any delegate (other than legal counsel).
3.1.5.3 Should any individual receive oral or written
information concerning the Plan, which is contradicted by a subsequent
determination by the Committee, then the Committee's final
determination shall control.
3.2 Rules of the Committee.
3.2.1 Any act which the Plan authorizes or requires the
Committee to do may be done by a majority of
11
its members. The action of such majority, shall constitute the action of
the Committee and shall have the same effect for all purposes as if made by
all members of the Committee at the time in office. The Committee may act
without any writing that records its decisions, and need not document its
meetings or teleconferences. The Committee may also act through any
authorized representative.
3.2.2 The members of the Committee may authorize one or more of their
number to execute or deliver any instrument, make any payment or perform
any other act which the Plan authorizes or requires the Committee to do.
3.2.3 The Committee may employ counsel and other agents and may
procure such clerical, accounting, actuarial and other services as they may
require in carrying out the provisions of the Plan. Legal counsel are
authorized as the Committee's delegates.
3.2.4 No member of the Committee shall receive any compensation for
his services as such. All expenses of administering the Plan, including,
but not limited to, fees of accountants, counsel and actuaries shall be
paid by Loral, to the extent that they are not paid under the Trust.
3.2.5 Each member of the Committee may delegate Committee
responsibilities among Loral directors, officers, or employees, and may
consult with or hire outside experts.
12
The expenses of such experts shall be paid by Loral, to the extent that
they are not paid under the Trust.
3.3 Claims Procedure.
3.3.1 The Committee shall determine Participants' and Beneficiaries'
rights to benefits under the Plan. In the event that a Participant or
Beneficiary disputes an initial determination made by the Committee, then
he may dispute the determination only by filing a written claim for
benefits.
3.3.2 If a claim is wholly or partially denied, the Committee shall
provide the claimant with a notice of denial, generally within 90 days of
receipt, written in a manner calculated to be understood by the claimant
and setting forth:
3.3.2.1 The specific reason(s) for such denial;
3.3.2.2 Specific references to the pertinent Plan provisions on
which the denial is based;
3.3.2.3 A description of any additional material or information
necessary for the claimant to perfect the claim with an explanation of
why such material or information is necessary (if applicable); and
13
3.3.2.4 Appropriate information as to the steps to be taken if
the claimant wishes the Committee to revise its initial denial. The
notice of denial shall be given within a reasonable time period but no
later than 90 days after the claim is received, unless circumstances
require an extension of time for processing the claim. If such
extension is required, written notice shall be furnished to the
claimant within 90 days of the date the claim was received stating
that an extension of time and the date by which a decision on the
claim can be expected, which shall be no more than 180 days from the
date the claim was filed.
3.3.2.5 If no written notice of denial is provided by the
Committee, then the claim shall be deemed to be denied, and the
claimant may appeal the claim as though the claim had been denied.
3.3.3 The claimant and/or his representative may appeal the denied
claim and may:
3.3.3.1 Request a review by making a written request to the
Committee provided that such a request is made, within 65 days of the
date of the notification of the denied claim;
3.3.3.2 Review pertinent documents.
14
3.3.4 Upon receipt of a request for review, the Committee shall
within a reasonable time period but not later than 60 days after
receiving the request, provide written notification of its decision to
the claimant stating the specific reasons and referencing specific
plan provisions on which its decision is based, unless special
circumstances require an extension for processing the review. If such
an extension is required, the Committee shall notify the claimant of
the date, no later than 120 days after receiving the request for
review, on which the Committee will notify the claimant of its
decision.
3.3.5 In the event of any dispute over benefits under this Plan,
all remedies available to the disputing individual under this Article
must be exhausted, within the specified deadlines, before legal
recourse of any type is sought.
3.4 QDRO Claim.
Claims relating to or affected by a domestic relations order as
defined by Code S 414(p) ("QDROs") or draft order shall be determined
under the Basic Plan Committee's procedures concerning domestic
relations orders. The claims procedure described in the preceding
section shall not apply to any such domestic relations order claim.
15
3.5 Indemnification of Committee Members.
------------------------------------------
To the fullest extent permitted by law, Loral agrees to indemnify, to
defend, and hold harmless the members of the Committee and its delegates,
individually and collectively, against any liability whatsoever for any action
taken or omitted by them in good faith in connection with this Plan or their
duties hereunder and for any expenses or losses for which they may become liable
as a result of any such actions or non-actions unless resultant from their own
willful misconduct; and Loral will purchase insurance for the Committee and its
delegates to cover any of their potential liabilities with regard to the Plan.
3.6 Power to Execute Plan and Other Documents.
-----------------------------------------------
The Vice President of Administration of Loral Corporation shall have the
authority to execute governmental filings or other documents relating to the
Plan (including the Plan document), or this authority may be delegated to
another officer or employee of Loral or a subsidiary or affiliate, by either the
Vice President of Administration of Loral Corporation or the Board.
3.7 Conclusiveness of Records.
-------------------------------
In administering the Plan, the Committee may conclusively rely upon the
Basic Plan employer's payroll and personnel records maintained in the ordinary
course of business.
16
3.8 No Personal Liability.
--------------------------
No Committee member or delegate shall be personally liable by reason of
any contract or other instrument executed by him or on his behalf in his
capacity as a member or delegate of a committee nor for any mistake of judgment
made in good faith, and Loral shall indemnify and hold harmless each member of
the Committee and each other officer, employee, or director of Loral to whom any
duty or power relating to the administration or interpretation of the Plan may
be allocated or delegated, against any cost or expenses (including counsel fees)
or liability (including any sum in settlement of a claim with the approval of
the Board) arising out of any act or omission to act in connection with the Plan
unless arising out of such person's own fraud or bad faith.
3.9 How Plan Benefits are Accrued.
----------------------------------
Benefits that would be accrued under the Basic Plan, but for the limiting
provisions of Code (S)(S) 415 and/or 401(a)(17), shall be deemed to be accrued
under the Plan.
3.10 Right to Amend.
--------------------
3.10.1 General Power to Amend. The Board may at any time amend the
Plan in any respect or suspend or terminate the Plan in whole or in part
without the consent of any Participant or Beneficiary or any subsidiary of
Loral whose employees are covered by this Plan, subject to Section 3.10.2.
Any such amendment, suspension or termination may be made with or without
retroactive effect, save as provided
17
in Section 3.10.2.
3.10.2 No Cut-Back of Accrued Benefits.
----------------------------------------
Notwithstanding the previous Section 3.10.1, this Plan may not be amended
or terminated in any respect that has the effect of reducing or eliminating
any Plan benefit that had accrued as of the effective date of the amendment
or termination, unless the affected Participants or Beneficiaries each
gives his consent. That is, there shall be no retroactive cut-backs of
accrued Plan benefits, without individual consent.
18
Article IV--Vesting and Forfeiture
4.1 Vesting.
-------------
4.1.1. A Participant shall be entitled to a benefit under this Plan
only upon satisfying the vesting requirements set out in this Section 4.1.
4.1.2. Vesting, as defined by this Section 4.1, shall occur only when
the Participant has (i) satisfied the vesting requirements of the Basic
Plan and made any contributions that are required to receive benefits under
the Basic Plan, (ii) terminated employment with Loral, (iii) satisfied all
eligibility requirements for benefits under this Plan, and (iv) applied and
received Committee approval to receive Plan benefits, with respect to the
forfeiture issues addressed by Section 4.1.3.
4.1.3. A Participant shall not be fully vested under this Section 4.1
until, following his termination and application for Plan benefits, the
Committee has determined that he is not subject to forfeiture of his Plan
benefits under this Section 4.1. Forfeiture of all Plan benefits (including
death benefits and Plan benefits previously paid) under this Section 4.1
shall take place, notwithstanding any contrary Plan provision, if a
Participant: (i) is Dismissed for Cause, as defined in Section 4.2, (ii)
becomes employed by a company in substantial competition with Loral, or
(iii) engages in conduct detrimental or contrary to the best interests of
Loral.
19
4.2 Dismissed for Cause.
-------------------------
"Dismissed for Cause" means termination of employment for (a) theft,
embezzlement, or malicious destruction of Loral's property; (b) fraud or other
wrongdoing against Loral; or (c) improper disclosure of Loral's trade secrets.
4.3 Forfeiture after Plan Benefits have Commenced.
---------------------------------------------------
Even though the Committee has made an initial favorable vesting
determination under Section 4.1., it may nevertheless determine that a
Participant's Plan benefits, after payment has commenced, are forfeited, if the
Committee reconsiders the issues addressed in Section 4.1.3 and determines that
forfeiture is in fact warranted. Such a forfeiture shall be effective as of the
date that the Committee determines the events of forfeiture have occurred, as
set out in Section 4.1.3. The Committee may therefore make a retroactive
forfeiture determination. Any Plan benefits that have been paid after the
effective date of the retroactive forfeiture determination shall be considered a
mistaken payment under Section 5.11.
4.4 Determination by Committee.
--------------------------------
The Committee shall have full, final, and discretionary authority to make
determinations under this Article IV. Any forfeiture determination made by the
Committee shall be final, binding and conclusive upon the Participant and his
Beneficiaries.
20
Article V - General Provisions
5.1 No Assignment or Alienation of Benefits.
---------------------------------------------
Subject to Sections 2.2 and 2.3, and to any QDROs, payment of benefits
pursuant to this Plan shall be made only to Participants. Such benefits shall
not be subject in any manner to the debts or other obligations of the person to
whom they are payable and shall not be subject to transfer, anticipation, sale,
assignment, bankruptcy, pledge, attachment, charge or encumbrance in any manner,
either voluntarily or involuntarily.
5.2 Withholding Taxes.
-----------------------
Whenever under the Plan payment is made to a Participant or beneficiary,
Loral shall be entitled to require as a condition of payment that the recipient
remit an amount, sufficient in Loral's opinion, to satisfy all FICA, federal and
other withholding tax requirements related thereto. Loral shall be entitled to
deduct such amount from any payment.
5.3 No Right to Continue Employment.
-------------------------------------
This Plan is voluntary on the part of Loral and shall not be deemed to
constitute an employment contract between Loral and a Participant and/or
consideration for or an inducement for or condition of employment of any
Participant. Nothing in this Plan shall be deemed to give any employee the right
to be retained in the service of Loral or to interfere with the right of Loral
to discharge, terminate or lay off any Participant at any time for any reason.
21
5.4 Unfunded Plan.
--- -------------
The Plan is intended to constitute an unfunded, nonqualified pension plan
for a select group of management or highly compensated employees, for the
purposes of ERISA.
5.5 Governing Law.
--- -------------
It is intended that the Plan conform to and meet the applicable
requirements of ERISA and the Code. Except to the extent preempted by ERISA, the
validity of the Plan or of any of its provisions shall be determined under, and
it shall be construed and administered according to, the laws of the State of
New York (including its statute of limitations and all substantive and
procedural law, and without regard to its conflict of laws provisions).
5.6 Payment of Benefits.
--- -------------------
All benefits payable under the Plan shall be paid under the Trust
Agreement. The rights or entitlement of any Participant or Beneficiary shall be
no greater than those of an unsecured general creditor of Loral, subject to the
Trust Agreement.
5.7 Section Headings.
--- ----------------
The section headings contained in the Plan are for purposes of convenience
only and are not intended to define or limit the contents of said sections.
22
5.8 Payment to a Minor or Incompetent.
--- ---------------------------------
If any amount is payable under this Plan to a minor or other legally
incompetent person, such amount may be paid in any one or more of the following
ways, as the Committee in its sole discretion shall determine:
5.8.1 To the legal representatives of such minor or other incompetent
person;
5.8.2 Directly to such minor or other incompetent person;
5.8.3 To a parent or guardian of such minor or other incompetent
person, to the person with whom such minor or other incompetent person
shall reside, or to a custodian for such minor under the Uniform Gifts to
Minors Act (or similar statute) of any jurisdiction. Payment to any person
in accordance with the foregoing provisions shall pro tanto discharge
Loral, the members of the Committee, and any person or corporation making
such payment pursuant to the direction of the Committee, and none of the
foregoing shall be required to see to the proper application of any such
payment to such person pursuant to the provisions of this Section 5.8.
Without in any manner limiting or qualifying the provisions of this Section
5.8, if any amount is payable under this Plan to a minor or any other
legally incompetent person, the Committee may in its discretion utilize the
procedures described in Section 5.8.
23
5.9 Doubt as to Right to Payment.
--------------------------------
If at any time any doubt exists as to the right of any person to any
payment under this Plan or the amount or time of such payment (including,
without limitation, any case of doubt as to identity, or any case in which any
notice has been received from any other person claiming any interest in amounts
payable hereunder, or any case in which a claim from other persons may exist by
reason of community property or similar laws), the Committee shall be entitled,
in its discretion, to direct that such sum be held as a segregated amount in
trust until such right or amount or time is determined or until order of a court
of competent jurisdiction, or to pay such sum into court in accordance with
appropriate rules of law in such case then provided, or to make payment only
upon receipt of a bond or similar indemnification (in such amount and in such
form as is satisfactory to the Committee).
5.10 Missing Payees.
-------------------
If all or portion of a Participant's vested Plan benefit becomes payable
and the Committee after a reasonable search cannot locate the Participant (or
his Beneficiary if such Beneficiary is entitled to payment), then, 5 years
after the Participant's benefit first became payable under the Plan, a notice
shall be mailed to the last known address of the Participant. If the Participant
does not respond within three months, the Committee may elect, upon advice of
counsel, to remove all records of the Participant's accrued benefit from the
24
Plan's current records and that benefit shall be used to offset future employer
contributions. If the Participant or his Beneficiary subsequently presents a
valid claim for benefits to the Committee, the Committee shall restore and pay
the appropriate Plan benefit.
5.11 Mistaken Payments.
-----------------------
No Participant or Beneficiary shall have any right to any payment made (1)
in error, (2) in contravention to the terms of the Plan, the Code, or ERISA, or
(3) because the Committee or its delegates were not informed of any death. The
Committee shall have full rights under the law and ERISA to recover any such
mistaken payment, and the right to recover attorney's fees and other costs
incurred with respect to such recovery. Recovery shall be made from future Plan
payments, or by any other available means.
5.12 Receipt and Release for Payments.
--------------------------------------
Any payment to any Participant, Beneficiary, or to any such person's legal
representative, parent, guardian, or any person or entity specified by Section
5.8 or under any other Plan provision, shall be in full satisfaction of all
claims that can be made under the Plan against the Trustee and Loral. The
Trustee and Loral may require such Participant, Beneficiary, legal
representative, or any other person or entity described in this Section 5.12, as
a condition precedent to such payment, to execute a receipt and release thereof
in such form as shall be determined by the Trustee or Loral.
25
5.13 Illegality of Particular Provisions.
-----------------------------------------
The illegality of any particular provision of this Plan shall not affect
the other provisions thereof, but the Plan shall be construed in all respects as
if such invalid provision were omitted.
5.14 Discharge of Liability.
----------------------------
If distribution in respect of a Participant is made under this Plan in a
form, or to a person, reasonably believed by the Committee or its delegate to be
proper, the Plan shall have no further liability with respect to the Participant
(or his spouse or Beneficiary) to the extent of such distribution.
IN WITNESS WHEREOF, LORAL CORPORATION, on its own behalf and as agent for
each of its subsidiaries, has caused this Plan to be executed by its duly
authorized officer, this 19th day of December, 1995.
LORAL CORPORATION
By: /s/ S. L. Jackson
------------------------------------
Title: Vice-President of Administration
26
