<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 17, 1997
REGISTRATION NO. 333-26517
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
LORAL SPACE & COMMUNICATIONS LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
BERMUDA 13-3867424
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
------------------------
600 Third Avenue
New York, New York 10016
(212) 697-1105
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
ERIC J. ZAHLER
600 Third Avenue
New York, New York 10016
(212) 697-1105
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER INCLUDING AREA CODE, OF
AGENT FOR SERVICE)
------------------------
WITH A COPY TO:
BRUCE R. KRAUS, ESQ.
WILLKIE FARR & GALLAGHER
One Citicorp Center
153 East 53rd Street
New York, New York 10022
(212) 821-8000
------------------------
APPROXIMATE DATE OF THE COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ] ________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
- ---------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
------------------------------------
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
OFFERING AGGREGATE
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE PRICE PER OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED SHARE PRICE REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Convertible Redeemable Preferred
Stock............................. 1,344 $52.50(1) $70,560 $22
shares(2)
- ------------------------------------------------------------------------------------------------------------
Common Stock $.01 par value......... 3,360 $-- $-- $--(4)
shares(3)
- ------------------------------------------------------------------------------------------------------------
Common Stock $.01 par value......... 15,542,922 $16.6875(1) $259,372,511 $78,598
shares(5)
- ------------------------------------------------------------------------------------------------------------
Total Due........................... $78,620(6)
============================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) under the Securities Act of 1933, as amended (the "Securities
Act").
(2) The shares of Convertible Redeemable Preferred Stock being registered
hereunder include such indeterminate number of additional shares as may
become issuable upon exchange of the securities upon redemption payments and
certain other payments made on the securities by the delivery of Common
Stock in accordance with the terms of the securities.
(3) The shares of Common Stock being registered hereunder include the number of
shares of Common Stock initially issuable upon conversion of the Convertible
Redeemable Preferred Stock plus such indeterminate number of additional
shares as may become issuable upon conversion of the securities as a result
of adjustments in the conversion price thereof or upon redemption payments,
interest payments and certain other payments made on the securities by the
delivery of Common Stock in accordance with the terms of the securities.
(4) Pursuant to Rule 457(i) under the Securities Act, no registration fee is
required for the Common Stock issuable upon conversion of the Convertible
Redeemable Preferred Stock because no additional consideration will be
required in connection with the issuance of such shares.
(5) 7,500,000 of such shares are being resold by the LB Partnerships, 4,205,622
of such shares are being resold by Alcatel Spacecom and 3,837,300 of such
shares are being resold by Aerospatiale SNI.
(6) A registration fee in the amount of $213,441 for the registration of
14,908,093 shares of Convertible Redeemable Preferred Stock and 1,255,684
shares of Common Stock was previously paid in connection with the May 5,
1997 filing of the Registration Statement.
------------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(a) MAY DETERMINE.
================================================================================
<PAGE> 2
PROSPECTUS
14,909,437 SHARES OF
CONVERTIBLE REDEEMABLE PREFERRED STOCK
AND 54,072,199 SHARES OF COMMON STOCK
LORAL SPACE & COMMUNICATIONS LTD.
------------------------
This Prospectus relates to (i) the resale by the holders thereof of
14,909,437 shares of the 6% Series C Convertible Redeemable Preferred Stock (the
"Preferred Stock") of Loral Space & Communications Ltd. ("Loral"), having an
aggregate liquidation preference equal to $745,471,850 and a mandatory
redemption date of November 1, 2006, (ii) the resale by the holders thereof of
37,273,593 shares of common stock, par value $.01 per share (the "Common
Stock"), of Loral that may be acquired upon conversion of the Preferred Stock
(the "Conversion Shares"), (iii) the resale by Alcatel Spacecom, a French
company ("Alcatel"), of 5,461,306 shares of Common Stock (the "Alcatel Shares"),
(iv) the resale by Aerospatiale SNI, a French company ("Aerospatiale"), of
3,837,300 shares of Common Stock (the "Aerospatiale Shares") and (v) the resale
by the LB Partnerships (as defined herein) of 7,500,000 shares of Common Stock
(the "LBP Shares" and together with the Preferred Stock, the Conversion Shares,
the Alcatel Shares and the Aerospatiale Shares, the "Securities"). The Preferred
Stock will be convertible into shares of Common Stock at any time prior to
redemption or maturity at a conversion price of $20.00 per share which
represents a conversion ratio of 2.5 shares per share of Preferred Stock,
subject to adjustment under certain conditions (the "Conversion Price").
Dividends and optional redemption payments on the Preferred Stock will be paid
in cash. Payments of the aggregate liquidation preference of the Preferred Stock
on the mandatory redemption date may be made in cash, by delivery of Common
Stock or both. See "Description of Preferred Stock."
The Common Stock is listed on the New York Stock Exchange (the "NYSE")
under the symbol "LOR." On June 16, 1997, the last reported sale price of the
Common Stock on the NYSE was $16 5/8 per share. Dividends on the Preferred Stock
are payable quarterly in arrears on February 1, May 1, August 1 and November 1,
commencing on August 1, 1997, subject to deferral without penalty as described
herein.
The Preferred Stock, with respect to dividend rights and rights on
liquidation, winding up and dissolution, ranks pari passu with the Company's
Series A Convertible Preferred Stock and senior to or pari passu with other
existing and future series of preferred stock and senior to all common stock of
the Company. See "Description of Preferred Stock -- Ranking." The Preferred
Stock does not limit the amount of Debt Obligations that the Company may incur.
The Preferred Stock is subject to mandatory redemption on November 1, 2006 (the
"Mandatory Redemption Date"). The Preferred Stock is not redeemable by the
Company before November 5, 1999 and thereafter will be redeemable, in whole or
in part, by the Company upon payment of the liquidation preference and premium
and accrued dividends, if any, on the Preferred Stock. See "Description of
Preferred Stock."
The Securities have not been registered for sale under the securities laws
of any state or jurisdiction as of the date of this Prospectus. Brokers or
dealers effecting transactions in the Securities should confirm the registration
thereof under the securities laws of the state in which such transactions occur,
or the existence of any exemption from registration.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER
"RISK FACTORS" BEGINNING ON PAGE 5.
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
June 17, 1997
<PAGE> 3
AVAILABLE INFORMATION
Loral is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed by Loral can be inspected and copied at public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549; Seven World Trade Center, 13th Floor, New York, New York 10048; and
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of
such material can be obtained from the Public Reference Section of the
Commission, Washington, D.C. 20549 at prescribed rates. The Commission maintains
a Web site at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding Loral. The Common Stock is quoted on
the NYSE, and any reports, proxy and information statements and other
information filed under the Exchange Act may also be inspected and copied at the
offices of the New York Stock Exchange, 120 Broad Street, New York, New York
10005.
Globalstar Telecommunications Limited ("GTL") and K&F Industries, Inc.
("K&F"), affiliates of Loral, are also subject to the informational requirements
of the Exchange Act and in accordance therewith file reports and other
information with the Commission. Information with respect to GTL and K&F may be
obtained from the Commission in the manner described above.
Loral has filed with the Commission a Registration Statement on Form S-3
(together with all exhibits and amendments, the "Registration Statement") under
the Securities Act, with respect to the Securities. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto, certain portions of which are omitted as
permitted by the rules and regulations of the Commission. For further
information with respect to Loral and the Securities, reference is made to the
Registration Statement, including the exhibits and schedules. The Registration
Statement may be inspected, without charge, at the Commission's principal office
at 450 Fifth Street, NW, Washington, D.C. 20549, and also at the regional
offices of the Commission listed above. Copies of such material may also be
obtained from the Commission upon the payment of prescribed rates.
Statements contained in the Prospectus as to any contracts, agreements or
other documents filed as an exhibit to the Registration Statement are not
necessarily complete, and in each instance reference is hereby made to the copy
of such contract, agreement or other document filed as an exhibit to the
Registration Statement for a full statement of the provisions thereof, and each
such statement in the Prospectus is qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by Loral with the Commission
pursuant to the Exchange Act and are hereby incorporated by reference into this
Prospectus:
(a) Loral's Annual Report on Form 10-K for the year ended December 31,
1996;
(b) Loral's Quarterly Report on Form 10-Q for the quarter ended March
31, 1997;
(c) Loral's Proxy Statement relating to the 1997 Annual Meeting of
Stockholders;
(d) Loral's Current Report on Form 8-K, filed March 28, 1997;
(e) Loral's Current Report on Form 8-K, filed on April 9, 1997;
(f) Loral's Current Report on form 8-K/A, filed on May 28, 1997; and
(g) the description of Loral's Common Stock contained in Loral's
registration statement on Form 8-A filed under the Exchange Act and any
amendments or reports filed for the purpose of updating such description.
All documents filed by Loral pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Securities offered hereby shall be deemed to
be incorporated by reference in this Prospectus and to be a part hereof from the
date of filing such
i
<PAGE> 4
documents (provided, however, that the information referred to in item 402(a)(8)
of Regulation S-K of the Commission shall not be deemed specifically
incorporated by reference herein).
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
(or in the applicable Prospectus Supplement) or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement as modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
Loral will provide without charge to each person, including any beneficial
owner, to whom a copy of this Prospectus has been delivered, upon the written or
oral request of any such person, a copy of any or all of the documents
incorporated by reference in this Prospectus (other than exhibits and schedules
thereto, unless such exhibits or schedules are specifically incorporated by
reference into the information that this Prospectus incorporates). Written or
oral requests for copies of these documents should be directed to Loral Space &
Communications Ltd., 600 Third Avenue, New York, New York 10016, Attention:
Secretary (Telephone (212) 697-1105).
FORWARD-LOOKING STATEMENTS
The statements contained or incorporated by reference in this Prospectus
that are not historical facts are "forward-looking statements" (as such term is
defined in the Private Securities Litigation Reform Act of 1995), which can be
identified by the use of forward-looking terminology such as "believes",
"expects", "may", "will", "should", or "anticipates" or the negative thereof or
other variations thereon or comparable terminology, or by discussions of
strategy that involve risks and uncertainties. From time to time, Loral, GTL,
and Globalstar L.P. ("Globalstar") or their representatives have made or may
make forward-looking statements, orally or in writing. Furthermore, such
forward-looking statements may be included in, but are not limited to, various
filings made by Loral, GTL, or Globalstar with the Commission, or press releases
or oral statements made by or with the approval of an authorized executive
officer of Loral, GTL, or Globalstar.
Management wishes to caution the reader that these forward-looking
statements, such as the statements regarding Globalstar's planned timetable for
launching and operating the Globalstar System, the extent of the market
opportunity for Globalstar's services and products presented by the growing
demand for telecommunications services worldwide, its anticipation of enabling
local service providers to extend low-cost, high-quality telecommunications
services to millions of people, its anticipated future revenues and capital
expenditures and other statements contained or incorporated by reference in this
Prospectus regarding matters that are not historical facts involve predictions.
No assurance can be given that the future results will be achieved; actual
events or results may differ materially as a result of risks facing Globalstar.
Such risks include, but are not limited to, problems related to technical
development and launch of the Globalstar System, the competitive environment in
which the system will operate, doing business in developing markets, obtaining
the necessary financing while being substantially leveraged, obtaining any
required U.S. and foreign government authorizations, licenses and permits, all
in a timely manner, at reasonable costs and on satisfactory terms and
conditions, as well as regulatory, legislative and judicial developments that
could cause actual results to vary materially from the future results indicated,
expressed or implied, in such forward-looking statements. See "Risk Factors."
ii
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information and financial statements and the notes thereto incorporated by
reference in this Prospectus. Unless otherwise specified or the context
otherwise requires, references in this Prospectus to "dollars," "$" and "U.S.$"
are to United States dollars.
THE OFFERING
CONVERTIBLE REDEEMABLE
PREFERRED STOCK:
Securities Offered......... 14,909,437 shares of 6% Series C Convertible
Redeemable Preferred Stock (the "Preferred Stock")
in an aggregate liquidation preference of
$745,471,850. The Preferred Stock is convertible at
a conversion price of $20.00 per share into an
aggregate of 37,273,593 shares of Common Stock.
Liquidation Preference..... $745,471,850 in the aggregate. Each share of the
Preferred Stock will have a liquidation preference
of $50.00.
Mandatory Redemption
Date....................... November 1, 2006 (the "Mandatory Redemption Date").
Dividends.................. Each share of the Preferred Stock will accrue
dividends from June 5, 1997, at the rate of 6% per
annum. Dividends will be computed on the basis of a
360-day year of twelve 30-day months and will be
payable quarterly in cash in arrears on February 1,
May 1, August 1 and November 1 of each year (each,
a "Payment Date"), commencing on August 1, 1997.
Loral may elect to defer dividend payments on any
Payment Date. Arrearages of deferred but unpaid
dividend accruals ("Dividend Arrearages") will not
bear interest, but so long as any Dividend
Arrearage remains outstanding, Loral will be
prohibited from paying (i) dividends on its Common
Stock or (ii) dividends on any other preferred
stock (other than pro rata dividends on Loral's
Series A Convertible Preferred Stock, par value
$.01 per share (the "Series A Preferred Stock"),
and any other series of preferred stock ranking
pari passu with the Preferred Stock (collectively,
"Parity Stock")). In the event that dividend
payments on the Preferred Stock are deferred by
Loral for an aggregate of six quarterly dividend
payments, the holders of the Preferred Stock (the
"Holders") will have the rights described under
"Voting Rights" below.
Ranking of the Preferred
Stock...................... The Preferred Stock, with respect to dividend
rights and rights on liquidation, winding up and
dissolution, ranks pari passu with Loral's Series A
Preferred Stock and senior to or pari passu with
all other series of preferred stock and senior to
all Common Stock of Loral.
<PAGE> 6
Optional Redemption by
Loral...................... Commencing November 5, 1999, the Preferred Stock
will be redeemable in cash at any time, in whole or
in part, at the election of Loral (the "Optional
Redemption"), at a redemption price equal to the
percentage of the liquidation preference set forth
below plus accrued and unpaid dividends, if any, to
the date of redemption (the "Optional Redemption
Date"), if redeemed in the 12-month period ending
on November 1 of the following years:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
----- ----------------
<S> <C>
2000 102%
2001 101%
</TABLE>
and thereafter at a redemption price equal to 100%
of the liquidation preference plus accrued and
unpaid dividends, if any, to the Optional
Redemption Date.
Mandatory Redemption by
Loral...................... The Preferred Stock is subject to mandatory
redemption (the "Mandatory Redemption") by Loral on
the Mandatory Redemption Date, at a redemption
price of 100% of the liquidation preference plus
accrued and unpaid dividends, if any (including all
Dividend Arrearages), to the Mandatory Redemption
Date. Loral may make payments of the aggregate
liquidation preference of the Preferred Stock on
the Mandatory Redemption Date: (i) in cash; (ii) by
delivery of Common Stock (based upon 100% of the
Average Market Value (as defined)); or (iii)
through any combination of the foregoing.
Optional Conversion by
Holders.................... The Preferred Stock is convertible, in whole or in
part, at the option of the Holders at any time
prior to the Mandatory Redemption Date (unless
earlier redeemed by Loral), initially at the
conversion price of $20.00 per share (equivalent to
2.5 shares of Common Stock for each $50.00
liquidation preference of Preferred Stock). Holders
will not be entitled to any Dividend Arrearage upon
conversion. The Conversion Price is subject to
adjustment upon the occurrence of certain dilutive
events.
Voting Rights.............. Except for certain amendments to Loral's Memorandum
of Association and as required by law, the Holders
of the Preferred Stock will not be entitled to any
voting rights unless Loral has deferred payments of
dividends on the Preferred Stock for an aggregate
of six quarterly interest or dividend payments (a
"Deferral Trigger Event"). If a Deferral Trigger
Event occurs while the Preferred Stock is
outstanding, then holders of a majority of the
outstanding shares of the Preferred Stock, voting
as a class, will be entitled to elect two directors
(the "Preferred Stock Directors") to the Board of
Directors. The Preferred Stock Directors will
promptly resign their offices upon receipt of
notice from Loral that all Dividend Arrearages with
respect to the Preferred Stock have been paid.
Restrictive Covenants...... None.
Registration Rights........ Pursuant to registration rights agreements
(collectively, the "Registration Rights Agreement")
executed among Loral and the Initial Purchasers (as
defined herein) and certain other parties, Loral
has agreed for the benefit of the Holders of
Preferred Stock that it will maintain a shelf
registration statement (the "Shelf Registration
Statement") continu-
2
<PAGE> 7
ously effective under the Securities Act until such
date as of which neither the Preferred Stock nor
the shares of Common Stock issuable upon conversion
thereof shall constitute restricted securities
pursuant to Rule 144(k) or until all the Preferred
Stock and the shares of the Common Stock issuable
upon conversion thereof have been sold pursuant to
such Shelf Registration Statement.
COMMON STOCK:
Securities Offered......... 16,798,606 shares of Common Stock. For a
description of the Common Stock, see "Description
of Capital Stock -- Common Stock."
Listing of Common Stock.... The Common Stock currently trades on the NYSE under
the symbol LOR. Loral has applied for listing of
the Conversion Shares, the Alcatel Shares, the
Aerospatiale Shares and the LBP Shares on the NYSE.
RISK FACTORS
An investment in the Securities involves certain risks that should be
carefully considered by prospective investors, including those discussed under
"Risk Factors" beginning on page 5.
3
<PAGE> 8
RECENT DEVELOPMENTS
SPACE/SYSTEMS LORAL
At March 31, 1997, Loral owned 75.5% of Space Systems/Loral, Inc. ("SS/L")
and expects shortly to acquire the remaining 24.5% pursuant to transactions with
Aerospatiale and Alcatel, who will each exchange their SS/L common stock for a
combination of Common Stock and Preferred Stock with a market value of $93.5
million.
GLOBALSTAR
On June 13, 1997, Globalstar and Globalstar Capital Corporation sold $325
million aggregate principal amount of their 11 1/4% Senior Notes due 2004 in a
transaction not registered under the Securities Act. The price to investors was
95.384% of the principal amount, which will yield 12 1/4% to maturity. Net
proceeds from the offering will be used for the continued construction and
deployment of the Globalstar System (as defined below).
Globalstar is building and preparing to launch and operate a low-earth
orbit satellite-based telecommunications system (the "Globalstar System").
Globalstar's current budget for the cost for the design, construction and
deployment of the Globalstar System, including working capital, cash interest on
anticipated borrowings and operating expenses is approximately $2.5 billion.
Globalstar has recently added enhanced capabilities and additional test
requirements and has experienced cost growth in the development of the ground
system, the final cost impact of which is under assessment. Globalstar, however,
does not expect such cost growth to increase the budget for the project by more
than five percent. Globalstar has raised or received commitments for
approximately $2.3 billion in equity, debt and vendor financing, which
represents approximately 91% of its current budget for completion of the
Globalstar System and commencement of worldwide operations.
In addition, Globalstar has agreed to purchase from SS/L eight additional
spare satellites at a cost of $175 million. Further, in order to accelerate the
deployment of gateways around the world, Globalstar has agreed to finance
approximately $80 million of the cost of up to 32 of the 35 gateways ordered by
Globalstar service providers. Globalstar expects to recover its investment in
this gateway financing program from resale of the gateways to service providers.
SKYNET
On March 14, 1997, Loral acquired Skynet Satellite Services ("Skynet"), the
third largest domestic satellite service provider, from AT&T for $478 million in
cash. Skynet is a leading U.S. satellite communications service provider that
owns and operates the Telstar satellite network. Skynet's customers lease
transponder capacity to distribute network television programming to local
affiliate stations, collect live video feeds for the reporting of news and
sporting events, and to offer direct-to-home subscription and pay-per-view
television programming, distance learning and educational television, as well as
business services such as VSAT networks, data distribution for information
services and other business television services. Loral intends to expand Skynet,
which has heretofore limited its operations to the U.S. market, to become a
worldwide satellite service provider.
On May 24, 1997, Skynet launched Telstar 5, a broadcast video and satellite
communications satellite. Skynet owns and operates Telstar 5, which orbits over
a fixed location at 97 degrees west longitude. Telstar 5 carries 52 transponders
and it is anticipated that it will serve television broadcasters and program
distributors across the United States, Puerto Rico, the Caribbean and into
Canada and Latin America.
4
<PAGE> 9
RISK FACTORS
Investors should consider the following risk factors and the risk factors
set forth in Loral's Form 10-K under "Certain Factors that May Affect Future
Results," which report is incorporated herein by reference, in addition to the
other information contained in this Prospectus, in evaluating whether to
purchase the Securities.
Ranking of Securities. The Securities are subordinated to all Debt
Obligations with respect to the payments of interest and amounts distributable
upon dissolution, liquidation or winding up of Loral. In addition, the Preferred
Stock will, with respect to dividend rights and rights on liquidation, winding
up and dissolution, rank pari passu with Loral's Series A Convertible Preferred
Stock and senior to or pari passu with all other existing and future series of
preferred stock of Loral and senior to the Common Stock. The terms of the
Preferred Stock do not limit the amount of indebtedness or other obligations
that Loral may incur. The terms of the Preferred Stock do not provide the
Holders with any rights to accelerate the payment of the Preferred Stock. There
can be no assurance that, in the event of a dissolution, liquidation,
reorganization or winding up of Loral, the purchasers of Securities will receive
any portion of their initial investment. See "Description of Preferred
Stock -- Ranking."
Absence of Existing Market for the Preferred Stock. The Preferred Stock
will constitute a new class of securities with no established trading market.
Loral currently does not intend to list the Preferred Stock on any national
securities exchange or to seek the admission thereof for trading on any
automated dealer quotation system. Loral has been advised by the Initial
Purchasers that following the completion of this offering, the Initial
Purchasers currently intend to make a market in the Preferred Stock. However,
they are not obligated to do so and any market-making activities with respect to
the Preferred Stock may be discontinued at any time without notice. Pursuant to
the Registration Rights Agreement, Loral has agreed to use its reasonable best
efforts to cause the Shelf Registration Statement to become effective with
respect to resales of the Preferred Stock and the Common Stock issuable upon
conversion of the Preferred Stock on or prior to 240 days from November 5, 1996.
No assurance can be given, however, as to the liquidity of the trading market
for the Preferred Stock.
The liquidity of, and trading market for, the Preferred Stock also may be
adversely affected by general declines in the market for similar securities.
Such a decline may adversely affect such liquidity and trading markets
independent of the financial performance of, and prospects for Loral.
Dividend Deferral on the Preferred Stock; Payments in Common
Stock. Dividend payments on the Preferred Stock are subject to deferral by
Loral without compound interest or penalty. The Holders do not have any rights
to accelerate payment following such deferral and are only entitled to certain
voting rights described herein. See "Description of Preferred Stock -- Voting
Rights." Loral will be dependent on its cash reserves to make quarterly payments
on the Preferred Stock. Dividend and optional redemption payments on the
Preferred Stock will be paid in cash. Payments of the aggregate liquidation
preference of the Preferred Stock on the Mandatory Redemption Date may be made
in cash, by delivery of Common Stock or both. There is no assurance that the
liquidity of, or trading market for, the Common Stock will be sufficient to
allow a Holder of Preferred Stock to fully realize the value of Common Stock
received in payment therefor. See "Description of Preferred Stock -- Mandatory
Redemption."
USE OF PROCEEDS
There will be no proceeds to Loral from the sale of the Securities by the
Selling Holders (as defined herein).
5
<PAGE> 10
DESCRIPTION OF CAPITAL STOCK
The authorized capital of Loral consists of (i) 750 million shares of
Common Stock, par value $.01 per share, (ii) 150 million shares of Series A
Convertible Preferred Stock, par value $.01 per share (the "Series A Preferred
Stock"), (iii) 750,000 shares of Series B Preferred Stock, par value $.01 per
share (the "Series B Preferred Stock"), to be issued upon exercise, if any, of
the rights (the "Rights") issued pursuant to the Company's Rights Plan and
attached to each certificate representing outstanding shares of Common Stock,
and (iv) 20,000,000 shares of 6% Series C Convertible Redeemable Preferred
Stock.
COMMON STOCK
The holders of Common Stock are entitled to voting rights. Under Bermuda
law, questions brought before a general meeting of shareholders are decided by a
majority vote of shareholders present at the meeting (or by such majority as The
Companies Act 1981 of Bermuda or the bye-laws of the company prescribe). Loral's
Bye-Laws provide that, with certain exceptions, any questions proposed for the
consideration of the shareholders will be decided by a simple majority of votes
cast by shareholders entitled to vote at the meeting, with each shareholder
present, or person holding proxies for any shareholder, entitled to one vote for
each share held.
The holders of Common Stock are entitled to receive ratably the dividends,
if any, that may be declared from time to time by the Board of Directors out of
funds legally available for such dividends. The holders of Common Stock are
entitled, under certain circumstances, to share ratably with holders of the
Series A Preferred Stock in all assets remaining after payment of liabilities
and after provision has been made for the payment of the $.01 liquidation
preference on the Series A Preferred Stock and the liquidation preference on any
other series of preferred stock of Loral. Holders of Common Stock have no
preemptive rights and no right to convert their Common Stock into any other
securities. There are no redemption or sinking fund provisions applicable to the
Common Stock. All the outstanding shares of Common Stock are validly issued,
fully paid and nonassessable.
PREFERRED STOCK
Series A Preferred Stock. The Series A Preferred Stock votes together with
the Common Stock as a single class on all matters submitted to shareholders,
except that it may not vote with respect to the election of directors of Loral.
The Series A Preferred Stock is entitled to a liquidation preference of $.01 per
share and otherwise participates pro rata with the Common Stock in dividends and
distributions, subject under certain circumstances to priority rights over the
Common Stock and pro rata distribution rights with the most senior preferred
stock of Loral then outstanding in a liquidating distribution. The Series A
Preferred Stock is subject to certain antidilution adjustments, including
adjustments for stock splits and reclassifications. The Series A Preferred Stock
will be convertible into Common Stock at the option of the holder upon receipt
of certain antitrust clearance or upon a sale to a third party unaffiliated with
Lockheed Martin.
Series B Preferred Stock. The Series B Preferred Stock will, if issued, be
junior to any other series of Preferred Stock which may be authorized by Loral's
shareholders. Holders of the Rights will be entitled, subject to the occurrence
of certain events, to purchase from Loral, one one-thousandth of a share of
Series B Preferred Stock at a purchase price of $75, but before such purchase
will have no voting, conversion, redemption or preemptive rights, nor will they
have any right to receive dividends.
6% Series C Convertible Redeemable Preferred Stock. The Preferred Stock,
with respect to dividend rights and rights upon liquidation, winding up and
dissolution, ranks pari passu with Loral's Series A Preferred Stock and senior
to or pari passu with all other existing and future series of preferred stock of
Loral and senior to the Common Stock. For a complete description of the terms of
the Preferred Stock, see "Description of the Preferred Stock."
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for Loral's Common Stock is The Bank of
New York.
6
<PAGE> 11
SELLING HOLDERS
In November 1996, Loral sold 12,000,000 6% Convertible Preferred Equivalent
Obligations (the "CPEOs") to Lehman Brothers Inc., Bear, Stearns & Co. Inc.,
Donaldson, Lufkin & Jenrette Securities Corporation, Oppenheimer & Co., Inc. and
Unterberg Harris (the "Initial Purchasers") in a private placement, which were
subsequently resold by the Initial Purchasers in transactions exempt from the
registration requirements of the Securities Act in the United States to
qualified institutional buyers (as defined in Rule 144A under the Securities
Act), to certain accredited investors (as defined in Rule 501(a) under the
Securities Act) and outside the United States to non-U.S. persons in offshore
transactions in reliance on Regulation S under the Securities Act. On June 5,
1997, the CPEOs were exchanged for 12,000,000 shares of the Preferred Stock. In
March 1997, Loral issued 1,845,774 CPEOs to Finmeccanica S.p.A ("Finmeccanica")
in connection with the purchase of Finmeccanica's ownership interest in SS/L,
which CPEOs were exchanged for 1,845,774 shares of Preferred Stock on June 5,
1997. Loral expects shortly to issue shares of Preferred Stock and Common Stock
to Aerospatiale and Alcatel in exchange for (i) Aerospatiale's ownership
interest in SS/L and (ii) Alcatel's ownership interests in SS/L and
Loral/Qualcomm Satellite Services, L.P. In August 1996, Lehman Brothers Merchant
Banking Portfolio Partnership L.P. (the "Merchant Banking Partnership"), Lehman
Brothers Capital Partners II, L.P. ("Capital Partners"), Lehman Brothers
Offshore Investment Partnership L.P. (the "Offshore Partnership") and Lehman
Brothers Offshore Investment Partnership-Japan L.P. (the "Japan Partnership,"
and together with the Merchant Banking Partnership, Capital Partners and the
Offshore Partnership, the "LB Partnerships") entered into a transaction with
Loral and Loral SpaceCom Corporation whereby the LB Partnerships exchanged
shares of preferred stock of SS/L (Bermuda) Ltd., an affiliate of Loral, held by
them for the 7,500,000 LBP Shares and certain other consideration in a
transaction exempt from the registration requirements of the Securities Act.
Lehman Brothers Holdings Inc. or certain of its wholly owned subsidiaries
constitute the general partners of each of the LB Partnerships. The Securities
may be offered and sold from time to time by the holder named herein or by their
transferees, donees or their successors (collectively, the "Selling Holders")
pursuant to this Prospectus.
The following table sets forth as of June 13, 1997, the respective number
of Securities beneficially owned by each Selling Holder (other than the LB
Partnerships and except as described below in footnote 1) and the number of
Conversion Shares issuable upon the conversion of such Selling Holder's
Preferred Stock. The term Selling Holders includes the holders listed below and
the beneficial owners of the Preferred Stock and their transferees, pledgees,
donees or other successors. Except as set forth below, other than as a result of
the ownership of the Securities, none of the Selling Holders has, or within the
past three years has had, any position, office or material relationship with
Loral or any of its predecessors or affiliates. The table has been prepared
based upon information furnished to Loral by or on behalf of the Selling
Holders.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SHARES OF SHARES OF
SELLING HOLDERS PREFERRED STOCK COMMON STOCK
- -------------------------------------------------------------- --------------- -----------------
<S> <C> <C>
Finmeccanica.................................................. 1,845,774 4,614,435
Lipper Convertibles, L.P...................................... 858,400 2,146,000
Fidelity Securities Fund: Fidelity Growth & Income
Portfolio................................................... 727,000 1,817,500
Alcatel(1).................................................... 549,463 6,834,963(2)
Aerospatiale(1)............................................... 514,200 5,122,800(3)
Oak Tree Partners, L.P........................................ 486,500 1,216,250
Alpine Associates............................................. 475,000 1,187,500(4)
MainStay Convertible Fund..................................... 415,000 1,037,500
Goldman, Sachs & Co........................................... 402,600 1,006,500
Fidelity Devonshire Trust: Fidelity Equity-Income Fund........ 388,600 971,500
Fidelity Puritan Trust: Fidelity Puritan Fund................. 300,000 750,000
Galaxy Equity Growth Fund..................................... 275,000 687,500
Fleet Trust Co................................................ 261,700 654,250
New York Life Insurance Company............................... 225,000 562,500
Fidelity Financial Trust: Fidelity Convertible Securities
Fund........................................................ 220,000 550,000
</TABLE>
7
<PAGE> 12
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SHARES OF SHARES OF
SELLING HOLDERS PREFERRED STOCK COMMON STOCK
- -------------------------------------------------------------- --------------- -----------------
<S> <C> <C>
Toronto Dominion (NY), Inc.................................... 220,000 550,000
Variable Insurance Products Fund: Equity-Income Portfolio..... 183,200 458,000
Allstate Insurance Company.................................... 145,000 362,500
Strategic Money Management Company BV......................... 129,000 322,500
Vista Select Equity Income Fund............................... 125,000 312,500
Vista Growth & Income Fund.................................... 120,000 300,000
Paloma Securities L.L.C....................................... 118,900 297,250(5)
OCM Convertible Trust......................................... 106,600 266,500
Lincoln National Life Insurance............................... 94,200 235,500
Merrill Lynch Capital Markets PLC............................. 90,000 225,000
Pitney Bowes Retirement Fund.................................. 86,100 215,250
Fidelity Advisor Series II: Fidelity Advisor Balanced Fund.... 85,000 212,500
Kellner, DiLeo & Co........................................... 81,000 202,500
State of Connecticut Combined Investment Funds................ 80,900 202,250
Galaxy Growth & Income Fund................................... 80,000 200,000
NY Life Separate AC#7......................................... 68,300 170,750
Fidelity Management Trust Company,
on behalf of accounts managed by it......................... 67,200 168,000
AIM High Yield Fund........................................... 64,650 161,625
Delta Air Lines Master Trust.................................. 64,600 161,500
Fidelity Puritan Trust: Fidelity Balanced Fund................ 61,000 152,500
Bank of Oklahoma, N.A., Trustee............................... 60,400 151,000
Vanguard Convertible Securities Fund, Inc..................... 56,500 141,250
Golden Rule Insurance Company................................. 56,000 140,000
Froley, Revy Investment Co., Inc. Account -- SAIF
Corporation................................................. 55,000 137,500
Citibank FAO: Delta Air Lines Master Trust, AC # 308323....... 50,000 125,000
Keystone Growth & Income (SI)................................. 50,000 125,000
Oppenheimer Bond Fund for Growth.............................. 50,000 125,000
Dean Witter Income Builder Fund............................... 49,000 122,500
Donaldson, Lufkin & Jenrette Securities Corporation........... 49,000 122,500
Pacific Horizon Capital Income Fund........................... 46,000 115,000
Alscott Investments LLC....................................... 41,800 104,500
Dean Witter Convertible Securities Trust...................... 40,000 100,000
Husic Capital Management as a Discretionary Asset Manager
for the Ameritech Pension Plan.............................. 40,000 100,000
Vanguard Equity Income Fund................................... 40,000 100,000
Hughes Aircraft Company Master Retirement Trust............... 32,700 81,750
The Common Fund............................................... 32,400 81,000
BT Securities Corp............................................ 32,000 80,000
Grace Brothers, Ltd........................................... 30,000 75,000
Societe Generale Securities Corp.............................. 30,000 75,000
Chase Manhattan FAO: Dow Chemical Company: Employees
Retirement Plan............................................. 28,500 71,250
Lincoln National Convertible Securities Fund.................. 28,500 71,250
Argent Classic Convertible Arbitrage Fund (Bermuda) Ltd....... 25,000 62,500
GEM Convertible Securities Partners, L.P...................... 25,000 62,500
Lehman Brothers International Europe.......................... 25,000 62,500
Mariner Partners, L.P......................................... 25,000 62,500
</TABLE>
8
<PAGE> 13
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SHARES OF SHARES OF
SELLING HOLDERS PREFERRED STOCK COMMON STOCK
- -------------------------------------------------------------- --------------- -----------------
<S> <C> <C>
Froley, Revy Investment Co., Inc.
Account-PRIM BOARD............................................ 24,700 61,750
Colonial Penn Insurance Co.................................... 24,500 61,250
Colonial Penn Life Insurance Co............................... 24,500 61,250
KD Offshore Fund, CV.......................................... 24,000 60,000
Ronnies Fund, L.P............................................. 23,125 57,812
Glenn Eaples Fund, L.P........................................ 22,875 57,187
AIM Balanced Fund............................................. 22,350 55,875
State Employees' Retirement Fund of the State of Delaware..... 22,000 55,000
The Northern Trust Co., Champion International Corp. Master
Retirement Trust, AC # 22-00788............................. 20,500 51,250
AIM Income Fund............................................... 20,000 50,000
McMahan Securities Co. L.P.................................... 20,000 50,000
The Northwestern Mutual Life Insurance Company................ 20,000 50,000
Pacific Mutual Life Insurance Co.............................. 20,000 50,000
Chilian Partners, L.P......................................... 19,250 48,125
MainStay VP Convertible Portfolio............................. 19,000 47,500
State of Connecticut Combined Investment Funds................ 17,400 43,500
United States Olympic Foundation.............................. 17,300 43,250
Frederic C. Hamilton.......................................... 16,300 40,750
Froley, Revy Investment Co., Inc. Account -- Delaware State
Retirement Fund -- Froley, Revy............................. 15,900 39,750
Weirton Trust................................................. 15,500 38,750
Fiduciary Trust Co., International............................ 15,000 37,500
Franklin Investor Securities Trust -- Convertible Securities
Fund........................................................ 15,000 37,500
Keystone Fund for Total Return................................ 15,000 37,500
TQA Vantage Fund.............................................. 15,000 37,500
LDG Limited Fund.............................................. 12,000 30,000
Collins Extended Fixed Income Account......................... 10,300 27,750
MassMutual High Yield Partners LLC............................ 10,200 25,500
Donaldson, Lufkin & Jenrette Securities Corporation........... 10,000 25,000
Mark IV Industries, Inc. and Subsidiaries Master Trust........ 10,000 25,000
Smith Barney Convertible Securities Portfolio................. 10,000 25,000
Union Bank of California...................................... 9,700 24,250
Massachusetts Mutual Life Insurance Company................... 9,000 22,500
MassMutual Corporate Value Partners Limited................... 9,000 22,500
William E. Simon.............................................. 9,000 22,500
Mary Ann S. Hamilton Trust.................................... 8,400 21,000
Estate of Carol G. Simon...................................... 8,000 20,000
Mount Sinai School of Medicine................................ 7,900 19,750
Northern Trust Co. FAO:
Associated Electric Gas & Ins. Services Ltd................... 7,000 17,500
Froley, Revy Investment Co., Inc. Account -- ICI American
Holdings Pension............................................ 6,300 15,750
Froley, Revy Investment Co., Inc. Account -- Zeneca Holdings
Pension..................................................... 6,300 15,750
Forest Fulcrum Fund L.P....................................... 5,500 13,750
Forest Fulcrum Fund Ltd....................................... 5,500 13,750
Argent Classic Convertible Arbitrage Fund L.P................. 5,000 12,500
Palladin Partners, L.P........................................ 5,000 12,500
</TABLE>
9
<PAGE> 14
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SHARES OF SHARES OF
SELLING HOLDERS PREFERRED STOCK COMMON STOCK
- -------------------------------------------------------------- --------------- -----------------
<S> <C> <C>
Salomon Bros. International Ltd............................... 4,500 11,250
Variable Insurance Products Fund III: Balance Portfolio....... 4,000 10,000
Vista Balanced Fund........................................... 3,500 8,750
Vista Equity Income Fund...................................... 3,500 8,750
Bank of America Convertible Securities Fund................... 3,500 8,750
Nations Bank, FAO: UNIF Inc. Profit Sharing Plan and Trust.... 3,400 8,500
Hamilton Family Trust......................................... 3,200 8,000
Greyhound Lines Fund.......................................... 3,000 7,500
Kayne, Anderson Offshore Limited.............................. 3,000 7,500
Rabbi Isaac Elchanan Theological Seminary
c/o The Laterman Companies.................................. 3,000 7,500
Ramer 1990 Living Trust....................................... 3,000 7,500
Froley, Revy Investment Co., Inc. Account -- Nalco Chemical
Retirement.................................................. 2,800 7,000
Brown & Williamson Convertible................................ 2,700 6,750
OCM Convertible Partnership................................... 2,700 6,750
Catholic Mutual Relief Society of America..................... 2,000 5,000
Direct for Catholic Mutual Relief Society of America.......... 2,000 5,000
Claman, Stephen and Renee..................................... 2,000 5,000
Dorsey, George IRA............................................ 2,000 5,000
Employee Benefit Convertible Fund............................. 2,000 5,000
Forevergreen Partners c/o The Laterman Companies.............. 2,000 5,000
Carolyn J. Friedman........................................... 2,000 5,000
Variflex, Inc. DBPP........................................... 2,000 5,000
Dean Witter Variable Income Builder Fund...................... 1,830 4,575
MassMutual Corporate Investors................................ 1,800 4,500
United National Life Insurance................................ 1,800 4,500
Merrill Lynch: FAO Kettering Medical Center
Funded Depreciation Acct.................................... 1,700 4,250
Texas Commerce FAO: The Fondren Foundation, AC # 1041208...... 1,600 4,000
Catholic Mutual Relief Society of America..................... 1,500 3,750
Corporate Mgt. Group RP....................................... 1,500 3,750
First National Bank of Omaha.................................. 1,500 3,750
The Laterman Companies........................................ 1,500 3,750
Beeman 1992 Living Trust...................................... 1,200 3,000
Norwich University............................................ 1,200 3,000
Bear Stearns Securities Corp.................................. 1,100 2,750
Pacific Innovation Trust Capital Income Fund.................. 860 2,150
Robert H. Abrams c/o The Laterman Companies................... 500 1,250
</TABLE>
- ---------------
(1) As of the date of this Prospectus, Alcatel and Aerospatiale do not
beneficially own the Securities listed next to their respective names in
this table; however, as described above, Loral expects shortly to issue such
Securities to Alcatel and Aerospatiale.
(2) Includes the 5,461,306 Alcatel Shares being offered pursuant to this
Prospectus.
(3) Includes the 3,837,300 Aerospatiale Shares being offered pursuant to this
Prospectus.
(4) Does not include 227,100 shares of Common Stock which are beneficially
owned, but which are not being offered hereby.
(5) Does not include 89,200 shares of Common Stock which are beneficially owned,
but which are not being offered hereby.
10
<PAGE> 15
The following table sets forth, as of June 1, 1997, information with
respect to the shares of Common Stock beneficially owned by the LB Partnerships.
See "Plan of Distribution."
<TABLE>
<CAPTION>
SHARES OWNED BEFORE
THE OFFERING
---------------------
NAME NUMBER PERCENT
- ------------------------------------------------------------------------- --------- -------
<S> <C> <C>
Merchant Banking Partnership............................................. 3,642,550 1.91%
Capital Partners......................................................... 2,475,815 1.30
Offshore Partnership..................................................... 1,000,922 *
Japan Partnership........................................................ 380,713 *
------- -----
Total............................................................... 7,500,000 3.92%
======= =====
</TABLE>
- ---------------
* Less than 1%
The information concerning the Selling Holders may change from time to
time. If required, such changes will be set forth in Prospectus Supplements. The
per share conversion price and, therefore, the number of shares of Common Stock
issuable upon conversion of the Preferred Stock, are subject to adjustment under
certain circumstances. Accordingly, the number of shares of Common Stock
issuable upon conversion of Preferred Stock may increase or decrease. Because
the Selling Holders may offer all or some portion of the Securities pursuant to
this Prospectus, and because there are currently no agreements, arrangements or
understandings with respect to the sale of Securities, no estimate can be given
as to the amount of Securities that will be held by the Selling Holders upon
termination of this offering.
The following summarizes the material relationships between the Selling
Holders and Loral and its affiliates:
SS/L Ownership. In March 1997, Loral acquired the 12.25% interest in SS/L
held by Finmeccanica in exchange for 1,845,774 CPEOs. Loral expects shortly to
acquire the remaining 24.5% of SS/L pursuant to transactions with Aerospatiale
and Alcatel who will each exchange their SS/L common stock for a combination of
Common Stock and Preferred Stock with a market value of $93.5 million. As
shareholders of SS/L, Aerospatiale, Alcatel and Finmeccanica (collectively, the
"Alliance Partners") were, and, after the exchange transactions described above,
the Alliance Partners will continue to be, entitled to representation on the
Board of Directors of SS/L and to certain limited veto rights regarding SS/L
corporate decisions.
SS/L Contracts. In the ordinary course of business, SS/L has entered into
and expects to continue to enter into subcontracts with affiliates of
Aerospatiale, Alcatel and Finmeccanica for the design, integration, testing,
manufacture and assembly of satellites and satellite components. SS/L and the
Alliance Partners have agreed to enter into teaming arrangements with respect to
proposals or bids submitted either by SS/L or the Alliance Partners to certain
customers. Subject to commercial practicability, such arrangements are intended
to provide for a certain level of subcontractor participation by the Alliance
Partners in programs for which SS/L serves as prime contractor and a certain
level of subcontractor participation by SS/L in programs for which one of the
Alliance Partners serves as prime contractor.
Globalstar. As of June 1, 1997, Alcatel and Finmeccanica beneficially
owned 2,190,000 and 1,311,168 ordinary partnership interests in Globalstar,
respectively. Affiliates of Alcatel and Alenia have entered into service
provider agreements with Globalstar. Under a consulting contract estimated at
$980,000, a joint venture formed by France Telecom and Alcatel is providing
Globalstar with various services, including engineering support, quality of
services studies and European regulatory support services.
LB Partnerships. The LB Partnerships are affiliates of Lehman Brothers
Inc. ("Lehman Brothers"). From time to time, Lehman Brothers has provided
investment banking, underwriting, financial advisory and other services to Loral
and its affiliates, for which services Lehman Brothers has received customary
indemnification, underwriting discounts and fees. In addition, Lehman Brothers
acts as a market maker for securities of Loral and its affiliates. The LB
Partnerships, Loral and Bernard L. Schwartz, Chairman and Chief Executive
Officer of Loral, own 48.2%, 22.5% and 27.1% of the capital stock of K&F,
respectively.
11
<PAGE> 16
PLAN OF DISTRIBUTION
The Securities offered hereby may be sold from time to time to purchasers
directly by the Selling Holders. Alternatively, the Selling Holders may from
time to time offer the Securities to or through underwriters, broker-dealers or
agents, who may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Holders or the purchasers of
Securities, for whom they may act as agent. The Selling Holders and any
underwriters, broker-dealers or agents that participate in the distribution of
the Securities may be deemed to be "underwriters" within the meaning of the
Securities Act and any profit on the sale of Securities by them and any
discounts, commissions, concessions or other compensation received by any such
underwriter, broker-dealer or agent may be deemed to be underwriting discounts
and commissions under the Securities Act.
The Securities offered hereby may be sold from time to time in one or more
transactions at fixed prices, at prevailing market prices at the time of sale,
at varying prices determined at the time of sale or at negotiated prices. Such
prices will be determined by the Selling Holders or by agreement between the
Selling Holders and underwriters and dealers who may receive fees or commissions
in connection therewith. The sale of the Securities may be effected in
transactions (which may involve crosses or block transactions) (i) on any
national securities exchange or quotation service on which the Securities may be
listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii)
in transactions otherwise than on such exchanges or in the over-the-counter
market or (iv) through the writing of options. At the time a particular offering
of Securities is made, a Prospectus Supplement, if required, will be distributed
which will set forth the aggregate amount and type of Securities being offered
and the terms of the offering, including the name or names of any underwriters,
broker-dealers or agents, any discounts, commissions and other terms
constituting compensation from the Selling Holders and any discounts,
commissions or concessions allowed or reallowed or paid to broker-dealers.
The outstanding Common Stock is listed on the NYSE, and Loral has applied
for listing of the Conversion Shares, the Alcatel Shares and the LBP Shares on
the NYSE. Loral currently does not intend to list the Preferred Stock on any
national securities exchange or to seek the admission thereof for trading on any
automated dealer quotation system. There is no assurance as to the development
or liquidity of any trading market that may develop for the Preferred Stock.
To comply with the securities laws of certain jurisdictions, if applicable,
the Securities will be offered or sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain jurisdictions
the Securities may not be offered or sold (unless they have been registered or
qualified for sale) in such jurisdictions or an exemption from registration or
qualification is available and is complied with.
Pursuant to the Registration Rights Agreement, all expenses of the
registration of the Preferred Stock and the Conversion Shares will be paid by
Loral, including, without limitation, Commission filing fees and expenses of
compliance with state securities or "blue sky" laws; provided, however, that the
Selling Holders will pay all underwriting discounts, selling commissions and
related fees, if any. Holders of Preferred Stock and Conversion Shares and Loral
have agreed to indemnify each other against certain liabilities, including
certain liabilities arising under the Securities Act.
This offering will terminate upon the earlier of (i) the date that the
Securities no longer constitute restricted securities under Rule 144(k) of the
Securities Act, or (ii) the date that all of the Securities covered by the Shelf
Registration Statement have been sold pursuant to the Shelf Registration
Statement.
12
<PAGE> 17
DESCRIPTION OF PREFERRED STOCK
GENERAL
The Preferred Stock was created and issued pursuant to the terms of a
Schedule that was attached to Loral's Bye-Laws (the "Series C Schedule") upon
approval of the creation and issuance of the Preferred Stock by Loral's
shareholders, which approval was granted by Loral's shareholders at the April
30, 1997 annual general meeting of shareholders. In addition, Loral has amended
its Memorandum of Association and filed a certificate of increase of share
capital to reflect the authorization of the Preferred Stock. The following
summarizes the material provisions the Series C Schedule and is subject to, and
qualified in its entirety by reference to, all the provisions of the Series C
Schedule, including the definition therein of certain terms. Capitalized terms
that are used but not otherwise defined herein have the meanings assigned to
them in the Series C Schedule.
The Preferred Stock is subordinated to all Debt Obligations of Loral and,
with respect to dividend rights and rights upon liquidation, winding up and
dissolution, ranks pari passu with Loral's Series A Preferred Stock held by
Lockheed Martin and ranks senior to or pari passu with all other existing and
future series of preferred stock of Loral.
DIVIDEND PAYMENTS
Each share of the Preferred Stock will accrue dividends from June 5, 1997,
at 6% per annum and is subject to mandatory redemption on the Mandatory
Redemption Date. Dividends will be computed on the basis of a 360-day year of
twelve 30-day months and will be payable quarterly in cash in arrears on
February 1, May 1, August 1 and November 1 of each year (each a "Payment Date"),
commencing on August 1, 1997 to the person in whose name the shares of Preferred
Stock are registered at the close of business on the Regular Record Date next
preceding such quarterly Payment Date.
Loral may elect to defer dividend payments on any Payment Date. Arrearages
of deferred but unpaid dividend accruals ("Dividend Arrearages") will not bear
interest, but so long as any Dividend Arrearage remains outstanding, Loral will
be prohibited from paying (i) dividends on its Common Stock and (ii) dividends
on any other series of Preferred Stock (other than pro rata dividends on the
Series A Preferred Stock and any other series of preferred stock ranking pari
passu with the Preferred Stock). In the event that Loral fails to pay the
dividends due for an aggregate of six quarterly payments, the Holders will have
the rights and remedies described herein under "-- Voting Rights."
OPTIONAL REDEMPTION
Commencing November 5, 1999, the Preferred Stock will be redeemable in cash
at any time, in whole or in part, at the election of Loral (the "Optional
Redemption"), at a redemption price equal to the percentage set forth below of
the liquidation preference to be redeemed plus accrued and unpaid dividends, if
any, to the date of redemption (the "Optional Redemption Date") if redeemed in
the 12-month period ending on November 1 of the following years:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2000 102%
2001 101%
</TABLE>
and thereafter at a redemption price equal to 100% of the liquidation preference
to be redeemed plus accrued and unpaid dividends, if any, to the Optional
Redemption Date.
MANDATORY REDEMPTION
Each share of Preferred Stock (if not earlier redeemed or converted) will
be mandatorily redeemed by Loral on the Mandatory Redemption Date at a
redemption price of 100% of the liquidation preference per
13
<PAGE> 18
share of Preferred Stock plus accrued and unpaid dividends, if any (including
all Dividend Arrearages), to the Mandatory Redemption Date.
Loral may make payments of the aggregate liquidation preference of the
Preferred Stock on the Mandatory Redemption Date, (i) in cash; (ii) by delivery
of Common Stock (based upon 100% of the Average Market Value); or (iii) through
any combination of the foregoing.
"Average Market Value" of the Common Stock will mean the arithmetic average
of the Current Market Value of the Common Stock for the ten trading days ending
on the second business day prior to the applicable date of payment.
"Current Market Value" of the Common Stock will mean the volume weighted
average sale price of the Common Stock as reported on the NYSE or any national
securities exchange upon which the Common Stock is then listed, for the trading
day in question.
CONVERSION RIGHTS
The Preferred Stock is convertible into Common Stock at any time at the
option of the Holder prior to the Mandatory Redemption Date (unless earlier
redeemed by Loral), initially at the conversion price (the "Conversion Price")
of $20.00 per share (equivalent to 2.5 shares of Common Stock for each $50.00
principal amount of Securities or for each share ($50.00 liquidation preference)
of Preferred Stock). The Preferred Stock is initially convertible into an
aggregate of 37,273,593 shares of Common Stock.
Preferred Stock surrendered for conversion during the period from the close
of business on any Regular Record Date next preceding any Payment Date to the
opening of business on such Payment Date (except Preferred Stock called for
redemption on a Redemption Date within such period) must be accompanied by
payment in cash of an amount equal to the dividends thereon which the registered
Holder is to receive; provided, that no payment shall be owed or payable to any
converting Holder if the Board of Directors of Loral shall have elected to defer
the dividends payment to be made on such Payment Date. No other adjustment for
dividends, including for any Dividends Arrearages, is to be made upon
conversion. Fractional shares of Common Stock will not be issued upon
conversion, but in lieu thereof Loral will pay a cash adjustment in the manner
described under "-- Adjustment for Fractional Shares."
The right of conversion attaching to any share of Preferred Stock may be
exercised by a Holder by delivering the Preferred Stock at the specified office
of a conversion agent (as described under "-- Payments, Paying Agents and
Conversion Agents" below) accompanied by a duly signed and completed notice of
conversion. The conversion date shall be the date on which the Preferred Stock
and the duly signed and completed notice of conversion shall have been so
delivered. A Holder delivering Preferred Stock for conversion will not be
required to pay any taxes or duties payable in respect of the issue or delivery
of Common Stock on conversion, but will be required to pay any tax or duty which
may be payable in respect of any transfer involved in the issue or delivery of
the Common Stock in a name other than that of the Holder. Certificates
representing shares of Common Stock will not be issued or delivered unless all
taxes and duties, if any, payable by the Holder have been paid.
The Conversion Price is subject to adjustment (under formulae set forth in
the Series C Schedule) under certain circumstances, including: (i) the issuance
of Common Stock as a dividend or distribution on Common Stock (other than the
issuance of Common Stock in connection with the conversion of Preferred Stock);
(ii) the issuance to all holders of Common Stock of rights or warrants entitling
them to subscribe for or purchase Common Stock at a price per share less than
the Current Market Price; (iii) certain subdivisions and combinations of Common
Stock; (iv) the issuance as a dividend or distribution to all holders of Common
Stock of shares of capital stock of Loral (other than Common Stock) or evidences
of indebtedness, cash or other assets of Loral (including securities, but
excluding those rights, warrants, dividends and distributions referred to above
and dividends and distributions in connection with the liquidation, dissolution
or winding up of Loral or paid exclusively in cash); (v) dividends or other
distributions consisting exclusively of cash (excluding any cash portion of
distributions referred to in clause (iv)) to all holders of Common Stock to the
extent such distributions, combined with (A) all such all-cash distributions
made within the preceding 12
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months in respect of which no adjustment has been made plus (B) any cash and the
fair market value of other consideration payable in respect of any tender offers
by Loral for Common Stock concluded within the preceding 12 months in respect of
which no adjustment has been made, exceeds 10% of Loral's market capitalization
(being the product of the then current market price of the Common Stock times
the number of shares of Common Stock then outstanding) on the record date for
such distribution; and (vi) the purchase of Common Stock pursuant to a tender
offer made by Loral to the extent that the aggregate consideration, together
with (X) any cash and the fair market value of any other consideration payable
in any other tender offer expiring within the 12 months preceding such tender
offer in respect of which no adjustment has been made plus (Y) the aggregate
amount of any such all-cash distributions referred to in clause (v) above to all
holders of Common Stock within the 12 months preceding the expiration of such
tender offer in respect of which no adjustments have been made, exceeds 10% of
Loral's market capitalization on the expiration of such tender offer.
In the case of certain consolidations or mergers to which Loral is a party
or the conveyance or transfer of the properties and assets of Loral
substantially as an entirety, each share of Preferred Stock then outstanding
would, without the consent of any Holders of Preferred Stock, become convertible
only into the kind and amount of securities, cash and other property receivable
upon such consolidation, merger, conveyance or transfer by a holder of the
number of shares of Common Stock into which the share of Preferred Stock might
have been converted immediately prior to such consolidation, merger, conveyance
or transfer, assuming such holder of Common Stock failed to exercise his rights
of election, if any, as to the kind or amount of securities, cash and other
property receivable upon the consolidation, merger, conveyance or transfer
(provided that if the kind of amount of securities, cash or other property so
receivable is not the same for each non-electing share, the kind and amount so
receivable by each non-electing share shall be deemed to be the kind and amount
so receivable per share by a plurality of the non-electing shares).
RANKING
The Preferred Stock is subordinated and subject, to the extent and in the
manner set forth in the Series C Schedule, to the prior payment in full of all
Debt Obligations of Loral (Section 13.01). "Debt Obligations" means the
principal of, premium, if any, interest and other amounts due on any
indebtedness, whether now outstanding or hereafter created, incurred, assumed or
guaranteed by Loral, for money borrowed from others (including obligations under
capitalized leases, purchase money indebtedness or any trade credit),
liabilities incurred in the ordinary course of business, commitment, standby and
other fees due and payable to financial institutions with respect to credit
facilities that may be maintained by Loral or in connection with the acquisition
by Loral of any other business or entity, or in respect of letters of credit or
bid, performance or surety bonds issued for the account or on the credit of
Loral, and, in each case, all renewals, extensions and refundings thereof. The
Preferred Stock, with respect to dividend rights and rights on liquidation,
winding up and dissolution, ranks pari passu with Loral's Series A Preferred
Stock and senior to or pari passu with all other series of preferred stock and
senior to all Common Stock of Loral. The Series C Schedule for the Preferred
Stock does not limit the amount of indebtedness or other obligations that Loral
may incur. See "Risk Factors -- Ranking of Securities."
No cash payments of liquidation preference of or dividends on the Preferred
Stock may be made and no Preferred Stock may be redeemed, retired or purchased
for cash (excepting payment for fractional shares) if Loral is then in default
in the payment of any Debt Obligations or if at the time any other Event of
Default under the terms of any Debt Obligations exists permitting acceleration
thereof. Upon any payment or distribution of assets of Loral in the event of any
insolvency, reorganization, liquidation or similar proceeding, all Debt
Obligations must be repaid in full (including any interest thereon accruing
after the commencement of any proceeding) before the Holders will be entitled to
receive or retain any payment. The Preferred Stock may not be declared due and
payable prior to the Mandatory Redemption Date because of the failure to make
dividend payments when due or to make payments with respect to any applicable
redemption or under the terms of any Debt Obligations. By reason of such
subordination, in the event of insolvency, creditors of Loral who are holders of
Debt Obligations may recover more, ratably, than Holders.
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No full dividends may be declared or paid or funds set apart for the
payment of dividends on any Parity Stock for any period unless full cumulative
dividends shall have been or contemporaneously are declared and paid (or are
deemed declared and paid) in full or declared and a sum in cash sufficient for
such payment set apart for such payment of the Preferred Stock. If full
dividends are not so paid, the Preferred Stock will share dividends pro rata
with any Parity Stock. No dividends may be paid or set apart for such payment on
other series of preferred stock of Loral or the Common Stock (collectively,
"Junior Stock") (except dividends on Junior Stock payable in additional shares
of Junior Stock) and no Junior Stock or any Parity Stock may be repurchased,
redeemed or otherwise retired nor may funds be set apart for payment with
respect thereto, if full cumulative dividends have not been paid in full (or
deemed paid) on the Preferred Stock. Payments of Dividend Arrearages and
dividends in connection with any optional redemption may be declared and paid at
any time, without reference to any regular Payment Date, to holders of record on
such date, not more than 45 days prior to the payment thereof, as may be fixed
by the Board of Directors of Loral. So long as any shares of Preferred Stock are
outstanding, Loral shall not make any payment on account of, or set apart for
payment money for a sinking or other similar fund for, the purchase, redemption
or other retirement of, any Parity Stock or Junior Stock or any warrants,
rights, calls or options exercisable for or convertible into any Parity Stock or
Junior Stock, and shall not permit any corporation or other entity directly or
indirectly controlled by Loral to purchase or redeem any Parity Stock or Junior
Stock or any such warrants, rights, calls or options unless full cumulative
dividends determined in accordance herewith on the Preferred Stock have been
paid (or are deemed paid) in full.
See "Risk Factors -- Ranking of Securities."
DENOMINATION, REGISTRATION AND TRANSFER
The certificates representing the Preferred Stock were issued in fully
registered form. The Preferred Stock was deposited with, or on behalf of, The
Depository Trust Company, New York, New York ("DTC"), and registered in the name
of Cede & Co., as DTC's nominee in the form of a global Preferred Stock
certificate (the "Global Certificate") or remain in the custody of the Transfer
Agent pursuant to a FAST Balance Certificate Agreement between DTC and the
Transfer Agent.
Upon the issuance of the Global Certificate, DTC or its custodian credited,
on its internal system, the respective liquidation preference of the individual
beneficial interests represented by such Global Certificate to the accounts of
persons who had accounts with such depositary. Ownership of beneficial interests
in a Global Certificate is limited to persons who have accounts with DTC
("participants") or persons who hold interests through participants. Ownership
of beneficial interests in a Global Certificate is shown on, and the transfer of
that ownership will be effected only through, records maintained by DTC or its
nominee (with respect to interests of participants) and the records of
participants (with respect to interests of persons other than participants).
So long as DTC, or its nominee, is the registered owner or holder of a
Global Certificate, DTC or such nominee, as the case may be, will be considered
the sole owner or holder of the Preferred Stock represented by such Global
Certificate for all purposes under the Series C Schedule and the Preferred
Stock. No beneficial owner of an interest in a Global Certificate will be able
to transfer the interest except in accordance with DTC's applicable procedures,
in addition to those described above.
Payments of the liquidation preference of and dividends on a Global
Certificate will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. Neither Loral, any transfer agent nor any paying agent
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in a Global
Certificate or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
Loral expects that DTC or its nominee, upon receipt of any payment of
dividends on a Global Certificate, will credit participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the aggregate liquidation preference of such Global Certificate as shown on the
records of DTC or its nominee. Loral also expects that payments by participants
to owners of beneficial interests in such Global Certificate held through such
participants will be governed by standing instructions and customary practices,
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as is now the case with securities held for the accounts of customers registered
in the names of nominees for such customers. Such payments will be the
responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules. If a Holder requires physical delivery of shares
of Preferred Stock issued in certificated form ("Certificated Securities") for
any reason, including to sell Preferred Stock to persons in jurisdictions which
require such delivery of such Securities or to pledge such Preferred Stock, such
Holder must transfer its interest in a Global Certificate in accordance with the
normal procedures of DTC and the procedures set forth in the Series C Schedule.
Loral expects that DTC will take any action permitted to be taken by a
Holder of Preferred Stock (including the presentation of Preferred Stock for
exchange as described below) only at the direction of one or more participants
to whose account the DTC interests in a Global Certificate are credited and only
in respect of such portion of the aggregate liquidation preference of the
Preferred Stock as to which such participant or participants has or have given
such direction.
DTC has advised Loral as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "Clearing Agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and may include certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although Loral expects that DTC will agree to the foregoing procedures in
order to facilitate transfers of interests in a Global Certificate, among
participants of DTC, it is under no obligation to perform or continue to perform
such procedures, and such procedures may be discontinued at any time. Neither
Loral nor any transfer agent will have any responsibility for the performance by
DTC or its participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.
If DTC is at any time unwilling or unable to continue as depositary for a
Global Certificate and a successor depositary is not appointed by Loral within
90 days, Loral will issue Certificated Securities in exchange for a Global
Certificate which will bear the legend referred to under "Notice to Investors"
subject to the provisions of such legend.
TRANSFER AND EXCHANGE
In connection with any transfer or exchange of Preferred Stock, the
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and Loral may require a Holder to pay any
taxes and fees required by law or permitted by the Series C Schedule. Loral is
not required to transfer or exchange any Preferred Stock selected for
redemption. Also, Loral is not required to transfer or exchange any Preferred
Stock for a period of 15 days before a selection of Preferred Stock to be
redeemed.
The registered Holder of Preferred Stock will be treated as the owner of
such Preferred Stock for all purposes.
The transfer of Preferred Stock may be registered, and Preferred Stock may
be presented in exchange for other Preferred Stock of different authorized
denominations, at the office of the Transfer Agent or the agency maintained by
Loral for such purpose in New York City and any other office or agency
maintained by Loral for such purpose, without service charge (other than the
cost of delivery) and upon payment of any taxes or other governmental charges.
Preferred Stock may also be presented for purposes of such exchange (but not
registration) at the offices of the Transfer Agent in London, or such other
paying agents as may be specified in notices to the Holders of Preferred Stock
in accordance with "Notices" below. Loral shall not be required, in
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the event of a redemption in part, (i) to register the transfer of Preferred
Stock for a period of 15 days immediately preceding the date notice is given
identifying the serial numbers of the Preferred Stock called for such
redemption; or (ii) to register the transfer of or exchange of, any such
Preferred Stock, or portion thereof, called for redemption.
PAYMENTS, PAYING AGENTS AND CONVERSION AGENTS
The liquidation preference or Redemption Price of and dividends on the
Preferred Stock will be payable and the Preferred Stock will be convertible and
exchangeable and transfers thereof will be registrable, at the office of the
Transfer Agent or the office or agency of Loral maintained for such purpose in
The City of New York and at any other office or agency maintained by Loral for
such purpose, provided that, at the option of Loral, payment of dividends in
cash may be made by check mailed to the address of the person entitled thereto
as it appears in the Security Register. All payments of cash will be made in
United States Dollars.
Payments of the liquidation preference or Redemption Price of the Preferred
Stock will be made at the corporate trust office of the Transfer Agent or agency
maintained by Loral for such purpose in New York City or any office or agency
maintained for such purpose. If the payments are made in cash, such payments
shall be made by United States dollar check drawn on, or wire transfer to a
United States dollar account maintained by the Holder with, a bank located in
New York City mailed to the Holder at such Holder's registered address or (if
arrangements satisfactory to Loral are made by the agent of the Holder) by wire
transfer to a dollar account maintained by the Holder with a bank in New York
City. Payment of dividends on any Payment Date will be made to the person in
whose name such Preferred Stock are registered at the close of business on the
Regular Record Date prior to the relevant Payment Date. Dividends payable on any
Preferred Stock that is redeemed in cash will be payable in the manner described
above with respect to payments of the Redemption Price of the Preferred Stock,
except Preferred Stock that is redeemed on a date after the close of business on
the Regular Record Date immediately preceding such Payment Date and on or before
the Payment Date, on which dividends will be paid to the Holder of record on the
Regular Record Date.
The Preferred Stock may be surrendered for conversion or exchange at the
corporate trust office of the Transfer Agent or the agency maintained by Loral
for such purpose in New York City or, at the option of the Holder and subject to
applicable laws and regulations, at the office of any of the conversion agents.
The paying agents and conversion agents may be terminated at any time and
additional or other paying and conversion agents may be appointed, provided that
until the Preferred Stock has been delivered for cancellation, or monies and/or
Common Stock sufficient to pay the liquidation preference of and dividends on
the Preferred Stock has been made available for payment and either paid or
returned to Loral, a paying, conversion and transfer agent will be maintained
(i) in New York City for the payment of the liquidation preference or Redemption
Price of and dividends, on Preferred Stock and for the surrender of Preferred
Stock for conversion or redemption and (ii) in a European city for the payment
of the liquidation preference or Redemption Price of and dividends, on Preferred
Stock and for the surrender of Preferred Stock for conversion or redemption.
Notice of any such termination or appointment and of any change in the office
through which any paying, conversion or transfer agent will act will be given in
accordance with "Notices" below.
All monies paid and all Common Stock delivered by Loral to a paying agent
for the payment of liquidation preference or Redemption Price of or dividends on
any Preferred Stock that remain unclaimed at the end of two years after such
liquidation preference or dividends shall have become due and payable will be
repaid or returned, as the case may be, to Loral, and the Holder of such
Preferred Stock will thereafter look only to Loral for payment or delivery
thereof.
VOTING RIGHTS
Except as required by law, the Holders will not be entitled to any voting
rights unless Loral has deferred scheduled payments of dividends on the
Preferred Stock for an aggregate of six quarterly dividends (a "Deferral Trigger
Event"). If a Deferral Trigger Event occurs while the Preferred Stock is
outstanding, then holders of a majority of the outstanding shares of the
Preferred Stock, voting as a class, will be entitled to elect two directors (the
"Preferred Stock Directors") to the Board of Directors. The CPE Nominees, if
appointed
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to the Board, or the Preferred Stock Directors, as the case may be, will
promptly resign upon receipt of notice from Loral that all Dividend Arrearages
with respect to the Preferred Stock have been paid.
REGISTRATION RIGHTS
Loral has agreed for the benefit of the Holders of the Preferred Stock that
it will maintain the Shelf Registration Statement continuously effective under
the Securities Act until such date as of which neither the Preferred Stock nor
the shares of Common Stock issuable upon conversion thereof shall constitute
restricted securities pursuant to Rule 144(k) or all the Preferred Stock and the
shares of Common Stock issuable upon conversion thereof have been sold pursuant
to such Shelf Registration Statement.
REPORTS
Whether or not required by the rules and regulations of the Commission, so
long as any Preferred Stock is outstanding, Loral will file with the Commission
and furnish to the Holders of Preferred Stock all quarterly and annual financial
information required to be contained in a filing with the Commission on Forms
10-Q and 10-K including a "Management's Discussion and Analysis of Results of
Operations and Financial Condition" and, with respect to the annual information
only, a report thereon by Loral's certified independent accountants.
MODIFICATION OF THE MEMORANDUM OF ASSOCIATION AND BYE-LAWS
Modification of the Series C Schedule may be made by Loral, with the
consent of the Holders of two-thirds in aggregate liquidation preference of the
outstanding Preferred Stock; provided, that no such modification or amendment
may, without the consent of the Holder of each outstanding share of Preferred
Stock affected thereby, (i) change the Mandatory Redemption Date of the
liquidation preference of, or the due date of any installment of dividends on
the Preferred Stock, (ii) reduce the liquidation preference or Redemption Price
of or the rate of dividends thereon any Preferred Stock, (iii) change the place
of payment where, or the coin or currency in which, any share of Preferred Stock
or any payment thereon is payable, (iv) impair the right to institute suit for
the enforcement of any such payment when due, (v) adversely affect the
conversion rights of the Holders, (vi) modify the provisions of the Series C
Schedule with respect to the subordination of the Preferred Stock in a manner
adverse to the Holders, (vii) adversely affect the right to require Loral to
redeem Preferred Stock or (viii) reduce the percentage of liquidation preference
of Preferred Stock the consent of whose Holders is required for modification of
the Series C Schedule or for waiver of compliance with certain provisions of the
Series C Schedule or for waiver of certain defaults. In addition, the Series C
Schedule provides that Loral shall not make any amendments to the Bye-Laws that
would have the effect of amending any provision of the Series C Schedule in a
manner that is adverse to the interests of the holders of the Preferred Stock
without the approval of the holders of a majority of the outstanding shares of
Preferred Stock.
ADJUSTMENT FOR FRACTIONAL SHARES
No fractional shares of Common Stock will be delivered upon the redemption
or conversion of any Preferred Stock. Whether or not a fractional share would be
delivered to a Holder of Preferred Stock shall be based upon the total number of
Shares of Preferred Stock at the time held by such Holder and the total number
of shares of Common Stock otherwise deliverable in respect thereof. In lieu of
the issuance of a fraction of a share of Common Stock, Loral shall pay instead
an amount in cash (rounded to the nearest whole cent) equal to the same fraction
of the closing sales price of a share of Common Stock on the trading day
immediately preceding the redemption or conversion date.
CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER
The Series C Schedule provides that Loral shall not consolidate with or
merge into any other corporation or convey or transfer its properties and assets
substantially as an entirety to any person, unless (i) any such successor
assumes Loral's obligations under the Preferred Stock or, if applicable, the
shares of Preferred Stock
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shall be converted into or exchanged for and shall become shares of such
surviving person, having in respect of such surviving person the same powers,
preference and relative participating, optional or other special rights and the
qualifications, limitations or restrictions thereon, that the Preferred Stock
had immediately prior to such transaction, (ii) after giving effect thereto, no
Event of Default shall have occurred and be continuing and (iii) certain other
conditions under the Series C Schedule are met.
NOTICES
Notice to Holders of Preferred Stock will be given by mail to the
registered addresses of such Holders.
REPLACEMENT OF SECURITIES
Shares of Preferred Stock that become mutilated, destroyed, stolen or lost
will be replaced by Loral at the expense of the Holder upon delivery to the
Transfer Agent, as the case may be, of the shares or evidence of the loss, theft
or destruction thereof satisfactory to Loral and the Trustee or such transfer
agent. In the case of a lost, stolen or destroyed share of Preferred Stock, an
indemnity satisfactory to Loral and the Transfer Agent may be required at the
expense of the Holder of such share before a replacement share will be issued.
GOVERNING LAW
The Series C Schedule and the Preferred Stock are governed by, and
construed in accordance with, the laws of Bermuda.
THE TRANSFER AGENT
The Bank of New York is the Transfer Agent for the Preferred Stock and the
Common Stock.
TAXATION
This summary of certain tax considerations is based upon current laws,
treaties, cases, regulations and rulings. It does not consider all the tax
issues that might be relevant to an investor or that depend upon an investor's
particular circumstances.
Prospective investors should consult their own professional advisors about
the tax consequences of an investment in Loral under the laws of the
jurisdictions in which they are subject to taxation.
The discussion of U.S. tax law is based upon the opinion of Willkie Farr &
Gallagher, special U.S. counsel to Loral. The summary of certain Bermuda tax
consequences is based upon the opinion of Appleby, Spurling & Kempe, Bermuda
counsel to Loral.
UNITED STATES TAX CONSIDERATIONS
Taxation of Loral. Loral will be subject to U.S. Federal, state and local
income taxation at regular corporate rates on any income that is effectively
connected with the conduct of a U.S. trade or business. When such income is
deemed removed from the U.S. business, it will be subject to an additional 30
percent "branch profits" tax. Based upon counsel's opinion as to the source of
income and effective connection rules that are applicable, Loral expects that a
significant portion of its income will be from foreign sources and will not be
effectively connected with the conduct of a U.S. trade or business. The IRS may
disagree and/or may promulgate regulations that would recharacterize a
substantial portion of Loral's income as from United States sources and as
effectively connected with a U.S. trade or business so as to subject that income
to regular United States income and branch profits taxes.
Any U.S. subsidiaries, such as Skynet, K&F and SS/L, will be subject to
regular U.S. taxes on their worldwide income. In addition, a 30% U.S.
withholding tax will be imposed on dividends and interest paid by such
corporations to Loral.
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Loral expects that a significant portion of its worldwide income will not
be subject to tax by the United States, Bermuda or by other countries from which
it derives income. However, some portion of Loral's income from sources outside
the United States, realized through Globalstar or otherwise, will be subject to
taxation by foreign countries and the extent to which certain countries may
require Loral or Globalstar to pay tax or to make payments in lieu of tax cannot
be determined in advance.
Taxation of Non-U.S. Securityholders in Loral. A non-U.S. resident alien
individual, a non-U.S. corporation, a non-U.S. trust or a non-U.S. estate will
not be subject to U.S. Federal income taxation on payments of dividends on the
Securities unless those payments are (i) effectively connected with the conduct
by the Securityholder of a trade or business in the United States or (ii) 25% or
more of Loral's gross income for a certain period (generally three years) prior
to the year of the payment was treated as effectively connected with trades or
businesses conducted by Loral in the United States. In this latter case, a
proportionate part of any payment, corresponding to the percentage of Loral's
gross income that is deemed effectively connected with Loral's United States
trades and businesses, would be subject to a 30% (or lower treaty rate) U.S.
withholding tax. Consistent with the discussion above, Loral expects that less
than 25% of its income in any year will be effectively connected with the
conduct of a trade or business in the United States.
In addition, such a non-U.S. Securityholder will not be subject to U.S.
Federal income taxation on gains realized by the Securityholder on a sale or
exchange of Securities unless the sale of such Securities is attributable to an
office or fixed place of business maintained by the Securityholder in the United
States or the Securityholder is an individual who is present in the United
States for 183 or more days during the year of sale and who have either a tax
home or an office or other fixed place of business in the United States to which
the offer or exchange is attributable. The determination of whether a
Securityholder is engaged in the conduct of a trade or business in the United
States or whether the sale of a Securityholder's Securities is attributable to
an office or fixed place of business of the Securityholder in the United States
depends on the facts and circumstances of each Securityholder's case. Each
Securityholder should consult with his own tax advisor to determine whether his
payments or gains with respect to a Security will be subject to U.S. federal
income taxation.
Taxation of United States Securityholders in Loral. Subject to the
discussion of PFICs below, a Securityholder holding a Security as a capital
asset will recognize capital gain or loss on a sale or other disposition of the
Security (other than in certain limited circumstances on a redemption by Loral).
While a Securityholder will generally recognize capital gain or loss on a
redemption by Loral, in certain limited circumstances a Securityholder may be
required to treat the redemption payments as a dividend to the extent of Loral's
undistributed current and accumulated earnings and profits. In such a case, the
Securityholder may not be entitled to recognize a loss. The limited
circumstances are primarily those involving Securityholders whose proportionate
interests in Loral remain the same or increase after the redemption and, in the
case of Securityholders with significant percentage interests in Loral, whose
interests in Loral are not materially reduced by the redemption.
Special rules apply to the taxation of a "passive foreign investment
company" (a "PFIC"). A PFIC is a foreign corporation (i) 75% or more of whose
gross income is passive or (ii) 50% or more of whose assets produce or are held
to produce passive income. Loral believes, based upon current projections of
future operating results, that it will not be a PFIC. In particular, Loral
expects, through Globalstar, SS/L, Skynet and other businesses, to earn
sufficient active business income and to hold sufficient active business assets,
commencing with its taxable year beginning January 1, 1997, to be able to avoid
PFIC status. However, Loral will earn passive income, both directly in the form
of interest on uninvested cash and dividends from less-than-25% owned
corporations, and indirectly in the form of interest on working capital and
royalties on certain intangibles. Furthermore, the extent and timing of
Globalstar's active business income cannot be predicted with certainty.
If Loral is or were to become a PFIC, a U.S. Securityholder would be
subject to a tax-deferral charge on gains on a sale of its Securities and on
certain "excess distributions" received from Loral, and such gains and excess
distributions would be taxable at ordinary income rates, unless the
Securityholder made the QEF
21
<PAGE> 26
election described below. The amount of the charges would depend, in part, on
the period during which the Securityholders held their Securities.
If a Securityholder makes the qualified electing fund ("QEF") election
provided in Section 1295 of the U.S. Internal Revenue Code (the "Code"), the
Securityholder will be required to include its pro rata share of Loral's
ordinary earnings and net capital gain in income for tax purposes for each
taxable year (regardless of when or whether cash attributable to such income is
actually distributed to such Securityholder by Loral). If the Securityholder
makes a QEF election, the tax-deferral charge and ordinary income rules
described in the preceding paragraph will not apply. Actual distributions out of
amounts so included in income will not be taxable to the Securityholder. A
Securityholder's tax basis in its Securities will be increased by the amount so
included and decreased by the amount of nontaxable distributions. Provided that
a Securityholder makes the QEF election for the first taxable year that Loral is
a PFIC, such Securityholder will cease to be subject to the PFIC inclusion rules
at such time that Loral no longer meets the statutory definition of a PFIC.
The QEF election is effective only if certain required information is made
available by Loral to the Internal Revenue Service (the "IRS"). In the event
Loral is characterized as a PFIC for federal income tax purposes, or upon
request of a U.S. Securityholder who intends to make the QEF election, Loral
will undertake to comply with the IRS information requirements and provide to
each U.S. Securityholder who makes such request the information needed for the
determination of such Securityholder's pro rata share of Loral's ordinary
earnings and net capital gain.
To the extent Loral has undistributed current or accumulated earnings and
profits, payment of dividends with respect to the Securities will be taxable
dividend income to a Securityholder. Because Loral is not incorporated in the
United States, the payments that are treated as dividends will not be eligible
for the dividends received deduction. Furthermore, adjustments to the conversion
ratio could result in constructive stock dividends that to the extent of Loral's
undistributed earnings and profits, could be taxable to a Securityholder.
Conversion of Preferred Stock into Common Stock of Loral will not be a
taxable event. Furthermore, no gain or loss would be recognized if at maturity
the principal amount of Preferred Stock is paid in Common Stock.
BERMUDA TAX CONSIDERATIONS
At the date of this Prospectus, there is no Bermuda income tax, corporation
or profits tax, withholding tax, capital gains tax, capital transfer tax, estate
or stamp duty or inheritance tax payable by Loral or the Holders (other than
Holders ordinarily resident in Bermuda) in respect of their investment in the
Securities.
Loral has obtained from the Minister of Finance under the Exempted
Undertakings Tax Protection Act 1966, as amended, a certificate confirming that,
in the event of there being enacted in Bermuda, any legislation imposing tax
computed on profits or income, or computed on any capital asset, gain or
appreciation or any tax in the nature of estate duty or inheritance tax, such
tax shall not until March 28, 2016 be applicable to Loral or to any of its
operations, or other obligations of Loral except insofar as such tax applies to
persons ordinarily resident in Bermuda and holding such Securities or other
obligations, or to any land in Bermuda leased or let to Loral.
Loral has been classified as non-resident of the Bermuda exchange control
area by the Bermuda Monetary Authority. The transfer of Securities between
persons regarded as non-resident of Bermuda for exchange control purposes and
the issue and redemption of Securities to and by such persons may be effective
without specific consents under the Exchange Control Act 1972 of Bermuda and
Regulations made thereunder. Transfers involving any person regarded as resident
in Bermuda for exchange control purposes requires specific authorization under
that Act. Loral by virtue of being a non-resident of Bermuda for exchange
control purposes, is free to acquire, hold and sell any foreign currency,
securities and other investments without restrictions.
Purchasers of Securities may be required to pay stamp taxes and other
charges in accordance with the laws and practices of the country of purchase.
Prospective purchasers should consult their tax advisers as to
22
<PAGE> 27
the tax laws of applicable jurisdictions and the specific tax consequences of
acquiring, holding and disposing of the Securities.
The Securities do not provide for additional payments by Loral following a
change in the tax laws or rules of Bermuda that is adverse to the Holders.
LEGAL OPINIONS
Certain United States tax matters described under "Taxation" will be passed
upon for Loral by Willkie Farr & Gallagher, New York, New York, general counsel
to Loral. The validity of the Securities offered hereby will be passed upon for
Loral by Appleby, Spurling & Kempe, Hamilton, Bermuda. As of June 1, 1997,
partners and counsel in Willkie Farr & Gallagher beneficially owned
approximately 20,000 shares of the Common Stock. Mr. Robert B. Hodes is of
counsel to the law firm of Willkie Farr & Gallagher, and a Director of Loral and
a member of the Audit and Executive Committees of the Board of Directors of
Loral.
EXPERTS
The financial statements of Loral and those of its affiliates, SS/L and
Globalstar, incorporated in this Prospectus by reference from Loral's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996 have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports, which are incorporated herein by reference, and have been so
incorporated in reliance upon the reports of said firm as experts in auditing
and accounting.
23
<PAGE> 28
======================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY LORAL OR ANY UNDERWRITER, DEALER OR AGENT. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
SECURITIES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF LORAL
SINCE THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information................ i
Incorporation of Certain Documents
By Reference....................... i
Forward-looking Statements........... ii
Prospectus Summary................... 1
Recent Developments.................. 4
Risk Factors......................... 5
Use of Proceeds...................... 5
Description of Capital Stock......... 6
Selling Holders...................... 7
Plan of Distribution................. 12
Description of Preferred Stock....... 13
Taxation............................. 20
Legal Opinions....................... 23
Experts.............................. 23
</TABLE>
======================================================
======================================================
LORAL SPACE &
COMMUNICATIONS LTD.
14,909,437 SHARES OF
CONVERTIBLE REDEEMABLE
PREFERRED STOCK
AND
54,072,199 SHARES
OF COMMON STOCK
-------------------------
PROSPECTUS
JUNE 17, 1997
-------------------------
======================================================
<PAGE> 29
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the fees and expenses payable by the
Registrant in connection with this offering, other than underwriting discounts
and commissions. All the amounts shown are estimates, except the SEC
registration fee:
<TABLE>
<S> <C>
SEC registration fee...................................... 292,061
NYSE listing fee.......................................... 163,000
Printing fees............................................. 50,000
Legal fees and expenses................................... 50,000
Accounting fees and expenses.............................. 17,500
Miscellaneous fees and expenses........................... 5,000
--------
Total................................................ $577,561
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Bermuda law permits a company to indemnify its directors and officers,
except for any act of fraud or dishonesty. The Registrant has provided in its
Bye-Laws that its directors and officers will be indemnified and held harmless
against any expenses, judgments, fines, settlements and other amounts incurred
by reason of any act or omission in the discharge of their duty, other than in
the case of fraud or dishonesty.
Bermuda law and the Bye-Laws of the Registrant also permit the Registrant
to purchase insurance for the benefit of its directors and officers against any
liability incurred by them for the failure to exercise the requisite care,
diligence and skill in the exercise of their powers and the discharge of their
duties, or indemnifying them in respect of any loss arising or liability
incurred by them by reason of negligence, default, breach of duty or breach of
trust.
The Registrant intends to enter into indemnification agreements with its
officers and directors. To the extent permitted by law, the indemnification
agreements may require the Registrant, among other things, to indemnify such
officers and directors against certain liabilities that may arise by reason of
their status or service as directors (other than liabilities arising from
willful misconduct of a culpable nature) and to advance their expenses incurred
as a result of any proceedings against them as to which they could be
indemnified.
The Registrant maintains a directors' and officers' liability insurance
policy.
II-1
<PAGE> 30
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ----------- ----------------------------------------------------------------------------------
<S> <C>
4.1* -- Schedule III to Second Amended and Restated Bye-laws relating to the 6% Series C
Convertible Preferred Stock.
5+ -- Opinion of Appleby, Spurling & Kempe.
8.1+ -- Tax Opinion of Willkie Farr & Gallagher.
8.2+ -- Tax Opinion of Appleby, Spurling & Kempe (included as part of their opinion filed
as Exhibit 5).
23.1+ -- Consent of Deloitte & Touche LLP.
23.2+ -- Consent of Appleby, Spurling & Kempe (included in their opinion filed as Exhibit
5).
23.3+ -- Consent of Willkie Farr & Gallagher (included in their opinion filed as Exhibit
8.1).
24** -- Powers of Attorney.
</TABLE>
- ---------------
* Incorporated by reference to Loral's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 (File No. 1-14180).
** Previously filed.
+ Filed herewith.
II-2
<PAGE> 31
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs
is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the registrant pursuant to the provisions described under item 15 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit or
proceeding), is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
<PAGE> 32
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW YORK, ON JUNE 17, 1997.
LORAL SPACE & COMMUNICATIONS LTD.
By: *
------------------------------------
Bernard L. Schwartz
Chairman of the Board and
Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------------------ --------------------------------------- ------------------
<C> <S> <C>
* Chairman of the Board and Chief June 17, 1997
- ------------------------------------------ Executive Officer (Principal Executive
Bernard L. Schwartz Officer)
* Director June 17, 1997
- ------------------------------------------
Robert B. Hodes
* Director June 17, 1997
- ------------------------------------------
Gershon Kekst
* Director June 17, 1997
- ------------------------------------------
Charles Lazarus
* Director June 17, 1997
- ------------------------------------------
Malvin A. Ruderman
* Director June 17, 1997
- ------------------------------------------
E. Donald Shapiro
* Director June 17, 1997
- ------------------------------------------
Arthur L. Simon
* Director June 17, 1997
- ------------------------------------------
Thomas J. Stanton Jr.
* Director June 17, 1997
- ------------------------------------------
Daniel Yankelovich
* Senior Vice President and Chief June 17, 1997
- ------------------------------------------ Financial Officer (Principal Financial
Michael P. DeBlasio Officer)
* Vice President and Controller June 17, 1997
- ------------------------------------------ (Principal Accounting Officer)
Harvey B. Rein
*By: /s/ ERIC J. ZAHLER
- ------------------------------------------
Eric J. Zahler
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 33
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ----------- ----------------------------------------------------------------------------------
<S> <C>
4.1* -- Schedule III to Second Amended and Restated Bye-laws relating to the 6% Series C
Convertible Preferred Stock.
5+ -- Opinion of Appleby, Spurling & Kempe.
8.1+ -- Tax Opinion of Willkie Farr & Gallagher.
8.2+ -- Tax Opinion of Appleby, Spurling & Kempe (included as part of their opinion filed
as Exhibit 5).
23.1+ -- Consent of Deloitte & Touche LLP.
23.2+ -- Consent of Appleby, Spurling & Kempe (included in their opinion filed as Exhibit
5).
23.3+ -- Consent of Willkie Farr & Gallagher (included in their opinion filed as Exhibit
8.1).
24** -- Powers of Attorney.
</TABLE>
- ---------------
* Incorporated by reference to Loral's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 (File No. 1-14180).
** Previously filed.
+ Filed herewith.
II-5
<PAGE> 1
EXHIBIT 5
[Letterhead of Appleby, Spurling & Kempe]
17 June, 1997
Loral Space & Communications Ltd.
600 Third Avenue
New York, New York 10016
Dear Sirs,
Re: Loral Space & Communications Ltd.
We have acted as Bermuda legal advisers to Loral Space & Communications
Ltd., a Bermuda exempted company (the "Company"). We have been requested to
render this opinion as to Bermuda law in connection with Amendment No. 1 to Form
S-3 Registration Statement (Registration No. 333-26517) relating to the offer
and sale from time to time by the Selling Holders named in the Registration
Statement of the following: up to (i) 14,909,437 shares of the 6% Series C
Convertible Redeemable Preferred Stock of the Company, including (A) 549,463
shares of Convertible Redeemable Preferred Stock (the "Alcatel Preferred
Shares") to be issued by the Company to Alcatel Spacecom, a French company, in
partial consideration for Alcatel Spacecom's ownership interest in Space
Systems/Loral, Inc. ("SS/L") pursuant to a certain exchange agreement (the
"Exchange Agreement") and (B) 514,200 shares of Convertible Redeemable Preferred
Stock (the "Aerospatiale Preferred Shares") to be issued by the Company to
Aerospatiale SNI, a French company, in partial consideration for Aerospatiale
SNI's ownership interest in SS/L pursuant to the Exchange Agreement (excluding
the Alcatel Preferred Shares and the Aerospatiale Preferred Shares, the "CPEO
Preferred Shares"), (ii) 37,273,593 shares of common stock of the Company, par
value $.01 per share (the "Common Stock"), to be issued upon conversion of the
CPEO Preferred Shares, the Alcatel Preferred Shares
<PAGE> 2
and the Aerospatiale Preferred Shares, including (A) 1,370,297 shares of Common
Stock issuable upon conversion of the Alcatel Preferred Shares and (B) 1,285,500
shares of Common Stock issuable upon conversion of the Aerospatiale Preferred
Shares, (iii) 1,255,684 shares of Common Stock to be issued by the Company to
Alcatel Spacecom in partial consideration for Alcatel Spacecom's ownership
interest in Loral/Qualcomm Satellite Services, L.P. pursuant to a certain
purchase and sale agreement (the "Purchase Agreement") together with 4,205,622
shares of Common Stock to be issued by the Company to Alcatel Spacecom in
consideration for Alcatel Spacecom's ownership interest in SS/L pursuant to the
Exchange Agreement (together the "Alcatel Common Shares"), (iv) 3,837,300 shares
of Common Stock (the "Aerospatiale Common Shares") to be issued by the Company
to Aerospatiale SNI in partial consideration for Aerospatiale SNI's ownership
interest in SS/L pursuant to the Exchange Agreement, and (v) 7,500,000 shares of
Common Stock (the "LPB Shares") acquired from the Company by the LB Partnerships
(as defined in the Registration Statement) in August 1996.
For purposes of this opinion, we have been supplied with and reviewed a
copy of the Registration Statement together with drafts of the Exchange
Agreement and Purchase Agreement (together the "Agreements"), and have relied
upon the Memorandum of Association and Bye-Laws of the Company and such other
documents, certificates and records and have made such investigations as we deem
necessary or appropriate in order to give the opinion expressed herein. As to
various questions of fact, we have relied on statements and certificates of
officers and representatives of the Company.
We have assumed: --
(i) the capacity, power and authority of each of the parties to the
Agreements (other than the Company) to enter into and perform its respective
obligations under the Agreements;
(ii) the truth, accuracy and completeness as of the date hereof of all
representations as to factual matters made in the documents which we have
examined;
(iii) the genuiness of all signatures on the documents which we have
examined;
(iv) the due execution and delivery of the Agreements in the form of
the drafts we have reviewed for the purpose of this opinion without alteration
which is material to this opinion; and
(v) the conformity to original documents of all documents produced to
us as copies and the authenticity of all original documents which, or copies of
which, have been submitted to us.
Based upon and subject to the foregoing and subject to the reservations
mentioned below and to any matter not disclosed to us, we are of the opinion
that: --
(i) the Company is duly incorporated and validly existing under Bermuda
law;
(ii) the CPEO Preferred Shares and the LBP Shares have been validly
issued and are fully paid and non-assessable;
(iii) the Alcatel Preferred Shares and the Aerospatiale Preferred
Shares, when duly sold, issued and paid for in accordance with the terms of the
Exchange Agreement, will be duly authorized and validly issued and will be fully
paid and non-assessable;
(iv) upon conversion of the CPEO Preferred Shares, the Alcatel
Preferred Shares and the Aerospatiale Preferred Shares pursuant to their terms,
the shares of Common Stock issuable upon such conversion will be validly issued,
fully paid and non-assessable;
(v) the Alcatel Common Shares when duly sold, issued and paid for in
accordance with the terms of the Purchase Agreement, will be duly authorized and
validly issued and will be fully paid and non-assessable;
(vi) the Aerospatiale Common Shares when duly sold, issued and paid for
in accordance with the terms of the Exchange Agreement, will be duly authorized
and validly issued and will be fully paid and non-assessable; and
(vii) the statements set forth in the Prospectus included as part of
the Registration Statement under the heading "Taxation -- Bermuda Tax
Considerations," to the extent that they constitute matters of
2
<PAGE> 3
Bermuda law, or legal conclusions with respect thereto, have been reviewed by us
and are accurate in all material respects and fairly present the information
disclosed therein in all material respects.
Our reservations are as follows: --
(A) We express no opinion as to any law other than Bermuda law and
none of the opinions expressed herein relates to compliance with or matters
governed by the laws of any jurisdiction other than Bermuda. Where an
obligation is to be performed in a jurisdiction other than Bermuda, a
Bermuda court may decline to enforce it to the extent that such performance
would be illegal or contrary to public policy under the laws of such other
jurisdiction.
(B) We express no opinion as to the availability of equitable
remedies, such as specific performance or injunctive relief, or as to any
matters which are within the discretion of the Bermuda courts, such as the
award of costs, or questions related to jurisdiction. Further, we express
no opinion as to the validity or binding effect in Bermuda of any waiver of
or obligation to waive any provision of law (whether substantive or
procedural) or any right or remedy arising through circumstances not known
at the time of the filing of the Registration Statement.
(C) Section 9 of the Interest and Credit Charges (Regulation) Act 1975
provides that the Bermuda courts have discretion as to the amount of
interest if any payable on the amount of a judgment after date of judgment.
If the court does not exercise that discretion, then interest will accrue
at the statutory rate which is currently seven per cent per annum.
(D) Where a party is vested with a discretion or may determine a
matter in its opinion, such discretion may have to be exercised reasonably
or such an opinion may have to be based on reasonable grounds.
(E) Where a party is vested with a discretion or may determine a
matter in its opinion, such discretion may have to be exercised reasonably
or such an opinion may have to be based on reasonable grounds.
(F) For the purposes of this opinion:-
(a) the term "fully paid" means, in relation to the issued shares
of a company limited by shares (that is to say, a company having the
liability of its members limited by its Memorandum of Association to the
amount, if any, unpaid on the shares held by them), that members holding
such shares have no liability to make any contribution or other payment
to the company in respect of those shares; and
(b) the term "non-assessable" means, in relation to fully paid
shares of a company, that such member shall not be bound by an
alteration to the Memorandum of Association or to the Bye-Laws of that
company after the date upon which he became a member, if insofar as the
alteration requires him to take, or subscribe for additional shares, or
in any way increases his liability to contribute to the share capital of
or otherwise to pay money to the company.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to our firm therein.
This opinion is governed by Bermuda law and is issued on the basis that it
will not give rise to action in any jurisdiction other than Bermuda. It is
issued solely for the benefit of the addressee in relation to the transaction
described above and is not to be made available to or relied upon by any other
person, firm or entity.
Yours faithfully,
/s/ APPLEBY, SPURLING & KEMPE
3
<PAGE> 1
EXHIBIT 8.1
[LETTERHEAD OF WILLKIE FARR & GALLAGHER]
June 17, 1997
Loral Space & Communications Ltd.
600 Third Avenue
New York, NY 10016
Ladies and Gentlemen:
We have acted as counsel to Loral Space & Communications Ltd. (the
"Company"), a company organized under the laws of Bermuda, in connection with
the preparation of a Registration Statement on Form S-3 (Registration No.
333-26517) (as amended, the "Registration Statement") relating to the offer and
sale from time to time by the Selling Holders named in the Registration
Statement of up to (i) 14,909,437 shares of Convertible Redeemable Preferred
Stock (the "Preferred Shares") of the Company and (ii) 54,072,199 shares of the
common stock of the Company, par value $.01 per share (together with the
Preferred Shares, the "Securities").
In so acting, we have examined originals or copies, certified or otherwise
identified to our satisfaction, of the Registration Statement and such corporate
records, agreements, documents and other instruments as we have deemed necessary
for the purpose of this opinion. We have also examined such other documents,
papers, statutes and authorities as we have deemed necessary to form a basis for
the opinion hereinafter expressed.
In our examination, we have assumed the genuineness of all signatures and
the conformity to original documents of all copies submitted to us. As to
various questions of fact material to our opinion, we have relied on statements
and certificates of officers and representatives of the Company and public
officials.
Based upon the foregoing and having regard for such legal questions as we
have deemed relevant, the legal conclusions set forth in the discussion of U.S.
tax law under the heading "Taxation--United States Tax Considerations" are our
opinions, and it is our opinion that this discussion addresses the material U.S.
tax consequences of an investment in the Securities.
We call to your attention that we are members of the Bar of the State of
New York and do not purport to be experts in, or to render any opinions with
respect to, the laws of jurisdictions other than the State of New York, except
for the federal laws of the United States of America and the Revised Uniform
Limited Partnership Act of the State of Delaware.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us in the Prospectus included as
part of the Registration Statement. In giving such consent, we do not admit
hereby that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the Rules and
Regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Willkie Farr & Gallagher
<PAGE> 1
EXHIBIT 23.1
CONSENT OF DELOITTE & TOUCHE LLP
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement (No. 333-26517) of Loral Space & Communications Ltd. (a
Bermuda company) of our reports with respect to the consolidated financial
statements of Loral Space & Communications Ltd., Space Systems/Loral, Inc., and
Globalstar, L.P. appearing in or incorporated by reference in the Annual Report
on Form 10-K of Loral Space & Communications Ltd. for the transition period
ended December 31, 1996 and to the reference to us under the heading "Experts"
in the Prospectus, which is part of this Registration Statement.
DELOITTE & TOUCHE LLP
New York, New York
June 16, 1997
