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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: March 1, 1994
Commission File Number 1-4238
LORAL CORPORATION
600 Third Avenue
New York, New York 10016
Telephone: (212) 697-1105
State of incorporation: New York
IRS identification number: 13-1718360
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ITEM 2: ACQUISITION OF ASSETS
On March 1, 1994, the Registrant completed its acquisition of Federal Systems
Company, a division of International Business Machines Corporation ("IBM"), for
$1,503,500,000 in cash, not including acquisition expenses, through a newly
formed subsidiary Loral Federal Systems Company ("LFSC").
LFSC, headquartered in Bethesda, Maryland, is a leading systems integrator and
supplier of advanced information technology products and services to defense
and non-defense agencies worldwide. (See "Business Description - Acquired
Businesses").
The purchase price was determined through arm's length bargaining between the
Registrant and IBM. The acquisition, effective January 1, 1994, was financed
through commercial paper borrowings, which are supported by the Registrant's
revolving credit agreements.
Business Description - Acquired Businesses
LFSC designs, develops, manufactures and integrates avionic systems, general
purpose processors, and electronic support systems. Programs include the U.S.
Navy's LAMPS MK III helicopter system for anti-submarine and anti-surface
warfare and airborne early detection as well as a similar program for the
United Kingdom's Ministry of Defense, the EH-101/Merlin. LFSC's systems
integration projects include the U.S. Army's modernization of its information
systems infrastructure.
LFSC is providing advanced avionics systems for the MC-130H Combat Talon II,
the U.S. Air Force's Special Operations Forces aircraft. In addition, LFSC is
producing the new VHSIC based central computer for the U.S. F-15 fighter. LFSC
is a major producer of electronic support measures systems ("ESM") and is
currently producing the defensive ESM subsystem for the B-2 bomber.
LFSC provides advanced technology systems which integrate hardware, software
and peripherals. LFSC is the prime contractor for the U.S. Army's distributed
interactive simulation training system, the Close Combat Tactical Trainer
("CCTT"). LFSC's Command and Data Processing program for the Space Division of
the U.S. Air Force Systems Command will upgrade the Air Force's satellite
control facilities.
LFSC provides systems design, analysis and integration to a broad array of
Federal government agencies including the U.S. Treasury
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Department, the U.S. Postal Service and the Internal Revenue Service.
LFSC is a recognized leader in designing and developing air traffic control
systems. Currently, LFSC is developing the Advanced Automation System for the
Federal Aviation Administration, which is a complete modernization of the U.S.
air traffic control system. LFSC is also upgrading the United Kingdom's air
traffic control system, the New EnRoute Centre and is in the final phase of
implementing an advanced air traffic control system in Taiwan.
ITEM 7: FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
a. As of the date of this Report, it is impracticable for the Registrant to
file audited financial statements of the acquired businesses. The
Registrant will file the required financial statements under cover of Form
8-K/A as soon as practicable but, in any event, not later than 60 days
after this Report on Form 8-K is required to be filed.
b. As of the date of this Report, it is impracticable for the Registrant to
file any of the pro forma financial information required to be filed. The
Registrant will file the required pro forma financial information under
cover of Form 8-K/A as soon as practicable but, in any event, not later
than 60 days after this Report on Form 8-K is required to be filed.
Filed herewith (-)
or incorporated
c. Exhibits by reference
10.1 Asset Purchase Agreement Current Report on
between Loral Corporation Form 8-K dated
and International Business December 12, 1993,
Machines Corporation dated Exhibit 10.1.
as of December 12, 1993;
and letter dated December
13, 1993.
10.2 Certain letters relating to -
the Asset Purchase
Agreement between Loral
Corporation and
International Business
Machines Corporation dated
December 21, 1993 through
March 1, 1994.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LORAL CORPORATION
--------------------
Registrant
Date: March 15, 1994 MICHAEL B. TARGOFF
--------------------
Michael B. Targoff
Senior Vice President
and Secretary
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EXHIBIT INDEX
Filed herewith (-)
or incorporated
by reference
------------------
10.1 Asset Purchase Agreement Current Report on
between Loral Corporation Form 8-K dated
and International Business December 12, 1993,
Machines Corporation dated Exhibit 10.1.
as of December 12, 1993;
and letter dated December
13, 1993.
10.2 Certain letters relating to -
the Asset Purchase
Agreement between Loral
Corporation and
International Business
Machines Corporation dated
December 21, 1993 through
March 1, 1994.
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EXHIBIT 10.2
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LORAL CORPORATION
600 Third Avenue
New York, New York 10016
December 21, 1993
International Business Machines
Corporation
Old Orchard Road
Armonk, New York 10504
Re: Asset Purchase Agreement
dated as of December 12, 1993
Dear Sirs:
Reference is made to the Asset Purchase Agreement dated as of
December 12, 1993 (the "Agreement") which each of us has executed. Capitalized
terms used in this letter agreement have the meanings attributed to them in the
Agreement, and the general provisions set forth in Appendix B to the Agreement
shall apply hereto. This is to correct certain typographical errors in the
Agreement.
1. Page 14, Line 13. The date "January 15, 1993" shall be changed
to "January 15, 1994".
2. Page 14, Line 24. The line "Notwithstanding the foregoing, the
Seller may preserve its" shall be changed to "Notwithstanding the foregoing,
the Buyer may preserve its".
3. Page 42, Line 39. The phrase "the the Closing Date" shall be
changed to "to the Closing Date."
4. Page 59, Line 12. The word "wtih" shall be changed to "with".
5. Page 82, Line 34. The phrase "as they effect" shall be changed
to "as they affect".
6. Page 100, Line 4. The word "Affliliate" shall be changed to
"Affiliate".
7. Appendix A, Page 1, Definition of "Applicable Benefits". The
term "Tranferred Employee" appearing in line 7 of the definition shall be
changed to "Transferred Employee".
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8. Appendix A, Page 7, Definition of "Management Employee". The
phrase "with context" appearing in line 9 of the definition shall be changed to
"in the context".
9. Disclosure Schedule, Section 3.09(d)(i). The Grand Total
appearing on Page 3 of Schedule I to Section 3.09(d)(i) shall be changed from
"2,938,024" to "1,998,024".
10. Disclosure Schedule, Section 9.18. The name "Arthur E. Johson"
shall be changed to "Arthur E. Johnson".
11. Letter dated December 13, 1993. The heading of the paragraph
numbered 1 shall be changed from "FAA Control" to "FAA Contract".
------------------
To confirm that you agree with the changes to the Agreement set forth
above, please sign below.
Sincerely,
LORAL CORPORATION
By /s/ Eric J. Zahler
-------------------
Confirmed
INTERNATIONAL BUSINESS MACHINES
CORPORATION
By /s/ Donald D. Westfall
-----------------------
By /s/ Joseph J. Martin
---------------------
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January 27, 1994
Loral Corporation
600 Third Avenue
New York, NY 10016
Dear Sirs:
Reference is made to the Asset Purchase Agreement (the "Agreement")
dated as of December 12, 1993, between Loral Corporation ("Loral") and
International Business Machines Corporation ("IBM") and to the Side Letter (the
"Side Letter") dated as of December 13, 1993, also between Loral and IBM.
Capitalized terms used herein have the meanings ascribed to them in the
Agreement and the general provisions set forth in Appendix B to the Agreement
shall apply hereto.
The Side Letter requires IBM to deliver a final Disclosure Schedule
to Loral by January 15, 1994. This letter agreement is to confirm our
understanding that the Disclosure Schedule will now be delivered to Loral by
IBM on or before January 28, 1994; provided, however, that Section 5.05 of the
Disclosure Schedule, if incomplete on January 28, 1994, shall be delivered to
Loral as soon as practicable after the determination of the allocation of the
Purchase Price to the Owned Real Property.
Section 2.08(a)(ii) of the Agreement provides that, with respect to
any Preapproved EAC Contract, any Change Notice with respect to the values
thereof at September 30, 1993, must be submitted by Loral by January 15, 1994.
This letter agreement confirms our understanding that any such Change Notice
may now be submitted by January 28, 1994 (or after January 28, 1994, but only
to the extent Loral certifies to IBM before January 28, 1994, that it is unable
to form a reasonable conclusion in a specified area or areas with respect to
such Change Notice due to the unavailability of necessary, specified
information).
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Please confirm your understanding by signing below.
Sincerely,
INTERNATIONAL BUSINESS MACHINES
CORPORATION
by /s/ Donald D. Westfall
----------------------------
Name: Donald D. Westfall
Confirmed,
LORAL CORPORATION,
by /s/ Eric J. Zahler
-------------------------
Name: Eric J. Zahler
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January 27, 1994
Loral Corporation
600 Third Avenue
New York, NY 10016
Dear Sirs:
Reference is made to the Asset Purchase Agreement dated as of
December 12, 1993 (the "Agreement"), and the letter agreement dated November
14, 1993 (the "Confidentiality Agreement"), both of which agreements each of us
has executed. Capitalized terms used in this letter agreement without
definition have the meanings attributed to them in the Agreement, and the
general provisions set forth in Appendix B to the Agreement shall apply hereto.
This letter agreement is to confirm certain understandings between us with
respect to the Agreement and the Confidentiality Agreement.
1. Information Provided After Execution of the Agreement. Since the
execution of the Agreement, the Seller has been providing, and through the
Closing Date the Seller will continue to provide, to the Buyer and to its
Representatives (as defined in the Confidentiality Agreement) certain
proprietary and confidential information of the Seller relating to the Business
("Business Information"), including information as to the Seller's cost of
providing products and services to be covered by the Transitional Services
Agreement ("Service-Related Information"). In furtherance of and without
limiting the provisions of the Confidentiality Agreement except as provided in
paragraph 4 below, it is understood and agreed by the parties that all such
Business Information (including Service-Related Information) is Evaluation
Material (as defined in the Confidentiality Agreement) (except to the extent
excluded by the third sentence of the second paragraph of the Confidentiality
Agreement) which is entitled, subject to paragraph 4
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below, to the protections provided by the Confidentiality Agreement prior to
the Closing Date.
2. Protection of Service-Related Information Post-Closing. The
Transitional Services Agreement (or a separate confidential disclosure
agreement ("CDA") entered into in conjunction with the Transitional Services
Agreement) will contain provisions for the protection of Service-Related
Information following the Closing. In the event the Closing is consummated
prior to the execution of the Transitional Services Agreement or CDA, the
Confidentiality Agreement shall survive (notwithstanding Section 6.01 of the
Agreement) but only with respect to Service-Related Information and only until
the execution of the Transitional Services Agreement (or a CDA) at which time
all previously provided Service-Related Information will be covered by such
Transitional Services Agreement (or CDA).
3. Consultants Bound by Confidentiality Agreement. It is understood
and agreed that any consultants (including any actuaries and manpower or human
resource consultants) engaged by the Buyer are Representatives of the Buyer who
are subject to the terms and conditions of the Confidentiality Agreement.
4. Permitted Use of Information. Nothing contained herein or in the
Confidentiality Agreement will prohibit the Buyer or its Representatives from
utilizing any Evaluation Material for any purpose contemplated by the Agreement
(including without limitation the preparation of the Transitional Services
Agreement and following the procedures contemplated by Sections 2.08 and 2.11
of the Agreement) or, following the Closing (subject to paragraph 2 above),
from using any such material in the conduct of the Business. Notwithstanding
anything to the contrary contained in the Confidentiality Agreement or the
Agreement, following the Closing (subject to paragraph 2 above), the Buyer will
have the right to disclose to appropriate government agencies all data required
to be disclosed or made available in connection with audits of government
contracts.
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Please confirm your agreement with the foregoing by signing and
returning one copy of this letter to the undersigned.
Very truly yours,
INTERNATIONAL BUSINESS MACHINES
CORPORATION
by /s/ Donald D. Westfall
-----------------------------
Name: Donald D. Westfall
by /s/ Joseph J. Martin
-----------------------------
Name: Joseph J. Martin
Title: Assistant Controller
Agreed and confirmed:
LORAL CORPORATION
by /s/ Eric J. Zahler
------------------------
Name: Eric J. Zahler
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LORAL CORPORATION
600 Third Avenue
New York, NY 10016
February 18, 1994
International Business
Machines Corporation
Old Orchard Road
Armonk, New York 10504
Dear Sirs:
Reference is made to the Asset Purchase Agreement (the "Agreement")
dated as of December 12, 1993, between Loral Corporation ("Loral") and
International Business Machines Corporation ("IBM") and in particular to
Section 5.08 of the Agreement. Capitalized terms used herein have the meanings
ascribed to them in the Agreement and the general provisions set forth in
Appendix B to the Agreement shall apply hereto.
Section 5.08 of the Agreement is hereby amended as follows:
1. Line 16 of Section 5.08 (page 56, line 29): Insert the words
"United States Federal" after the word "specified".
2. Line 27 of Section 5.08 (page 56, line 40): Insert after
"covered by Section 5.08(a)(i))" the words ", in each case, where the ultimate
customer is a United States Federal governmental agency".
3. Lines 46 and 47 of Section 5.08 (page 57, lines 13 and 14):
Replace the words "immediately after the Closing" with the words "on the date
hereof, other than through the Business".
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Please sign below to confirm that you agree with the changes to the
Agreement set forth above.
Very truly yours,
LORAL CORPORATION
by /s/ Eric J. Zahler
-----------------------
Name: Eric J. Zahler
Confirmed:
INTERNATIONAL BUSINESS
MACHINES CORPORATION
by /s/ Joseph J. Martin
--------------------------
Name: Joseph J. Martin
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LORAL CORPORATION
600 Third Avenue
New York, NY 10016
February 25, 1994
International Business
Machines Corporation
Old Orchard Road
Armonk, New York 10504
Dear Sirs:
Reference is made to the Asset Purchase Agreement (the "Agreement")
dated as of December 12, 1993, between Loral Corporation ("Loral") and
International Business Machines Corporation ("IBM"). Capitalized terms used
herein have the meanings ascribed to them in the Agreement and the general
provisions set forth in Appendix B to the Agreement shall apply hereto.
Section 7.07(a) of the Agreement provides that if the Closing occurs
before the execution of a definitive Transitional Services Agreement, then IBM
and Loral will enter into an interim arrangement to provide for the
continuation of certain products and services pending the execution of such
Transitional Services Agreement.
In accordance with Section 7.07, IBM and Loral are currently
negotiating the terms of a services agreement (the "Master Services
Agreement"), an initial draft of which has been provided by IBM to Loral. IBM
and Loral agree to negotiate such agreement in good faith and to enter into
such Master Services Agreement on, or as soon as reasonably practicable after,
March 31, 1994. The Master Services Agreement, when executed, will be
retroactive to the Closing Date. Pending execution of the Master Services
Agreement, IBM or its Subsidiaries will continue to provide the products and
services they are currently providing to the Business, and Loral
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(through the Business) will continue to provide the products and services the
Business is currently providing to IBM, on the same terms and subject to the
same conditions as those on which such products and services are currently
being provided, subject to any adjustments that may be subsequently agreed to
in the Master Services Agreement.
Please sign below to confirm that you agree with the arrangements set
forth above.
Very truly yours,
LORAL CORPORATION
by /s/ Eric J. Zahler
----------------------
Name: Eric J. Zahler
Confirmed:
INTERNATIONAL BUSINESS
MACHINES CORPORATION
by /s/ Joseph J. Martin
-----------------------
Name: Joseph J. Martin
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LORAL CORPORATION
600 Third Avenue
New York, NY 10016
February 28, 1994
International Business
Machines Corporation
Old Orchard Road
Armonk, New York 10504
Dear Sirs:
Reference is made to the Asset Purchase Agreement (the "Agreement")
dated as of December 12, 1993, between Loral Corporation ("Loral") and
International Business Machines Corporation ("IBM"). Capitalized terms used
herein have the meanings ascribed to them in the Agreement and the general
provisions set forth in Appendix B to the Agreement shall apply hereto.
In connection with the acquisition of the Business, Loral has formed
Loral Federal Systems Company ("LFSC") as an indirect wholly-owned subsidiary.
Loral hereby designates and requests that at the Closing, instead of the
Purchased Assets being delivered directly to Loral as contemplated by the
Agreement, those of the Purchased Assets located at the Federal Systems
Facility in Houston, Texas, or relating to the activities of the Business there
(except for certain Contracts as set forth in the Assignment and Assumption
agreement referred to below), be conveyed directly to Loral's wholly-owned
subsidiary, Loral Aerospace Corporation ("LAC"), and the remainder of the
Purchased Assets be transferred to LFSC. In accordance with the foregoing
designations, IBM will deliver the Purchased Assets at the Closing by means of
the execution and delivery by IBM, Loral, LFSC and LAC of a Bill of Sale in the
form of Attachment A hereto and an Assignment and Assumption Agreement in the
form of Attachment B hereto, instead of by means of documents in the form of
Exhibits A and B to the Agreement.
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In furtherance of and without limiting the provisions of the
Agreement, and in consideration for IBM's agreement to convey the Purchased
Assets in accordance with the foregoing paragraph, Loral stipulates and agrees
as follows:
1. In accordance with Section 14.06 of the Agreement, Loral
guarantees the performance of, and shall remain primarily liable to IBM under,
all of its covenants and agreements contained in the Agreement.
2. Section 12.03(iv) of the Agreement is hereby amended to insert
the clause ", or to cause the performance or payment and discharge in due
course," after the word "discharge" in the eighth line of said Section
12.03(iv) (that is, in line 39 on Page 95).
3. Loral agrees that, with respect to each Assumed Liability with
respect to which, following the Closing and after obtaining the Required
Consents (i) Loral is not the primary obligor and (ii) IBM remains liable (for
example, as a guarantor under a Contract as a result of a Government Contract
Novation or under a lease which is assigned to and assumed by a Loral
Subsidiary), Loral hereby guarantees to IBM and to each obligee with respect to
such Assumed Liability the performance by LFSC, LAC or any other of its
Subsidiaries that is the primary obligor with respect to such Assumed
Liability. This guarantee is made for the benefit of IBM and such obligees,
each of whom is entitled to rely upon it.
Please sign below to confirm that you agree with the provisions set
forth above.
Very truly yours,
LORAL CORPORATION
by /s/ Eric J. Zahler
------------------------
Name: Eric J. Zahler
Confirmed:
INTERNATIONAL BUSINESS
MACHINES CORPORATION
by /s/ Joseph J. Martin
------------------------
Name: Joseph J. Martin
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International Business Machines
Corporation
Old Orchard Road
Armonk, NY 10504
Dated As Of March 1, 1994
Loral Corporation
600 Third Avenue
New York, NY 10016
IBM/Loral-Leases and other Post Closing Matters
Dear Sirs:
The undersigned, International Business Machines Corporation ("IBM"),
as Seller, and you, Loral Corporation ("Loral"), as Buyer, are parties to an
Asset Purchase Agreement dated as of December 12, 1993 (the "Agreement")
covering the sale of the Business and certain assets of IBM relating to the
Business, the closing of which sale transaction is taking place on the date
hereof. (Capitalized terms used and not defined herein shall have the same
meanings ascribed in the Agreement and the general provisions set forth in
Appendix B to the Agreement shall apply hereto.)
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The purpose of this letter is to set forth our understanding with
respect to the following matters:
I. Leases:
Schedule I (the "Schedule") to Section 3.09(d) of the Disclosure
Schedule contains a listing of real property leases that will be assigned to
Loral's designated subsidiary, Loral Federal Systems Company ("Company"),
subject to the following deletions and modifications:
1. The following leases listed in Schedule I, as noted above, will
not be assigned but will be retained by IBM free of any claim or interest
therein by Loral or Company:
(a) The 1213 Innsbruck Drive lease in Sunnyvale, CA.
(b) The 7701 Greenbelt Road lease in Greenbelt, MD.
(c) The Bay Area Boulevard lease in Houston, TX.
(d) The last two (of the three listed) Rts 38 and 96 Tioga, NY
leases (for, respectively, 9140 rsf and 4692 rsf).
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2. Modifications and Clarifications:
(a) The lease listed as being 100 Scarborough Drive,
Pleasantville, NJ, is 501 Scarborough Drive.
(b) The first listed Rts 38 and 96 Tioga, NY lease (for 10,000
rsf) is being extended and will be assigned.
(c) The 31,681 rsf specified for 8000 Granger Court,
Springfield, VA lease is 57,065 rsf.
3. Subleases:
(a) In lieu of the assignment of the Houston, TX lease (which
was deleted from the Schedule as above provided), Loral has
requested that there be a sublease made to Loral Aerospace
Corporation, another subsidiary of Loral, the terms of which lease
are currently being negotiated. Loral and IBM shall continue to
negotiate in good faith (for a maximum period of six months) the
terms of such sublease and pending concluding of a sublease, the
Federal Systems Company personnel (who are being transferred to
Company) located in the Houston building, shall be permitted during
such maximum period to continue
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occupancy of the same space occupied by them at the same
rental rates and charges and upon the same terms as internally
charged and provided by IBM to the Federal Systems Company for
such occupancy prior to Closing.
(b) It is believed that IBM is subleasing some 1667
rsf at 3045 Technology Parkway in Orlando, FL from a third
party sublandlord, Science Applications International,
pursuant to a month-to-month sublease which commenced on or
about December 10, 1993. If in fact IBM is subleasing such
space, IBM will assign such sublease to Loral, which shall be
responsible for obtaining the necessary consents to such
assignment of the sublease to Company. If assigned, Company
shall assume the obligations under the sublease which shall be
deemed an Assumed Liability.
(c) In lieu of the assignment of the 6251 Ammendale
Road, Beltsville, MD lease deleted from the Schedule, as
provided above, the parties contemplate that IBM will sublease
some 10,000 rsf to Company. Loral has advised that if Company
is able to procure a certain government contract, then it
would want to be
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able to sublease a total of 45,000 rsf. The parties will
negotiate in good faith the terms of the initial sublease and
the period of time within which Company will be able to expand
to the desired 45,000 rsf. Pending negotiation of the
sublease, Company personnel (i.e., the former Federal Systems
Company personnel located in the building) shall be permitted
to continue occupancy for a maximum period not to exceed six
months of the same space occupied by them at the same internal
rental rates and charges and upon the same terms as charged
and provided by IBM to the Federal Systems Company for such
occupancy prior to Closing.
4. New Leases. The parties are currently negotiating terms
for two new leases as specified below (which lease terms, when negotiated,
shall be retroactive to and including the date hereof):
(a) Boulder, CO. The parties are presently
contemplating a one year term for 100,000 rsf of space
currently occupied by Federal Systems Company personnel in an
IBM owned building. Alternatively, Loral is negotiating with
IBM the possibility and terms upon which IBM will assign an
existing IBM
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lease from a third party landlord of a building at 910 Spine
Road, which contains some 156,835 rsf, and expires on April
30, 1996, with extension options. The parties are engaged in
negotiating the terms of the 100,000 rsf, one year lease in
the IBM building and the parties will in good faith continue
to negotiate with respect to a possible assignment of the 910
Spine Road lease by IBM to Company.
(b) Gaithersburg, MD. The parties are negotiating a
lease for office space by IBM to Company in Building 183 and
will continue such negotiations in good faith.
All leases and subleases made directly to, or assigned to and
assumed by Loral or Company or another designated subsidiary of Loral shall
constitute Assumed Liabilities of Loral.
II. Other Post Closing Matters:
1. Gaithersburg, MD. The driveway entrance (the "Loral
Driveway") to the Gaithersburg Owned Real Property (hereinafter the "Loral
Gaithersburg Site") opening onto Frederick Road a/k/a MD Route 355, permits
right hand turns to be made onto Frederick Road when exiting therefrom (as well
as permits right hand turns
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and left hand turns from Frederick Road entering into the Loral Gaithersburg
Site). Loral has complained that when exiting the Loral Gaithersburg Site,
vehicles cannot make a left hand turn onto Frederick Road because of the
configuration (in accordance with then State and City governmental approvals)
of the concrete divider controlling the exit from the Loral Gaithersburg Site,
and accordingly, Loral wishes to be able to obtain an easement to use the
driveway (the "IBM Driveway") located on the Excluded Gaithersburg Real
Property (hereinafter the "IBM Gaithersburg Site"). IBM has refused to grant
such easement to Loral, taking the position (disputed by Loral) that it is not
unusual in the case of properties that border on a highway, for vehicles
exiting from such properties to have to make a right turn and proceed to the
next traffic controlled intersection to accomplish the left turn on to the
highway that may be desired. The parties have not reached an agreement on this
point, however, the parties do agree that Loral, in good faith shall make
application to and endeavor to obtain such state and city governmental
approvals as may be necessary to permit a reconfiguration and realignment of
the existing Loral Driveway (and any required traffic light modifications) so
as to permit left hand turns onto Frederick Road; if however, such approvals
cannot be
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obtained then the following shall apply: Unless the granting of an access
easement permitting vehicles exiting the Loral Gaithersburg Site to use the IBM
Driveway is required by law in order to permit the subdivision of the Loral
Gaithersburg Site and the IBM Gaithersburg Site into two separate parcels
(i.e., the subdivision would be denied if such access easement were not
granted, assuming for purposes hereof that all of the other conditions required
by law for subdivision were satisfied) it is IBM's position that IBM shall not
be required to grant such access easement to Loral (Loral reserving the right
to dispute such position on any grounds that may be applicable under the
Agreement). If the contrary situation is the case, i.e., the access easement
is required by law to permit such subdivision, then IBM will grant such
required (for subdivision) access easement to Loral. The parties shall act in
good faith in connection with the subdivision application.
2. Manassas, VA.
(a) Fire Service Pump System. A Fire Service Pump
System in Manassas (hereinafter the "System") located on the
site being conveyed to Loral (the "Loral Manassas Site"),
services both the Loral Manassas Site and the site retained by
IBM (the "IBM Manassas Site").
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Originally the parties contemplated that the System would
remain on the IBM Manassas Site and IBM would operate same for
the benefit of both sites. At the request of Loral, ownership
of the System was transferred to Loral and in accordance with
the Common Use and Maintenance Agreement entered into between
the partes and filed with the City Attorney of the City of
Manassas, Loral is obligated to continue uninterrupted fire
protection service via the System to both sites. Loral has
raised the issue that it does not wish to service the IBM
Manassas Site because of possible third-party and other
liability that might arise from failure to properly operate
the System. Loral has requested that IBM sever the System so
that the IBM Manassas Site has its own fire protection system,
with Loral only being required to provide transitional service
pending severance of the System and the IBM system becoming
operational. The parties have not agreed on the foregoing
(notwithstanding the execution of the Common Use and
Maintenance Agreement) and shall continue negotiations which
may, among other things, include the
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possibility of, without limitation, a severance of the System,
or the transfer of ownership of the System and associated
equipment and the land on which it is situated back to IBM
with IBM assuming the obligation to operate the System to
service both sites upon the terms specified in the Common Use
and Maintenance Agreement.
(b) Electrical Power Services. In paragraph 3 of the
Common Use and Maintenance Agreement it states, among other
thing, that "Loral will seek any necessary approvals from
VEPCO and the City to become the customer of the City in place
of IBM for power supplied through the transformer substation."
The parties confirm their intent that Loral's seeking of such
approvals is premised upon the power to be supplied, being
power at reasonably competitive rates, and that the obtaining
of assurances with regard thereto is a reasonable and
necessary concomitant of the seeking of such approvals.
3. Other Easements As May by Required by Law.
Notwithstanding the execution by IBM and Loral of (a) the Common Use and
Maintenance Agreement relating to
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<PAGE> 25
the Loral Manassas Site and the IBM Manassas Site, and the Statement relating
to the Loral Gaithersburg Site and the IBM Gaithersburg Site, both IBM and
Loral agree that if the local or state governmental authorities require, as a
condition of the respective subdivision of the sites, that either party as
owner of one of the sites grant easement(s) to the other party as owner of the
other site, then IBM or Loral, as the case may be, as owner of the servant
site, shall grant such easement(s) to the other party as owner of the dominant
site, without cost or charge being made therefor, other than, if applicable,
the equitable sharing of any operating expenses in connection therewith.
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<PAGE> 26
Kindly sign below were indicated to signify your agreement with the
foregoing.
Very truly yours,
INTERNATIONAL BUSINESS MACHINES
CORPORATION
By: /s/ John E. Hickey
----------------------------
Name: John E. Hickey
Title: Secretary
AGREED TO:
LORAL CORP.
By:
--------------------------
Name: Eric J. Zahler
Title: Vice President
/s/ Bruce R. Kraus
--------------------------
By: Bruce R. Kraus
as Attorney in Fact
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<PAGE> 27
LORAL CORPORATION
600 THIRD AVENUE
NEW YORK, NY 10016
March 1, 1994
International Business Machines Corporation
Old Orchard Road
Armonk, NY 10504
Dear Sirs:
Reference is made to the Asset Purchase Agreement dated as of
December 12, 1993 (the "Agreement") which each of us has executed. Capitalized
terms used in this letter agreement have the meanings attributed to them in the
Agreement, and the general provisions set forth in Appendix B to the agreement
shall apply hereto. This is to set forth our respective legal commitments with
regard to the following matters:
1. With respect to the air traffic control contract with the
Federal Aviation Administration (FAA), Seller has made an estimate at
completion ("EAC") valuation of such contract as at December 31, 1993. At the
earlier of (x) March 31, 1995, or, at the option of Seller, December 31, 1995,
or (y) when the FAA signs a contract modification which substantially covers or
supersedes proposed contract modification 245, Buyer shall prepare an EAC
(which shall not be presumptive but rather subject to challenge by Seller) for
such contract based on all information reasonably available to Buyer at the
time the contract modification is executed, or if such modification has not
been so executed, as of March 31, 1995, or, if Seller has elected to delay the
date, at December 31, 1995. In either case, the new EAC shall make appropriate
provisions for and shall be determined as follows:
(1) determined on the same basis and using subjective judgments and
assessments consistent with, to the extent applicable, the
determination of such amount at December 31, 1993;
(2) risk assessment and potential profit improvements associated
with a change in the applicable contractual obligations; if
<PAGE> 28
any, having shifted to a fixed price type contract;
(3) costs and revenue arising from or related to any termination or
reduction or increase in the scope of the contract; and
(4) otherwise pursuant to the terms and provisions of Section 2.08
of the Agreement (including, without limitation, arbitration by
Arthur Anderson).
Any resulting change from the December 31, 1993 EAC calculation (discounted to
net present value at an annual interest rate factor of 7%) to the Year-End
Statement of Net Assets To Be Sold shall be borne 75% by Seller and 25% by
Buyer, by Seller promptly paying such 75% amount in cash to Buyer. Each of
Buyer and Seller and their respective representatives shall have a right of
inspection and copying of the records of the other party related to any new
modification and new EAC. In addition, if the proposed contract modification
is signed with a liquidated damages clause for failure to make timely delivery
or other like provisions where either the amount of revenue to Buyer or
payments or credits by Buyer to the FAA, are determinable as a function of
contract performance, then there will be no EAC provision for such liquidated
damages clause or other like provisions, but if and when such revenue
adjustment or such payments, credits or damages are actually implemented or
paid, as the case may be, the amount thereof shall be used to retroactively
recalculate the new EAC and any resulting change to the Statement of Net Assets
To Be Sold shall be borne 75% by Seller and 25% by Buyer, by Seller promptly
paying such 75% amount in cash to Buyer, all determined pursuant to the
provisions of Section 2.08 of the Agreement (including, without limitation,
arbitration by Arthur Anderson). For all purposes of this letter agreement any
new Price Waterhouse report shall be sufficient if it states that it is based
upon the Agreement as amended by this letter agreement. The maximum amount
which Buyer shall be entitled to receive from Seller under this paragraph 2 of
this letter agreement shall be $200 million.
2. The parties agree that this Agreement shall supersede and
replace the adjustment contemplated by paragraph 1 of the side-letter dated
December 13, 1993, between them.
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<PAGE> 29
-----------------------------
To confirm that this agreement sets forth our respective legal
commitments, please sign below.
[S]
Sincerely,
LORAL CORPORATION
by /s/ Eric J. Zahler
--------------------------
Confirmed
INTERNATIONAL BUSINESS MACHINES CORPORATION
by /s/ Joseph J. Martin
- -------------------------------
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<PAGE> 30
INTERNATIONAL BUSINESS MACHINES CORPORATION
Old Orchard Road
Armonk, NY 10504
March 1, 1994
Loral Corporation
600 Third Avenue
New York, NY 10016
Dear Sirs:
Reference is made to the Asset Purchase Agreement dated as of
December 12, 1993 (the "Agreement") between Loral Corporation ("Loral") and
International Business Machines Corporation ("IBM"). Capitalized terms used in
this letter agreement without definition have the meanings attributed to them
in the Agreement and the general provisions set forth in Appendix B to the
Agreement shall apply hereto. This letter agreement is to confirm certain
understandings between us with respect to employees of IBM-U.K. who were
seconded to IBM Aerospace Systems Integration Corporation ("IBM-ASIC") as of
the date of the Agreement ("IBM-ASIC Secondees") and therefore are not Affected
Employees. After the Closing Date, IBM-ASIC and any successor or successors in
interest are referred to herein as "Buyer's UK-ASIC Affiliate").
1. Representations, Warranties and Covenants of Seller to Apply to
IBM-ASIC Secondees. Without limiting the application of any
representations, warranties or covenants set forth in the
Agreement in accordance with their terms, the representations,
warranties and covenants of the Seller set forth in Sections
3.16, 3.17 (other than insofar as such Section would require
compliance with U.S. laws) and 5.01(a)(ix) of the Agreement
shall apply with respect to IBM-ASIC Secondees to the same
extent as if the IBM-ASIC Secondees had been employed directly
by Seller or an Included Subsidiary. Such representations,
warranties and covenants are accurate and complete in all
respects except as limitations thereon may appear from the
terms of the IBM Announcement Letter, as defined below. The
Seller has made
<PAGE> 31
available to the Buyer true, correct and complete copies of all
U.K. or U.S. employee benefit plans, contracts or arrangements
(or summaries of all unwritten plans, contracts or
arrangements, each of which is accurate and complete in all
material respects) of the nature referenced in Section 3.28(a)
of the Agreement (the "IBM-UK Plans") maintained or in effect
for the benefit of the IBM-ASIC Secondees. The IBM-UK Plans
are in material compliance with, and have been funded to the
extent required by, Applicable Law.
2. Provisions Governing Employee Benefit Arrangements for IBM-ASIC
Secondees.
(a) Each IBM-ASIC Secondee who made a timely election to
become an employee of IBM-ASIC and who is employed by
Buyer's UK-ASIC Affiliate on the pension transfer date
contemplated by the letter referenced in the following
sentence ("Transferred IBM-ASIC Employee") shall,
provided such employee has made a timely election to have
his or her pension entitlement so transferred, have his
or her IBM Pension Plan (established in the United
Kingdom) (the "IBM UK Pension Plan") or IBM UK B Plan
pension benefits transferred to an equivalent plan now in
effect or to be established by Buyer's UK-ASIC Affiliate
("Buyer's UK-ASIC Plans"). The terms and conditions of
Buyer's UK-ASIC Plans and the amount of funds to be
transferred from the applicable IBM Plan to the
applicable Buyer's UK-ASIC Plan shall be determined in
accordance with the terms, conditions and procedures set
forth in the annexed letter dated February 3, 1994 from
Richard Bostock FIA to A.P. Cunningham, Esq. (the
"Actuary's Letter"). We agree that verification
procedures comparable to those set forth in Section 9.03
of the
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<PAGE> 32
Agreement shall be available to Buyer for the purpose of
verifying the calculation of the amount of funds to be
transferred as described above. Following such transfer,
Buyer's UK-ASIC Plans shall assume all Liabilities of the
IBM UK Pension Plan or the IBM UK B Plan, as applicable,
for pension benefits so transferred with respect to the
Transferred IBM-ASIC Employees and the Seller shall
provide indemnification and hold-harmless protection
equivalent in scope to that set forth in Section 9.04(a)
of the Agreement.
(b) All Liability for IBM UK Pension Plan and IBM UK B Plan
benefits with respect to IBM-ASIC Secondees who become
employees of Buyer's UK- ASIC Affiliate, but who do not
qualify as Transferred IBM-ASIC Employees, shall be
retained by Seller. Except as set forth in paragraph
2(a) hereof, the Seller shall be responsible for
discharging, in accordance with the current provisions of
the IBM-UK Plans, all IBM UK Pension Plan and IBM UK B
Plan Liabilities, and all Liabilities under IBM-UK Plans
for claims incurred prior to the Closing Date, and for
claims incurred at any time with respect to accidents,
injuries or events which occurred prior to the Closing
Date, including those incurred but not reported in
accordance with the terms of such Plans. The Buyer shall
be responsible for paying all claims for accidents,
injuries or events which occur on or subsequent to the
Closing Date in accordance with the provisions of the
plans maintained by Buyer's UK Affiliate.
3. Employment of IBM-ASIC Secondees. Buyer's UK-ASIC
Affiliate will employ
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<PAGE> 33
IBM-ASIC Secondees who accept employment with Buyer's
UK-ASIC Affiliate on a basis consistent with that set
forth in the draft letter to "Regular IBM UK Employees
Seconded to IBM ASIC" dated Monday, February 7, 1994, a
copy of which was telecopied to A.P. Cunningham, Esq. by
Debbie Newton on February 7, 1994 at 8:19 a.m. (the "IBM
Announcement Letter"). Buyer will establish additional
Voluntary Contribution schemes on a basis consistent with
Attachment 2 of such draft.
4. Application of Article IX. Without limiting the
application of any provision of Article IX of the
Agreement in accordance with its terms, to the extent any
IBM-ASIC Secondee is entitled to benefits under one or
more of the Plans as a result of having satisfied the
requirements for participation in such Plan through prior
service with IBM or a covered IBM Affiliate, Article IX
of the Agreement shall also apply to such IBM-ASIC
Secondee, but only to the extent of such benefits, as if
he or she was an Affected Employee and, in the case of
each IBM-ASIC Secondee who qualifies as a Transferred
IBM-ASIC Employee, as if he or she was a Transferred
Employee. Whether or not IBM-ASIC Secondees are covered
by any of the Plans or qualify as Transferred IBM- ASIC
Employees, Sections 9.15, 9.16 and 9.17 of the Agreement
shall also apply as if each IBM-ASIC Secondee who becomes
employed by Buyer's UK-ASIC Affiliate were a Transferred
Employee, and Seller's obligations under Section 9.18 of
the Agreement shall also apply to all IBM-ASIC Secondees
(other than S. Epremian) as if they were Affected
Employees.
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<PAGE> 34
5. Supplemental UK Pension Agreement. As promptly as
practicable after the Closing, the parties agree to enter
into a supplemental pension agreement (i) confirming the
basis on which IBM-ASIC Secondees who are employed by
Buyer's UK Affiliate after the Closing will temporarily
participate in the IBM Pension Plan, the IBM UK B Plan
and the IBM Group Life Assurance Plan (all of which are
established in the United Kingdom) after the Closing;
(ii) recording the steps to be taken by each party in
connection with the transfer of assets referenced in the
Actuary's Letter, and (iii) incorporating such other
provisions as are necessary to carry out such transfer
and comply with Applicable Law. Except to the extent
otherwise required by Applicable Law, the principles and
allocation of responsibilities set forth in such
agreement shall be consistent wherever possible with the
principles and allocation of responsibilities set forth
in the Agreement, the Actuary's Letter and the
Announcement Letter.
Please confirm your agreement with the foregoing by signing and
returning one copy of this letter to the undersigned
Very truly yours,
INTERNATIONAL BUSINESS MACHINES
CORPORATION
By: /s/ Joseph J. Martin
---------------------
Name: Joseph J. Martin
Agreed and confirmed:
LORAL CORPORATION
By: /s/ Eric J. Zahler
-------------------
Name: Eric J. Zahler
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<PAGE> 35
LORAL CORPORATION
LORAL FEDERAL SYSTEMS COMPANY
LORAL AEROSPACE CORPORATION
600 Third Avenue
New York, New York 10016
March 1, 1994
International Business Machines
Corporation
Old Orchard Road
Armonk, NY 10504
Dear Sirs:
Reference is made to the Asset Purchase Agreement dated as of
December 12, 1993 (the "Agreement") between Loral Corporation ("Loral") and
International Business Machines Corporation ("IBM") and the Agreement of
Assignment, dated as of March 1, 1994, among Loral, Loral Federal Systems
Company ("LFSC") and Loral Aerospace Corporation ("LAC"). Capitalized terms
used in this letter agreement without definition have the meanings attributed
to them in the Agreement and the general provisions set forth in Appendix B to
the Agreement shall apply hereto. This letter agreement is to confirm certain
understandings among us with respect to certain Contracts:
1. Notwithstanding anything to the contrary contained in the
Assignment Agreement, with respect to any Contracts that may not be assigned to
LFSC or LAC without the consent of a third party, or which requires novation,
the performance obligations of IBM thereunder shall be deemed to be
subcontracted or delegated to LFSC or LAC, as the case may be, to the extent
permitted by such Contract, until such Contract is novated or such consent is
obtained. LFSC and LAC, as subcontractors or delegates, shall perform such
Contracts, including the collection of any monies due and payable thereunder.
IBM hereby authorizes Loral, LFSC or LAC, as the case may be, to perform such
Contracts. Prior to obtaining the necessary consent to assignment or the
novation of such Contracts to either LFSC or LAC, as the case may be, IBM,
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<PAGE> 36
as the contracting party, shall take such timely action upon written request by
Loral as is reasonably necessary to allow LFSC or LAC to perform such Contracts
and to protect any rights that may exist or accrue under such Contracts until
they are novated or such consents are obtained.
2. This Agreement is in furtherance, and not in derogation, of
Sections 2.05 and 7.05 of the Agreement, which remain in full force and effect.
Please confirm your agreement with the foregoing by signing and
returning one copy of this letter to the undersigned.
Very truly yours,
LORAL CORPORATION
By: /s/ Eric J. Zahler
----------------------
LORAL FEDERAL SYSTEMS
COMPANY
By: /s/ Eric J. Zahler
----------------------
LORAL AEROSPACE CORPORATION
By: /s/ Eric J. Zahler
----------------------
Agreed and confirmed:
INTERNATIONAL BUSINESS MACHINES
CORPORATION
By: /s/ Joseph J. Martin
- ---------------------------------
-7-
<PAGE> 37
Loral Corporation
600 Third Avenue
New York, New York 10016
March 1, 1994
International Business Machines Corporation
Old Orchard Road
Armonk, New York 10504
Dear Sirs:
Reference is made to the Asset Purchase Agreement (the "Agreement")
dated as of December 12, 1993, between Loral Corporation ("Loral") and
International Business Machines Corporation ("IBM"). Capitalized terms used
herein have the meanings ascribed to them in the Agreement and the general
provisions set forth in Appendix B to the Agreement shall apply hereto.
Section 2.09 of the Agreement provides that if the Projected Net
Assets To Be Sold exceeds the Final Net Assets To Be Sold, then the Stated
Price shall be reduced by an amount equal to (x) the Projected Net Assets To Be
Sold minus (y) the Final Net Assets To Be Sold.
In accordance with Section 2.09, subject to the further agreements
and conditions set forth below, IBM and Loral have agreed that the Stated
Price, as adjusted pursuant to Section 2.09 and Section 7.08, is to be
$1,503,500,000, subject to the following further agreements and conditions.
(1) Any Liability whether presently in existence or arising
hereafter, arising out of or related to claims by the U.S. Government in
connection with IBM's lease of the property located at 3700 Bay Area Boulevard,
Houston, Texas (the "Houston Facility") and IBM's participation in the related
joint venture, Middlebrook Associates, shall be an Excluded Liability under
Section 2.04 of the Agreement. Loral shall provide reasonable cooperation to
IBM in the defense of any such claim, but shall be reimbursed, at cost, for any
substantial effort or expense incurred by Loral. The Final Net Assets To Be
Sold does not include any Liabilities in connection with
-8-
<PAGE> 38
the leased space being surrendered at the Houston Facility, notwithstanding
Section 2.08(a)(i).
(2) It is assumed by the parties that the Final Net Assets To Be
Sold does not include an asset in respect of the expectation of recovery from
McDonnell Douglas on the A-12 program. To the extent such an asset exists, it
shall be a Purchased Asset, but its value shall be deemed to be zero for
purposes of computing the Final Net Assets To Be Sold. If, contrary to the
parties' assumption, such an asset is included as a positive value in the Final
Net Assets To Be Sold, then the Stated Price shall be adjusted as contemplated
by Section 2.09 of the Agreement as required to reflect such valuation, and (if
the Closing shall have occurred prior to any determination that such asset has
been erroneously included in the Final Net Assets To Be Sold at a positive
valuation) then the amount of such asset shall be refunded to the Buyer as an
Adjustment Amount pursuant to Section 2.08(c) of the Agreement.
(3) Assets with a net book value of approximately $6,300,000
consisting of leasehold improvements at the Houston Facility with a net book
value of approximately $4,000,000 and previously identified excess furniture
and equipment located at the Houston Facility with a net book value of
approximately $2,300,000 shall be Excluded Assets under Section 2.02 of the
Agreement. Loral agrees to cooperate with IBM in the repossession of such
furniture and equipment.
(4) With respect to the air traffic control programs of the Business
in the Republic of China, to the extent that the Final Net Assets To Be Sold
includes assets for unbilled receivables or other inventory in dispute between
the Business and other divisions of IBM, such assets shall be Excluded Assets
and their value shall not be (and IBM believes and Loral assumes has not been)
included in computing the Final Net Assets To Be Sold. If, contrary to the
parties' assumption, such an asset is included as a positive value in the Final
Net Assets To Be Sold, then the Stated Price shall be adjusted as contemplated
by Section 2.09 of the Agreement as required to reflect such exclusion, and (if
the Closing shall have occurred prior to any determination that such amount has
been erroneously included in the Final Net Assets To Be Sold at a positive
valuation) the amount of such assets shall be refunded to the Buyer as an
Adjustment Amount pursuant to Section 2.08(c) of the
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<PAGE> 39
Agreement. Any Taxes imposed by the Republic of China in connection with the
assets discussed above shall be an Excluded Liability under Section 2.04 of the
Agreement.
(5) Loral will have no liability to IBM with respect to the space in
Boulder, Colorado currently used by the Business, which will be vacated
following the Closing, except to the extent, if any, that a Liability for such
reduction in space is reflected in the Final Net Assets To Be Sold.
(6) IBM shall use its reasonable good faith efforts to transfer to
Loral or its Subsidiaries or otherwise permit Loral or its Subsidiaries to
benefit from its unemployment tax experience rating in Virginia and Texas and
in such other states in which the Business operates as Loral may reasonably
request.
(7) Section 2.06(d) of the Agreement is hereby amended by
substituting for the phrase "prior to the Closing Date" in the first sentence
thereof the phrase "prior to October 31, 1994."
Please confirm your agreement with the foregoing by signing and
returning one copy of this letter to the undersigned.
Very truly yours,
LORAL COPORATION
By: /s/ Eric J. Zahler
----------------------
Name: Eric J. Zahler
Title: Vice President
Agreed and confirmed:
INTERNATIONAL BUSINESS MACHINES
CORPORATION
By: /s/ Joseph J. Martin
----------------------------
Joseph J. Martin
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