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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1
(AMENDMENT NO. 1)
TENDER OFFER STATEMENT PURSUANT TO SECTION
14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
LORAL CORPORATION
(NAME OF SUBJECT COMPANY)
LOCKHEED MARTIN CORPORATION
LAC ACQUISITION CORPORATION
(BIDDERS)
COMMON STOCK, PAR VALUE $0.25 PER SHARE
(Title of class of securities)
543859 10 2
(CUSIP number of Class of Securities)
FRANK H. MENAKER, ESQ.
LOCKHEED MARTIN CORPORATION
6801 ROCKLEDGE DRIVE
BETHESDA, MARYLAND 20817
(301) 897-6000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS ON
BEHALF OF THE PERSON(S) FILING STATEMENT
with a copy to:
PETER ALLAN ATKINS, ESQ.
LOU R. KLING, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 735-3000
<PAGE>
This Amendment No. 1 amends and supplements the Tender Offer Statement on
Schedule 14D-1 (as may be amended from time to time, the "Schedule 14D-1") of
LAC Acquisition Corporation, a New York corporation (the "Purchaser") and a
wholly-owned subsidiary of Lockheed Martin Corporation, a Maryland corporation
("Lockheed Martin"), filed on January 12, 1996 with the Securities and Exchange
Commission (the "Commission") in respect of the tender offer (the "Offer") by
the Purchaser for all of the outstanding shares of Common Stock, par value $.01
per share, of Loral Corporation (the "Company"). The Offer is being made
pursuant to an Agreement and Plan of Merger dated as of January 7, 1995 by and
among the Company, Purchaser and Lockheed Martin.
Purchaser and Lockheed Martin have made certain minor corrections to the
Offer to Purchase, dated January 12, 1996 (which was filed with the Commission
on January 12, 1996 as Exhibit (a)(1) to the Schedule 14D-1), prior to the
initial distribution to the stockholders of the Company of the printed offer to
purchase. Accordingly, the Purchaser and Parent are hereby amending and
supplementing the Schedule 14D-1 to add as an exhibit thereto a copy of the
final printed version of such Offer to Purchase, as set forth below:
ITEM 11. Material to be Filed as Exhibits.
Item 11 is hereby amended and supplemented by the addition of the following
exhibit thereto:
Exhibit (a)(9) Offer to Purchase, dated January 12, 1996 (final
printed version)
2
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Dated: January 12, 1996 LOCKHEED MARTIN CORPORATION
By: /s/ Marcus C. Bennett
___________________________________
Name: Marcus C. Bennett
Title:Senior Vice President and
Chief Financial Officer
3
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Dated: January 12, 1996 LAC ACQUISITION CORPORATION
By: /s/ Frank H. Menaker, Jr.
___________________________________
Name: Frank H. Menaker, Jr.
Title: Vice President
4
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
Exhibit (a)(9) Offer to Purchase, dated January 12, 1996 (final printed version)
</TABLE>
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
LORAL CORPORATION
AT
$38.00 NET PER SHARE
BY
LAC ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
LOCKHEED MARTIN CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, FEBRUARY 9, 1996, UNLESS THE OFFER IS EXTENDED. LAC
ACQUISITION CORPORATION HAS AGREED, SUBJECT TO THE TERMS AND CONDITIONS OF
THE OFFER, TO EXTEND THE OFFER UNTIL IMMEDIATELY AFTER THE TIME OF THE SPIN-
OFF RECORD DATE (AS DEFINED BELOW).
THE OFFER IS BEING MADE AS A PART OF A SERIES OF TRANSACTIONS THAT ARE
EXPECTED TO RESULT IN (I) THE DISTRIBUTION TO THE STOCKHOLDERS OF LORAL
CORPORATION (THE "COMPANY") OF SHARES OF STOCK IN LORAL SPACE & COMMUNICATIONS,
LTD., A NEWLY-FORMED BERMUDA COMPANY ("LORAL SPACE" OR "SPINCO"), THAT WILL OWN
AND MANAGE SUBSTANTIALLY ALL OF THE COMPANY'S SPACE AND SATELLITE
TELECOMMUNICATIONS INTERESTS, INCLUDING THE COMPANY'S DIRECT AND INDIRECT
INTERESTS IN GLOBALSTAR, L.P. ("GLOBALSTAR") AND SPACE SYSTEMS/LORAL, INC.
("SS/L") AND CERTAIN OTHER ASSETS OF THE COMPANY (THE "SPIN-OFF") AND (II) THE
ACQUISITION OF THE COMPANY'S DEFENSE ELECTRONICS AND SYSTEMS INTEGRATION
BUSINESSES BY LOCKHEED MARTIN CORPORATION ("PARENT") PURSUANT TO THE OFFER AND
MERGER DESCRIBED HEREIN.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER, THE
MERGER AND THE SPIN-OFF, DETERMINED THAT THE OFFER, THE MERGER AND THE SPIN-OFF
ARE FAIR TO THE STOCKHOLDERS OF THE COMPANY AND ARE IN THE BEST INTERESTS OF
THE STOCKHOLDERS OF THE COMPANY, AND RECOMMENDS ACCEPTANCE OF THE OFFER AND
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER BY THE
STOCKHOLDERS OF THE COMPANY.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE A NUMBER OF SHARES OF
COMMON STOCK PAR VALUE $0.25 PER SHARE (INCLUDING THE ASSOCIATED RIGHTS)
(COLLECTIVELY, THE "SHARES"), WHICH, WHEN ADDED TO THE SHARES THEN BENEFICIALLY
OWNED BY PARENT AND ITS AFFILIATES, CONSTITUTES AT LEAST TWO-THIRDS OF THE
TOTAL NUMBER OF SHARES OUTSTANDING AND TWO-THIRDS OF THE VOTING POWER OF THE
SHARES THEN OUTSTANDING ON A FULLY DILUTED BASIS.
--------------
IMPORTANT
Any stockholder desiring to tender Shares should either (1) complete and sign
the Letter of Transmittal (or facsimile thereof) in accordance with the
instructions in the Letter of Transmittal and deliver it to the Depositary with
the certificate(s) representing tendered Shares and all other required
documents or tender such Shares pursuant to the procedures for book-entry
transfer set forth in Section 3 or (2) request his or her broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
him or her. A stockholder having Shares registered in the name of a broker,
dealer, commercial bank, trust company or other nominee must contact such
person if he or she desires to tender such Shares.
Any stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available or who cannot comply
with the procedures for book-entry transfer on a timely basis may tender such
Shares pursuant to the guaranteed delivery procedure set forth in Section 3.
Questions and requests for assistance or additional copies of this Offer to
Purchase and the Letter of Transmittal may be directed to the Information Agent
or the Dealer Manager at their respective addresses and telephone numbers set
forth on the back cover of this Offer to Purchase. Additional copies of this
Offer to Purchase, the Letter of Transmittal and the other tender offer
materials may also be obtained from the Information Agent, the Dealer Manager
or from brokers, dealers, commercial banks or trust companies.
--------------
The Dealer Manager for the Offer is:
BEAR, STEARNS & CO. INC.
January 12, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
------- ----
<C> <S> <C>
1. Terms of the Offer; Expiration Date................................. 3
2. Acceptance for Payment and Payment.................................. 3
3. Procedure for Tendering Shares...................................... 4
4. Withdrawal Rights................................................... 6
5. Certain Tax Considerations.......................................... 6
6. Price Range of Shares; Dividends.................................... 9
7. Certain Information Concerning the Company.......................... 10
8. Certain Information Concerning the Purchaser and Parent............. 13
9. Source and Amounts of Funds......................................... 15
10. Background of the Offer; the Merger Agreement; the Spin-Off; the
Rights Agreement................................................... 17
11. Purpose of the Offer, the Merger and the Spin-Off; Plans for the
Company............................................................ 41
12. Effect of the Offer on the Market for the Shares; Stock Exchange
Listing; Registration under the Exchange Act....................... 42
13. Dividends and Distributions......................................... 43
14. Extension of Tender Period; Amendment; Termination.................. 44
15. Certain Conditions to the Offer..................................... 45
16. Certain Legal Matters; Regulatory Approvals......................... 47
17. Fees and Expenses................................................... 50
18. Miscellaneous....................................................... 50
</TABLE>
Schedule I--Directors and Executive Officers of Parent and the Purchaser
Schedule II--Certain Information About Parent Required by New York Law
Schedule III--Certain Business Relationships Involving Parent, Company and
their Respective Affiliates
Exhibit A--Agreement and Plan of Merger
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To the Holders of Common Stock of
LORAL CORPORATION:
INTRODUCTION
LAC Acquisition Corporation (the "Purchaser"), a New York corporation and a
wholly owned subsidiary of Lockheed Martin Corporation, a Maryland corporation
("Parent"), hereby offers to purchase all outstanding shares of common stock
(the "Common Stock"), par value $0.25 per share, of Loral Corporation, a New
York corporation (the "Company"), and the associated preferred stock purchase
rights (the "Rights"; and together with the Common Stock, the "Shares") at
$38.00 per Share, net to the seller in cash, without interest, upon the terms
and subject to the conditions set forth in this Offer to Purchase and in the
related Letter of Transmittal (which together constitute the "Offer"). The
Rights will be issued on January 22, 1996 pursuant to a Rights Agreement,
dated as of January 10, 1996 (as amended), between the Company and The Bank of
New York (the "Rights Agreement"), and will be evidenced by and trade with
certificates evidencing the Common Stock. See Section 10 for a brief
description of the Rights Agreement and its application to the Offer and the
Merger (as hereinafter defined). Tendering stockholders will not be obligated
to pay brokerage fees or commissions or, except as set forth in Instruction 6
of the Letter of Transmittal, stock transfer taxes on the purchase of Shares
by the Purchaser pursuant to the Offer. The Purchaser will pay all charges and
expenses of Bear, Stearns & Co. Inc. ("Bear Stearns"), which is acting as
Dealer Manager for the Offer (in such capacity, the "Dealer Manager"), First
Chicago Trust Company of New York (the "Depositary") and Morrow & Co. (the
"Information Agent") incurred in connection with the Offer. See Section 17.
For purposes of this Offer to Purchase, references to "Section" are references
to a section of this Offer to Purchase, unless the context otherwise requires.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED BELOW) A
NUMBER OF SHARES WHICH WHEN ADDED TO THE SHARES THEN BENEFICIALLY OWNED BY
PARENT REPRESENT AT LEAST TWO-THIRDS OF THE TOTAL NUMBER OF SHARES OUTSTANDING
AND TWO-THIRDS OF THE VOTING POWER OF THE SHARES OUTSTANDING ON A FULLY
DILUTED BASIS (THE "MINIMUM CONDITION"). SEE SECTION 15.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD OF DIRECTORS" OR THE
"BOARD") HAS UNANIMOUSLY APPROVED THE OFFER, THE MERGER AND THE SPIN-OFF,
DETERMINED THAT THE OFFER, THE MERGER AND THE SPIN-OFF ARE FAIR TO THE
STOCKHOLDERS OF THE COMPANY AND ARE IN THE BEST INTERESTS OF THE STOCKHOLDERS
OF THE COMPANY, AND RECOMMENDS ACCEPTANCE OF THE OFFER AND APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE MERGER BY THE STOCKHOLDERS OF THE
COMPANY.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of January 7, 1996 (the "Merger Agreement"), among Parent, the Purchaser
and the Company. The Merger Agreement provides, among other things, that, upon
the terms and subject to the conditions therein, as soon as practicable after
the satisfaction or waiver of certain conditions, including the consummation
of the Offer and the Spin-Off and the approval and adoption of the Merger
Agreement by the stockholders of the Company, if required by applicable law,
the Purchaser will be merged with and into the Company (the "Merger"), with
the Company being the corporation surviving the Merger (the "Surviving
Corporation"). Each issued and outstanding Share (other than Dissenting Shares
(as hereinafter defined)) not owned by Parent, the Purchaser, the Company or
any of their subsidiaries other than a Retained Subsidiary (as defined in
Section 10) will be converted into and represent the right to receive $38.00
in cash or any higher price that may be paid per Share in the Offer, without
interest (the "Merger Price"). See Section 10.
Following the consummation of the Offer, the Company will distribute (the
"Spin-Off") common stock (the "Loral Space Shares" or "Spinco Shares") of
Loral Space & Communications, Ltd. a newly-formed Bermuda company and a wholly
owned subsidiary of the Company ("Loral Space" or "Spinco"), to the holders of
Shares on a record date to be determined by the Board of Directors of the
Company (the "Spin-Off Record
1
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Date"), in accordance with the terms of a Restructuring, Financing and
Distribution Agreement, dated as of January 7, 1996, among Parent, the
Company, Loral Telecommunications Acquisition, Inc. (the predecessor-in-
interest of Loral Space) and certain subsidiaries of the Company (the
"Distribution Agreement"). The Distribution Agreement and each of the
agreements entered into in connection with the Merger Agreement and the
Distribution Agreement are hereinafter sometimes referred to as the "Ancillary
Agreements." The parties to the Distribution Agreement have agreed to use
their reasonable efforts to cause the Spin-Off Record Date to be established
so as to occur immediately prior to the acceptance for payment of Shares by
the Purchaser pursuant to the Offer and have also agreed that in no event
shall the Spin-Off Record Date be established so as to occur as of or at any
time after the acceptance for payment by the Purchaser of the Shares pursuant
to the Offer. As a result, a record holder of Shares who tenders Shares
pursuant to the Offer (and who does not subsequently withdraw and sell such
Shares) is expected to be the record holder thereof on the Spin-Off Record
Date. Accordingly, in the event that Shares are accepted for payment pursuant
to the Offer, such record holders will be entitled to receive, in respect of
each Share tendered, $38.00 net in cash (without interest) from the Purchaser
and one Loral Space Share from the Company. As a result of the Spin-Off, Loral
Space will own and manage substantially all of the space and satellite
telecommunications interests of the Company and its subsidiaries, including,
without limitation, the Company's interests in Globalstar, L.P. ("Globalstar")
and Space Systems/Loral, Inc. ("SS/L") and certain other assets of the
Company. In addition, pursuant to the terms of the Distribution Agreement,
cash which Parent will provide in the amount of $712,400,000, subject to
adjustment under certain circumstances, will be included in the assets
contributed to Loral Space by the Company in connection with the Spin-Off
("Loral Space Cash Amount" or "Spinco Cash Amount"), of which $344,000,000 is
being contributed by the Company to Loral Space in consideration for the
acquisition by the Company of shares of preferred stock of Loral Space that
are convertible into 20% of Loral Space's common stock on a fully diluted
basis. After the Spin-Off, the Company will continue to own and operate the
defense electronics and systems integration businesses and other businesses of
the Company not transferred to Loral Space (collectively, the "Retained
Business") and the preferred stock referred to above. Accordingly, upon
consummation of the Offer, the Spin-Off and the Merger, Parent will have
acquired the Retained Business and a 20% fully-diluted equity interest in
Loral Space. Consummation of the Offer is conditioned upon, among other
things, the Spin-Off Record Date having been set (the "Spin-Off Condition").
The Spin-Off Record Date is not expected to occur until immediately prior to
the expiration of the Offer. The Merger is conditioned upon, among other
things, the Spin-Off having been consummated in all material respects. The
distribution of the Loral Space Shares pursuant to the Spin-Off is conditioned
upon the Purchaser having notified the Company that it is prepared to
immediately accept for payment Shares tendered pursuant to the Offer. In the
Merger Agreement, the Purchaser has agreed to extend the Offer until
immediately after the time of the Spin-Off Record Date. The Company has
advised Parent and the Purchaser that, prior to the time notice of the Spin-
Off Record Date is given and at least ten days prior to the Expiration Date
(as defined below), it expects to distribute to holders of Shares an
information statement or a prospectus with respect to the business, operations
and management of Loral Space (the "Information Statement"). See Section 10.
Lazard Freres & Co. LLC ("Lazard Freres"), one of the financial advisors to
the Company, has delivered to the Board of Directors of the Company its
written opinion that the aggregate consideration to be received by the holders
of Shares in the Offer, the Merger and the Spin-Off is fair to the holders of
Shares from a financial point of view. A copy of such opinion is included with
the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9"), which is being mailed to stockholders concurrently
herewith, and stockholders are urged to read the opinion in its entirety for a
description of the assumptions made, factors considered and procedures
followed by Lazard Freres.
According to the Company, as of December 31, 1995, there were 173,068,379
Shares outstanding and 11,131,234 Shares that may be issued prior to the
Expiration Date upon the exercise of stock options and other rights issued
under the Company's stock option plans. As a result, the Purchaser believes
that the Minimum Condition would be satisfied if at least 122,799,742 Shares
are validly tendered and not withdrawn prior to the Expiration Date.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
2
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1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the
conditions of the Offer, the Purchaser will accept for payment and pay for all
Shares that have been validly tendered prior to the Expiration Date and not
withdrawn as permitted by Section 4. The term "Expiration Date" means 12:00
Midnight, New York City time, on February 9, 1996, unless and until the
Purchaser, as provided below, shall have extended the period of time for which
the Offer is open, in which event the term "Expiration Date" means the latest
time and date at which the Offer, as so extended by the Purchaser, shall
expire. Pursuant to the Merger Agreement, the Purchaser, subject to the terms
and conditions of the Offer, will extend the period of time during which the
Offer is open if the Offer would otherwise expire prior to the Spin-Off Record
Date or the expiration or termination of any applicable waiting period under
the Antitrust Laws (as defined in Section 10 below). The Purchaser will not
otherwise extend the period of time during which the Offer is open unless any
of the conditions described in Section 15 shall not have been satisfied, or
unless Parent reasonably determines that such extension is necessary to comply
with any legal or regulatory requirements relating to the Offer or the Spin-
off. The Purchaser expressly reserves the right to amend the terms and
conditions of the Offer; provided that, without the consent of the Company, no
amendment may be made which (i) decreases the price per Share or changes the
form of consideration payable in the Offer, (ii) decreases the number of
Shares sought, or (iii) imposes additional conditions to the Offer or amends
the terms of the Offer in a manner materially adverse to the holders of
Shares.
The Offer is subject to certain conditions set forth in Section 15,
including satisfaction of the Minimum Condition, the Spin-Off Condition and
the expiration or termination of any waiting period under the Antitrust Laws.
If any such condition is not satisfied prior to the expiration of the Offer,
the Purchaser may, subject to the terms of the Merger Agreement, (i) terminate
the Offer and return all tendered Shares to tendering stockholders, (ii)
extend the Offer and, subject to withdrawal rights as set forth in Section 4,
retain all such Shares until the expiration of the Offer as so extended, (iii)
other than as described in Section 15, waive such condition and, subject to
any requirement to extend the period of time during which the Offer is open,
purchase all Shares validly tendered and not withdrawn by the Expiration Date
or (iv) delay acceptance for payment of (whether or not the Shares have
theretofore been accepted for payment), or payment for, any Shares tendered
and not withdrawn, subject to applicable law, until satisfaction or waiver of
the conditions to the Offer. In the Merger Agreement, the Purchaser has
agreed, subject to the conditions in Section 15 and its rights under the
Offer, to accept for payment Shares as promptly as practicable following the
expiration of the Offer. For a description of the Purchaser's right to extend
the period of time during which the Offer is open, and to amend, delay or
terminate the Offer, see Section 14.
The Company has provided or will provide (upon request of Parent or the
Purchaser) the Purchaser with the Company's stockholder list and security
position listings for the purpose of disseminating the Offer to holders of
Shares. This Offer to Purchase and the related Letter of Transmittal will be
mailed to record holders of Shares and will be furnished to brokers, banks and
similar persons whose names, or the names of whose nominees, appear on the
stockholder list or, if applicable, who are listed as participants in a
clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT. Upon the terms and subject to the
conditions of the Offer, the Purchaser will accept for payment and pay for all
Shares validly tendered and not properly withdrawn by the Expiration Date as
soon as practicable after the later of (i) the Expiration Date and (ii) the
satisfaction or waiver of the conditions set forth in Section 15 (the "Offer
Purchaser Date"). For a description of the Purchaser's right to terminate the
Offer and not accept for payment or pay for Shares or to delay acceptance for
payment or payment for Shares, see Section 14.
For purposes of the Offer, the Purchaser shall be deemed to have accepted
for payment tendered Shares when, as and if the Purchaser gives oral or
written notice to the Depositary of its acceptance of the tender of such
Shares. Payment for Shares accepted for payment pursuant to the Offer will be
made by deposit of the purchase price with the Depositary, which will act as
agent for the tendering stockholders for the purpose of receiving payments
from the Purchaser and transmitting such payments to tendering stockholders.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of certificates for
such Shares (or of a confirmation of a book-entry transfer of such Shares into
the Depositary's account at one of the Book-Entry Transfer Facilities (as
defined in Section 3)), a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) and any other required documents. For a
3
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description of the procedure for tendering Shares pursuant to the Offer, see
Section 3. Accordingly, payment may be made to tendering stockholders at
different times if delivery of the Shares and other required documents occur
at different times. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID BY THE
PURCHASER ON THE CONSIDERATION PAID FOR SHARES PURSUANT TO THE OFFER,
REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT.
If the Purchaser increases the consideration to be paid for Shares pursuant
to the Offer, the Purchaser will pay such increased consideration for all
Shares purchased pursuant to the Offer.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to one or more of its affiliates the right to purchase
Shares tendered pursuant to the Offer, but any such transfer or assignment
will not relieve the Purchaser of its obligations under the Offer or prejudice
the rights of tendering stockholders to receive payment for Shares validly
tendered and accepted for payment.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if certificates are submitted for more Shares than are tendered,
certificates for such unpurchased or untendered Shares will be returned (or,
in the case of Shares tendered by book-entry transfer, such Shares will be
credited to an account maintained at one of the Book-Entry Transfer
Facilities), without expense to the tendering stockholder, as promptly as
practicable following the expiration or termination of the Offer.
3. PROCEDURE FOR TENDERING SHARES. To tender Shares pursuant to the Offer,
either (a) a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) and any other documents required by the Letter of
Transmittal must be received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase and either (i) certificates
for the Shares to be tendered must be received by the Depositary at one of
such addresses or (ii) such Shares must be delivered pursuant to the
procedures for book-entry transfer described below (and a confirmation of such
delivery received by the Depositary including an Agent's Message (as defined
below) if the tendering stockholder has not delivered a Letter of
Transmittal), in each case prior to the Expiration Date, or (b) the guaranteed
delivery procedure described below must be complied with. The term "Agent's
Message" means a message transmitted by a Book-Entry Transfer Facility to and
received by the Depositary and forming a part of a book-entry confirmation,
which states that such Book-Entry Transfer Facility has received an express
acknowledgement from the participant in such Book-Entry Transfer Facility
tendering the Shares which are the subject of such book-entry confirmation
that such participant has received and agrees to be bound by the terms of the
Letter of Transmittal and that the Company may enforce such agreement against
such participant.
The Depositary will establish an account with respect to the Shares at each
of The Depository Trust Company, Midwest Securities Trust Company and
Philadelphia Depository Trust Company (collectively referred to as the "Book-
Entry Transfer Facilities") for purposes of the Offer within two business days
after the date of this Offer to Purchase, and any financial institution that
is a participant in the system of any Book-Entry Transfer Facility may make
delivery of Shares by causing such Book-Entry Transfer Facility to transfer
such Shares into the Depositary's account in accordance with the procedures of
such Book-Entry Transfer Facility. However, although delivery of Shares may be
effected through book-entry transfer, the Letter of Transmittal (or facsimile
thereof) properly completed and duly executed together with any required
signature guarantees or an Agent's Message and any other required documents
must, in any case, be received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase prior to the Expiration
Date, or the guaranteed delivery procedure described below must be complied
with. Delivery of the Letter of Transmittal and any other required documents
to a Book-Entry Transfer Facility does not constitute delivery to the
Depositary.
Except as otherwise provided below, all signatures on a Letter of
Transmittal must be guaranteed by a recognized member of a Medallion Signature
Guarantee Program (each, of the foregoing, an "Eligible Institution").
Signatures on a Letter of Transmittal need not be guaranteed (a) if the Letter
of Transmittal is signed by the registered holder of the Shares tendered
therewith and such holder has not completed the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (b) if such Shares are tendered
for the account of an Eligible Institution. See Instructions 1 and 5 of the
Letter of Transmittal.
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If a stockholder desires to tender Shares pursuant to the Offer and such
stockholder's certificates evidencing such Shares are not immediately
available or such stockholder cannot deliver such Shares and all other
required documents to the Depositary by the Expiration Date, or such
stockholder cannot complete the procedure for delivery by book-entry transfer
on a timely basis, such Shares may nevertheless be tendered if all of the
following conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed Delivery
substantially in the form provided by the Purchaser is received by the
Depositary (as provided below) by the Expiration Date; and
(iii) the certificates for such Shares (or a confirmation of a book-entry
transfer of such Shares into the Depositary's account at one of the Book-
Entry Transfer Facilities), together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantee or an Agent's Message and any other documents required
by the Letter of Transmittal, are received by the Depositary within five
New York Stock Exchange, Inc. ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, telex, facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in such
Notice.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING THROUGH BOOK-ENTRY TRANSFER FACILITIES, IS AT THE OPTION
AND RISK OF THE TENDERING STOCKHOLDER AND THE DELIVERY WILL BE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF CERTIFICATES FOR SHARES ARE
SENT BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED,
IS RECOMMENDED.
Under the federal income tax laws, the Depositary will be required to
withhold 31% of the amount of any payments made to certain stockholders
pursuant to the Offer. In order to avoid such backup withholding, each
tendering stockholder must provide the Depositary with such stockholder's
correct taxpayer identification number and certify that such stockholder is
not subject to such backup withholding by completing the Substitute Form W-9
included in the Letter of Transmittal (see Instruction 10 of the Letter of
Transmittal) or by filing a Form W-9 with the Depositary prior to any such
payments. If the stockholder is a nonresident alien or foreign entity not
subject to back-up withholding, the stockholder must give the Depositary a
completed Form W-8 Certificate of Foreign Status prior to receipt of any
payments.
By executing a Letter of Transmittal, a tendering stockholder irrevocably
appoints designees of the Purchaser as such stockholder's proxies in the
manner set forth in the Letter of Transmittal to the full extent of such
stockholder's rights with respect to the Shares tendered by such stockholder
and accepted for payment by the Purchaser (and any and all other Shares or
other securities issued or issuable in respect of such Shares on or after
January 7, 1996, other than any Loral Space Shares distributed in respect of
the Shares in connection with the Spin-Off). All such proxies shall be
irrevocable and coupled with an interest in the tendered Shares. Such
appointment is effective only upon the acceptance for payment of such Shares
by the Purchaser. Upon such acceptance for payment, all prior proxies and
consents granted by such stockholder with respect to such Shares and other
securities will, without further action, be revoked, and no subsequent proxies
may be given nor subsequent written consents executed by such stockholder
(and, if given or executed, will be deemed ineffective). Such designees of the
Purchaser will be empowered to exercise all voting and other rights of such
stockholder as they, in their sole discretion, may deem proper at any annual,
special or adjourned meeting of the Company's stockholders, by written consent
or otherwise. The Purchaser reserves the right to require that, in order for
Shares to be validly tendered, immediately upon the Purchaser's acceptance for
payment of such Shares, the Purchaser is able to exercise full voting rights
with respect to such Shares and other securities (including voting at any
meeting of stockholders then scheduled or acting by written consent without a
meeting).
5
<PAGE>
The NYSE has advised Parent and the Purchaser that it expects that
commencing two business days prior to the Spin-Off Record Date and up to the
date Shares are distributed pursuant to the Spin-Off, the Shares will trade on
the NYSE with due bills attached. Such due bills will entitle a purchaser of a
Share during such period to receive one Loral Space Share from the seller of
the Share, when and if such seller receives Loral Space Shares in the
Distribution. If Shares are not accepted for purchase pursuant to the Offer
and Loral Space Shares are not issued in the Distribution, the due bills will
become null and void. Due bills are separate instruments from the Shares which
are the subject of the Offer; accordingly, due bills should not be tendered to
the Purchaser in the Offer.
A tender of Shares pursuant to any one of the procedures described above
will constitute the tendering stockholder's acceptance of the terms and
conditions of the Offer, as well as the tendering stockholder's representation
and warranty that such stockholder has the full power and authority to tender
and assign the Shares tendered, as specified in the Letter of Transmittal. The
Purchaser's acceptance for payment of Shares tendered pursuant to the Offer
will constitute a binding agreement between the tendering stockholder and the
Purchaser upon the terms and subject to the conditions of the Offer.
All questions as to the form of documents and the validity, eligibility
(including time of receipt) and acceptance for payment of any tender of Shares
will be determined by the Purchaser, in its sole discretion, which
determination shall be final and binding. The Purchaser reserves the absolute
right to reject any or all tenders of Shares determined by it not to be in
proper form or the acceptance for payment of or payment for which may, in the
opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves
the absolute right to waive any defect or irregularity in any tender of
Shares. No tender of Shares will be deemed to have been properly made until
all defects and irregularities relating thereto have been cured or waived. The
Purchaser's interpretation of the terms and conditions of the Offer in this
regard will be final and binding. None of the Purchaser, Parent, the Dealer
Manager, the Depositary, the Information Agent or any other person will be
under any duty to give notification of any defect or irregularity in tenders
or incur any liability for failure to give any such notification.
4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date. Thereafter, such tenders
are irrevocable, except that they may be withdrawn after March 11, 1996 unless
theretofore accepted for payment as provided in this Offer to Purchase.
To be effective, a written, telegraphic, telex or facsimile transmission
notice of withdrawal must be timely received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase and must
specify the name of the person who tendered the Shares to be withdrawn and the
number of Shares to be withdrawn and the name of the registered holder of the
Shares, if different from that of the person who tendered such Shares. If the
Shares to be withdrawn have been delivered to the Depositary, a signed notice
of withdrawal with (except in the case of Shares tendered by an Eligible
Institution) signatures guaranteed by an Eligible Institution must be
submitted prior to the release of such Shares. In addition, such notice must
specify, in the case of Shares tendered by delivery of certificates, the name
of the registered holder (if different from that of the tendering stockholder)
and the serial numbers shown on the particular certificates evidencing the
Shares to be withdrawn. Withdrawals may not be rescinded, and Shares withdrawn
will thereafter be deemed not validly tendered for purposes of the Offer.
However, withdrawn Shares may be retendered by again following one of the
procedures described in Section 3 at any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by the Purchaser, in its sole
discretion, which determination shall be final and binding. None of the
Purchaser, Parent, the Dealer Manager, the Depositary, the Information Agent
or any other person will be under any duty to give notification of any defect
or irregularity in any notice of withdrawal or incur any liability for failure
to give any such notification.
5. CERTAIN TAX CONSIDERATIONS. The following summary addresses the material
federal income tax consequences to holders of Shares who sell their Shares in
the Offer. The summary does not address all aspects of federal income taxation
that may be relevant to particular holders of Shares and thus, for example,
may not be applicable to holders of Shares who are not citizens or residents
of the United States or holders of Shares who are employees and who acquired
their Shares pursuant to the exercise of incentive stock options; nor does
this summary address the effect of any applicable foreign, state, local or
other tax laws. The discussion assumes that
6
<PAGE>
each holder of Shares holds such Shares as a capital asset within the meaning
of Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code").
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE PRECISE
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF THE PROPOSED
TRANSACTIONS.
Tax Consequences of Receipt of Cash and Loral Space Shares. Assuming that
the Purchaser accepts Shares pursuant to the Offer, and the Spin-Off and the
Merger are consummated, stockholders who hold their Shares of record on the
Spin-Off Record Date, and who also tender their Shares in the Offer or have
such Shares exchanged for the Merger Price upon consummation of the Merger,
will receive for each such Share consideration consisting of (i) one Loral
Space Share and (ii) $38.00 in cash. Stockholders who hold their Shares of
record on the Spin-Off Record Date, and who sell such Shares after the date as
of which the Spin-Off shall be effected (the "Distribution Date") other than
pursuant to the Offer or the Merger, will receive consideration consisting of
(i) one Loral Space Share for each Share held on the Spin-Off Record Date and
(ii) the proceeds from the sale of their Shares. In each of the above-
mentioned cases, the receipt of such consideration will be a taxable
transaction for federal income tax purposes.
The proper federal income tax characterization of the Spin-Off as either a
dividend or as proceeds from the sale or exchange of Shares is unclear. When
addressing the issue of whether a distribution from a corporation in
connection with a disposition of all of the shares of that corporation is
treated as sale proceeds or as an ordinary income dividend, the courts and the
Internal Revenue Service ("IRS") have each reached inconsistent positions and
have used inconsistent methods of analysis.
Certain authorities support treatment of the Offer, the Spin-Off and the
Merger as a single integrated transaction in which a holder of Shares receives
the cash in an actual exchange for a portion of such holder's Shares and
receives the Loral Space Shares in a constructive redemption of such holder's
remaining Shares. Parent and the Company have agreed to treat the purchase of
Shares in the Offer, the Spin-Off and the Merger in accordance with this
analysis for all tax purposes. If this treatment applies, a holder of Shares
would recognize gain or loss equal to the difference between (i) the sum of
the amount of cash plus the fair market value of the Loral Space Shares
received (which fair market value generally should equal the trading value per
Loral Space Share on the Distribution Date) and (ii) such holder's adjusted
tax basis for such holder's Shares. Such gain or loss will be capital gain or
loss and will be long-term capital gain or loss if, on the date of the
exchange, the stockholder has held the Shares for more than one year.
Although there are authorities supporting the view that the Loral Space
Shares received in the Spin-Off should be treated as having been received in a
constructive redemption of a portion of the Shares, certain other authorities
support treating the receipt of the Loral Space Shares as taxable in an
independent transaction. If the Spin-Off was treated as an independent
transaction, the fair market value of the Loral Space Shares would be taxable
to the recipient as a distribution from the Company under Section 301 of the
Code. It is also possible that the portion of the value of the Loral Space
Shares equal to a pro rata portion of some or all of the Loral Space Cash
Amount could be treated as received in exchange for such holder's Shares, with
only the remaining portion of the value of the Loral Space Shares treated as a
distribution under Section 301. In either case, the cash received by a holder
of Shares would still be treated as received in exchange for such holder's
Shares and would be subject to tax in the manner described above.
Under Section 301 of the Code, the amount of the distribution would be
taxable as a dividend for federal income tax purposes to the extent of the
Company's current and accumulated earnings and profits. The amount of the
distribution that exceeds such earnings and profits would first be treated as
a non-taxable return of capital to the extent of the stockholder's tax basis
in such stockholder's Shares, and such stockholder's tax basis in such Shares
would be reduced accordingly (but not below zero), and thereafter as capital
gain. The determination of a corporation's earnings and profits requires
complex factual and legal analyses; moreover, the amount of a corporation's
current earnings and profits cannot be determined until the close of its
taxable year. Nonetheless, the Company has informed the Purchaser that the
Company believes, based upon present estimates of its current and accumulated
earnings and profits, that the Company's earnings and profits should exceed
the amount of any such distribution. To the extent, if any, that the receipt
of Loral Space Shares is treated as a dividend under the foregoing rules,
certain corporate stockholders may be eligible for the "dividends received
deduction" ("DRD") with respect to such dividend, subject to certain holding
period and other limitations. Any such dividend received by a corporate
stockholder eligible for the DRD would constitute an "extraordinary dividend"
subject to the
7
<PAGE>
provisions of Section 1059 of the Code if, in general, the value of the
distribution, together with any other distributions received by such holder
with respect to its Shares during the 85-day period preceding the Spin-Off,
exceeds 10% of the holder's basis in its Shares. If Section 1059 were to
apply, a corporate stockholder that has not held its Shares for a period of
two years prior to the dividend announcement date would be required to reduce
its basis in (thereby increasing its gain on the disposition of) such Shares
by the portion of the dividend that was excluded from income by reason of the
DRD.
Under current law, the maximum federal tax rate applicable to long-term
capital gains recognized by an individual is 28%, and the maximum federal tax
rate applicable to ordinary income (including dividends) and short-term
capital gains recognized by individuals is 39.6%. The maximum federal tax rate
applicable to all capital gains and ordinary income recognized by a
corporation is 35%. It is possible that legislation may be enacted that would
reduce the maximum federal tax rate applicable to long-term capital gains,
possibly with retroactive effect. It is not possible to predict whether or in
what form any such legislation may be enacted.
Regardless of whether the receipt of the Loral Space Shares is treated as a
constructive redemption or a distribution under Section 301 of the Code, a
holder's tax basis in the Loral Space Shares generally will be equal to the
fair market value of the Loral Space Shares on the Distribution Date, and such
holder's holding period for the Loral Space Shares will begin on the day after
the Distribution Date.
Dissenters. A holder of Shares who does not sell Shares in the Offer or the
Merger and who exercises and perfects his rights under the NYBCL to demand
fair value for such Shares (See Section 10) will recognize capital gain or
loss (and may recognize an amount of interest income) attributable to any
payment received pursuant to the exercise of such rights and may recognize
capital gain or loss or dividend income on the receipt of Loral Space Shares
based upon the principles described above.
Withholding. Unless a stockholder complies with certain reporting and/or
certification procedures or is an exempt recipient under applicable provisions
of the Code (and regulations promulgated thereunder), such stockholder may be
subject to a "backup" withholding tax of 31% with respect to any payments
received in the Offer, the Merger or as a result of the exercise of the
holder's dissenters' rights. Stockholders should contact their brokers to
ensure compliance with such procedures. Foreign stockholders should consult
with their tax advisors regarding withholding taxes in general.
Real Estate Transfer Taxes. Certain states and localities, including New
York State and New York City, impose taxes on certain transfers of controlling
interests (including transfers pursuant to transactions such as the Offer and
the Merger) in entities that own real property (including certain leasehold
interests) located in such states and localities ("Real Property Transfer
Taxes"). Pursuant to the Tax Sharing Agreement (defined below) Parent and the
Company have generally agreed to file any tax returns in respect of Real
Property Transfer Taxes required to be filed in connection with the Offer or
the Merger and to pay any Real Property Taxes required to be paid as a result
of the Offer or the Merger. Although there is no authority directly on point,
it is possible that payment of such Real Property Transfer Taxes would not be
a taxable event to the stockholders of the Company, or alternatively, that
payment of such Real Property Transfer Taxes would be treated as either
additional sale proceeds or a deemed distribution taxable as a dividend to the
stockholders of the Company.
THE FOREGOING SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES IS INCLUDED HEREIN
FOR GENERAL INFORMATION PURPOSES ONLY. ACCORDINGLY, EACH HOLDER OF SHARES IS
URGED TO CONSULT HIS OR HER OWN TAX ADVISOR REGARDING THE FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF THE OFFER, THE MERGER AND THE
SPIN-OFF.
8
<PAGE>
6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and traded on the
NYSE under the Symbol "LOR". The following table sets forth, for the calendar
periods indicated, the high and low sales prices and dividends paid per share
for the Shares on the NYSE as adjusted to reflect the two-for-one stock split
distributed on October 7, 1993 and the two-for-one stock split distributed on
September 29, 1995.
<TABLE>
<CAPTION>
HIGH LOW DIVIDEND
--------- --------- --------
<S> <C> <C> <C>
1993 Quarterly Summary:
First Quarter.............................. $14 13/32 $11 1/8 $0.063
Second Quarter............................. $15 1/8 $12 23/32 $0.063
Third Quarter.............................. $16 3/8 $14 1/2 $0.070
Fourth Quarter............................. $19 3/8 $14 1/2 $0.070
1994 Quarterly Summary:
First Quarter.............................. $21 3/8 $17 15/16 $0.070
Second Quarter............................. $20 3/8 $16 3/4 $0.070
Third Quarter.............................. $21 3/8 $16 3/4 $0.075
Fourth Quarter............................. $20 7/16 $18 11/16 $0.075
1995 Quarterly Summary:
First Quarter.............................. $22 3/16 $18 3/16 $0.075
Second Quarter............................. $26 7/16 $21 3/16 $0.075
Third Quarter.............................. $29 5/16 $24 7/8 $0.080
Fourth Quarter............................. $36 1/4 $26 7/8 $0.080
</TABLE>
The Merger Agreement prohibits the Company from declaring or paying any
dividend or distribution on the Shares (other than the Spin-Off), except that
the Company may declare and pay to holders of Shares regular quarterly
dividends of not more than $0.08 per Share on the dividend and payment dates
normally applicable to the Shares.
The closing sales price of the Shares as reported by the NYSE was $36.25 per
share on January 5, 1996, the last full day of trading prior to the first
public announcement of the Offer.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
9
<PAGE>
7. CERTAIN INFORMATION CONCERNING THE COMPANY. The Company is a New York
corporation and its principal executive offices are located at 600 Third
Avenue, New York, New York 10016. Through its subsidiaries and divisions, the
Company is a leading supplier of advanced electronic systems, components and
services to U.S. and foreign governments for defense and non-defense
applications, The Company's principal business areas are: electronic combat;
training and simulation; tactical weapons; command, control, communications
and intelligence (C/3/I)/reconnaissance; systems integration; and
telecommunications and space systems. The Company has achieved an incumbent
position on a wide range of existing programs through internal growth and
development and a series of acquisitions focused on its core technologies.
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and is required to file
reports and other information with the Securities and Exchange Commission (the
"Commission") relating to its business, financial condition and other matters.
Information, as of particular dates, concerning the Company's directors and
officers, their remuneration, options granted to them, the principal holders
of the Company's securities and any material interest of such persons in
transactions with the Company is required to be described in periodic
statements distributed to the Company's stockholders and filed with the
Commission. These reports, proxy statements and other information, including
the Company's Annual Report on Form 10-K for the year ended March 31, 1995
(the "Company 10-K") and the Schedule 14D-9, should be available for
inspection and copying at the Commission's office at 450 Fifth Street, N.W.,
Washington D.C. 20549, and at the regional offices of the Commission located
at 75 Park Place, New York, New York 10007 and Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of this
material may also be obtained by mail, upon payment of the Commission's
customary fees, from the Commission's principal office at 450 Fifth Street,
N.W., Washington, D.C. 20549.
The above information concerning the Company and the information contained
herein regarding the Spin-Off have been taken from or based upon the Company
10-K and other publicly available documents on file with the Commission, other
publicly available information and information provided by the Company.
Although neither the Purchaser nor Parent has any knowledge that would
indicate that such information is untrue, neither the Purchaser nor Parent nor
the Dealer Manager takes any responsibility for, or makes any representation
with respect to, the accuracy or completeness of such information or for any
failure by the Company to disclose events that may have occurred and may
affect the significance or accuracy of any such information but which are
unknown to the Purchaser or Parent or the Dealer Manager.
A copy of this Offer to Purchase, and certain of the agreements referred to
herein, are attached as exhibits to the Purchaser's Tender Offer Statement on
Schedule 14D-1, dated January 12, 1996 (the "Schedule 14D-1"), which has been
filed with the Commission. The Schedule 14D-1 and the exhibits thereto, along
with such other documents as may be filed by the Purchaser with the
Commission, may be examined and copied from the offices of the Commission in
the manner set forth in the second paragraph of this Section 7.
10
<PAGE>
Summary Financial Information for the Company. The following table sets
forth certain summary consolidated financial information with respect to the
Company and its subsidiaries excerpted or derived from the audited financial
statements contained in the Company's annual report on Form 10-K and the
unaudited financial information contained in the Company's Quarterly Reports
on Form 10-Q for the six months ended September 30, 1995 and 1994. More
comprehensive financial information is included in such reports and other
documents filed by the Company with the Commission, and the following summary
is qualified in its entirety by reference to such documents (which may be
inspected and obtained as described above), including the financial statements
and related notes contained therein. Neither Parent nor the Purchaser nor the
Dealer Manager assumes any responsibility for the accuracy of the financial
information set forth below.
LORAL CORPORATION
SUMMARY FINANCIAL INFORMATION--(NOTE 1)
(IN MILLIONS)
<TABLE>
<CAPTION>
UNAUDITED
SIX MONTHS ENDED AUDITED FROM 10-K
SEPTEMBER 30, YEARS ENDED MARCH 31,
----------------- --------------------------
1995 1994 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Sales......................... $3,109.1 $2,690.1 $5,484.4 $4,008.7 $3,335.4
Operating Income.............. 318.7 236.7 564.5 401.4 296.3
Income Before Extraordinary
Item and Cumulative Effect of
Changes in Accounting........ 151.3 121.2 288.4 228.3 159.1
Net Income (Loss)............. 151.3 121.2 288.4 228.3 (92.1)
<CAPTION>
SEPTEMBER 30, MARCH 31,
----------------- --------------------------
1995 1994 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total Assets.................. $5,827.6 $5,011.0 $4,810.3 $5,176.2 $3,228.1
Working Capital............... 533.8 686.5 536.6 554.4 610.5
Total Debt.................... 1,833.3 1,559.0 1,316.5 1,798.0 534.0
Shareholders' Equity.......... 1,859.4 1,502.8 1,687.5 1,381.3 1,187.9
</TABLE>
- --------
Note 1: The accompanying unaudited, consolidated, summary financial
information consists of the consolidated financial information of the
various businesses of the Company.
11
<PAGE>
Summary Financial Information for Retained Business. The summary unaudited
financial data for the Retained Business (the "Retained Business Financial
Data") in the following table has been provided to Parent and the Purchaser by
the Company. The Company has advised Parent and the Purchaser that the
Retained Business Financial Data has been derived from the consolidated
financial statements of the Company. This financial data is presented in
considerably less detail than complete financial statements and does not
include all of the disclosures required by generally accepted accounting
principles. Neither Parent nor the Purchaser nor the Dealer Manager assumes
any responsibility for the accuracy of the Retained Business Financial
Statements.
RETAINED BUSINESS
SUMMARY FINANCIAL INFORMATION--(NOTE 1)
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, YEAR ENDED MARCH 31,
----------------- -----------------------------------
1995 1994 1995 1994 1993
-------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATING DATA: $ $ $
Sales................... $3,109.1 $2,690.1 $5,484.4 $4,008.7 $3,335.4
Operating Income........ 317.8 235.9 564.5 401.2 295.4
Income Before
Extraordinary Item and
Cumulative Effect of
Changes in Accounting.. 159.9 118.8 296.2 231.9 164.3
Net Income (Loss)....... 159.9 118.8 296.2 231.9 (80.1)
<CAPTION>
SEPTEMBER 30, MARCH 31,
----------------- -----------------------------------
1995 1994 1995 1994 1993
-------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total Assets............ $5,572.5 $4,852.7 $4,558.3 $5,016.9 $3,091.1
Working Capital......... 511.8 686.7 531.4 551.2 606.7
Total Debt.............. 1,833.3 1,559.0 1,316.5 1,798.0 534.0
Shareholders' Equity.... 1,592.1 1,344.9 1,430.3 1,218.8 1,047.1
</TABLE>
- --------
Note 1: The accompanying unaudited, consolidated, summary financial
information consists of the consolidated financial information of the
various businesses of the Company which constitute the Retained Business.
12
<PAGE>
Projected Financial Information. In the course of the discussions between
representatives of Parent and the Company (see Section 10), the Company
provided Parent with certain projected financial data for the fiscal years
ending March 31, 1996, March 31, 1997, March 31, 1998 and March 31, 1999. This
data was not prepared with a view to public disclosure or compliance with
published guidelines of the Commission or the guidelines established by the
American Institute of Certified Public Accountants regarding projections, and
is included in this Offer to Purchase only because it was provided to Parent.
The Company's independent auditors have not examined, compiled or applied any
procedures with respect to this data and express no opinion or any kind of
assurance thereon. None of Parent, the Purchaser or the Company, or any of
their respective financial advisors or the Dealer Manager assumes any
responsibility for the validity, reasonableness, accuracy or completeness of
this projected data. While presented with numerical specificity, this
projected data is based upon a variety of assumptions relating to the
businesses of the Company which may not be realized and is subject to
significant uncertainties and contingencies, many of which are beyond the
control of the Company and, therefore, this projected data is inherently
imprecise, and there can be no assurance that projected financial results or
any valuation assumed therein will be realized. It is expected that there will
be a difference between actual and estimated or projected results and actual
results may vary materially from those shown. The Company does not intend to
update or otherwise revise this projected data prior to the consummation of
the Merger. The projected financial data set forth below should be read
together with the Retained Business Financial Data included above.
RETAINED BUSINESS
PROJECTED FINANCIAL INFORMATION
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31,
------------------------------
1996 1997 1998 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Sales...................................... $6,300 $6,800 $7,300 $8,000
Operating Income........................... $ 703 $ 762 $ 827 $ 922
Margin on Operating Income................. 11.2% 11.2% 11.3% 11.5%
Free Cash Flow*............................ $ 600 $ 610 $ 630 $ 660
</TABLE>
- --------
* "Free Cash Flow" consists of net cash from operating activities, less net
capital expenditures, plus proceeds of stock purchases by employee benefit
plans and exercises of stock options, in each case during the year in
question.
8. CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT. The Purchaser is
a newly formed New York corporation and a wholly owned subsidiary of Parent.
To date, Purchaser has not conducted any business other than in connection
with the Offer. Until immediately prior to the time the Purchaser purchases
Shares pursuant to the Offer, it is not anticipated that the Purchaser will
have any significant assets or liabilities or engage in activities other than
those incident to its formation and capitalization and the transactions
contemplated by the Offer. Because the Purchaser is a newly formed corporation
and has minimal assets and capitalization, no meaningful financial information
regarding the Purchaser is available.
Parent is a holding company for the Lockheed Corporation and the Martin
Marietta Corporation and their respective subsidiaries. The businesses of
Parent are organized into five major operating sectors: Aeronautics;
Electronics; Energy and Environment; Information and Technology Services; and
Space and Strategic Missiles. Prior to the Offer, Parent began a process
designed to result in the merger of the five largest direct or indirect
subsidiaries of Parent with and into Parent. These subsidiaries include
Lockheed Corporation and Martin Marietta Corporation. This process is not
related to the Offer and it is presently anticipated that these mergers will
occur effective as of January 28, 1996. The mergers are subject to certain
conditions including the approval of the Boards of Directors of the various
companies involved. The principal executive offices of Parent and Purchaser
are located at 6801 Rockledge Drive, Bethesda, Maryland 20817.
The name, citizenship, business address, principal occupation or employment
and five-year employment history of each of the directors and executive
officers of the Purchaser and Parent are set forth in Schedule I hereto.
13
<PAGE>
Set forth below is a summary of certain consolidated financial information
with respect to Parent and its consolidated subsidiaries excerpted or derived
from the information contained in or incorporated by reference into Parent's
Annual Report on Form 10-K for the year ended December 31, 1994 filed with the
Commission pursuant to Rule 15d-2 of the Exchange Act (the "Parent 10-K") and
Parent's Quarterly Report on Form 10-Q for the quarter ended September 30,
1995. More comprehensive financial information is included in or incorporated
by reference into the Parent 10-K and other documents filed by Parent, Martin
Marietta Corporation and Lockheed Corporation with the Commission, and the
financial information summary set forth below is qualified in its entirety by
reference to the Parent 10-K and such other documents and all the financial
information and related notes contained therein.
LOCKHEED MARTIN CORPORATION
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AT OR FOR
NINE MONTHS
ENDED AT OR FOR YEAR
SEPTEMBER 30, ENDED DECEMBER 31,
------------- ------------------------
1995 1994/3/ 1993/2/ 1992/1/
------------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Income Statement Data:
Net sales............................. $16,801 $22,906 $22,397 $16,030
Earnings before cumulative effect of
changes in accounting................ 371 1,055 829 649
Net earnings (loss)................... 371 1,018 829 (361)
Balance Sheet Data:
Working capital....................... 2,044 2,508 1,770 1,654
Intangible assets related to contracts
and programs acquired................ 1,861 1,971 2,127 42
Cost in excess of net assets acquired. 2,794 2,831 2,697 841
Total assets.......................... 18,366 18,049 17,108 10,827
Long-term debt (including
current maturities).................. 3,607 3,879 4,372 2,130
Stockholders' equity.................. 6,255 6,086 5,201 3,482
Earnings (loss) per common share
Assuming no dilution:
Before cumulative effect of
changes in accounting.............. $ 1.72 $ 5.32 $ 3.99 $ 3.31
Cumulative effect of changes
in accounting...................... -- (.20) -- (5.15)
------- ------- ------- -------
$ 1.72 $ 5.12 $ 3.99 $ (1.84)
======= ======= ======= =======
Assuming full dilution:
Before cumulative effect of
changes in accounting.............. $ 1.67 $ 4.83 $ 3.75 $ 3.31
Cumulative effect of changes
in accounting...................... -- (.17) -- (5.15)
------- ------- ------- -------
$ 1.67 $ 4.66 $ 3.75 $ (1.84)
======= ======= ======= =======
</TABLE>
Parent is subject to the informational filing requirements of the Exchange
Act and is required to file reports and other information with the Commission
relating to its business, financial condition and other matters. Information,
as of particular dates, concerning Parent's directors and executive officers,
their remuneration, the
1. Reflects the adoption of Statement of Financial Accounting Standards (SFAS)
No. 106, Employers' Accounting for Postretirement Benefits Other than
Pensions, and SFAS No. 112, Employers' Accounting for Postemployment
Benefits.
2. Reflects the purchase of Lockheed Fort Worth Company effective February 28,
1993 and the GE Aerospace business combination effective April 2, 1993.
3. Reflects the adoption of Statement of Position No. 93-6, Employers'
Accounting for Employee Stock Ownership Plans.
14
<PAGE>
principal holders of Parent's securities and any material interest of such
persons in transactions with Parent is required to be described in periodic
statements delivered to Parent's stockholders and filed with the Commission.
Parent has not been a reporting company under the Exchange Act for a full year
and certain of these documents are not yet due to be, and therefore have not
been, filed with the Commission. As described above, Parent is a holding
company for Lockheed Corporation and Martin Marietta Corporation, each of
which was subject to the informational requirements of the Exchange Act with
respect to events through March 15, 1995 (at which time Lockheed Corporation
and Martin Marietta Corporation combined and become subsidiaries of Parent),
and was required to file reports and other information with the Commission
relating to its business, financial condition and other matters. Such reports
and other information, including the Parent 10-K, may be inspected and copies
may be obtained from the offices of the Commission in the same manner as set
forth in Section 7.
For information regarding certain material business relationships during the
previous three fiscal years of the Company between the Company and its
affiliates, on the one hand, and the Parent and its affiliates, on the other
hand, see the information set forth on Schedule III attached hereto.
Except as set forth in the immediately preceding paragraph or elsewhere in
this Offer to Purchase, none of Parent, the Purchaser or any of their
affiliates (collectively the "Purchaser Entities"), or, to the best knowledge
of any of the Purchaser Entities, any of the persons listed on Schedule I, has
any contract, arrangement, understanding or relationship with any other person
with respect to any securities of the Company, including, but not limited to,
any contract, arrangement, understanding or relationship concerning the
transfer or the voting of any securities of the Company, joint ventures, loan
or option arrangements, puts or calls, guaranties of loans, guaranties against
loss or the giving or withholding of proxies. Except as set forth in this
Offer to Purchase, none of the Purchaser Entities, or, to the best knowledge
of any of the Purchaser Entities, any of the persons listed on Schedule I, has
had, since April 1, 1993, any business relationships or transactions with the
Company or any of its executive officers, directors or affiliates that would
require reporting under the rules of the Commission. Except as set forth in
this Offer to Purchase, since April 1, 1993, there have been no contacts,
negotiations or transactions between the Purchaser Entities, or their
respective subsidiaries or, to the best knowledge of any of the Purchaser
Entities, any of the persons listed on Schedule I, and the Company or its
affiliates, concerning a merger, consolidation or acquisition, tender offer or
other acquisition of securities, election of directors or a sale or other
transfer of a material amount of assets. None of the Purchaser Entities or, to
the best knowledge of any of the Purchaser Entities, any of the persons listed
on Schedule I, beneficially owns any Shares or has effected any transactions
in the Shares in the past 60 days.
9. SOURCE AND AMOUNTS OF FUNDS. The total amount of funds required by the
Purchaser to acquire all outstanding Shares pursuant to the Offer and the
Merger, to consummate the transactions contemplated by the Offer, the Merger
Agreement and the Distribution Agreement, to refinance certain indebtedness of
the Company, and to pay fees and expenses relating to the Offer and the Merger
is estimated to be approximately $8.4 billion. These funds will be provided to
the Purchaser by Parent either through an equity investment in, or debt
financing provided to, Purchaser or a combination thereof. Parent intends to
obtain these funds, together with the funds necessary to provide working
capital to support the combined operations of Parent and its subsidiaries,
including the Company and its subsidiaries following the closing of the Offer,
from loans to be provided by Morgan Guaranty Trust Company of New York
(together with its affiliates, "Morgan Guaranty"), Bank of America National
Trust and Savings Association (together with its affiliates, "Bank of
America"; collectively with Morgan Guaranty, the "Co-Arrangers"), Citibank
USA, Inc. (together with its affiliates, "Citibank"), as managing agent, and a
syndicate of other commercial banks (the "Banks") to be formed by the Co-
Arrangers. It is anticipated that the loans to be provided by Morgan Guaranty,
Bank of America, Citibank, and the other Banks (which are collectively
referred to as the "Bank Financing") will be fully and unconditionally
guaranteed by Purchaser and certain other subsidiaries of Parent and are
collectively referred to as the "Bank Financing." Alternatively, Parent may
obtain all or a portion of the necessary financing through the issuance of
commercial paper backed by the Bank Financing. The existing revolving credit
facilities of Parent and the Company will be terminated in connection with the
closing of the Offer and the consummation of the Bank Financing.
Set forth below is a summary description of the Bank Financing. Consummation
of the Bank Financing is subject to, among other things, successful
syndication of the Bank Financing and the negotiation and execution
15
<PAGE>
of definitive financing agreements on terms satisfactory to Parent, Purchaser
and the Co-Arrangers. The summary description does not purport to be complete,
and there can be no assurance that the terms set forth below will be contained
in such agreements or that such agreements will not contain additional
provisions.
Parent has received commitments from Morgan Guaranty and Bank of America
pursuant to which each of them has agreed to provide up to $1.375 billion of
the Bank Financing, and from Citibank pursuant to which it has agreed to
provide up to $750 million of the Bank Financing. The Co-Arrangers also have
agreed to act as agents for an anticipated commercial bank syndicate
(including the Co-Arrangers and Citibank). Morgan Guaranty has advised Parent
that, based upon its knowledge of, and experience in, the loan syndication
market and subject to certain assumptions, it is highly confident that it will
be able to arrange a syndicate of lenders for an additional $6.5 billion.
Parent has agreed to pay certain fees to Morgan Guaranty, Bank of America
and to Citibank as managing agent, and has agreed to pay Bank of America, as
Administrative Agent under the Credit Facilities, an annual administrative
fee. Parent also has agreed to pay certain of the expenses of the Co-Arrangers
incurred in connection with the Bank Financing and to provide the Co-
Arrangers, Citibank, as the Managing Agent, and their respective directors,
officers, employees, and affiliates with customary indemnification.
The Bank Financing will consist of two facilities which will be entered into
prior to or concurrently with the consummation of the Offer. The credit
facilities will consist of a 364-day unsecured revolving credit facility in
the amount of $5 billion (the "Short-Term Facility") and a five-year unsecured
revolving credit facility in the amount of $5 billion (the "Five-Year
Facility"). The Short-Term Facility and the Five-Year Facility are
collectively referred to as the "Credit Facilities." The Short-Term Facility
will have a final maturity 364 days after the date of execution of the
definitive financing agreement for the Short-Term Facility. There will be no
required prepayments or scheduled reductions of availability of loans under
the Credit Facilities.
Revolving loans under the Credit Facilities will bear interest, at the
option of Parent, at (i) a base rate equal to the higher of the rate announced
from time to time by Bank of America as its reference rate or the daily
Federal Funds rate plus 0.5%; (ii) the London interbank offered rate ("LIBOR")
for one-, two-, three-, six- (or subject to the Banks' consent) twelve-month
periods plus an interest rate margin based on the rating for senior, unsecured
long-term debt of Parent announced from time to time by Standard & Poor's
Corporation ("S&P") and Moody's Investor Services, Inc. ("Moody's"); (iii) a
reserve- and FDIC insurance-adjusted rate for 30-,60-, 90-, or 180-day
certificates of deposit (the "CD Rate") plus an interest rate margin based on
the rating for senior, unsecured long-term debt of Parent announced from time
to time by S&P and Moody's; or (iv) a money market bid rate based on
competitive bids solicited of the Banks and accepted by Parent pursuant to an
auction mechanism under the Credit Facilities. The interest rate margins over
LIBOR and the CD Rate range from .165% and .29%, respectively, to .31% and
.435%, respectively, for the Short-Term Facility, and from .145% and .27%,
respectively, to .50% and .625%, respectively, for the Five-Year Facility,
depending on the level of such ratings. Interest will be payable quarterly in
arrears based on a 365/366-day year for the reference rate used in determining
the rate on base rate loans and will be payable semi-annually in arrears or at
the end of the relevant interest period, whichever is sooner, based on a 360-
day year and the actual number of days elapsed for LIBOR and CD Rate loans.
Money market bid rate loans will bear interest at rates established on the
basis of a bidding procedure and interest will be payable at such times as are
determined by such procedures.
Facility fees under the Credit Facilities will be payable to each Bank on
the amount of its commitment, whether used or unused, based on the rating for
senior, unsecured long-term debt of Parent announced from time to time by S&P
and Moody's. The facility fees for the Short-Term Facility will range from
.06% to .09% and the facility fees for the Five-Year Facility will range from
.08% to .25%, depending on the level of such ratings.
Each Bank's obligation to make loans under the Credit Facilities will be
subject to, among other things, the negotiation, execution, and delivery of
definitive financing agreements (collectively, the "Bank Financing
Agreements"), and the compliance by Parent and Purchaser thereunder. The
covenants in the Bank Financing
16
<PAGE>
Agreements will include but not be limited to covenants limiting the ability
of Parent and certain of its subsidiaries to encumber certain of their assets,
and a covenant not to exceed a maximum leverage ratio. It is anticipated that
the Bank Financing Agreements will include terms, conditions, representations,
warranties, covenants, indemnities, events of default, and other provisions
customary in such agreements.
Following closing of the Offer, it is anticipated that Parent will refinance
all or a portion of the borrowings under the Credit Facilities contemplated
herein with funds raised in the public or private securities markets. In the
event the Offer has not been consummated by April 30, 1996 the Offer is
conditioned upon obtaining the financing described herein (the "Financing
Condition"). See Section 15.
10. BACKGROUND OF THE OFFER; THE MERGER AGREEMENT; THE SPIN-OFF; THE RIGHTS
AGREEMENT.
BACKGROUND OF THE OFFER
Reductions in the Federal defense budgets for research, development, test
and evaluation and procurement over the last several years have caused
continued pressures on participants in the aerospace/defense industry to
consolidate in order to maintain critical mass and production economies. Both
Parent and the Company have been active participants in the consolidation of
the industry. In light of the anticipated continuation of the recent
consolidations in the aerospace/defense industry, the management and Board of
Directors of Parent have reviewed periodically Parent's strategic plans,
including but not limited to the possibility of making acquisitions and
potential internal investments and entering into joint ventures and business
combinations with companies engaged in a similar or related business.
On July 31, 1995, representatives of Bear Stearns met with Mr. Bernard L.
Schwartz, the chairman and chief executive officer of the Company, to review
certain recent developments in the defense industry, including certain current
trends and opportunities with respect to the consolidation of the defense
industry. At this meeting Mr. Schwartz stated to Bear Stearns that the Company
might be willing to consider a possible transaction with Parent if Parent was
similarly interested. On August 11, 1995 and again on August 24, 1995,
representatives of Bear Stearns met with certain members of the senior
management of Parent, including Mr. Daniel M. Tellep, Chairman of the Board
and Chief Executive Officer of Parent, and Mr. Norman R. Augustine, the
President of Parent, in order to also review developments in the defense
industry. At these meetings representatives of Bear Stearns indicated that the
Company might be willing to consider a possible transaction with Parent.
On September 14, 1995, Mr. Augustine and Mr. Schwartz were attending a
meeting at the Pentagon with certain government officials on an unrelated
matter. After this meeting Mr. Augustine and Mr. Schwartz briefly discussed
the general topic of a possible transaction between Parent and the Company and
they agreed to meet at a subsequent date to discuss the matter further.
Thereafter, on September 20, 1995, Mr. Augustine and Mr. Schwartz met to
discuss the broad outlines of a possible transaction between Parent and the
Company. On the following day, September 21, 1995, Mr. Tellep had a telephone
conversation with Mr. Schwartz following up on the matters discussed at the
meeting between Mr. Schwartz and Mr. Augustine the day before. On September
28, during a regularly-scheduled meeting of the Parent Board, Mr. Tellep
informed the Parent Board of the discussions with senior management of the
Company and members of Parent's management.
During the course of discussions over September and October, the parties
initially discussed a possible transaction involving only the defense and
systems integration-related businesses of the Company in which the Company's
stockholders would receive stock consideration having a value of approximately
$32 per share in a stock-for-stock merger transaction (assuming pooling-of-
interests accounting treatment). At a meeting on October 31, 1995, and at a
later meeting on November 8, 1995, representatives of both parties, including
Messrs. Tellep, Augustine and Schwartz, met to further discuss the possibility
of a transaction between Parent and the Company. In particular, the parties
discussed certain management and organizational issues, as well as certain
broad transaction valuation parameters. Messrs. Tellep, Augustine and Schwartz
agreed that representatives of the two companies should meet to explore
various possibilities.
17
<PAGE>
On November 17, 1995, and at subsequent meetings during the remainder of
November (including meetings on November 27-28, 1995), members of the
management of Parent and the Company, together with their respective legal
counsel and representatives of Bear Stearns, met to discuss several different
possible transaction structures and various financial, operational, accounting
and legal issues relating to a transaction between Parent and the Company. The
discussions at these meetings focused initially on structuring the proposed
transaction as a stock-for-stock merger, but due to pooling-of-interests
accounting and other concerns raised by a spin-off structure, the parties
agreed to pursue an all-cash transaction instead. Additionally, the parties
had preliminary discussions regarding the possibility of Parent acquiring a
20% equity interest in Loral Space.
On December 1, 1995, during a special telephonic meeting of the Parent
Board, Mr. Tellep updated the Parent Board with respect to the current
discussions between senior management of the Company and members of Parent's
management and discussed with the Parent Board certain of the business and
other issues which had been raised in the course of those discussions. On
December 4, 1995, Parent and the Company entered into a Confidentiality and
Standstill Agreement (the "Confidentiality and Standstill Agreement"),
relating to, among other things, the information to be provided by each
company to the other and limiting the ability of each party for three years to
acquire any voting securities or assets of, or solicit proxies or make a
public announcement of a proposal for any extraordinary transaction with
respect to, the other party. Parent and the Company subsequently obtained
various financial and other information regarding each other's business.
At a meeting on December 5, 1995, Messrs. Tellep, Augustine and Schwartz,
and Mr. Frank C. Lanza, the President and Chief Operating Officer of the
Company, met to further discuss the proposed transaction between Parent and
the Company, and various operational and management issues related thereto. On
the same day, other officers and certain legal representatives of the two
companies, as well as representatives of Bear Stearns, met to discuss
structure and business issues, and commenced financial due diligence. On
December 7, 1995, during a regularly-scheduled meeting of the Parent Board,
Parent's management provided the members of the Parent Board with an update of
the recent discussions between the senior management of the Company and
members of Parent's management. Representatives of Bear Stearns also reviewed
with the Parent Board various financial and industry-related issues relating
to a possible transaction with the Company.
During this period, meetings also occurred between certain members of the
management of Parent, the Company and representatives of Bear Stearns to
continue negotiating price and to discuss, among other things, various
organizational and operational aspects of a possible transaction. In addition,
during this period the legal representatives of each company met to discuss,
among other things, the possible structure of a transaction and related legal
issues.
At meetings held in early December, Messrs. Tellep, Augustine and Schwartz,
together with representatives of Bear Stearns and certain legal counsel of
both parties, continued their discussions as to specific organizational and
operational issues related to the proposed transaction. Although the parties
had made progress at these meetings, the parties acknowledged that there were
still very significant issues relating to a proposed transaction that were not
yet resolved and that further study by each party of the various issues which
had been raised by the proposed transaction would be beneficial. On December
15, 1995, at a special telephonic meeting of the Parent Board, Parent's
management provided the members of the Parent Board with a further update of
the recent discussions between the senior management of the Company and
members of Parent's management, and the outstanding issues between the parties
relating to price, management structure and various other matters.
During the week commencing December 18, 1995, Parent and its legal advisers
delivered initial drafts of the principal transaction documents to the Company
and its legal advisers, and over the next two weeks the parties and their
respective legal counsel met to discuss and negotiate with respect to the
principal transaction documents.
At subsequent meetings on December 21, 1995 and December 22, 1995 involving
Messrs. Tellep, Augustine and Schwartz and various other members of the
management of both Parent and the Company, along with representatives of Bear
Stearns and certain legal counsel to Parent and the Company, the parties
continued to
18
<PAGE>
discuss the structure of the proposed transaction, various operational and
management issues relating to the transaction, and various price, timing and
other significant terms and conditions related thereto. Although substantial
progress was made at these latter meetings with respect to certain outstanding
issues relating to the proposed transaction, certain issues remained
unresolved.
Commencing on January 2, 1996, members of Parent management met with members
of the Company's management to review various information relating to the
Company and to conduct a detailed due diligence review relating to the
proposed transaction. In addition, during this period, legal representatives
of each company and various outside financial and accounting advisors of
Parent and the Company met to conduct business, financial, accounting and
legal due diligence, to discuss outstanding legal and other issues and to
continue to negotiate the terms of the Merger Agreement, the Distribution
Agreement and the other transaction documents.
At a special meeting of the Parent Board on January 7, 1996, a presentation
regarding a possible transaction with the Company was made to the Parent Board
by senior management. The presentation to and discussion by the Parent Board
was wide-ranging and included, among other things, a review of (i)
management's current view of the financial condition and prospects of the
Company and Parent; (ii) the strategic value of the proposed transaction and
the possible effects of the transaction on Parent's stockholders, operations,
customers and future growth and its financial condition and prospects; and
(iii) the current state of the industry consolidation and potential
consolidation opportunities and trends in the foreseeable future. A review of
the Company's organization, businesses, management and financials was provided
to the Parent Board, together with a discussion of the potential strategic
benefits of the proposed transaction. A summary of the financial implications
was also provided, as well as a comparison of the transaction to other
strategic alternatives available to Parent. In addition, Bear Stearns
presented its views as to possible market reactions and competitive responses
to the potential transaction. The General Counsel of the Company and one of
the representatives of Parent's outside legal advisors also reviewed with
Parent's Board the duties of the directors in considering such transaction and
various legal issues relating to the proposed transaction. In addition, Bear
Stearns rendered its written opinion to the Parent Board that the Offer, the
Merger and the acquisition of twenty percent (20%) equity interest in Loral
Space, taken as a whole, were fair from a financial point of view to the
stockholders of Parent. After receiving such advice and after reviewing
various additional information relating to the transaction, the Parent Board
unanimously approved the terms and conditions of the proposed transaction with
the Company, including the terms and conditions of the Merger Agreement, the
Distribution Agreement and the other transaction documents contemplated
thereby.
The parties executed the Merger Agreement and the Distribution Agreement as
of January 7, 1996 and publicly announced the transaction on January 8, 1996.
On January 12, 1996, Purchaser commenced the Offer.
THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement. A
copy of the Merger Agreement (with certain Exhibits omitted) is attached
hereto as Exhibit A and is incorporated herein by reference. The following
summary is qualified in its entirety by reference to the Merger Agreement.
The Offer. The Merger Agreement provides for the making of the Offer by the
Purchaser. The Purchaser has agreed to accept for payment and pay for all
Shares tendered pursuant to the Offer as soon as practicable following the
Expiration Date and to extend the Offer until immediately following the Spin-
Off Record Date and the expiration or termination of any applicable waiting
period under the Antitrust Laws. The obligation of Purchaser to accept for
payment and pay for Shares tendered pursuant to the Offer is subject to (i)
the satisfaction or waiver of all of the conditions to the Spin-Off, (ii) the
tender and non-withdrawal of Shares which, when added to the Shares then
beneficially owned by Parent, constitutes two-thirds of the outstanding Shares
and represents two-thirds of the voting power of the outstanding Shares on a
fully diluted basis, and (iii) the satisfaction of certain other conditions
described in Section 15. The Purchaser has agreed that, without the written
19
<PAGE>
consent of the Company, no amendment to the Offer may be made which changes
the form of consideration to be paid or decreases the price per Share, the
number of Shares sought in the Offer or which imposes additional conditions to
the Offer other than those described in Section 15 or amends any other term of
the Offer in any manner materially adverse to holders of Shares.
The Merger. The Merger Agreement provides that, following the purchase of
Shares pursuant to the Offer, and the satisfaction or waiver of the other
conditions to the Merger, the Purchaser will be merged with and into the
Company. The Merger will become effective at such time (the "Effective Time")
as a certificate of merger or, if applicable, a certificate of ownership and
merger, is filed with the Secretary of State of the State of New York in the
manner required by the New York Business Corporation Law (the "NYBCL").
At the Effective Time, (i) except as provided in (ii) below, each Share
issued and outstanding immediately prior to the Effective Time will be
converted into the right to receive $38.00 in cash, or any higher price paid
per Share in the Offer, without interest (the "Merger Price"); (ii) (a) each
Share held in the treasury of the Company or held by any subsidiary of the
Company (other than a subsidiary that will be owned directly or indirectly by
the Company following the Spin-Off (each such company a "Retained
Subsidiary")) and each Share held by Parent or any subsidiary of Parent
immediately prior to the Effective Time will be cancelled and retired and
cease to exist; provided, that Shares held beneficially or of record by any
plan, program or arrangement sponsored or maintained for the benefit of
employees of Parent or the Company or any subsidiaries thereof will not be
deemed to be held by Parent or the Company regardless of whether Parent or the
Company has, directly or indirectly, the power to vote or control the
disposition of such shares; (b) each Share held by any
holder who has not voted in favor of the Merger and has delivered a written
objection to the Merger and demanded fair value with respect to such Share in
accordance with Section 623 of the NYBCL will not be converted into or be
exchangeable for the right to receive the Merger Price (the "Dissenting
Shares"); and (iii) each share of common stock of the Purchaser issued and
outstanding immediately prior to the time of the Effective Date will be
converted into and exchangeable for one share of common stock of the Surviving
Corporation.
The Company will take all actions (including, but not limited to, obtaining
any and all consents from employees to the matters contemplated by Section
2.10 of the Merger Agreement) necessary to provide that all outstanding
options and other rights to acquire Shares ("Stock Options") granted under any
stock option plan, program or similar arrangement of the Company or any
subsidiary of the Company, each as amended (the "Option Plans"), will become
fully exercisable and vested on the date (the "Vesting Date") which will be
set by the Company and which, in any event, shall be not less than 30 days
prior to the consummation of the Offer, whether or not otherwise exercisable
and vested. All Stock Options which are outstanding immediately prior to
Purchaser's acceptance for payment and payment for Shares tendered pursuant to
the Offer will be cancelled as of the consummation of the Offer and the
holders thereof (other than holders who are subject to the reporting
requirements of Section 16(a) of the Exchange Act) will be entitled to receive
from the Company, for each Share subject to such Stock Option, (1) an amount
in cash equal to the difference between the Merger Price and the exercise
price per share of such Stock Option, which amount will be payable upon
consummation of the Offer, plus (2) one share of common stock, par value $0.01
per Share of Loral Space ("Loral Space Common Stock" or "Spinco Common
Stock"), which will be held by an escrow agent pending delivery on the
Distribution Date. All applicable withholding taxes attributable to the
payments made hereunder or to distributions contemplated hereby will be
deducted from the amounts payable under clause (1) above and all such taxes
attributable to the exercise of Stock Options on or after the Vesting Date
will be withheld from the proceeds received in the Offer or the Merger, as the
case may be, in respect of the Shares issuable on such exercise.
The Company will take all actions (including, but not limited to, obtaining
any and all consents from employees to the matters contemplated by the Merger
Agreement) necessary to provide that all restrictions on transferability with
respect to each Share which is granted pursuant to the Company's 1987
Restricted Stock Purchase Plan (the "1987 Plan") and which is outstanding and
not vested on the Vesting Date will lapse, and each such Share will become
free of restrictions as of the Vesting Date. All applicable withholding taxes
attributable to the vesting of restricted Shares will be withheld from the
proceeds received in respect of such Shares in the Offer or the Merger, as the
case may be.
20
<PAGE>
Except as provided in the Merger Agreement or as otherwise agreed to by the
parties and to the extent permitted by the Option Plans and the 1987 Plan, (i)
the Option Plans and the 1987 Plan will terminate as of the Effective Time and
the provisions in any other plan, program or arrangement, providing for the
issuance or grant by the Company or any of its subsidiaries of any interest in
respect of the capital stock of the Company or any of its subsidiaries will be
deleted as of the Effective Time and (ii) the Company will use all reasonable
efforts to ensure that following the Effective Time no holder of Stock Options
or any participant in the Option Plans or any other such plans, programs or
arrangements will have any right thereunder to acquire any equity securities
of the Company, the Surviving Corporation or any subsidiary thereof.
The Merger Agreement provides that the restated certificate of incorporation
and by-laws of the Company at the Effective Time will be the certificate of
incorporation and by-laws of the Surviving Corporation until amended in
accordance with applicable law; provided, that promptly following the
Effective Time, the certificate of incorporation of the Company will be
amended to change the name of the Surviving Corporation so that the word
"Loral" will be deleted therefrom. The Merger Agreement also provides that the
directors and officers of the Purchaser at the Effective Time will be the
initial directors and officers of the Surviving Corporation and will hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualify in the manner provided in the certificate of
incorporation and by-laws of the Surviving Corporation, or as otherwise
provided by applicable law.
Recommendation. In the Merger Agreement, the Company states that the Board
of Directors has unanimously (i) determined that the Offer, the Merger and the
Spin-Off are fair to and in the best interests of the stockholders of the
Company and (ii) resolved to recommend acceptance of the Offer and approval
and adoption of the Merger Agreement and the Merger by the stockholders of the
Company.
Interim Agreements of Parent, Purchaser and the Company. Pursuant to the
Merger Agreement, the Company has covenanted and agreed that, during the
period from the date of the Merger Agreement to the consummation of the Offer
and until such time as the directors designated by Parent in accordance with
the Merger Agreement constitute in their entirety a majority of the Company's
Board of Directors (the "Board Reorganization"), the Company and its
subsidiaries (other than Loral Space and the Loral Space Companies (as defined
below)) will each conduct its operations according to its ordinary course of
business, consistent with past practice, and will use its commercially
reasonable efforts to (i) preserve intact its business organization, (ii)
maintain its material rights and franchises, (iii) keep available the services
of its officers and key employees, and (iv) keep in full force and effect
insurance comparable in amount and scope of coverage to that maintained as of
the date of the Merger Agreement (collectively the "Ordinary Course
Obligations"); provided, that Loral Space and the Loral Space Companies will
comply with the Ordinary Course Obligations to the extent that non-compliance
therewith could adversely affect the Retained Business or adversely affect (or
materially delay) the consummation of the Offer, the Merger or the Spin-Off.
"Loral Space Companies" means Loral General Partner, Inc., a Delaware
corporation ("LGP"), SS/L, Globalstar, Globalstar Telecommunications Limited,
a company organized under the laws of Bermuda ("GTL"), Loral Globalstar, L.P.,
a Delaware limited partnership, Loral Globalstar Limited, a Cayman Islands
corporation ("LGL"), K&F Industries, Inc., a Delaware corporation ("K&F"),
Loral/QUALCOMM Partnership, L.P., a Delaware limited partnership ("LQP"),
Loral/QUALCOMM Satellite Services. L.P., a Delaware limited partnership
("LQSS"), Continental Satellite Corporation, a California corporation
("Continental"), Loral Travel Services Inc., a Delaware corporation, Loral
Properties Inc., a Delaware corporation and each of the subsidiaries of such
companies.
Without limiting the generality of and in addition to the foregoing, and
except as otherwise contemplated by the Merger Agreement, the Tax Sharing
Agreement (as defined below) or the Distribution Agreement (the Tax Sharing
Agreement together with the Distribution Agreement, the "Ancillary
Agreements"), prior to the consummation of the Offer and the Board
Reorganization, neither the Company nor any of its subsidiaries (other than
Loral Space and the Loral Space Companies insofar as any action of the type
specified below could not adversely affect the Retained Business and could not
adversely affect (or materially delay) the Offer, the Spin-Off or the Merger)
will, without the prior written consent of Parent: (a) amend its charter or
by-laws other than filing a Certificate of Amendment of the Company's restated
certificate of incorporation as contemplated by the Rights
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Agreement; (b) subject to certain exceptions, authorize for issuance, issue,
sell, deliver or agree to commit to issue, sell or deliver (whether through
the issuance or granting of options, warrants, commitments, subscriptions,
rights to purchase or otherwise) any stock of any class or any other
securities or amend any of the terms of any such securities or agreements
(subject to certain exceptions); (c) split, combine or reclassify any shares
of its capital stock, declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof)
in respect of its capital stock (other than pursuant to the Rights Agreement)
or redeem or otherwise acquire any of its securities or any securities of its
subsidiaries (other than pursuant to the Rights Agreement); provided, that the
Company may declare and pay to holders of Shares regular quarterly dividends
of not more than $0.08 per Share on the dividend declaration and payment dates
normally applicable to the Shares; (d) (i) pledge or otherwise encumber shares
of Capital Stock of the Company or any of its subsidiaries; or (ii) except in
the ordinary course of business consistent with past practices, (A) incur,
assume or prepay any long-term debt or incur, assume, or prepay letters of
credit or any material short-term debt; (B) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for any material obligations of any other person except wholly
owned subsidiaries of the Company; (C) make any material loans, advances or
capital contributions to, or investments in, any other person; (iii) change
the practices of the Company and its Retained Subsidiaries with respect to the
timing of payments or collections; or (D) mortgage or pledge any assets of the
Retained Business, or create or permit to exist any material lien thereupon;
(e) except (i) as disclosed in the Disclosure Schedule to the Merger Agreement
and except for arrangements entered into in the ordinary course of business
consistent with past practices, (ii) as required by law or (iii) as
specifically provided for in the Merger Agreement or Distribution Agreement
enter into, adopt or materially amend any bonus, profit sharing, compensation,
severance, termination, stock option, stock appreciation right, restricted
stock, performance unit, pension, retirement, deferred compensation,
employment, severance or other employee benefit agreements, trusts, plans,
funds or other arrangements of or for the benefit or welfare of any Retained
Employee (i.e., all current and former officers and employees of the Company
and its subsidiaries, other than Loral Space employees) (or any other person
for whom the Retained Business will have liability), or (except for normal
increases in the ordinary course of business that are consistent with past
practices) increase in any manner the compensation or fringe benefits of any
Retained Employee (or any other person for whom the Retained Business will
have liability), or pay any benefit not required by any existing plan and
arrangement (including, without limitation, the granting of stock options,
stock appreciation rights, shares of restricted stock or performance units) or
enter into any contract, agreement, commitment or arrangement to do any of the
foregoing; (f) transfer, sell, lease, license or dispose of any lines of
business, subsidiaries, divisions, operating units or facilities (other than
facilities currently closed or currently proposed to be closed) relating to
the Retained Business outside the ordinary course of business or enter into
any material commitment or transaction with respect to the Retained Business
outside the ordinary course of business; (g) acquire or agree to acquire, by
merging or consolidating with, by purchasing an equity interest in or a
portion of the assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof, or otherwise acquire or agree to acquire any assets of any
other person (other than the purchase of assets in the ordinary course of
business and consistent with past practice), in each case where such action
would be material to the Retained Business; (h) except as may be required by
law or as disclosed in the Disclosure Schedule to the Merger Agreement, take
any action to terminate or materially amend any of its pension or retiree
medical plans with respect to or for the benefit of Retained Employees or any
other person for whom the Retained Business will have liability; (i)
materially modify, amend or terminate (1) any significant contract related to
the Retained Business or waive any material rights or claims of the Retained
Business, except in the ordinary course of business consistent with past
practice; or (2) any contract having an aggregate contract value of $100
million or greater, whether or not in the ordinary course of business
consistent with past practice, unless such modification, amendment or
termination does not materially diminish the projected profit or materially
increase the projected loss anticipated from such contract; provided, that
nothing contained in this clause shall limit the Company and its subsidiaries
in connection with programs or contracts with respect to which Parent or a
subsidiary of Parent has submitted, or is reasonably expected to submit, a
competing bid; provided further, that the provisions of this clause will not
apply to any arrangement, agreement or contract proposal previously submitted
by the Company or a subsidiary thereof which proposal, upon acceptance
thereof, cannot be revised or withdrawn; (j) effect any material change in any
of its methods of accounting in effect as of March 31, 1995,
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except as may be required by law or generally accepted accounting principles;
(k) except as expressly provided in the Merger Agreement, amend, modify, or
terminate the Rights Agreement or redeem any Rights thereunder; provided, that
if the Board of Directors of the Company by a majority vote determines in its
good faith judgment, based as to legal matters upon the written opinion of
legal counsel, that the failure to redeem any Rights would likely constitute a
breach of the Board's fiduciary duty, the Rights may be redeemed; (l) enter
into any material arrangement, agreement or contract that individually or in
the aggregate with other material arrangements, agreements and contacts
entered into after the date of the Merger Agreement, the Company reasonably
expects will adversely affect in a significant manner the Retained Business
after the date of the Merger Agreement; provided, that nothing contained in
this clause will limit the Company and its subsidiaries from submitting bids
for programs or contracts with respect to which the Company reasonably expects
Parent or a subsidiary of Parent to submit a bid; and (m) enter into a legally
binding commitment with respect to, or any agreement to take, any of the
foregoing actions.
Acquisition Proposals. In the Merger Agreement, the Company has agreed that
the Company and its officers, directors, employees, representatives and agents
will immediately cease any existing discussions or negotiations with any
parties conducted prior to the date of the Merger Agreement with respect to
any Acquisition Proposal (as defined below). The Company and its subsidiaries
may not, and will use their best efforts to cause their respective officers,
directors, employees and investment bankers, attorneys, accountants or other
agents retained by the Company or any of its subsidiaries not to, (i) initiate
or solicit, directly or indirectly, any inquiries with respect to, or the
making of any Acquisition Proposal, or (ii) except as permitted below, engage
in negotiations or discussions with, or furnish any information or data to any
Third Party (as defined below) (other than the transactions contemplated by
the Merger Agreement and by the Ancillary Agreements). Notwithstanding
anything to the contrary contained in the Merger Agreement, the Company may
furnish information to, and participate in discussions or negotiations
(including, as a part thereof, making any counter-proposal) with, any Third
Party which submits an unsolicited written Acquisition Proposal to the Company
if the Company's Board of Directors by a majority vote determines in its good
faith judgment, based as to legal matters upon the written opinion of legal
counsel, that the failure to furnish such information or participate in such
discussions or negotiations would likely constitute a breach of the Board's
fiduciary duties under applicable law; provided, that nothing in the Merger
Agreement will prevent the Board from taking, and disclosing to the Company's
shareholders, a position contemplated by Rules 14d-9 and 14e-2 promulgated
under the Exchange Act with regard to any tender offer; provided further, that
the Board will not recommend that the shareholders of the Company tender their
Shares in connection with any such tender offer unless the Board by a majority
vote determines in its good faith judgment, based as to legal matters on the
written opinion of legal counsel, that failing to take such action would
likely constitute a breach of the Board's fiduciary duty; provided further,
that the Company may not enter into any agreement with respect to any
Acquisition Proposal except concurrently with or after the termination of the
Merger Agreement (except with respect to confidentiality and standstill
agreements to the extent expressly permitted below). The Company will promptly
provide Parent with a copy of any written Acquisition Proposal received and a
written statement with respect to any non-written Acquisition Proposal
received, which statement shall include the identity of the parties making the
Acquisition Proposal and the terms thereof. The Company will promptly inform
Parent of the status and content of any discussions regarding any Acquisition
Proposal with a Third Party. In no event will the Company provide non-public
information regarding the Retained Business to any Third Party making an
Acquisition Proposal unless such party enters into a confidentiality agreement
containing provisions designed to reasonably protect the confidentiality of
such information. In the event that following the date of the Merger Agreement
the Company enters into a confidentiality agreement with any Third Party which
does not include terms and conditions which are substantially similar to the
"standstill" provisions of the confidentiality agreement between the Company
and Parent, dated as of December 4, 1995, then Parent and its affiliates will
be released from their obligations under such standstill provisions to the
same extent as such Third Party.
"Acquisition Proposal" means any bona fide proposal, whether in writing or
otherwise, made by a Third Party to acquire beneficial ownership (as defined
in Rule 13(d) under the Exchange Act) of all or a material portion of the
assets of, or any material equity interest in, any of the Company, a Retained
Subsidiary or the
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Retained Business pursuant to a merger, consolidation or other business
combination, sale of shares of capital stock, sale of assets, tender offer or
exchange offer or similar transaction involving either the Company, a Retained
Subsidiary or the Retained Business, including, without limitation, any single
or multi-step transaction or series of related transactions which is
structured to permit such Third Party to acquire beneficial ownership of any
material portion of the assets of, or any material portion of the equity
interest in, either the Company, a Retained Subsidiary or the Retained
Business (other than the transactions contemplated by the Merger Agreement and
the Ancillary Agreements); provided, however, that the term "Acquisition
Proposal" does not include any transactions which relate solely to the
businesses to be owned by Loral Space and the Loral Space Companies following
the Spin-Off and which do not have a material adverse effect on the
consummation of the Offer, the Merger, the Spin-Off or the transactions
contemplated by the Merger Agreement.
Board Representation. The Merger Agreement provides that in the event that
Purchaser acquires at least a majority of the Shares outstanding pursuant to
the Offer, Parent will be entitled to designate for appointment or election to
the Company's Board of Directors, upon written notice to the Company, such
number of persons so that such designees of Parent constitute the same
percentage (but in no event less than a majority) of the Company's Board of
Directors (rounded up to the next whole number) as the percentage of Shares
acquired in connection with the Offer. Prior to the consummation of the Offer,
the Board of Directors of the Company will obtain the resignation of such
number of directors as is necessary to enable such number of Parent designees
to be so elected. In connection therewith, the Company will mail to the
stockholders of the Company the information required by Section 14(f) of the
Exchange Act and Rule 14f-1 thereunder unless such information has previously
been provided to such stockholders in the Schedule 14D-9. Parent and the
Purchaser will provide to the Company in writing, and be solely responsible
for, any information with respect to such companies and their nominees,
officers, directors and affiliates required by such Section and Rule.
Notwithstanding the foregoing, the parties to the Merger Agreement will use
their respective best efforts to ensure that at least three of the members of
the Company's Board of Directors will, at all times prior to the Effective
Time be, Continuing Directors (as defined in the Merger Agreement).
Amendment of Rights Agreement. Pursuant to the Merger Agreement, the Company
has agreed to amend, and has amended, the Rights Agreement as necessary (i) to
prevent the Merger Agreement or the transactions contemplated by the Merger
Agreement or Distribution Agreement (including, without limitation, the
publication or other announcement of the Offer and the consummation of the
Offer and the Merger) from resulting in the distribution of separate rights
certificates or the occurrence of a "Distribution Date" under the Rights
Agreement or being deemed to be a "Triggering Event" or a "Section 13 Event"
under the Rights Agreement and (ii) to provide that neither Parent nor the
Purchaser will be deemed to be an "Acquiring Person" under the Rights
Agreement by reason of such transactions.
Stockholders' Meeting. Pursuant to the Merger Agreement, if required under
applicable law in order to consummate the Merger, the Company, acting through
its Board of Directors, will, in accordance with applicable law, its restated
certificate of incorporation and by-laws and the rules and regulations of the
NYSE: (a) duly call, give notice of, convene and hold a special meeting of its
stockholders as soon as practicable following the consummation of the Offer
for the purpose of considering and taking action on the Merger Agreement (the
"Stockholders' Meeting"); (b) subject to its fiduciary duties under applicable
laws as advised by counsel, include in the Information Statement prepared by
the Company for distribution to stockholders of the Company in advance of the
Stockholders' Meeting in accordance with Regulation 14C promulgated under the
Exchange Act (the "14C Information Statement") the recommendation of its Board
of Directors referred to above; and (c) use its best efforts to (i) obtain and
furnish the information required to be included by it in the 14C Information
Statement, and, after consultation with Parent, respond promptly to any
comments made by the Commission with respect to the 14C Information Statement
and any preliminary version thereof and cause the 14C Information Statement to
be mailed to its stockholders following the consummation of the Offer and (ii)
obtain the necessary approvals of the Merger Agreement by its stockholders.
Parent will provide the Company with the information concerning Parent and
Purchaser required to be included in the 14C Information Statement and will
vote, or cause to be voted, all Shares owned by it or its subsidiaries in
favor of approval and adoption of the Merger Agreement.
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Actions Related to Spin-Off. In accordance with the Merger Agreement,
simultaneously with the execution of the Merger Agreement, the Company and
certain of its subsidiaries entered into the Distribution Agreement.
Immediately prior to the Spin-Off Record Date, the Company, Loral Space and
certain other parties will enter into the Tax Sharing Agreement. From and
after the Effective Time, Parent shall cause the Surviving Corporation to
perform any and all obligations and agreements of the Company set forth in the
Merger Agreement or in the Ancillary Agreements or in any other agreements
contemplated in the Merger Agreement or in the Ancillary Agreements. Parent
and Purchaser accept and agree that, subject to the provisions of the
Distribution Agreement, the form of certificate of incorporation and by-laws
of Loral Space adopted in contemplation of the Spin-Off will be as agreed to
by the Company and Loral Space in their sole discretion; provided, that
nothing in the certificates of incorporation and by-laws will adversely affect
or otherwise limit (i) Loral Space's ability to perform its obligations under
the Ancillary Agreements or the other agreements contemplated by the
Distribution Agreement or (ii) the Company's or its affiliates' rights under
the Stockholders Agreement. In no event shall Parent or Purchaser or any of
their subsidiaries be entitled to receive any shares of Loral Space Common
Stock as a distribution with respect to Shares purchased upon consummation of
the Offer. If, for any reason, any shares of Loral Space Common Stock
distributed in the Spin-Off are received by Parent or Purchaser or any of
their subsidiaries with respect to Shares acquired by Purchaser in the Offer,
then Parent or Purchaser will convey, on behalf of the Company, such shares of
Loral Space to the stockholders of the Company who would have otherwise
received such shares of Loral Space pursuant to the Distribution Agreement;
provided, that the foregoing provisions will not apply with respect to Shares
held by Parent or any of its subsidiaries prior to the date of the Merger
Agreement. If the Company reasonably determines that the Spin-Off may not be
effected without registering the shares of common stock of Loral Space to be
distributed in the Spin-Off pursuant to the Securities Act of 1933, as amended
(the "Securities Act"), the Company, Parent and Purchaser, as promptly as
practicable, will use their respective best efforts to cause the shares of
Loral Space to be registered pursuant to the Securities Act and thereafter
effect the Spin-Off in accordance with the terms of the Distribution Agreement
including, without limitation, by preparing and filing on an appropriate form
a registration statement under the Securities Act covering the shares of Loral
Space and using their respective best efforts to cause such registration
statement to be declared effective and preparing and making such other filings
as may be required under applicable state securities Laws. Parent will, and
will cause the Surviving Corporation to, treat the Spin-Off for purposes of
all federal and state taxes as an integrated transaction with the Offer and
the Merger and thus report the Spin-Off as a constructive redemption of a
number of Shares equal in value to the value of the Loral Space Common Stock
distributed in the Spin-Off.
Directors and Officers Insurance and Indemnification. In the Merger
Agreement, Parent agreed that from and after the Effective Time, Parent will
cause the Surviving Corporation to indemnify, defend and hold harmless the
present and former officers, directors, employees and agents of the Company
and its subsidiaries (the "Indemnified Parties") against all losses, claims,
damages, expenses or liabilities arising out of or related to actions or
omissions or alleged actions or omissions occurring at or prior to the
Effective Time to the same extent and on the same terms and conditions
(including with respect to advancement of expenses) provided for in the
Company's restated certificate of incorporation and by-laws and agreements in
effect as of December 31, 1995 (to the extent consistent with applicable law),
which provisions will survive the Merger and continue in full force and effect
after the Effective Time. Without limiting the foregoing, (i) Parent will, and
will cause the Surviving Corporation to, periodically advance expenses
(including attorney's fees) as incurred by an Indemnified Party with respect
to the foregoing to the full extent permitted under the Company's restated
certificate of incorporation and by-laws in effect on the date of the Merger
Agreement (to the extent consistent with applicable law) and (ii) any
determination required to be made with respect to whether an Indemnified Party
will be entitled to indemnification will, if requested by such Indemnified
Party, be made by independent legal counsel selected by the Surviving
Corporation and reasonably satisfactory to such Indemnified Party. Parent has
agreed to guarantee the obligations of the Surviving Corporation provided for
under the indemnification provisions of the Merger Agreement; provided, that
the guarantee obligations of Parent will, in the aggregate, be limited to an
amount equal to the Net Worth of the Company. "Net Worth of the Company" means
an amount equal to (i) the aggregate value of the consolidated assets of the
Retained Business less (ii) the aggregate value of the consolidated
liabilities of the Retained Business, each as reflected on the books and
records of the Company as
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of the most recent quarterly period ended prior to the date of the
consummation of the Offer. In addition, in the Merger Agreement, for a period
of six years after the Effective Time, Parent will use reasonable efforts to
cause to be maintained in effect the current policies of directors and
officers liability insurance maintained by the Company (provided that Parent
may substitute therefor policies with reputable and financially sound carriers
of at least the same coverage and amounts containing terms and conditions
which are no less advantageous) with respect to claims arising from or related
to facts or events which occurred at or before the Effective Time; provided,
that Parent will not be obligated to make annual premium payments for such
insurance to the extent such premiums exceed 150% of the annual premiums paid
as of the date hereof by the Company for such insurance (the "Maximum
Amount"). If the amount of the annual premiums necessary to maintain or
procure such insurance coverage exceeds the Maximum Amount, Parent and the
Surviving Corporation will maintain the most advantageous policies of
directors, and officers' insurance obtainable for an annual premium equal to
the Maximum Amount.
Employment Agreements. Prior to the Spin-Off, the Company will use its best
efforts to, and will use its best efforts to cause its subsidiaries to, assign
to Loral Space or subsidiaries of Loral Space or terminate all employment
agreements with employees of the Company who are not Retained Employees (the
"Employment Agreements") and all individual severance agreements with
employees of the Company who are not Retained Employees (the "Severance
Agreements"). The parties acknowledge and agree that, whether or not such
Employment Agreements and Severance Agreements are so assigned or terminated,
all liabilities under or arising from such Employment Agreements and Severance
Agreements other than as expressly contemplated in the Distribution Agreement
or the Merger Agreement will be deemed to be Loral Space Liabilities (as
defined in Section 10), with respect to which Loral Space will indemnify the
Company and Parent as provided therein. Parent acknowledges and agrees that
all employment agreements and severance agreements with the Retained Employees
will be binding and enforceable obligations of the Surviving Corporation,
except as the parties thereto may otherwise agree. The parties to the Merger
Agreement acknowledge and agree that all liabilities under or arising from
such agreements with the Retained Employees from and after the consummation of
the Offer will be deemed to be Company Liabilities (as defined in the
Distribution Agreement), with respect to which the Company and Parent will
indemnify Loral Space as provided therein.
Fiscal Year Ended March 31, 1996 Bonus. Parent agrees to cause the Company
to pay in cash to each Company Bonus Employee (as defined below) to the extent
not previously paid, all bonus compensation payable with respect to the fiscal
year of the Company ending March 31, 1996 under any bonus program of the
Company or its subsidiaries in which such Company Bonus Employee participated
prior to the consummation of the Offer or under any employment agreement. Such
bonus compensation will be paid at the time or times that comparable bonus
compensation was paid to a similarly situated employee after March 31, 1995
with respect to the fiscal year ended March 31, 1995. Bonus compensation which
is based on objective criteria will be calculated and paid in accordance with
such criteria. With respect to bonus compensation which is wholly or partially
discretionary, such bonus compensation will be determined and paid on a basis
consistent with past practices of the Company. Subject to the conditions
regarding the aggregate amount of discretionary bonuses as described below,
the amount of discretionary bonus compensation to be paid to any Company Bonus
Employee will be determined by the Chief Executive Officer of the Company in
office immediately prior to the date of the consummation of the Offer or by
his designee. "Company Bonus Employee" means a person (other than any current
or former officer or employee of Loral Space, any Loral Space Company or the
Loral Space Business (the "Loral Space Employees")), employed by the Company
or any of its subsidiaries immediately prior to the date the Offer is
consummated, who was eligible to receive a bonus under any bonus program of
the Company or any of its subsidiaries in effect at December 31, 1995, or
under any employment agreement in effect on such date, with respect to the
fiscal year ending March 31, 1996.
Loral Space agrees to pay in cash to each Loral Space Bonus Employee (as
defined below) to the extent not previously paid, all bonus compensation
payable with respect to the fiscal year of the Company ending March 31, 1996
under any bonus program of the Company or its subsidiaries in which such Loral
Space Bonus Employee participated prior to the consummation of the Offer or
under any employment agreement. Such bonus
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compensation will be paid at the time or times that comparable bonus
compensation was paid to any similarly situated employee after March 31, 1995
with respect to the fiscal year ended March 31, 1995. Bonus compensation which
is based on objective criteria will be calculated and paid in accordance with
such criteria. With respect to bonus compensation which is wholly or partially
discretionary, such bonus compensation will be determined and paid on a basis
consistent with past practices of the Company. Subject to the following
paragraph, the amount of discretionary bonus compensation to paid to any Loral
Space Bonus Employee will be determined by Loral Space. "Loral Space Bonus
Employee" means any Loral Space Employee employed by the Company or any of its
subsidiaries immediately prior to the date the Offer is consummated, who was
eligible to receive a bonus under any bonus program of the Company or any of
its subsidiaries in effect at December 31, 1995, or under any employment
agreement in effect on such date, with respect to the fiscal year ending March
31, 1996. Upon payment of such bonuses to Loral Space Bonus Employees, Loral
Space shall submit to Parent a statement showing the individual and aggregate
bonus amounts paid to Loral Space Bonus Employees, and Parent will thereupon
promptly pay to Loral Space (or cause the Company to pay to Loral Space) the
aggregate amount of bonuses so paid; provided, that if the consummation of the
Offer occurs prior to March 31, 1996, the amount of such reimbursement will be
a prorated amount of the aggregate bonus amounts so paid, based on a fraction,
the numerator of which is the number of days of the Company's fiscal year
ending March 31, 1996 which had elapsed as of the consummation of the Offer,
and the denominator of which is 365.
The aggregate amount of discretionary bonuses payable to all Company Bonus
Employees and Loral Space Bonus Employees as a group for the fiscal year
ending March 31, 1996 will not exceed a dollar amount to be mutually agreed to
by the Chief Executive Officer of Parent and the Chief Executive Officer of
Loral Space; provided, that in the event the Chief Executive Officer of Parent
and the Chief Executive Officer of Loral Space cannot agree on such dollar
amount, the maximum aggregate amount of discretionary bonuses payable to
Company Bonus Employees and Loral Space Bonus Employees shall be based on the
aggregate amount of discretionary bonuses paid to all such employees for the
Company's fiscal year ending March 31, 1995, increased by a percentage equal
to the average of the percentage increases in discretionary bonuses paid to
all such employees over the Company's three fiscal years ending March 31,
1993, 1994 and 1995.
Transaction Bonus. Pursuant to the "change of control" provisions of the
Restated Employment Agreement between the Company and Bernard L. Schwartz
dated April 1, 1990, as amended June 14, 1994, the Company will, subject to
the following sentences of this paragraph, make a cash payment to Mr. Schwartz
upon consummation of or following the Offer, calculated in accordance with
such agreement, less $18 million waived by Mr. Schwartz. The net amount
payable to Mr. Schwartz, taking this waiver into account, is approximately $18
million. The Company also may make a cash payment of a bonus (inclusive of the
amount paid to Mr. Schwartz pursuant to the preceding sentence, the
"Transaction Bonus") to Transaction Bonus Employees (as defined below) other
than Mr. Schwartz; provided, that the aggregate Transaction Bonus paid will
not exceed $40 million; and provided further, that the Transaction Bonus
payable to any Transaction Bonus Employee will not exceed the maximum amount
which can be paid at such time without such amounts being treated as "excess
parachute payments" within the meaning of Section 280G of the Code, taking
into account all payments made on or prior to the time the Transaction Bonus
is paid (including the value of accelerated vesting of stock options or
restricted shares granted under the 1987 Plan determined in accordance with
proposed regulations promulgated under Section 280G of the Code) which
constitute parachute payments for purposes of Section 280G of the Code. The
Transaction Bonus may be paid by the Company, in its discretion, prior to, on
or immediately following, the date the Offer is consummated. "Transaction
Bonus Employee" means Mr. Schwartz and each person employed by the Company or
any of its subsidiaries on or prior to the date the Offer is consummated who
is selected by Mr. Schwartz to receive a Transaction Bonus.
Employment Protection Agreements. The Company may provide for employment
protection payments to be made to certain Company employees upon qualifying
terminations of employment pursuant to "Employment Protection Agreements" and
an "Employment Protection Plan" (each substantially in the forms attached to
the Merger Agreement as Exhibits C and D, respectively; together, the
"Employment Protection Arrangements") occurring after a change in control of
the Company; provided that (i) neither the execution of the Merger
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Agreement nor the Distribution Agreement, nor any transaction contemplated
thereby, will constitute a change in control of the Company for any purpose
under the Employment Protection Arrangements or give rise to any rights
thereunder and (ii) the Employment Protection Arrangements will terminate as
of the consummation of the Offer and no rights thereunder will continue after
the consummation of the Offer.
Supplemental Severance Program. Prior to the Effective Time, the Company
will adopt a severance plan substantially in the form attached to the Merger
Agreement as Exhibit E (the "Supplemental Severance Plan") covering up to 150
employees of the Company or its subsidiaries selected by the Company prior to
the Effective Time. The Supplemental Severance Program will provide enhanced
severance benefits to Company employees upon a dismissal without "cause" or a
voluntary termination for "good reason" within twenty-four months after the
consummation of the Offer. The benefits under this program, which are payable
in addition to a participant's regular severance benefits, will generally be
equal to one year's base salary and bonus, plus the cost of acquiring
continued welfare benefits coverage for a period of one year. Also, if a
participant's regular severance benefits are reduced after the consummation of
the Offer, the benefits payable under the program are increased by an
equivalent amount. In no event may the payments made to any participant exceed
the maximum amount which can be so paid without causing the payments to be
treated as "excess parachute payments" for purposes of Section 280G of the
Code.
Employee Benefits. Except with respect to accruals under any defined benefit
pension plans, Parent will, or will cause the Company to, give Retained
Employees full credit for purposes of eligibility, vesting and determination
of the level of benefits under any employee benefit plans or arrangements
maintained by the Parent, the Company or any subsidiary of Parent or Company
for such Retained Employees' service with the Company or any subsidiary of the
Company to the same extent recognized by the Company immediately prior to the
Effective Time. Parent will, or will cause the Company to, (i) waive all
limitations as to pre-existing conditions, exclusions and waiting periods with
respect to participation and coverage requirements applicable to the Retained
Employees under any welfare plans that such employees may be eligible to
participate in after the Effective Time, other than limitations or waiting
periods that are already in effect with respect to such employees and that
have not been satisfied as of the Effective Time under any welfare plan
maintained for the Retained Employees immediately prior to the Effective Time,
and (ii) provide each Retained Employee with credit for any co-payments and
deductibles paid prior to the Effective Time in satisfying any applicable
deductible or out-of-pocket requirements under any welfare plans that such
employees are eligible to participate in after the Effective Time.
Obligation to Use Reasonable Efforts. Subject to the terms and conditions of
the Merger Agreement and without limitation to the provisions below, Parent,
Purchaser and the Company agree to use all reasonable efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
reasonably necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
the Merger Agreement and the Ancillary Agreements (including, without
limitation, (i) cooperating in the preparation and filing of the Offer
documents, the Schedule 14D-9, the Form 10, the Information Statement and any
amendments to any thereof; (ii) cooperating in making available information
and personnel in connection with presentations, whether in writing or
otherwise, to prospective lenders to Parent and Purchaser that may be asked to
provide financing for the transactions contemplated by the Merger Agreement;
(iii) taking of all action reasonably necessary, proper or advisable to secure
any necessary consents or waivers under existing debt obligations of the
Company and its subsidiaries or amend the notes, indentures or agreements
relating thereto to the extent required by such notes, indentures or
agreements or redeem or repurchase such debt obligations; (iv) contesting any
pending legal proceeding relating to the Offer, the Merger or the Spin-Off;
and (v) executing any additional instruments necessary to consummate the
transactions contemplated by the Merger Agreement and the Ancillary
Agreements). In case at any time after the Effective Time any further action
is necessary to carry out the purposes of the Merger Agreement, the proper
officers and directors of each party will use all reasonable efforts to take
all such necessary action.
Each of the Company, Parent and Purchaser shall cooperate and use their
respective reasonable efforts to make all filings and obtain all consents and
approvals of governmental authorities (including, without limitation,
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the Federal Communication Commission ("FCC")) and other third parties
necessary to consummate the transactions contemplated by the Merger Agreement
and the Ancillary Agreements. Each of the parties to the Merger Agreement will
furnish to the other party such necessary information and reasonable
assistance as such other persons may reasonably request in connection with the
foregoing.
In addition to and without limiting the agreements of Parent and Purchaser
described in the immediately preceding paragraph, Parent, Purchaser and the
Company will (i) take promptly all actions necessary to make the filings
required of Parent, Purchaser or any of their affiliates under the applicable
Antitrust Laws, (ii) comply at the earliest practicable date with any request
for additional information or documentary material received by Parent,
Purchaser or any of their affiliates from the Federal Trade Commission ("FTC")
or the Antitrust Division of the Department of Justice (the "Antitrust
Division") pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") and from the Commission or other foreign
governmental or regulatory authority pursuant to the Antitrust Laws, and (iii)
cooperate with the Company in connection with any filing of the Company under
applicable Antitrust Laws and in connection with resolving any investigation
or other inquiry concerning the transactions contemplated by the Merger
Agreement or the Ancillary Agreements commenced by any of the FTC, the
Antitrust Division, state attorneys general, the Commission, or other foreign
governmental or regulatory authorities.
In furtherance and not in limitation of the covenants of Parent and
Purchaser described above, Parent, Purchaser and the Company shall each use
all reasonable efforts to resolve such objections, if any, as may be asserted
with respect to the Offer, the Spin-Off, the Merger or any other transactions
contemplated by the Merger Agreement or the Ancillary Agreements under any
Antitrust Law. If any administrative, judicial or legislative action or
proceeding is instituted (or threatened to be instituted) challenging the
Offer, the Spin-Off, the Merger or any other transactions contemplated by the
Merger Agreement or the Ancillary Agreements as violative of any Antitrust
Law, Parent, Purchaser and the Company will each cooperate to contest and
resist any such action or proceeding, and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order (whether temporary,
preliminary or permanent) (any such decree, judgment, injunction or other
order is hereafter referred to as an "Order") that is in effect and that
restricts, prevents or prohibits consummation of the Offer, the Spin-Off, the
Merger or any other transactions contemplated by the Merger Agreement or the
Ancillary Agreements, including, without limitation, by pursuing all
reasonable avenues of administrative and judicial appeal. Parent and Purchaser
will each also use their respective reasonable efforts to take all reasonable
action, including, without limitation, agreeing to hold separate or to divest
any of the businesses or assets of Parent or Purchaser or any of their
affiliates, or, following the consummation of the Offer or the Effective Time,
of the Company or any of the Retained Subsidiaries, as may be required (i) by
the applicable governmental or regulatory authority (including without
limitation the FTC, the Antitrust Division, any state attorney general or any
foreign governmental or regulatory authority) in order to resolve such
objections as such governmental or regulatory authority may have to such
transactions under any Antitrust Law, or (ii) by any domestic or foreign court
or other tribunal, in any action or proceeding brought by a private party or
governmental or regulatory authority challenging such transactions as
violative of any Antitrust Law, in order to avoid the entry of, or to effect
the dissolution, vacating, lifting, altering or reversal of, any Order that
has the effect of restricting, preventing or prohibiting the consummation of
the Offer, the Spin-Off, the Merger or any other transactions contemplated by
the Merger Agreement or the Ancillary Agreements; provided that Parent will
not be required to take any action, divest any asset or enter into any consent
decree if the taking of such action, disposing of such asset or entering into
such decree would have a Significant Adverse Effect. "Significant Adverse
Effect" means any change or effect that, in Parent's judgment, is reasonably
likely to adversely affect in a substantial way the benefits and opportunities
which Parent reasonably expects to receive from the acquisition of the
Retained Business or from Parent's current business.
Each of the Company, Parent and Purchaser will promptly inform the other
party of any material communication received by such party from the FTC, the
Antitrust Division, the Securities and Exchange Commission (the "Commission")
or any other governmental or regulatory authority regarding any of the
transactions contemplated by the Merger Agreement. Parent and/or Purchaser
will promptly advise the Company
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with respect to any understanding, undertaking or agreement (whether oral or
written) which it proposes to make or enter into with any of the foregoing
parties with regard to any of the transactions contemplated by the Merger
Agreement.
"Antitrust Law" means the Sherman Act, as amended, the Clayton Act, as
amended, the HSR Act, the Federal Trade Commission Act, as amended, EC Merger
Regulations and all other federal, state and foreign statutes, rules,
regulations, orders, decrees, administrative and judicial doctrines, and other
laws that are designed or intended to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of trade.
Representations and Warranties. The Merger Agreement contains certain
representations and warranties of the parties including, without limitation,
representations by the Company as to organization, capitalization, authority
relative to the Merger Agreement, consents and approvals, absence of certain
changes concerning the Company's business, undisclosed liabilities, reports,
offer documents, no default, litigation and compliance with law, employee
benefit plans, assets and intellectual property, certain contracts and
arrangements, taxes, Retained Business FCC licenses, labor matters, Rights
Agreement and certain fees.
Conditions to the Merger. Pursuant to the Merger Agreement, the obligations
of each of Parent, the Purchaser and the Company to effect the Merger are
subject to the satisfaction or waiver, at or prior to the Effective Time, of
certain conditions, including: (a) if required by applicable law, the Merger
Agreement will have been adopted by the affirmative vote of the stockholders
of the Company by the requisite vote in accordance with applicable law; (b) no
statute, rule, regulation, order, decree, or injunction will have been
enacted, entered, promulgated or enforced by any court or governmental
authority which prohibits or restricts the consummation of the Merger, (c) any
waiting period applicable to the Merger under the Antitrust Laws will have
terminated or expired and all approvals required under the Antitrust Laws will
have been received; (d) the Spin-Off will have been consummated in all
material respects; and (e) the Offer will not have been terminated in
accordance with its terms prior to the purchase of any Shares.
Except if the Purchaser has accepted for payment and paid for Shares validly
tendered pursuant to the Offer or fails to accept for payment any Shares
pursuant to the Offer in violation of the terms thereof, the obligation of the
Company to effect the Merger is further subject to the satisfaction at or
prior to the Effective Time of the following conditions: (a) the
representations and warranties of Parent and the Purchaser contained in the
Merger Agreement will be true and correct in all material respects at and as
of the Effective Time as if made at and as of such time; and (b) each of
Parent and the Purchaser will have performed in all material respects its
obligations under the Merger Agreement required to be performed by it at or
prior to the Effective Time pursuant to the terms thereof.
Except if the Purchaser has accepted for payment and paid for Shares validly
tendered pursuant to the Offer or fails to accept for payment any Shares
pursuant to the Offer in violation of the terms thereof, the obligations of
Parent and the Purchaser to effect the Merger are further subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) the representations and warranties of the Company contained in the Merger
Agreement will be true and correct in all material respects at and as of the
Effective Time as if made at and as of such time; (b) the Company will have
delivered to Purchaser certain legal opinions in connection with the Company's
public indebtedness; and (c) the Company will have performed in all material
respects each of its obligations under the Merger Agreement required to be
performed by it at or prior to the Effective Time pursuant to the terms
thereof.
Termination. The Merger Agreement may be terminated and the Offer and the
Merger may be abandoned at any time (notwithstanding approval of the Merger by
the stockholders of the Company) prior to the Effective Time: (a) by mutual
written consent of Parent, the Purchaser and the Company; (b) by Parent,
Purchaser or the Company if any court of competent jurisdiction in the United
States or other United States governmental body will have issued a final
order, decree or ruling or taken any other final action restraining, enjoining
or otherwise
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prohibiting the consummation of the Offer, the Spin-Off or the Merger and such
order, decree, ruling or other action is or shall have become nonappealable;
(c) by Parent or Purchaser if due to an occurrence or circumstance which would
result in a failure to satisfy any of the conditions set forth in Section 15,
Purchaser will have (i) failed to commence the Offer within the time required
by Regulation 14D under the Exchange Act, (ii) terminated the Offer, or (iii)
failed to pay for Shares pursuant to the Offer prior to June 30, 1996; (d) by
the Company if (i) there is no material breach of any representation,
warranty, covenant or agreement on the part of the Company and Purchaser has
(A) failed to commence the Offer within the time required by Regulation 14D
under the Exchange Act, (B) terminated the Offer or (C) failed to pay for
Shares pursuant to the Offer prior to June 30, 1996 or (ii) prior to the
purchase of Shares pursuant to the Offer, a Third Party has made a bona fide
offer that the Board of Directors of the Company by a majority vote determines
in its good faith judgment and in the exercise of its fiduciary duties, based
as to legal matters on the written opinion of legal counsel, is a Higher Offer
(as defined below); provided, that such termination under this clause (ii)
will not be effective until payment of the fee discussed below; (e) by Parent
or Purchaser prior to the purchase of Shares pursuant to the Offer, if (i)
there has been a breach of any representation or warranty on the part of the
Company or Loral Space contained in the Merger Agreement or the Distribution
Agreement resulting in a Material Adverse Effect (as defined in the Merger
Agreement) or materially adversely affecting (or materially delaying) the
consummation of the Offer, (ii) there has been a breach of any covenant or
agreement on the part of the Company or Loral Space under either the Merger
Agreement or the Distribution Agreement resulting in a Material Adverse Effect
or materially adversely affecting (or materially delaying) the consummation of
the Offer, which will not have been cured prior to the earlier of (A) 10 days
following notice of such breach or (B) two business days prior to the date on
which the Offer expires, (iii) the Company engages in Active Negotiations (as
defined below) with a Third Party with respect to a Third Party Acquisition
(as defined below), (iv) the Board of Directors of the Company will have
withdrawn or modified (including effecting any amendment of Schedule 14D-9) in
a manner adverse to Purchaser, its approval or recommendation of the Offer,
the Spin-Off, the Merger, the Merger Agreement or the Distribution Agreement,
has recommended to the Company's stockholders another offer, has authorized
the redemption of any Rights (whether or not in accordance with the Merger
Agreement) after the Company's receipt of an Acquisition Proposal, or has
adopted any resolution to effect any of the foregoing or (v) the number of
shares validly tendered and not withdrawn when added to the shares
beneficially owned by Parent, prior to the expiration of the Offer, does not
constitute at least two-thirds of the Shares, determined on a fully diluted
basis, and on or prior to such date an entity or group (other than Parent or
Purchaser) has made and not withdrawn a proposal with respect to a Third Party
Acquisition; or (f) by the Company if (i) there has been a breach of any
representation or warranty in the Merger Agreement or the Distribution
Agreement on the part of Parent or Purchaser which materially adversely
affects (or materially delays) the consummation of the Offer or (ii) there has
been a material breach of any covenant or agreement in the Merger Agreement or
the Distribution Agreement on the part of Parent or Purchaser which materially
adversely affects (or materially delays) the consummation of the Offer which
has not been cured prior to the earlier of (A) 10 days following notice of
such breach or (B) two business days prior to the date on which the Offer
expires.
Termination Fee. Pursuant to the Merger Agreement, (a) if: (i) Parent or
Purchaser terminates the Merger Agreement pursuant to Clause (e)(ii), (iii) or
(v) of the immediately preceding paragraph and within 12 months thereafter the
Company enters into an agreement with respect to a Third Party Acquisition, or
a Third Party Acquisition occurs, involving any party (or any affiliate
thereof) (A) with whom the Company (or its agents) had negotiations with a
view to a Third Party Acquisition, (B) to whom the Company (or its agents)
furnished information with a view to a Third Party Acquisition or (C) who had
submitted a proposal or expressed an interest in a Third Party Acquisition, in
the case of each of clauses (A), (B) and (C) after the date of the Merger
Agreement and prior to such termination; or (ii) Parent or Purchaser
terminates the Merger Agreement pursuant to Clause (e)(iii) or (v) of the
immediately preceding paragraph and, within 12 months thereafter, a Third
Party Acquisition will occur involving a Higher Offer (as defined below); or
(iii) Parent or Purchaser terminates the Merger Agreement pursuant to Clause
(e)(iv) of the immediately preceding paragraph; or (iv) the Company terminates
the Merger Agreement pursuant to Clause (d)(ii) of the immediately preceding
paragraph; then, in each case, the Company will pay to Parent, within one
business day following the execution and delivery of such agreement or such
occurrence, as the case may be, or simultaneously with such determination
pursuant to
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Clause (d)(ii) above, a fee, in cash, of $175 million; provided, that the
Company in no event will be obligated to pay more than one such $175 million
fee with respect to all such agreements and occurrences and such termination.
"Active Negotiations" means negotiations with a Third Party that has
proposed a Third Party Acquisition or made an Acquisition Proposal, or with
such Third Party's agents or representatives with respect to the substance of
such Third Party Acquisition or Acquisition Proposal, but will not include (x)
communications in connection with, or constituting, the furnishing of
information pursuant to a confidentiality agreement as contemplated by the
Merger Agreement or (y) communications that include no more than an explicit
bona fide rejection of such proposal and a very brief statement of the reasons
therefor.
"Third Party Acquisition" means the occurrence of any of the following
events: (i) the acquisition of the Company by merger or otherwise by any
person (which includes for these purposes a "person" as such term is defined
in Section 13(d)(3) of the Exchange Act) or entity other than Parent, the
Purchaser or any affiliate thereof (a "Third Party"); (ii) the acquisition by
a Third Party of more than 30% of the total assets of the Company and its
subsidiaries, taken as a whole; (iii) the acquisition by a Third Party of 30%
or more of the outstanding Shares; (iv) the adoption by the Company of a plan
of liquidation or the declaration or payment of an extraordinary dividend; or
(v) the purchase by the Company or any of its subsidiaries of more than 20% of
the outstanding shares.
"Higher Offer" means any Third Party Acquisition which reflects a higher
value for the Shares than the aggregate value being provided pursuant to the
transactions contemplated by the Merger Agreement and the Ancillary Agreements
including, without limitation, the shares of Loral Space Common Stock
distributed in the Spin-Off. Prior to the termination of the Merger Agreement
by the Company pursuant to Clause (d)(ii) above, the Board of Directors will
provide a reasonable opportunity to a nationally recognized investment banking
firm selected by Parent, Purchaser or their designee (the "IB") to evaluate
the proposed Third Party Acquisition, to determine whether it is a Higher
Offer and to advise the Board of Directors of the Company of the basis for and
results of its determination. The Company agrees to cooperate and cause the
Company's financial advisors to cooperate with the IB (including, without
limitation, providing the IB with full access to all such information which
the IB deems relevant and which the IB agrees to keep confidential) to the
extent reasonably requested by the IB. The fees and expenses incurred by the
IB shall be paid by Parent. Nothing contained in the definitions of "Active
Negotiations", "Third Party Acquisitions" or "Higher Offer" will prevent
Parent and Purchaser from challenging, by injunction or otherwise, the
termination or attempted termination of the Merger Agreement pursuant to
Clause (d)(ii) above.
Pursuant to the Merger Agreement, in the event of the termination and
abandonment of the Merger Agreement, the Merger Agreement will become void and
have no effect, without any liability on the part of any party or its
affiliates, directors, officers or stockholders, other than the provisions
relating to the termination fee, fees and expenses, governing law, brokerage
fees and commissions, indemnification and confidentiality of information,
provided, that a party will not be relieved from liability for any breach of
the Merger Agreement. Notwithstanding anything to the contrary contained in
the Merger Agreement, upon payment by the Company of the fees and expenses
referred to in the Merger Agreement, the Company will be released from all
liability thereunder, including any liability for any claims by Parent, the
Purchaser or any of their affiliates based upon or arising out of any breach
of the Merger Agreement or any Ancillary Agreements.
Fees and Expenses. If the Merger Agreement is terminated pursuant to Clause
(e)(i) or (e)(ii) above (the "Designated Termination Provisions") or Parent is
entitled to receive the $175 million fee under the Merger Agreement, then the
Company will reimburse Parent, Purchaser and their affiliates (not later than
one business day after submission of statements therefor) for actual
documented out-of-pocket fees and expenses, not to exceed $45 million,
actually incurred by any of them or on their behalf in connection with the
Offer, the proposed Merger and the proposed Spin-Off and the transactions
contemplated by the Merger Agreement and the Distribution Agreement
(including, without limitation, fees payable to financing sources, investment
bankers (including to the IB), counsel to any of the foregoing and
accountants), whether incurred prior to or after the
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date of the Merger Agreement. The Company will in any event pay the amount
requested (not to exceed $45 million) within one business day of such request,
subject to the Company's right to demand a return of any portion as to which
invoices are not received in due course. Except as specifically provided in
Section 8.3 of the Merger Agreement and except as otherwise specifically
provided in the Distribution Agreement, each party shall bear its own
respective expenses incurred in connection with the Merger Agreement, the
Offer and the Merger, including, without limitation, the preparation,
execution and performance of the Merger Agreement and the Ancillary Agreements
and the transactions contemplated thereby, and all fees and expenses of
investment bankers, finders, brokers, agents, representatives, counsel and
accountants.
THE DISTRIBUTION AGREEMENT
The following is a summary of certain provisions of the Distribution
Agreement. A copy of the Distribution Agreement is attached as an exhibit to
the Schedule 14D-1 and is incorporated herein by reference. The Distribution
Agreement may be examined, and copies may be obtained, as set forth in Section
7 above. The following summary is qualified in its entirety by reference to
the Distribution Agreement.
Pursuant to the Distribution Agreement, the Company and certain subsidiaries
of the Company, through a series of transactions, will transfer to Loral Space
all of their respective right, title and interest in and to the following
assets (such assets, the "Loral Space Assets"): (a) all shares of capital
stock or partnership interests, as the case may be, then owned in the Loral
Space Companies, (b) the $712,400,000 cash amount being transferred to the
Company pursuant to the Distribution Agreement, (c) the rights to the "Loral"
name, (d) all rights to receive management fees from certain of the Loral
Space Companies, (e) all rights and interests in any prospective domestic or
international direct broadcast satellite projects currently under
consideration, (f) certain service provider operations related to Globalstar,
(g) certain rights and liabilities with respect to certain litigation in which
the Company has an interest, (h) certain corporate aircraft, (i) a portion of
the leasehold interest in the Company's New York corporate offices, (j)
certain FCC license applications, and (k) certain Warrants to be received from
Globalstar in connection with the Company's guarantee of certain Globalstar
bank indebtedness, and (l) certain other assets described in the Distribution
Agreement, in exchange for the issuance by Loral Space to the Company and its
subsidiaries of a certain amount of Loral Space capital stock. Concurrently
with the actions in the immediately preceding sentence, Loral Space will
assume and will in due course pay, perform and discharge (or will cause to be
assumed and cause in due course to be paid, performed and discharged), all of
the various liabilities ("Loral Space Liabilities" or "Spinco Liabilities")
relating to (a) each business and each former business which is or was
conducted by Loral Space or a Loral Space Company as of the date of the
Distribution or which is or was included within the Loral Space Assets (all
such businesses, the "Loral Space Business"), (b) the employees of Loral
Space, and (c) certain other liabilities relating to the Loral Space Companies
or the Loral Space Business or otherwise.
As promptly as practicable after the date of the Distribution Agreement and
prior to the Distribution Date, the Company and Loral Space will prepare an
Information Statement (which will set forth appropriate disclosure concerning
Loral Space and the Loral Space Companies, the Loral Space Business, the Spin-
Off and certain other matters) and Loral Space will file with the Commission a
registration statement on Form 10 (which will include or incorporate by
reference the Information Statement). The Company and Loral Space will use
their respective reasonable efforts to cause the Form 10 to be declared
effective under the Exchange Act or, if either the Company or Parent
reasonably determines that the Distribution may not be effected without
registering the Loral Space Common Stock pursuant to the Securities Act, the
Company shall use its best efforts to cause the Loral Space Common Stock to be
registered pursuant to the Securities Act and thereafter effect the
Distribution in accordance with the terms of the Distribution Agreement,
including, without limitation, by preparing and filing on an appropriate form
of registration statement under the Securities Act covering the Loral Space
Common Stock and using its best efforts to cause such registration statement
to be declared effective. Following the effectiveness of such Form 10 (or
registration statement, as the case may be), the Company will mail the
Information Statement to the holders of the Company Common Stock.
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Subject to terms and conditions of the Distribution Agreement, the Company's
Board of Directors (or any duly appointed committee thereof) will in its
reasonable discretion establish the Spin-Off Record Date and the Distribution
Date and any appropriate procedures in connection with the Distribution
(subject in each case to the provisions of applicable law) as soon as
reasonably practicable following the date of the Distribution Agreement or on
such other dates as Parent may reasonably request; provided that (x) the Spin-
Off Record Date may not be earlier than the twentieth day following the date
on which the Offer is commenced and also may not be earlier than the tenth day
following the date on which this Board takes action to establish the Spin-Off
Record Date (the "Distribution Declaration Date") and (y) the parties hereto
will use their reasonable efforts to cause the Spin-Off Record Date to be
established so as to occur immediately prior to the acceptance for payment by
the Purchaser of the shares of Common Stock pursuant to the Offer (provided
that in no event will the Spin-Off Record Date be established so as to occur
as of or at any time after the acceptance for payment by the Purchaser of the
shares of common stock pursuant to the Offer); provided further that if all
conditions to the Offer have been satisfied or waived prior to the date on
which all of the Distribution Conditions (as defined below) have been
satisfied (or waived, to the extent expressly permitted by the provisions of
the Distribution Agreement), then the Purchaser will be permitted, but not
required, to accept for payment at such time the shares of Common Stock
pursuant to the Offer notwithstanding the fact that the Distribution
Conditions have not been satisfied or waived (provided that prior to such
acceptance for payment Purchaser first obtains the consent of the Company,
which consent may not be unreasonably withheld). The parties hereto
acknowledge and agree that payment of the Distribution will be conditioned on
(x) the satisfaction (or waiver, to the extent expressly permitted by the
provisions of the Distribution Agreement) of each of the Distribution
Conditions on a date which is prior to the fiftieth (50th) day following the
Spin-Off Record Date and (y) Parent and Purchaser not having taken any action,
on or after the Distribution Declaration Date, to extend or delay the
expiration of the Offer to a date which is later than the Spin-Off Record
Date.
The obligations of each of the Company, its subsidiaries and Loral Space
under the Distribution Agreement are subject to the satisfaction of the
following conditions (the "Distribution Conditions"): (i) the Purchaser will
have notified the Company that it is prepared to immediately accept for
payment shares of Company Common Stock pursuant to the terms and conditions of
the Offer as set forth in Section 15, (ii) the Spin-Off Record Date will have
been set by the Company's Board of Directors, (iii) the Form 10 (or any
registration statement filed in lieu thereof) will have been declared
effective by the Commission, (iv) the Loral Space Common Stock will have been
accepted for listing or quotation in accordance with the Distribution
Agreement, (v) no court order or law will have been enacted, promulgated,
issued or entered against any of the parties which (x) prohibits or materially
restricts consummation of any of the transactions contemplated by the
Distribution Agreement and (y) remains in effect as of the date on which the
satisfaction of this condition is determined, (vi) the Company and each of the
Retained Subsidiaries will have obtained all consents required to be obtained
by the Company as a result of or in connection with the transactions
contemplated by the Distribution Agreement in order to avoid a material
default under any material contract to or by which the Company, Loral Space or
any of their respective subsidiaries is a party or may be bound, or otherwise
necessary to permit the Company and each of the Retained Subsidiaries to
conduct their business in a manner consistent with its past practices,
(vii) all consents and approvals of, and notices to and filings with, any
governmental entity or any other person or entity arising out of or relating
to the consummation of the transactions contemplated by the Distribution
Agreement, will have been obtained or made (as the case may be), (viii) the
guarantee by the Company of certain bank indebtedness of Globalstar (the
"Globalstar Bank Guarantee") will have been amended so that the provisions
thereof shall, following the transactions described above (the
"Restructuring"), be amended in the manner contemplated pursuant to the
Distribution Agreement (with such changes thereto as Parent and the Company
may approve prior to the Offer Purchase Date), and (ix) certain Merchant
Banking Partnerships affiliated with Lehman Brothers Holdings Inc. (the
"Lehman Partnerships") and all other holders of the preferred stock of Loral
Aerospace Holdings, Inc. ("Holdings") (if any) will have exchanged all issued
and outstanding shares of such preferred stock for shares of capital stock or
other equity securities of either Loral Space, any Loral Space Company or any
subsidiary of Loral Space.
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Following the Spin-Off, Loral Space will establish a qualified defined
benefit pension plan and trust ("Loral Space Pension Plan" or "Spinco Pension
Plan"). Thereafter, the Company will direct the trustees of the trusts under
the Loral Corporation Pension Plan and the Retirement Plan of Loral Aerospace
Corp. (the "Company Pension Plans") to transfer in cash or in kind, as agreed
to by the Company and Loral Space, to the trust under the Loral Space Pension
Plan, an amount determined by the certified actuary of the Company Pension
Plans to be equal to, with respect to each such Company Pension Plan, (A) the
product of (i) the fair market value of the assets held under such Company
Pension Plan as of the last day of the month prior to the month in which the
transfer occurs (the "Valuation Date") and (ii) a fraction, the numerator of
which is equal to the present value of all accrued benefits under such Company
Pension Plan as of the Distribution Date in respect of Loral Space Employees
and the denominator of which is equal to the present value of all accrued
benefits under such Company Pension Plan less (B) the payments made by such
Company Pension Plan between the Distribution Date and the date of transfer in
respect of Loral Space Employees. From the Valuation Date to the date of
transfer, the assets to be transferred will be credited with interest at the
interest rate available on a 30-day treasury note at the auction date on or
immediately preceding the Valuation Date. Following the Distribution Date,
Loral Space shall cause SSL to establish a trust intended to qualify under
Section 501(a) of the Code ("Loral Space SSL Trust" or "Spinco SSL Trust") and
intended to hold the assets of the Retirement Plan of SSL (the "SSL Plan").
Thereafter, the Company shall direct the Trustees of the Loral Master Pension
Trust (the "Master Trust") to transfer in cash or in kind as agreed to by SSL
and the Company from the Master Trust to the Loral Space SSL Trust, the assets
held by the Master Trust under the SSL Plan. Upon the transfers described
above, Loral Space agrees to indemnify and hold harmless the Company, its
officers, directors, employees, agents and affiliates from and against any and
all Indemnifiable Losses arising out of or related to the Loral Space Pension
Plan and the SSL Plan, including all benefits accrued by Loral Space Employees
prior to the Distribution Date under the Company Pension Plans and the SSL
Plan.
Loral Space will assume and be solely responsible for all liabilities and
obligations arising under the Company's retiree welfare plans (including
retiree medical plans) with respect to Loral Space Employees. The Company will
retain and be solely responsible for all liabilities and obligations arising
under the Company's retiree welfare plans (including retiree medical plans)
with respect to Retained Employees.
Loral Space represents and warrants to the Company that (i) except as
expressly provided in the Globalstar Bank Guarantee (as amended pursuant to
the Distribution Agreement), neither the Company nor any of the Retained
Subsidiaries will, after giving effect to the Restructuring, be liable
directly or indirectly, as borrower, surety, guarantor, indemnitor or
otherwise, with respect to (and that none of the assets of the Company other
than the Loral Space Assets (such assets the "Retained Assets") will be bound
by or subject to) any of the Loral Space Liabilities or any Loral Space
indebtedness, (ii) there are no intercompany agreements between the Company
and the Retained Subsidiaries, on the one hand and Loral Space and the Loral
Space Companies on the other in effect as of the date of the Distribution
Agreement, which, either individually or in the aggregate, are materially
adverse to (i) the business, properties, operations, prospects, results of
operations or condition (financial or otherwise) of the Retained Business or
(ii) the ability of the Company or any of the Retained Subsidiaries to perform
their respective obligations under the Distribution Agreement, the Tax Sharing
Agreement or the Stockholders Agreement, (iii) there are no Loral Space Assets
which have been used within the Retained Business within one year prior to the
date of the Distribution Agreement, other than those Loral Space Assets which
are listed on the Disclosure Schedule to the Distribution Agreement, (iv)
except as set forth in the Disclosure Schedule to the Distribution Agreement
neither Loral Space nor any Loral Space Company will, immediately after giving
effect to the Restructuring and the Distribution, own, hold or lease, in whole
or in part, any of the assets, properties, licenses and rights which are
reasonably necessary to carry on the Retained Business as presently conducted,
and (v) prior to, on or shortly after the Distribution Date, GTL or Globalstar
(as the case may be) will issue to the Company warrants to acquire equity of
GTL or Globalstar (as the case may be), which warrants will be on the terms
and conditions described in the December 21, 1995 memorandum from Michael B.
Targoff to Enrique Fernandez relating to, among other things, the Globalstar
Bank Guarantee and the Globalstar Credit Agreement (the "Globalstar Warrant
Memorandum") and shall otherwise be on such terms and conditions as are
customary to transactions of a similar nature.
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Except as otherwise specified by Loral Space prior to the Offer Purchase
Date, the executive officers of the Company shall be the executive officers of
Loral Space on and after the Distribution Date. Effective as of the
Distribution Date, (a) those Retained Employees who are employed by the
Company or any of its subsidiaries immediately prior to the Distribution Date
will become employees of the Company in the same capacities as then held by
such employees (or in such other capacities as the Company will determine in
its sole discretion) and (b) those Loral Space Employees, together with those
persons whose primary employment is with the Loral Space Business, who are
employed by the Company or any of its subsidiaries immediately prior to the
Distribution Date will become employees of Loral Space in the same capacities
as then held by such employees (or in such other capacities as Loral Space
will determine in its sole discretion).
Prior to the Spin-Off, the Company will establish a rabbi trust or trusts
for the benefit of participants in the Company's Supplemental Executive
Retirement Plan ("SERP") and will deposit in such rabbi trust or trusts an
amount at least equal to the present value of the accrued benefits under the
SERP. This amount is not expected to exceed $11 million. The liabilities for
the accrued benefits under the SERP with respect to Loral Space Employees, and
any assets held in the rabbi trust or trusts relating to such liabilities,
will be transferred to Loral Space as soon as practicable after the
Distribution Date.
Each of the parties agree that except as otherwise expressly provided in
Article IV of the Distribution Agreement, all existing intercompany agreements
in effect immediately prior to the Distribution Date will not be deemed
altered, amended or terminated as a result of the Distribution Agreement or
the consummation of the transactions contemplated by the Distribution
Agreement and will otherwise remain in effect immediately after giving effect
to the Restructuring.
In addition to any indemnification required by Articles II, VI and VIII of
the Distribution Agreement, subject to the terms and conditions set forth
therein, from and after the Distribution Date, Loral Space shall indemnify,
defend and hold harmless the Company, each Retained Subsidiary, the Purchaser
and Parent and each of their respective directors, officers, employees,
representatives, advisors, agents and affiliates (collectively, the "Parent
Indemnified Parties") from, against and in respect of any and all
indemnifiable losses of the Parent Indemnified Parties arising out of,
relating to or resulting from, directly or indirectly, (i) any
misrepresentations or breach of warranty made by or on behalf of Loral Space
or, on or prior to the Offer Purchase Date, made by or on behalf of the
Company which misrepresentation or breach of warranty is contained in the
Distribution Agreement or the Stockholders Agreement (as defined in this
Section 10), (ii) any breach of any agreement or covenant under the
Distribution Agreement or the Stockholders Agreement on the part of Loral
Space or, on or prior to the Offer Purchase Date, on the part of the Company,
(iii) any and all Loral Space Liabilities, (iv) the conduct of the Loral Space
Business or any part thereof on, prior to or following the Distribution Date,
(v) any transfer of Loral Space Assets to, or assumption of Loral Space
Liabilities by, Loral Space or any Loral Space Company in accordance with the
Distribution Agreement or otherwise in connection with the Restructuring
(other than any costs and expenses which have been expressly assumed by the
Company pursuant to the provisions of the Distribution Agreement), (vi) any
indemnifiable loss resulting from any claims that any statements or omissions
relating to or describing directly or indirectly, Loral Space, any Loral Space
Company, the Loral Space Business, any Loral Space Asset or any Loral Space
Liability, and which occur on or prior to the Offer Purchase Date (A) in the
Information Statement, the Form 10 or in any registration statement filed
pursuant to the Distribution Agreement (in each case other than with respect
to any statements or omissions made in reliance upon and in conformity with
information furnished in writing by Parent, the Purchaser or their affiliates,
representatives or advisors) and other than any statements or omissions which
relate solely to the Merger Agreement and the Distribution Agreement and the
transactions contemplated thereby), or (B) in any document(s) filed with the
Commission by Loral Space or any Loral Space Company after the date hereof
pursuant to either the Securities Act or the Exchange Act (in each case other
than with respect to any statements or omissions which relate solely to the
Merger Agreement and the Distribution Agreement and the transactions
contemplated thereby), which, in the case of either clause (A) or (B) above,
are false or misleading with respect to any material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, (vii) the failure
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of the Company or Loral Space to obtain any final order or other consent or
approval of the FCC with respect to any of the transactions contemplated
pursuant to either the Distribution Agreement or the Merger Agreement and
(viii) any Excluded Indemnifiable Losses (as defined below). Notwithstanding
the foregoing, Loral Space's indemnification obligations pursuant to the
Distribution Agreement will not in any event include any indemnifiable losses
arising out of or relating to litigation relating to the Offer and the
transactions contemplated thereby, except to the extent of any indemnifiable
losses (such indemnifiable losses, the "Excluded Indemnifiable Losses") which
the Company is able to demonstrate resulted directly from (a) any statement or
omission on the part of Loral Space or any of its affiliates in the documents
referred to in clause (vi) above or (b) any business activities, assets or
liabilities of Loral Space, any of the Loral Space Companies or the Loral
Space Business.
Notwithstanding Loral Space's obligations to indemnify Parent Indemnified
Parties described above, Loral Space shall be obligated to indemnify the
Parent Indemnified Parties only for those indemnifiable losses under clauses
(i), (ii) or (vi) of the immediately preceding paragraph as to which the
Parent Indemnified Parties have given Loral Space written notice thereof on or
prior to the third anniversary of the Distribution Date (it being understood
that there shall be no corresponding time limitation with respect to any
Indemnifiable Losses arising under clauses (iii), (iv), (v), (vii) and (viii)
of the immediately preceding paragraph; provided further that claims with
respect to breaches of covenants and agreements set forth in the Distribution
Agreement or in the Stockholders Agreement will survive for the applicable
statute of limitations period. Notwithstanding the foregoing, if on or before
the expiration of such indemnification period any Parent Indemnified Party has
given notice to Loral Space pursuant to the Distribution Agreement of any
matter which would be the basis for a claim of indemnification by such Parent
Indemnified Party pursuant to the immediately preceding paragraph, such Parent
Indemnified Party will have the right after the expiration of such
indemnification period to assert or to continue to assert such claim and to be
indemnified with respect thereto.
In addition to any indemnification required by Articles II, VI and VIII of
the Distribution Agreement, subject to the terms and conditions set forth
therein, from and after the Distribution Date, the Company will indemnify,
defend and hold harmless Loral Space, each Loral Space Company and each of
their respective directors, officers, employees, representatives, advisors,
agents and affiliates (collectively, the "Loral Space Indemnified Parties")
from, against and in respect of any and all indemnifiable losses of the Loral
Space Indemnified Parties arising out of, relating to or resulting from,
directly or indirectly, (i) any breach of the Distribution Agreement or any
agreement or covenant set forth in the Distribution Agreement or in the
Stockholders Agreement on the part of Parent or the Purchaser or, following
the Offer Purchase Date, on the part of the Company, (ii) any and all
liabilities of the Company and the Retained Subsidiaries (such liabilities,
the "Retained Liabilities"), (iii) the conduct of the businesses of the
Company, the Retained Subsidiaries and the Retained Business or any part
thereof on, prior to or following the Distribution Date, (iv) any
Indemnifiable Loss resulting from any claims that any statements or omissions
(A) relating to or describing, directly or indirectly, Parent or the
Purchaser, and which occur on or prior to the Offer Purchase Date in any
Solicitation/Recommendation Statement on Schedule 14D-9 of the Company filed
in connection with the Offer, the Information Statement, the Form 10 or in any
registration statement filed pursuant to Section 3.1 or Section 3.3 of the
Distribution Agreement (in each case only to the extent of any statements or
omissions made in reliance upon and in conformity with information furnished
in writing by Parent, the Purchaser or their affiliates, representatives or
advisors), (B) in any Tender Offer Statement on Schedule 14D-1 of the
Purchaser or Parent filed in connection with the Offer (other than any
statements or omissions made in reliance upon and in conformity with
information furnished in writing by the Company, and Retained Subsidiary,
Loral Space, any Loral Space Company or any of their respective affiliates,
representatives or advisors), or (C) in any other document(s) filed after the
date of the Distribution Agreement by Parent or the Purchaser with the
Commission pursuant to either the Securities Act or the Exchange Act or the
Exchange Act (e.g., statements or omissions made in a Current Report on Form
8-K filed by either Parent or the Purchaser after the date of the Distribution
Agreement pursuant to the Exchange Act), which, in the case of either clauses
(A), (B) or (C) above, are false or misleading with respect to any material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading and (v) any
Indemnifiable Loss arising out of or resulting from litigation relating to the
Offer and the
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transactions contemplated thereby (other than Excluded Indemnifiable Losses).
Notwithstanding the foregoing and anything to the contrary in the Distribution
Agreement or any other agreement to be entered into pursuant to the
Distribution Agreement, the Company shall not be required to indemnify, defend
and hold harmless any Loral Space Indemnified Party from and against any
Indemnifiable Loss resulting from any claims that the statements included in
the Information Statement, the Form 10 or in any registration statement filed
pursuant to Section 3.1 or Section 3.3 of the Distribution Agreement (in each
case other than statements or omissions made in reliance upon and in
conformity with information furnished in writing by Parent, the Purchaser or
their affiliates, representatives or advisors expressly for use therein) are
false or misleading with respect to any material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
Notwithstanding the Company's obligations to indemnify the Loral Space
Indemnified Parties described in the preceding paragraph, the Company will be
obligated to indemnify the Loral Space Indemnified Parties only for those
Indemnifiable Losses under Clause (i) and (iv) of the immediately preceding
paragraph as to which the Loral Space Indemnified Parties have given the
Company written notice thereof on or prior to the expiration of any applicable
statute of limitations period (it being understood that there will be no
corresponding time limitation with respect to any Indemnifiable Losses arising
under clauses (ii) and (iii) of the immediately preceding paragraph).
Notwithstanding the foregoing, if on or before the expiration of such
indemnification period any Loral Space Indemnified Party has given notice to
the Company of any matter which would be the basis for a claim of
indemnification by such Loral Space Indemnified Party pursuant to the
immediately preceding paragraph, such Loral Space Indemnified Party will have
the right after the expiration of such indemnification period to assert or to
continue to assert such claim and to be indemnified with respect thereto.
TAX SHARING AGREEMENT
The following is a summary of certain provisions of the Tax Sharing
Agreement (as defined below). A copy of the Tax Sharing Agreement is attached
hereto as an exhibit to the Schedule 14D-1 and is incorporated herein by
reference. The Tax Sharing Agreement may be examined, and copies may be
obtained, as set forth in Section 7 above. The following summary is qualified
in its entirety by reference to the Tax Sharing Agreement.
Pursuant to a tax sharing agreement, to be entered into prior to the
consummation of the Offer, between Parent, Purchaser, the Company and Loral
Space (the "Tax Sharing Agreement"), Parent generally has agreed, among other
things, to file all tax returns with respect to, and to pay all taxes imposed
upon or attributable to, the Company or the Retained Subsidiaries for all
taxable periods, including the taxes incurred in connection with the transfers
of the Loral Space Assets to Loral Space and the Loral Space. Loral Space
generally has agreed, among other things, to file all tax returns with respect
to Loral Space or the Loral Space Spino Companies for all taxable periods
beginning after the Distribution Date and to pay all taxes imposed upon or
attributable to Loral Space or the Loral Space Companies for all taxable
periods. The Tax Sharing Agreement will become effective only upon
consummation of the Offer.
THE RIGHTS AGREEMENT
The Company has advised Parent that pursuant to the Rights Agreement, on
January 7, 1996 the Board of Directors of the Company declared a dividend
distribution of one Right for each Share outstanding at the close of business
on January 22, 1996 (the "Rights Record Date") and with respect to any Shares
issued thereafter until the Rights Distribution Date (as defined below) and,
in certain circumstances, with respect to Shares issued after the Distribution
Date. Except as set forth below, each Right, when it becomes exercisable,
entitles the registered holder to purchase from the Company a unit consisting
initially of one one-thousandth of a share (a "Unit") of Series A Preferred
Stock, par value $1.00 per share (the "Rights Preferred Stock"), of the
Company at a purchase price of $180 per Unit, subject to adjustment (the
"Rights Purchase Price"). The description and terms of the Rights are set
forth in the Rights Agreement.
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Initially, the Rights were and are attached to all certificates representing
Shares then outstanding, and no separate certificates evidencing the Rights
(the "Rights Certificates") were or have been distributed. The Rights will
separate from the Common Stock and a "Rights Distribution Date" will occur
upon the earlier of (i) ten days (or such later date as the Board of Directors
shall determine) following public disclosure that a person or group of
affiliated or associated persons has become an "Acquiring Person" (as defined
below), or (ii) ten business days (or such later date as the Board of
Directors shall determine) following the commencement of a tender offer or
exchange offer that would result in a person or group becoming an "Acquiring
Person". Except as set forth below, an "Acquiring Person" is a person or group
of affiliated or associated persons who has acquired beneficial ownership of
20% or more of the outstanding Shares. The term "Acquiring Person" excludes
(i) the Company, (ii) any subsidiary of the Company, (iii) any employee
benefit plan of the Company or any subsidiary of the Company or (iv) any
person or entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan.
Until the occurrence of the Rights Distribution Date, (i) the Rights will be
evidenced by the Share certificates and will be transferred with and only with
such Shares certificates, (ii) new Share certificates issued after the Rights
Record Date will contain a notation incorporating the Rights Agreement by
reference, and (iii) the surrender for transfer of any certificates for Shares
outstanding will also constitute the transfer of the Rights associated with
the Shares represented by such certificate. Pursuant to the Rights Agreement,
the Company reserves the right to require prior to the occurrence of a
Triggering Event (as defined below) that, upon any exercise of Rights, a
number of Rights be exercised so that only whole shares of Rights Preferred
Stock will be issued.
As soon as practicable after the occurrence of the Rights Distribution Date,
Rights Certificates will be mailed to holders of record of Shares as of the
close of business on the Rights Distribution Date and, thereafter, the
separate Rights Certificates alone will represent the Rights. Except in
certain circumstances specified in the Rights Agreement or as otherwise
determined by the Board of Directors of the Company, only Shares issued prior
to the Rights Distribution Date will be issued with Rights.
The Rights are not exercisable until the occurrence of the Rights
Distribution Date. The Rights will expire at the close of business on January
22, 2006, unless extended or earlier redeemed by the Company as described
below.
In the event that, at any time following the Rights Distribution Date, a
person becomes an Acquiring Person, each holder of a Right will thereafter
have the right to receive, upon exercise of the Right, Shares (or, in certain
circumstances, cash, property or other securities of the Company) having a
value equal to two times the exercise price of the Right. Notwithstanding the
foregoing, following the occurrence of the event set forth in this paragraph,
all Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person will be null and
void and nontransferable and any holder of any such Right (including any
purported transferee or subsequent holder) will be unable to exercise or
transfer any such Right. For example, at an exercise price of $200 per Right,
each Right not owned by an Acquiring Person (or by certain related parties)
following an event set forth in this paragraph would entitle its holder to
purchase $400 worth of Shares (or other consideration, as noted above) for
$200. Assuming that the Shares had a per share value of $40 at such time, the
holder of each valid Right would be entitled to purchase ten Shares for $200.
In the event that, at any time following the date on which there has been
public disclosure that, or of facts indicating that, a person has become an
Acquiring Person (the "Stock Acquisition Date"), (i) the Company is acquired
in a merger or other business combination transaction in which the Company is
not the surviving corporation (other than a merger which follows an offer
described in the preceding paragraph), or (ii) 50% or more of the Company's
assets or earning power is sold, mortgaged or transferred, each holder of a
Right (except Rights which previously have been voided as set forth above)
shall thereafter have the right to receive, upon exercise, common stock of the
acquiring company having a value equal to two times the exercise price of the
Right. The events set forth in this paragraph and in the preceding paragraph
are referred to as the "Triggering Events."
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The Purchase Price payable, and the number of Units of Rights Preferred
Stock or other securities or property issuable, upon exercise of the Rights
are subject to adjustment from time to time to prevent dilution (i) in the
event of a stock dividend on, or a subdivision, combination or
reclassification of, the Rights Preferred Stock, (ii) if holders of Rights
Preferred Stock are granted certain rights or warrants to subscribe for Rights
Preferred Stock or convertible securities at less than the current market
price of the Rights Preferred Stock, or (iii) upon the distribution to holders
of the Rights Preferred Stock of evidences of indebtedness or assets
(excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, no adjustment in the Rights Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Rights
Purchase Price. No fractional Units will be issued and, in lieu thereof, an
adjustment in cash will be made based on the market price of the Rights
Preferred Stock on the last trading date prior to the date of exercise.
Because of the nature of the Rights Preferred Stock's dividend and
liquidation rights, the value of the one one-thousandth interest in a share of
Rights Preferred Stock purchasable upon exercise of each Right should
approximate the value of one Share. Shares of Rights Preferred Stock
purchasable upon exercise of the Rights will not be redeemable. Each share of
Rights Preferred Stock will be entitled to a quarterly dividend payment of
1,000 times the dividend declared per Share. In the event of liquidation, each
share of Rights Preferred Stock will be entitled to a $1.00 preference and,
thereafter the holders of the shares of Rights Preferred Stock will be
entitled to an aggregate payment of 1,000 times the aggregate payment made per
Share. Each share of Rights Preferred Stock will have one vote, voting
together with the Shares. These rights are protected by customary antidilution
provisions.
At any time until ten days following the Stock Acquisition Date, the Company
may redeem the Rights in whole, but not in part, at a price (the "Redemption
Price") of $.0001 per Right (payable in cash, Shares or other consideration
deemed appropriate by the Board of Directors) by resolution of the Board of
Directors. The redemption of the Rights may be made effective at such time, on
such basis, and with such conditions as the Board of Directors in its sole
discretion may establish. Immediately upon such action of the Board of
Directors ordering redemption of the Rights, the Rights will terminate and the
only right of the holders of Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company including, without limitation, the right to
vote or to receive dividends. While the distribution of the Rights will not be
taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights
become exercisable for capital stock (or other consideration) of the Company
or for common stock of the acquiring company as set forth above.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by
resolution of the Board of Directors. After the Rights Distribution Date, the
provisions of the Rights Agreement may be amended by resolution of the Board
of Directors in order to cure any ambiguity, to make changes which do not
adversely affect the interests of holders of Rights (excluding the interests
of any Acquiring Person or its affiliates or associates), or to shorten or
lengthen any time period under the Rights Agreement; provided, however, that
no amendment to adjust the time period governing redemption shall be made at
such time as the Rights are not redeemable.
Because (i) the Offer is an offer to purchase all of the outstanding Shares
and the Board has unanimously determined that the Offer described herein is
fair to and in the best interests of the Company's stockholders and (ii) on
January 7, 1996, the Board of Directors approved amending the Rights Agreement
in accordance with the terms of the Merger Agreement, the acquisition of
Shares pursuant to the Offer or the consummation of the Merger will not (a)
cause any person to become an Acquiring Person or, (b) cause a Rights
Distribution Date or a Stock Acquisition Date to occur or cause or require the
distribution of any Rights Certificates to the record holders of Shares or,
(c) give rise to a Triggering Event.
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LORAL SPACE STOCKHOLDERS AGREEMENT
The following is a summary of certain provisions of the Stockholders
Agreement (as defined below). A copy of the Stockholders Agreement is attached
as an exhibit to the Schedule 14D-1 and is incorporated herein by reference.
The Stockholders Agreements may be examined, and copies may be obtained, as
set forth in Section 7, above. The following summary is qualified in its
entirety by reference to the Stockholders Agreement.
On or prior to the Distribution Date, the Company and Loral Space will enter
into a Stockholders Agreement (the "Stockholders Agreement"), which
establishes, among other things, certain conditions with respect to the
relationship between Loral Space, on the one hand, and the Company and its
affiliates (the "Subject Stockholders"), on the other hand. The Stockholders
Agreement limits the ability of the Subject Stockholders, during the term of
the Stockholders Agreement, to acquire any voting securities or assets of, or
solicit proxies or make a public announcement of a proposal for any
extraordinary transaction with respect to, Loral Space. The Stockholders
Agreement provides that, subject to certain exceptions, the Subject
Stockholders are obligated to vote any equity securities of Loral Space, at
the option of the Subject Stockholders, either (i) as recommended by the Board
of Directors or management of Loral Space, or (ii) in the same proportions as
the holders of equity securities of Loral Space vote their securities. The
Stockholders Agreement also limits the ability of the Subject Stockholders to
transfer the equity securities of Loral Space held by the Subject Stockholders
except pursuant to a registered public offering or the provisions of Rule 144
under the Exchange Act or pursuant to certain permitted transfers. The
Stockholders Agreement provides that if, within one year following the date
thereof, the Subject Stockholders vote against certain business combination
transactions, Loral Space shall have the right to purchase from the Subject
Stockholders all of the equity securities of Loral Space held by the Subject
Stockholders at an agreed-upon price. The Stockholders Agreement also provides
that if, within one year following the date thereof certain transactions
occur, the Company shall have the right to purchase from Loral Space
(including any successor to the rights and obligations of Loral Space) a
certain number of shares of Loral Space (or such successor) at an agreed-upon
price. The Stockholders Agreement also provides that in the event of certain
transactions, the Subject Stockholders shall have the right to require Loral
Space to purchase the Globalstar Warrants (as defined in the Stockholders
Agreement) for an agreed upon price. The Stockholders Agreement further
provides that under certain circumstances and subject to certain conditions
the Subject Stockholders may require Loral Space to register under the
Securities Act any Loral Space securities held by the Subject Stockholders.
The Stockholders Agreement provides, subject to certain exceptions, that, in
the event of a tender offer, if Subject Stockholders wish to sell or transfer
any Loral Space securities pursuant to the tender offer the Subject
Stockholders must first offer the shares for sale to Loral Space. The term of
the Stockholders Agreement will continue until the earlier of (x) the date on
which the voting power of the equity securities owned by the Subject
Stockholders represents, on a fully-diluted basis, less than five percent (5%)
of the total voting power, (y) the seventh anniversary of the date of the
agreement, or (z) a change of control in Loral Space.
11. PURPOSE OF THE OFFER, THE MERGER AND THE SPIN-OFF; PLANS FOR THE
COMPANY.
Purpose of the Offer. The purpose of the Offer, the Merger and the Spin-Off
is for the Purchaser to acquire control of the entire equity interest of the
Retained Business (and to acquire a 20% equity interest in Loral Space).
Consummation of the Offer in accordance with its terms and conditions will
provide the Purchaser with at least a two-thirds equity interest in the
Company. As described above, as a result of the Spin-Off, the Company will
continue to own only the Retained Business and a 20% equity interest in Loral
Space. The Merger will allow the Purchaser to acquire all outstanding Shares
not tendered and purchased pursuant to the Offer. The acquisition of the
entire equity interest in the Retained Business and the 20% equity interest in
Spinco has been structured as a cash tender offer followed by the Spin-Off and
a cash merger in order to provide a prompt and orderly transfer of ownership
of the Retained Business and the 20% equity interest in Loral Space from the
public stockholders of the Company to Parent and to provide stockholders with
cash and Loral Space Shares for all their Shares. The purchase of Shares
pursuant to the Offer will increase the likelihood that the Merger will be
effected.
Except as noted in this Offer to Purchase, neither Parent nor the Purchaser
has any present plans or proposals that would result in an extraordinary
corporate transaction, such as a merger, reorganization,
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liquidation, relocation of operations, or sale or transfer of assets,
involving the Company or any of its subsidiaries, or any material changes in
the Company's corporate structure or business or the composition of its
management or personnel.
12. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK EXCHANGE
LISTING; REGISTRATION UNDER THE EXCHANGE ACT. The purchase of Shares pursuant
to the Offer will reduce the number of Shares that might otherwise trade
publicly and may reduce the number of holders of Shares, which could adversely
affect the liquidity and market value of the remaining Shares held by
stockholders other than the Purchaser. The Purchaser cannot predict whether
the reduction in the number of Shares that might otherwise trade publicly
would have an adverse or beneficial effect on the market price for or
marketability of the Shares or whether it would cause future market prices to
be greater or less than the Offer price.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the requirements of the NYSE for continued listing
and may, therefore, be delisted from such exchange. According to the NYSE's
published guidelines, the NYSE could consider delisting the Shares if, among
other things, the number of publicly held Shares (excluding Shares held by
officers, directors, their immediate families and other concentrated holdings
of 10% or more) were less than 600,000, there were less than 1,200 holders of
at least 100 shares or the aggregate market value of the publicly held Shares
were less than $5 million. If, as a result of the purchase of Shares pursuant
to the Offer, the Shares no longer meet the requirements of the NYSE for
continued listing and the listing of Shares on such exchanges is discontinued,
the market for the Shares could be adversely affected.
If the NYSE were to delist the Shares, it is possible that the Shares would
trade on another securities exchange or in the over-the-counter market and
that price quotations for the Shares would be reported by such exchange or
through NASDAQ or other sources. The extent of the public market for the
Shares and availability of such quotations would, however, depend upon such
factors as the number of holders and/or the aggregate market value of the
publicly held Shares at such time, the interest in maintaining a market in the
Shares on the part of securities firms, the possible termination of
registration of the Shares under the Exchange Act and other factors.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), which has the effect, among other things, of allowing brokers to
extend credit on the collateral of the Shares. Depending upon factors similar
to those described above regarding listing and market quotations, the Shares
might no longer constitute "margin securities" for the purposes of the Federal
Reserve Board's margin regulations and, therefore, could no longer be used as
collateral for loans made by brokers.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated if the Shares are not listed on a national
securities exchange and there are fewer than 300 holders of record.
Termination of the registration of the Shares under the Exchange Act would
substantially reduce the information required to be furnished by the Company
to holders of Shares and to the Commission and would make certain of the
provisions of the Exchange Act, such as the short-swing profit recovery
provisions of Section 16(b), the requirement of furnishing a proxy or
information statement in connection with stockholder action and the related
requirement of an annual report to stockholders and the requirements of Rule
13e-3 under the Exchange Act with respect to "going private" transactions, no
longer applicable to the Shares. Furthermore, "affiliates" of the Company and
persons holding "restricted securities" of the Company may be deprived of the
ability to dispose of such securities pursuant to Rule 144 promulgated under
the Securities Act. If registration of the Shares under the Exchange Act were
terminated, the Shares would no longer be "margin securities" or eligible for
listing on a securities exchange or NASDAQ reporting. It is the current
intention of Parent to deregister the Shares after consummation of the Offer
if the requirements for termination of registration are met.
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No appraisal rights are available in connection with the Offer. However, if
the Merger is consummated, shareholders of the Company may have certain rights
under the NYBCL to dissent and demand appraisal of, and payment in cash for
the fair value of, the Shares. Such rights, if the statutory procedures are
complied with, could lead to a judicial determination of the fair value
(excluding any element of value arising from accomplishment or expectation of
the Merger) required to be paid in cash to such dissenting holders for their
Shares. Any such judicial determination of the fair value of Shares could be
based upon considerations other than or in addition to the price paid in the
Offer and the market value of the Shares, including asset values and the
investment value of the Shares. The value so determined could be more or less
than the purchase price per Share pursuant to the Offer or the consideration
per Share to be paid in the Merger. The foregoing summary of the rights of
dissenting shareholders does not purport to be a complete statement of the
procedures to be followed by shareholders desiring to exercise their
dissenters' rights. The preservation and exercise of dissenters' rights are
conditioned on strict adherence to the applicable provisions of New York law.
In addition, the Merger will have to comply with other applicable procedural
and substantive requirements of New York law, including any duties to minority
shareholders imposed upon a controlling or, if applicable, majority
shareholder.
The Commission has adopted Rule 13e-3 under the Exchange Act, which is
applicable to certain "going private" transactions and which may under certain
circumstances be applicable to the Merger or another business combination
following the purchase of Shares pursuant to the Offer in which Purchaser
seeks to acquire the remaining Shares not held by it. Purchaser believes,
however, that if the Merger is consummated within one year of the purchase of
Shares pursuant to the Offer, Rule 13e-3 will not be applicable to the Merger.
Purchaser believes that if the Merger is not consummated within one year of
its purchase of Shares pursuant to the Offer, Rule 13e-3 may be applicable to
the Merger. Rule 13e-3 requires, among other things, that certain financial
information concerning the Company and certain information relating to the
fairness of the proposed transaction and the consideration offered to minority
stockholders in such transaction be filed with the Commission and disclosed to
stockholders prior to consummation of the transaction.
13. DIVIDENDS AND DISTRIBUTIONS. If, on or after the date of the Merger
Agreement, the Company should (i) split, combine or otherwise change the
Shares or its capitalization, (ii) issue or sell any additional securities of
the Company or otherwise cause an increase in the number of outstanding
securities of the Company (except for Shares issuable upon the exercise of
employee stock options outstanding on the date of the Merger Agreement) or
(iii) acquire currently outstanding Shares or otherwise cause a reduction in
the number of outstanding Shares, then, without prejudice to the Purchaser's
rights under Sections 1 and 15, the Purchaser, in its sole discretion, subject
to the terms of the Merger Agreement, may make such adjustments as it deems
appropriate in the purchase price and other terms of the Offer.
If, on or after the date of the Merger Agreement, the Company should declare
or pay any dividend on the Shares or make any distribution (including, without
limitation, cash dividends, the issuance of additional Shares pursuant to a
stock dividend or stock split, the issuance of other securities or the
issuance of rights for the purchase of any securities, but excluding any
regular quarterly dividend on the Shares of not more than $.08 per share on
the dividend and payment dates normally applicable to the Shares) with respect
to the Shares, other than Loral Space Shares payable or distributable in
respect of the Shares in connection with the Spin-Off, that is payable or
distributable to stockholders of record on a date prior to the transfer to the
name of the Purchaser or its nominee or transferee on the Company's stock
transfer records of the Shares purchased pursuant to the Offer, then, without
prejudice to the Purchaser's rights under Sections 1 and 15, any such
dividend, distribution or right to be received by the tendering stockholders
will be received and held by the tendering stockholders for the account of the
Purchaser and will be required to be promptly remitted and transferred by each
tendering stockholder to the Depositary for the account of the Purchaser,
accompanied by appropriate documentation of transfer. Pending such remittance
and subject to applicable law, the Purchaser will be entitled to all rights
and privileges as owner of any such dividend, distribution or right and may
withhold the entire purchase price or deduct from the purchase price the
amount or value thereof, as determined by the Purchaser in its sole
discretion.
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14. EXTENSION OF TENDER PERIOD; AMENDMENT; TERMINATION. The Purchaser
expressly reserves the right, in its sole discretion, at any time or from time
to time, regardless of whether or not any of the events set forth in Section
15 will have occurred or will have been determined by the Purchaser to have
occurred, subject to the terms of the Merger Agreement and applicable rules of
the Commission, (i) to extend the period of time during which the Offer is
open and thereby delay acceptance for payment of, and the payment for, any
Shares, by giving oral or written notice of such extension to the Depositary
and (ii) to amend the Offer in any respect by giving oral or written notice of
such amendment to the Depositary. In the Merger Agreement, Parent and the
Purchaser have agreed not to extend the Expiration Date beyond the twentieth
business day following commencement of the Offer unless one or more of the
conditions set forth in Section 15 is not satisfied or unless Parent
reasonably determines that such extension is necessary to comply with any
legal or regulatory requirements relating to the Offer or the Spin-Off. Parent
and Purchaser have also agreed in the Merger Agreement, subject to the terms
and conditions thereof, to extend the Expiration Date if the Offer would
otherwise expire prior to Spin-Off Record Date or the expiration or
termination of any applicable waiting period under the Antitrust Laws. In the
Merger Agreement, the Purchaser expressly reserves the right to amend the
terms or conditions of the Offer; provided, that without the consent of the
Company, the Purchaser will not amend the terms or conditions of the Offer to
change the form of consideration to be paid or decrease the price per Share
payable in the Offer, the number of Shares sought in the Offer or to impose
conditions to the Offer in addition to those set forth in Section 15 or to
amend any other term of the Offer in any manner materially adverse to the
holders of Shares. The rights reserved by the Purchaser in this paragraph are
in addition to the Purchaser's rights to terminate the Offer pursuant to
Section 15. Any extension, amendment or termination will be followed as
promptly as practicable by public announcement thereof, the announcement in
the case of an extension to be issued no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date
in accordance with the public announcement requirements of Rules 14d-4(c) and
14e-1(d) under the Exchange Act. Any reduction in the purchase price pursuant
to the Merger Agreement will be considered an amendment to the Offer, and will
be followed by the appropriate announcement. Without limiting the obligation
of the Purchaser under such Rules or the manner in which the Purchaser may
choose to make any public announcement, the Purchaser currently intends to
make announcements by issuing a release to the Dow Jones News Service or the
Reuters News Service.
The Purchaser also reserves the right, in its sole discretion, subject to
the terms of the Merger Agreement, in the event any of the conditions
specified in Section 15 will not have been satisfied and so long as Shares
have not theretofore been accepted for payment, to delay (except as otherwise
required by applicable law) acceptance for payment of or payment for Shares or
to terminate the Offer and not accept for payment or pay for Shares.
If the Purchaser extends the Offer, or if the Purchaser (whether before or
after its acceptance for payment of Shares) is delayed in its purchase of or
payment for Shares or is unable to pay for Shares pursuant to the Offer for
any reason, then, without prejudice to the Purchaser's rights under the Offer,
the Depositary may retain tendered shares on behalf of the Purchaser, and such
Shares may not be withdrawn except to the extent tendering stockholders are
entitled to withdrawal rights as described in Section 4. However, the ability
of the Purchaser to delay the payment for Shares which the Purchaser has
accepted for payment is limited by Rule 14e-1(c) under the Exchange Act, which
requires that a bidder pay the consideration offered or return the securities
deposited by or on behalf of holders of securities promptly after the
termination or withdrawal of such bidder's offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer
(including the Minimum Condition), the Purchaser will disseminate additional
tender offer materials and extend the Offer to the extent required by Rules
14d-4(c) and 14d-6(d) under the Exchange Act. The minimum period during which
the Offer must remain open following material changes in the terms of the
Offer or information concerning the Offer, other than a change in price or a
change in percentage of securities sought, will depend upon the facts and
circumstances, including the relative materiality of the terms or information.
With respect to a change in price or a change in percentage of securities
sought, a minimum ten business day period is generally required to allow for
adequate dissemination to stockholders and investor response. If prior to the
Expiration Date, the Purchaser should decide to increase the price per Share
being offered in the Offer, such increase will be applicable to all
stockholders whose Shares are accepted for payment pursuant to the Offer. As
used in this Offer to Purchase, "business day" means any day other than
Saturday, Sunday or a
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federal holiday and consists of the time period from 12:01 A.M. through 12:00
Midnight, New York City time as computed in accordance with Rule 14d-l under
the Exchange Act.
15. CERTAIN CONDITIONS TO THE OFFER. Notwithstanding any other provision of
the Offer, Purchaser shall not be required to accept for payment or pay for,
and may delay the acceptance for payment of (whether or not the Shares have
theretofore been accepted for payment), or the payment for, any Shares
tendered, and may terminate or extend the Offer and not accept for payment any
Shares, if:
(i) immediately prior to the expiration of the Offer (as extended in
accordance with the terms of the Offer), (A) any applicable waiting period
under the Antitrust Laws will not have expired or been terminated or any
approvals required under the EC Merger Regulation (as defined below) will not
have been received, (B) the Spin-Off Record Date for the distribution of
shares of Loral Space common stock to stockholders of the Company pursuant to
the Distribution Agreement will not have been set by the Company's Board of
Directors, (C) the public indenture merger opinions will not have been
delivered to Purchaser and the applicable public indenture trustees, or (D)
the number of Shares validly tendered and not withdrawn when added to the
Shares then beneficially owned by Parent does not constitute two-thirds of the
Shares then outstanding and represent two-thirds of the voting power of the
Shares then outstanding on a fully diluted basis on the date of purchase; OR
(ii) on or after the date of the Merger Agreement and prior to the acceptance
for payment of Shares, any of the following conditions exist:
(a) any of the representations or warranties of the Company contained in
the Merger Agreement will not have been true and correct at the date when
made or (except for those representations and warranties made as of a
particular date which need only be true and correct as of such date) shall
cease to be true and correct at any time prior to consummation of the
Offer, except where the failure to be so true and correct would not,
individually or in the aggregate, have a Material Adverse Effect (as
defined in the Merger Agreement); provided, that if any such failure to be
so true and correct is curable by the Company through the exercise of its
reasonable efforts, then Purchaser may not terminate the Offer under this
subsection (a) until 10 business days after written notice thereof has been
given to the Company by Parent or Purchaser and unless at such time the
matter has not been cured; or
(b) any of the representations or warranties of Loral Space contained in
the Distribution Agreement will not have been true and correct at the date
when made or (except for those representations and warranties made as of a
particular date which need only be true and correct as of such date) will
cease to be true and correct at any time prior to consummation of the
Offer, except where the failure to be so true and correct would not
individually or in the aggregate, have a Material Adverse Effect; provided,
that if any such failure to be so true and correct is curable by Loral
Space through the exercise of its reasonable efforts, then Purchaser may
not terminate the Offer under this subsection (b) until 10 business days
after written notice thereof has been given to the Company by Parent or
Purchaser and unless at such time the matter has not been cured; or
(c) the Company will have breached any of its covenants or agreements
contained in the Merger Agreement, except for any such breaches that,
individually or in the aggregate, would not have a Material Adverse Effect;
provided that, if any such breach is curable by the Company through the
exercise of its reasonable efforts, then Purchaser may not terminate the
Offer under this subsection (c) until 10 business days after written notice
thereof has been given to the Company by Parent or Purchaser and unless at
such time the breach has not been cured; or
(d) Loral Space or the Company will have breached any of its covenants or
agreements contained in the Distribution Agreement, except for any such
breaches that, individually or in the aggregate, would not have a Material
Adverse Effect; provided, that if any such breach is curable by Spinco or
the Company through the exercise of its reasonable efforts, then Purchaser
may not terminate the Offer under this subsection (d) until 10 business
days after written notice thereof has been given to the Company or Spinco,
as the case may be, by Parent or Purchaser and unless at such time the
breach has not been cured; or
(e) there will have been any statute, rule, regulation, judgment, order
or injunction promulgated, enacted, entered, enforced or deemed applicable
to the Offer, or any other legal action will have been taken,
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by any state, federal or foreign government or governmental authority or by
any U.S. court, other than the routine application to the Offer, the Merger
or the Spin-Off of waiting periods under the HSR Act, that presents a
substantial likelihood of (1) making the acceptance for payment of, or the
payment for, some or all of the Shares illegal or otherwise prohibiting,
restricting or significantly delaying consummation of the Offer, (2)
imposing material limitations on the ability of Purchaser or Parent to
acquire or hold or to exercise any rights of ownership of the Shares, or
effectively to manage or control the Retained Business, the Company, the
Retained Subsidiaries, Purchaser or any of their respective affiliates,
which individually or in the aggregate could constitute a Significant
Adverse Effect; or
(f) any fact or circumstance exists or will have occurred that has a
Material Adverse Effect; or
(g) there will have occurred (1) any general suspension of trading in, or
limitation on prices for, securities on the NYSE, (2) the declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States (whether or not mandatory), (3) the commencement of a war,
armed hostilities or other international or national calamity directly or
indirectly involving the United States and having a Material Adverse Effect
or materially adversely affecting (or materially delaying) the consummation
of the Offer, (4) any limitation or proposed limitation (whether or not
mandatory) by any U.S. governmental authority or agency, or any other
event, that materially adversely affects generally the extension of credit
by banks or other financial institutions, (5) from the date of the Merger
Agreement through the date of termination or expiration of the Offer, a
decline of at least 25% in the Standard & Poor's 500 Index or (6) in the
case of any of the situations described in clauses (1) through (5)
inclusive, existing at the date of the commencement of the Offer, a
material acceleration, escalation or worsening thereof; or
(h) any person (which includes a "person" as such term is defined in
Section 13(d)(3) of the Exchange Act) other than Purchaser, any of its
affiliates, or any group of which any of them is a member will have
acquired beneficial ownership of more than 20% of the outstanding Shares or
will have entered into a definitive agreement or an agreement in principle
with the Company with respect to a tender offer or exchange offer for any
Shares or merger, consolidation or other business combination with or
involving the Company or any of its subsidiaries; or
(i) prior to the purchase of Shares pursuant to the Offer, the Board of
Directors of the Company will have withdrawn or modified (including by
amendment of the Schedule 14D-9) in a manner adverse to Purchaser its
approval or recommendation of the Offer, the Merger Agreement, the Merger
or the Spin-Off, will have recommended to the Company's stockholders
another offer, will have authorized the redemption of the Rights (whether
or not in accordance with Section 6.1(k) of the Merger Agreement) after the
Company has received an Acquisition Proposal, or will have adopted any
resolution to effect any of the foregoing which, in the sole judgment of
Purchaser in any such case, and regardless of the circumstances (including
any action or omission by Purchaser) giving rise to any such condition,
makes it inadvisable to proceed with such acceptance for payment; or
(j) the Merger Agreement will have been terminated in accordance with its
terms; or
(k) the Spin-Off Record Date will not have occurred; or
(l) the conditions to the Spin-Off will not have been satisfied or
waived; OR
(iii) Parent and Purchaser will not have secured financing on terms
reasonably acceptable to Parent to finance the purchase of all of the Shares
at the Merger Price and to consummate the transactions contemplated by the
Merger Agreement and the Ancillary Agreements; provided, that the condition
set forth in this clause (iii) will be a condition to Purchaser's obligations
with respect to the Offer only if (A) the Offer has not been consummated on or
before April 30, 1996, (B) Parent has not taken any significant action outside
of the ordinary course of business, which prevents Parent from obtaining
sufficient financing to purchase all of the Shares at the Merger Price and to
consummate the transactions contemplated by the Merger Agreement and the
Ancillary Agreements and (C) Parent and Purchaser are in substantial
compliance with their respective material obligations under Sections 6.4, 6.5
and 6.6 of the Merger Agreement.
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The foregoing conditions are for the sole benefit of Purchaser and may be
asserted by Purchaser regardless of the circumstances giving rise to such
conditions, or may be waived by Purchaser in whole or in part at any time and
from time to time in its sole discretion; provided, that the condition set
forth in clause (ii)(j) above may be waived or modified only by the mutual
consent of Purchaser and the Company.
16. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS. Except as described in this
Section 16, based on a review of publicly available filings by the Company
with the Commission and other publicly available information concerning the
Company, neither Parent nor the Purchaser is aware of any license or
regulatory permit that appears to be material to the business of the Company
and its subsidiaries, taken as a whole, that might be adversely affected by
the acquisition of Shares by the Purchaser or Parent pursuant to the Offer,
the Merger or otherwise or of any approval or other action by any
governmental, administrative or regulatory agency or authority, domestic or
foreign, that would be required prior to the acquisition of Shares by the
Purchaser or Parent pursuant to the Offer, the Merger or otherwise. Should any
such approval or other action be required, Parent and the Purchaser currently
contemplate that it will be sought. While the Purchaser does not currently
intend to delay the acceptance for payment of Shares tendered pursuant to the
Offer pending the outcome of any such matter, there can be no assurance that
any such approval or other action, if needed, would be obtained or would be
obtained without substantial conditions or that adverse consequences might not
result to the business of the Company or Parent or that certain parts of the
business of the Company or Parent might not have to be disposed of in the
event that such approvals were not obtained or any other actions were not
taken. The Purchaser's obligation under the Offer to accept for payment and
pay for Shares is subject to certain conditions, including conditions relating
to the legal matters discussed in this Section 16. See Section 15.
State Takeover Statutes. The Company is incorporated under the laws of the
State of New York. Section 912 of the NYBCL prohibits certain "business
combinations" (defined to include mergers and consolidations) involving a New
York corporation and an "interested shareholder" (defined generally as a
person who is the beneficial owner of 20% or more of the outstanding voting
stock of such New York corporation) for a period of five years following the
date on which such interested shareholder became such (such date, a "stock
acquisition date") unless such business combination or the purchase of stock
made by such interested shareholder is approved by the board of directors of
such New York corporation prior to such interested shareholder's stock
acquisition date or certain other statutory conditions have been met. At a
meeting on January 7, 1996, the Board of Directors approved the Merger
Agreement, the Merger, the Offer and the Purchaser's purchase of Shares
pursuant to the Offer. Accordingly, the provisions of Section 912 of the NYBCL
have been satisfied with respect to the Offer and the Merger and such
provisions will not delay the consummation of the Merger. Article 16 of the
NYBCL also requires a bidder for shares of a New York corporation to file a
registration statement with the attorney general and satisfy certain
disclosure requirements. Parent and the Purchaser have filed such a
registration statement and this Offer to Purchase sets forth the information
required to be disclosed pursuant to Article 16 of the NYBCL.
A number of other states have adopted "takeover" statutes that purport to
apply to attempts to acquire corporations that are incorporated in such
states, or whose business operations have substantial economic effects in such
states, or which have substantial assets, security holders, employees,
principal executive offices or places of business in such states.
In Edgar v. MITE Corporation, the Supreme Court of the United States
invalidated on constitutional grounds the Illinois Business Takeover Act,
which, as a matter of state securities law, made takeovers of corporations
meeting certain requirements more difficult. However, in CTS Corp. v. Dynamics
Corp. of America, the Supreme Court held that a state may, as a matter of
corporate law and, in particular, those laws concerning corporate governance,
constitutionally disqualify a potential acquiror from voting on the affairs of
a target corporation without prior approval of the remaining stockholders,
provided that such laws were applicable under certain conditions, in
particular, that the corporation has a substantial number of stockholders in
the state and is incorporated there.
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The Company, directly or through subsidiaries, conducts business in a number
of states throughout the United States, some of which have enacted "takeover"
statutes. The Purchaser does not know whether any of these statutes will, by
their terms, apply to the Offer, and has not complied with any such statutes
other than those adopted by the State of New York. To the extent that certain
provisions of these statutes purport to apply to the Offer, the Purchaser
believes that there are reasonable bases for contesting such statutes. If any
person should seek to apply any state takeover statute, the Purchaser would
take such action as then appears desirable, which action may include
challenging the validity or applicability of any such statute in appropriate
court proceedings. If it is asserted that one or more takeover statutes apply
to the Offer, and it is not determined by an appropriate court that such
statute or statutes do not apply or are invalid as applied to the Offer, the
Purchaser might be required to file certain information with, or receive
approvals from, the relevant state authorities, and the Purchaser might be
unable to purchase or pay for Shares tendered pursuant to the Offer, or be
delayed in continuing or consummating the Offer. In such case, the Purchaser
may not be obligated to accept for payment or pay for Shares tendered. See
Section 15.
Antitrust. Under the HSR Act, certain acquisitions may not be consummated
unless information has been furnished to the FTC and the Antitrust Division
and certain waiting period requirements have been satisfied. The Offer and the
acquisition of Shares pursuant to the Merger Agreement are subject to the HSR
Act. Parent expects to file a Notification and Report Form with respect to the
Offer on or before January 19, 1996.
Under the provisions of the HSR Act applicable to the Offer, the purchase of
Shares under the Offer may not be consummated until the expiration of a 15-
calendar day waiting period following the filing by Parent. Accordingly, if
Parent files its HSR Notification and Report Form on January 19, 1996, the
waiting period with respect to the Offer will expire at 11:59 p.m., New York
City time, on February 3, 1996, unless Parent receives a request for
additional information or documentary material, or the Antitrust Division and
the FTC terminate the waiting period prior thereto. If, within such 15-day
waiting period, either the Antitrust Division or the FTC requests additional
information or material from Parent concerning the Offer, the waiting period
will be extended and would expire at 11:59 p.m., New York City time, on the
tenth calendar day after the date of substantial compliance by Parent with
such request. Only one extension of the waiting period pursuant to a request
for additional information is authorized by the HSR Act. Thereafter, such
waiting period may be extended only by court order or with the consent of
Parent. The Purchaser will not accept for payment Shares tendered pursuant to
the Offer unless and until the waiting period requirements imposed by the HSR
Act with respect to the Offer have been satisfied. See Section 15.
No separate HSR Act waiting period requirements with respect to the Merger
Agreement will apply, so long as the 15-day waiting period expires or is
terminated. Thus, all Shares will be acquired pursuant to the Offer at the
close of the 15-day waiting period or on the tenth calendar day after the date
of substantial compliance with a request for additional information (assuming
all other conditions to the Offer have been satisfied or waived in accordance
with the provisions thereof).
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's acquisition of
Shares pursuant to the Offer and the Merger Agreement. At any time before or
after the Purchaser's acquisition of Shares, the Antitrust Division or the FTC
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the acquisition
of Shares pursuant to the Offer or otherwise or seeking divestiture of Shares
acquired by the Purchaser or divestiture of substantial assets of Parent or
its subsidiaries. Private parties and state attorneys general may also bring
legal action under the antitrust laws under certain circumstances. Based upon
an examination of publicly available information relating to the businesses in
which Parent and the Company are engaged, Parent and the Purchaser believe
that the acquisition of Shares by the Purchaser will not violate the antitrust
laws. Nevertheless, there can be no assurance that a challenge to the Offer or
other acquisition of Shares by the Purchaser on antitrust grounds will not be
made or, if such a challenge is made, of the result. See Section 15 for
certain conditions to the Offer, including conditions with respect to
litigation and certain governmental actions.
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EC Merger Regulation. According to the Company 10-K, the Company may conduct
substantial operations within the European Community (the "EC") and certain of
the individual member states of the EC. The EC Merger Regulation requires that
notices of concentrations with a "community dimension" be provided to the EC
Commission for review and approval prior to being put into effect. The Offer
will be deemed to have a "community dimension" if the combined aggregate
worldwide annual revenues of both the Company and the Purchaser exceeds ECU 5
billion, if the community-wide annual revenues of each of the Company and the
Purchaser exceed ECU 250 million, and if both the Company and the Purchaser do
not receive more than two-thirds of their respective community-wide revenues
from one and the same member state. Based upon information contained in the
Company 10-K, the Purchaser believes that the Offer may be considered to have
a "community dimension" if the Offer falls within the EC Merger Regulation,
the EC Commission, as opposed to individual member states, has exclusive
jurisdiction to review it, subject to certain exceptions.
Under the EC Merger Regulation, a concentration that meets the foregoing
guidelines requires the filing of a notice in a prescribed form with the EC
Commission. This filing must normally be made within seven days of the earlier
of the announcement of a public bid, the conclusion of the relevant agreement
or acquisition of a controlling interest, although extensions of time are
sometimes granted. Transactions subject to the filing requirements of the EC
Merger Regulation are suspended automatically until three weeks after receipt
of the notice. The EC Commission may extend the suspension period for such
period as it finds necessary to make a final decision on the legality of the
transaction. In the case of a public bid, the bidder may acquire shares of the
target company during the suspension period, but may not vote such shares
until after the end of the period unless the EC Commission grants permission
to do so in order to permit the bidder to maintain the full value of its
investment.
The EC Commission must decide whether to initiate proceedings within one
month after the receipt of the notice, subject to certain extensions for EC
holidays or if an individual member state has requested a referral of the
transaction. If proceedings are initiated, the EC Commission must reach a
decision in the proceedings within four months of the commencement of the
proceedings. If the EC Commission fails to reach a decision within either of
these time periods the transactions will be deemed to be compatible with the
common market.
If the EC Commission declares the Offer to be not compatible with the common
market, it may prevent the consummation of the transaction, order a
divestiture if the transaction has already been consummated or impose
conditions or other obligations. In the event that the transaction is found
not to be subject to the EC Merger Regulation, various national merger control
regimes of the member states may apply, and it may be necessary to obtain
approvals from such national authorities.
There can be no assurance that a challenge to the Offer will not be made
pursuant to the EC Merger Regulation and if such a challenge is made, what the
outcome will be, or, alternatively, if the concentration does not meet the
aforementioned guidelines and does not require the filing of a notice with the
EC Commission, what the outcome will be pursuant to the merger regulations of
one or more of the various member states.
FCC Regulation. The Communications Act of 1934, as amended (the
"Communications Act"), requires prior approval by the FCC of the assignment or
transfer of control of any radio or satellite license or licensee, or the
assignment or transfer of any rights arising under any such license. The FCC
distinguishes between pro forma transfers and assignments, in which ultimate
ownership and control are not substantially changed and for which applications
are processed on an expedited basis, and "substantial" assignments and
transfers of control, which trigger an opportunity for public comment and
receive a more comprehensive review by the FCC. Applications must be filed
with the FCC seeking approval of both pro forma and substantial assignments
and transfers. The Communications Act requires the FCC to find that the
proposed transfer or assignment would serve the public interest, convenience
and necessity as a prerequisite to granting approval. The FCC may also require
that the applicant demonstrate that it possesses the requisite legal,
financial, technical and other qualifications to operate the licensed
facilities before it will approve the assignment or transfer. The FCC
assesses, as part of the process of considering applications proposing
assignments or transfers of control of FCC licenses or licensees, certain
information with respect to officers, directors and stockholders of the entity
to which control is to be transferred.
49
<PAGE>
The Offer and acquisition of Shares pursuant to the Merger Agreement will
result in substantial assignments of, and transfers of control over, certain
private radio licenses used internally by the Company in connection with its
defense electronics and systems integration business. Such assignments and
transfers will require prior FCC approval. The public-comment period, however,
will not be triggered because these licenses are private radio licenses.
Moreover, in the case of private radio licenses, special temporary
authorizations possibly may be obtained to allow the Offer and acquisition of
Shares to close even if the FCC has not yet granted its approval of the
underlying private radio transfer applications. In addition, based on publicly
available information, Parent and Purchaser believe that the Spin-Off will
result in a pro forma assignment of, and transfer of control over, certain
licenses and authorizations issued by the FCC to the Company and its
subsidiaries in connection with their telecommunications and space systems
business, which will require prior FCC approval. There can be no assurance
that challenge to the Offer or the Spin-Off will not be made pursuant to the
Communications Act, and if such challenge were made, what the outcome would
be.
Commission Approval of Information Statement. The Company intends to file
the Information Statement with the Commission as part of a registration
statement of the Loral Space Common Stock under the Exchange Act. The Company
may not distribute the Information Statement or the Loral Space Common Stock
until the Commission has reviewed such registration statement and declared it
effective.
Margin Rules. The Purchaser and Parent believe that the requirements of the
margin regulations promulgated by the Federal Reserve Board are not applicable
to the financing of the Offer and the Merger.
Short-Form Merger. Section 905 of the NYBCL would permit the Merger to occur
without a vote of the Company's shareholders (a "short-form merger") if the
Purchaser were to acquire at least 90% of the outstanding Shares in the Offer.
17. FEES AND EXPENSES. Parent and the Purchaser have engaged Bear Stearns to
act as financial advisor to Parent in connection with the proposed acquisition
of the Company and as Dealer Manager in connection with the Offer. Parent has
agreed to pay Bear Stearns a fee of $5 million as compensation for its
services to date as financial advisor to Parent and an additional fee of $20
million upon the consummation of the purchase by Parent or Purchaser of more
than 50% of the capital stock of the Company for a total fee of $25 million.
If Parent or Purchaser receives recovery of expenses or any other similar fee
pursuant to the Merger Agreement, then Parent shall pay Bear Stearns
immediately upon receipt of such expenses an additional fee of $20 million.
The Purchaser also has agreed to reimburse Bear Stearns for its expenses,
including reasonable counsel fees and to indemnify it against certain
liabilities and expenses, including certain liabilities under the federal
securities laws.
The Purchaser has retained Morrow & Co. to act as the Information Agent and
First Chicago Trust Company of New York to act as the Depositary in connection
with the Offer. The Information Agent may contact holders of Shares by mail,
telephone, telex, facsimile, telegraph and personal interview and may request
brokers, dealers, commercial banks, trust companies and other nominees to
forward the Offer material to beneficial owners. The Information Agent and
Depositary each will receive reasonable and customary compensation for their
services, will be reimbursed for certain reasonable out-of-pocket expenses and
will be indemnified against certain liabilities and expenses in connection
therewith, including certain liabilities under the federal securities laws.
The Depositary has not been retained to make solicitations or recommendations
in connection with the Offer.
Neither the Purchaser nor Parent will pay any fees or commissions to any
broker or dealer or other persons for soliciting tenders of Shares pursuant to
the Offer (other than the fees of the Dealer Manager and the Information
Agent). Brokers, dealers, commercial banks and trust companies will be
reimbursed by the Purchaser for reasonable expenses incurred by them in
forwarding material to their customers.
18. MISCELLANEOUS. The Purchaser is not aware of any jurisdiction in which
the making of the Offer is not in compliance with applicable law. If the
Purchaser becomes aware of any jurisdiction in which the making of the Offer
would not be in compliance with applicable law, the Purchaser will make a good
faith effort to comply
50
<PAGE>
with any such law. If, after such good faith effort, the Purchaser cannot
comply with any such law, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Shares residing in such
jurisdiction. In those jurisdictions where securities or blue sky laws require
the Offer to be made by a licensed broker or dealer, the Offer is being made
on behalf of the Purchaser by the Dealer Manager or one or more registered
brokers or dealers which are licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR PARENT NOT CONTAINED IN THIS
OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
The Purchaser has filed with the Commission the Schedule 14D-1 pursuant to
Rule 14d-3 under the Exchange Act, furnishing certain additional information
with respect to the Offer, and may file amendments thereto. The Schedule 14D-l
and any amendments thereto, including exhibits, may be inspected and copies
may be obtained at the same places and in the same manner as set forth in
Section 7 (except they will not be available at the regional offices of the
Commission).
LAC Acquisition Corporation
January 12, 1996
51
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT
The name, business address, present principal occupation or employment and
five-year employment history of each director and executive officer of Parent
and certain other information are set forth below. Unless otherwise indicated
below, the address of each director and officer is c/o 6801 Rockledge Drive,
Bethesda, Maryland 20817. No information is provided in the right-hand column
where the individual has occupied the position indicated in the middle column
for the past five years and holds no outside directorships. Unless otherwise
indicated, each occupation set forth opposite an individual's name refers to
employment with Parent. All directors and officers listed below are citizens
of the United States. Parenthetical years indicate the year the individual was
elected or appointed a director of Lockheed Corporation or Martin Marietta
Corporation (which were combined into Lockheed Martin Corporation in the first
quarter of 1995).
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND
NAME BUSINESS EXPERIENCE
(AGE AT POSITIONS AND OFFICES (PAST FIVE YEARS)
12/31/95) HELD WITH PARENT OUTSIDE DIRECTORSHIPS
--------- --------------------- ------------------------
<S> <C> <C>
Norman R. Au- President and Chief President of Lockheed Martin Corpo-
gustine (60) Executive Officer; ration since March 16, 1995 and
Director (1986) Chief Executive Officer of Lockheed
Martin Corporation since January 1,
1996. Chairman of the Board of Mar-
tin Marietta from 1988 to 1995 and
Chief Executive Officer from 1987 to
1995; served as Vice Chairman of
Martin Marietta between 1987 and
1988, as President and Chief Operat-
ing Officer in 1986 and 1987, as Ex-
ecutive Vice President in 1985 and
1986, and as a Senior Vice President
in 1985; director of Phillips Petro-
leum Company and Proctor & Gamble
Co.
Marcus C. Senior Vice President and Senior Vice President and Chief Fi-
Bennett (60) Chief Financial Officer; nancial Officer of Parent since
Director (1993) March 16, 1995. Vice President and
Chief Financial Officer of Martin
Marietta since 1988; served as Vice
President of Finance from 1984 to
1988; serves as Chairman of Martin
Marietta Materials, Inc., a majority
owned subsidiary of Martin Marietta,
and Orlando Central Park, Inc. and
Chesapeake Park, Inc., wholly owned
subsidiary of Martin Marietta; di-
rector of Carpenter Technology,
Inc.; member of Financial Executives
Institute, MAPI Finance Council and
The Economic Club of Washington;
serves as a director of the Private
Sector Council and as a member of
its CFO Task Force.
Lynne V. Cheney Director (1994) W. H. Brady, Jr. Distinguished Fel-
(54) low at the American Enterprise In-
stitute for Public Policy Research,
an independent, nonpartisan organi-
zation sponsoring original research
on domestic and international eco-
nomic policy,
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND
NAME BUSINESS EXPERIENCE
(AGE AT POSITIONS AND OFFICES (PAST FIVE YEARS)
12/31/95) HELD WITH PARENT OUTSIDE DIRECTORSHIPS
--------- --------------------- ------------------------
<S> <C> <C>
foreign and defense policy, and so-
cial and political issues since
1992; served as Chairman of the Na-
tional Endowment for the Humanities,
an independent federal agency sup-
porting education, research, preser-
vation, and public programs in hu-
manities, 1986-1992; director of
Reader's Digest Association, Inc.,
IDS Mutual Fund Group, FPL Group,
Inc. and UP Group Resources, Inc.
A. James Director (1981) Chairman of the Board of Clark En-
Clark (68) terprises, Inc., a holding company
engaged in the construction business
since 1987; served as its President
since 1972; Chairman of the Execu-
tive Committee for the Clark Con-
struction Group, Inc.; director of
Potomac Electric Power Company and
Carr Realty Corporation; member of
the Board of Trustees of The Johns
Hopkins University; director of the
University of Maryland Foundation
and a member of the Board of Visi-
tors for the University of Maryland
Foundation.
Vance D. Executive Vice President Director since 1996; Executive Vice
Coffman and Chief Operating Officer; President and Chief Operating Offi-
(51) Director (1996) cer since 1996; President and Chief
Operating Officer, Space and Strate-
gic Missiles Sector from March 1995
to December 1995; previously served
in Lockheed Corporation as Executive
Vice President, from 1992-1995; and
President of Lockheed Space Systems
Division from 1988-1992.
Edwin I. Director (1987) Of Counsel to Paul, Hastings,
Colodny Janofsky & Walker; served as Chief
(69) Executive Officer of USAir, Inc.
from 1975 until retiring in June
1991 and as Chairman of the Board of
USAir, Inc. from 1978 until July
1992; also served as Chairman of the
Board of USAir Group, Inc. from 1983
until retiring from that position in
July 1992; director of USAir Group,
Inc., COMSAT Corporation, Esterline
Technologies Corp. and Ascent Enter-
tainment; member of the Board of
Trustees of the University of Roch-
ester.
Lodwrick M. Director (1991) Chairman Emeritus of the Board of
Cook (67) ARCO, a petroleum, coal and chemical
company since June 1995, served as
Chief Executive Officer of ARCO from
October 1985 to July 1994; served as
a director of ARCO since
</TABLE>
S-2
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND
BUSINESS EXPERIENCE
NAME POSITIONS AND OFFICES (PAST FIVE YEARS)
(AGE AT 12/31/95) HELD WITH PARENT OUTSIDE DIRECTORSHIPS
----------------- --------------------- ------------------------
<S> <C> <C>
1980; director of H.F. Ahmanson &
Company; member of Investment Advi-
sory Committee of Aurora Capital
Partners, L.P.
James L. Everett, Director (1976) Served as Chief Executive Officer of
III (69) Philadelphia Electric Company from
1978 and Chairman of its Board of
Directors from 1982 until his re-
tirement in 1988; director of Tasty
Baking Company.
Houston K. Flourney Director (1976) Special Assistant to the President
(66) for Governmental Affairs, University
of Southern California, Sacramento,
California, since August 1981; Pro-
fessor of Public Administration,
University of Southern California,
Sacramento, California, 1981 to
1993; served as Vice President for
Governmental Affairs, University of
Southern California, Los Angeles.
1978 to 1981; director of Fremont
General Corporation, Fremont Invest-
ment and Loan Corporation and Tosco
Corporation.
James F. Gibbons Director (1985) Dean of the School of Engineering,
(64) Stanford University, Stanford, Cali-
fornia, since September 1984; Pro-
fessor of Electronics, Stanford Uni-
versity, since 1964; director of
Raychem Corporation, Centigram Com-
munications Corporation. Cisco Sys-
tems Incorporation, El Paso Natural
Gas Company and Amati Communications
Corp.
Edward L. Hennessy, Director (1983) Served as Chairman of the Board and
Jr. (67) Chief Executive Officer of
AlliedSignal Inc. from May 1979
through June 1991 and served as
Chairman of AlliedSignal Inc. from
July 1991 through December 1991; di-
rector of The Bank of New York, The
Wackenhut Corporation and Walden
Residential Properties, Inc.;
trustee of Catholic University of
America and Stevens Institute of
Technology, a director and treasurer
of March of Dimes and a director of
Public TV,
Channel 13.
Edward E. Hood, Jr. Director (1993) Joined GE in 1957 after service in
(65) the U.S. Air Force; elected a Vice
President of GE in 1968 and Vice
Chairman and Executive Officer of GE
in 1979; served as a director of GE
from 1980 until his retirement in
1993;
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND
BUSINESS EXPERIENCE
NAME POSITIONS AND OFFICES (PAST FIVE YEARS)
(AGE AT 12/31/95) HELD WITH PARENT OUTSIDE DIRECTORSHIPS
----------------- --------------------- ------------------------
<S> <C> <C>
director of FlightSafety Interna-
tional, Inc., The Lincoln Electric
Company and Gerber Scientific, Inc.,
Chairman Emeritus of the Board of
Trustees of Rensselaer Polytechnic
Institute; serves as a trustee of
North Carolina State University.
Caleb B. Hurtt (64) Director (1987) Served as President and Chief Oper-
ating Officer of Martin Marietta
from 1987 until his retirement in
January 1990; was its Executive Vice
President in 1987 and a Senior Vice
President from 1983 to 1987; Vice
Chairman of the Board of Trustees of
Stevens Institute of Technology;
served as Chairman of the Board of
Governors of the Aerospace Indus-
tries Association in 1989 and is a
past Chairman of the NASA Advisory
Council.
Gwendolyn S. King Director (1992) Senior Vice President of Corporate
(55) and Public Affairs for PECO Energy
Company (formerly Philadelphia Elec-
tric Company) since October 1992;
served as Commissioner of the Social
Security Administration from August
1989 through September 1992, and as
Executive Vice President of Gogol &
Associates in Washington, D.C. from
March 1988 to July 1989; director of
Monsanto Company; member of the Ex-
ecutive Committee of Pennsylvania
Electric Association, the Philadel-
phia Convention and Visitors Center,
and the Central Philadelphia Devel-
opment Corp.
Lawrence O. Kitchen Director (1975) Chairman of the Executive Committee
(72) of Lockheed Corporation from January
1, 1989 to March 16, 1995; served as
Chairman of the Board and Chief Ex-
ecutive Officer of Lockheed Corpora-
tion, 1986 to 1988; served as Presi-
dent and Chief Operating Officer of
Lockheed Corporation, 1975 to 1985;
serves on the Advisory Board of the
Industrial Bank of Japan; director
of Kendall-Jackson Winery, Ltd.
Gordon S. Macklin Director (1992) Chairman of the Board of White River
(67) Corporation, an information services
company; served as Chairman of the
Board of Hambrecht & Quist, Inc., a
venture capital and investment bank-
ing company, from 1987 until his re-
tirement in April 1992;
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND
BUSINESS EXPERIENCE
NAME POSITIONS AND OFFICES (PAST FIVE YEARS)
(AGE AT 12/31/95) HELD WITH PARENT OUTSIDE DIRECTORSHIPS
----------------- --------------------- ------------------------
<S> <C> <C>
served as President of the National
Association of Securities Dealers,
Inc. from 1970 until 1987; director
of Fund American Enterprises Hold-
ings, Inc., MCI Communications Cor-
poration, Med-Immune, Inc. and Info
Vest Corporation; serves as direc-
tor, trustee or managing general
partner, as the case may be of 53 of
the investment companies in the
Franklin/Templeton Group of Funds.
Vincent N. Marafino Director (1980) Executive Vice President of Lockheed
(65) Martin Corporation from March 16,
1995 to December 31, 1995. Vice
Chairman of the Board and Chief Fi-
nancial and Administrative Officer
of Lockheed from August 1, 1988-
1995; served as Executive Vice Pres-
ident--Chief Financial and Adminis-
trative Officer of Lockheed, 1983 to
1988; served as an executive officer
of Lockheed from 1971-1995. Director
since December 1995 of Rohr, Inc.
Eugene F. Murphy Director (1993) President and Chief Executive Offi-
(59) cer of GE Aircraft Engines since
1993; served as President and Chief
Executive Officer of GE Aerospace
from 1992 to 1993; served as Senior
Vice President of GE Communications
& Services from 1986 to 1992; served
as a member of President Reagan's
National Security Telecommunications
Advisory Committee; former Chairman
and permanent member of the Board of
Directors of the Armed Forces Commu-
nications and Electronics Associa-
tion; member of the Aerospace Indus-
tries Association Board of Gover-
nors.
Allen E. Murray Director (1991) Served as Chairman of the Board and
(66) Chief Executive Officer of Mobil
Corporation from 1986 until his re-
tirement on March 1, 1994; director
of Metropolitan Life Insurance Com-
pany, Minnesota Mining and Manufac-
turing Company, Morgan Stanley Group
Inc. and St. Francis Hospital; mem-
ber of the Board of Trustees of New
York University, a member of the
Chase Manhattan Bank International
Advisory Committee, and serves as an
honorary director of the American
Petroleum Institute; member of The
Business Council, The Business
Roundtable, The Council on Foreign
Relations, and The Trilateral Com-
mission.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND
BUSINESS EXPERIENCE
NAME POSITIONS AND OFFICES (PAST FIVE YEARS)
(AGE AT 12/31/95) HELD WITH PARENT OUTSIDE DIRECTORSHIPS
- ----------------- --------------------- ------------------------
<S> <C> <C>
David S. Potter Director (1987) Served as Chairman of the Board of
(70) John Fluke Manufacturing Company,
Inc., an electronic instrument and
sensor firm, Everett, Washington.
1990-1991; retired Vice President
and Group Executive of General Mo-
tors Corporation; served as Vice
President of General Motors Corpora-
tion 1976 to 1985; director of John
Fluke Manufacturing Company, Inc.
1986-1995.
Frank Savage (57) Director (1990) Chairman, Alliance Capital Manage-
ment International, an investment
management company since 1994; Se-
nior Vice President of The Equitable
Life Assurance Society of the United
States since 1987; Chairman of the
Board of Alliance Corporate Finance
Group, Inc. since 1993; Chairman of
the Board of Equitable Capital Man-
agement Corporation, 1992-1993; and
Vice Chairman of the Board of Equi-
table Capital Management Corpora-
tion, 1986-1992; director of Alli-
ance Capital Management Corporation.
ARCO Chemical Company, and Essence
Communications, Inc.; trustee of
Johns Hopkins University and Howard
University; director of the Council
on Foreign Relations; New York Phil-
harmonic; and former U.S. Presiden-
tial appointee to the Board of Di-
rectors of U.S. Synthetic Fuels Cor-
poration.
Daniel M. Tellep Chairman of the Board; Chief Executive Officer of Parent
(64) Director (1987) from March 16, 1995 to December 31,
1995. Chairman of the Board and
Chief Executive Officer of Lockheed
Corporation January 1, 1989 to March
16, 1995; served as President of
Lockheed Corporation, August 1988 to
December 1988; served as Group Pres-
ident-- Missiles and Space Systems
of Lockheed Corporation, 1986 to
1988, and President, Lockheed
Missiles & Space Company, Inc., a
wholly owned subsidiary of Lockheed
Corporation, 1984 to 1988; served as
an executive officer of Lockheed
Corporation since March 1983; direc-
tor of First Interstate Bancorp,
Southern California Edison Company,
and SCEcorp.
</TABLE>
S-6
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND
NAME BUSINESS EXPERIENCE
(AGE AT POSITIONS AND OFFICES (PAST FIVE YEARS)
12/31/95) HELD WITH PARENT OUTSIDE DIRECTORSHIPS
--------- --------------------- ------------------------
<S> <C> <C>
Carlisle A. Director (1990) Retired Admiral U.S. Navy, 1990;
H. Trost Chief of Naval Operations, United
(65) States Navy, 1986-1990; also served
as Commander in Chief, U.S. Atlantic
Fleet, Commander U.S. Seventh Fleet,
and Deputy Commander in Chief of the
U.S. Pacific Fleet; director of Lou-
isiana Land and Exploration Company,
General Public Utilities Corp., GPU
-- Nuclear Corp., General Dynamics
Corporation, Precision Components
Corporation, and Bird-Johnson Compa-
ny, Trustee of the U.S. Naval Acad-
emy Foundation and U.S. Naval Acad-
emy Alumni Association.
James R. Director (1988) Partner, O'Melveny & Myers, a law
Ukropina firm, Los Angeles, California, since
(58) 1992; former Chairman of the Board
and Chief Executive Officer of Pa-
cific Enterprises, a diversified
holding company 1989 to 1991; direc-
tor of Pacific Mutual Life Insurance
Company and member of the Board of
Trustees of Stanford University.
Douglas C. Director (1990) Chairman of the Board, President and
Yearley (60) Chief Executive Officer of Phelps
Dodge Corporation, a producer of
copper and copper products, carbon
blacks, and wheels and rims for me-
dium and heavy trucks, Phoenix, Ari-
zona, serving as Chairman and Chief
Executive Officer since 1989 and
President since 1991; served as Ex-
ecutive Vice President of Phelps
Dodge Corporation form 1987 to 1989;
served as President of Phelps Dodge
Industries, a division of Phelps
Dodge Corporation, from 1988 to
1990; served as Senior Vice Presi-
dent of Phelps Dodge Corporation
from 1982 to 1986; director of
Phelps Dodge Corporation, J.P. Mor-
gan & Co. Incorporated, Morgan Guar-
anty Trust Company of New York and
USX Corporation.
Minoru S. President, Missiles & Space President, Lockheed Missiles and
Araki (64) Space Company, Inc. from March 16,
1995 until present; Previously
served in Lockheed Corporation as
Executive Vice President, Missiles
and Space Systems Group and Execu-
tive Vice President--Lockheed Mis-
siles & Space Company, Inc., from
October 1988 to March, 1995.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND
NAME BUSINESS EXPERIENCE
(AGE AT POSITIONS AND OFFICES (PAST FIVE YEARS)
12/31/95) HELD WITH PARENT OUTSIDE DIRECTORSHIPS
--------- --------------------- ------------------------
<S> <C> <C>
James A. Sector President--Aeronautics President and Chief Operating Offi-
Blackwell, Sector cer, Aeronautics Sector Since March
Jr. (55) 1995; previously served in Lockheed
Corporation as Vice President and
President from April 1993 to March
1995, Lockheed Aeronautical Systems
Company; served as an executive em-
ployee of Lockheed Aeronautical Sys-
tems Company from 1986 until March
1995.
Melvin R. Sector President--Space & President and Chief Operating Offi-
Brashears Strategic Missiles cer, Space and Strategic Missiles
(50) Sector, from January 1996; Deputy,
Space and Strategic Missiles Sector
from November 1995 to December 1995;
Executive Vice President of Lockheed
Missiles & Space Company, Inc. from
March 1995-November 1995 and Presi-
dent of Lockheed Commercial Space
Company; previously served in Lock-
heed Corporation as Vice President
and Assistant General Manager, Space
Systems Division, Lockheed Missiles
and Space Company, Inc., from 1992-
1995; Director of Advanced Space
Programs, from 1991-1992.
Thomas A. Sector President--Electronics President and Chief Operating Offi-
Corcoran cer, Electronics Sector since March
(51) 1995; previously served in Martin
Marietta Corporation as President,
Electronics Group, from 1993-March
1995; previously served at General
Electric Corporation as Vice Presi-
dent and General Manager, from 1990-
1993.
Dain M. President, Tactical President, Tactical Aircraft Systems
Hancock Aircraft Systems since March 1995; previously served
(54) in Lockheed Corporation as Vice
President from 1993 to March 1995;
and Vice President and F-16 Program
Director, Lockheed Fort Worth Compa-
ny, from 1993 to March 1995. From
1966 until 1993 he was an employee
of General Dynamics Corporation.
John R. President, President, Sanders; previously
Kreik (51) Sanders served in Lockheed Corporation as
President, Lockheed Sanders, Inc.
from 1990-1995.
James W. President President, Astronautics since March
McAnally, 1995; previously served in Martin
Jr. (59) Marietta Corporation as President,
Astronautics from 1993 to March
1995.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND
BUSINESS EXPERIENCE
NAME POSITIONS AND OFFICES (PAST FIVE YEARS)
(AGE AT 12/31/95) HELD WITH PARENT OUTSIDE DIRECTORSHIPS
- ----------------- --------------------- ------------------------
<S> <C> <C>
John S. McLellan President, Aeronautical President, Aeronautical Systems
(54) Systems since March 1995; previously served
in Lockheed
Corporation as Vice President and
Executive
Vice President, Lockheed Aeronauti-
cal Systems Company from March 1994
to March 1995; served as President,
Lockheed Aircraft Service Company-
Ontario from February 1992 to March
1994; served as Executive Vice Pres-
ident from April 1989 to February
1992.
Frank H. Menaker, Vice President and Vice President and General Counsel
Jr. (55) General Counsel for Lockheed Martin Corporation
since March 1995, after having
served in the same capacity for Mar-
tin Marietta Corporation since 1981.
He joined Martin Marietta Corpora-
tion in 1970 as an Assistant Divi-
sion Counsel for aerospace opera-
tions in Baltimore; became a Corpo-
rate Assistant General Counsel in
1973 and in 1977 was named General
Counsel of that corporation's aero-
space operations. Mr. Menaker is
Chair of the ABA Public Contract Law
Section, a member of the Board of
Directors of the National Chamber
Litigation Center, and a member of
the Steering Committee for the Law-
yer's Committee for Human Rights.
Albert Narath President--Energy and President and Chief Operating Offi-
(63) Environment Sector cer, Energy and Environment Sector,
Lockheed Martin Corporation from Au-
gust 15, 1995 to present; President,
Sandia Corporation from April 1989
to August 14, 1995.
Robert E. Rulon Vice President and Vice President and Controller since
(52) Controller March 1995; previously served in
Lockheed Corporation as Vice Presi-
dent and Controller from 1992-1995;
served as a Vice President, Internal
Audit from 1990-1992.
Walter E. Vice President and Vice President and Treasurer since
Skowronski (47) Treasurer March 1995; previously served in
Lockheed Corporation as Vice Presi-
dent and Treasurer from 1992-1995;
served as staff Vice President, In-
vestor Relations from 1990-1992.
</TABLE>
S-9
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND
NAME BUSINESS EXPERIENCE
(AGE AT POSITIONS AND OFFICES (PAST FIVE YEARS)
12/31/95) HELD WITH PARENT OUTSIDE DIRECTORSHIPS
--------- --------------------- ------------------------
<S> <C> <C>
Peter B. Sector President--Information President and Chief Operating Offi-
Teets (54) and Technology Services cer, Information and Technology
Services Sector since March 1995;
previously served in Martin Marietta
Corporation as Corporate Vice Presi-
dent (since 1985) and President,
Space Group, from 1993-1995; served
as President, Astronautics Group
from 1987-1993.
</TABLE>
S-10
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
OF THE PURCHASER
The name, business address, present principal occupation or employment and
five-year employment history of each director and executive officer of
Purchaser and certain other information are set forth below. Unless otherwise
indicated below, the address of each director and officer is c/o 6801
Rockledge Drive, Bethesda, Maryland 20817. Unless otherwise indicated, each
occupation set forth opposite an individual's name refers to employment with
Parent. Parenthetical years indicate the year the individual was elected or
appointed to the position or office. All directors and officers listed below
are citizens of the United States.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND
BUSINESS EXPERIENCE
NAME POSITIONS AND OFFICES (PAST FIVE YEARS)
(AGE AT 12/31/95) HELD WITH PURCHASER OUTSIDE DIRECTORSHIPS
- ----------------- --------------------- ------------------------
<S> <C> <C>
Marcus C. Bennett President and Senior Vice President and Chief Fi-
(60) Director nancial Officer of Parent since
March 16, 1995. Vice President and
Chief Financial Officer of Martin
Marietta since 1988; served as Vice
President of Finance from 1984 to
1988; serves as Chairman of Martin
Marietta Materials, Inc., a majority
owned subsidiary of Martin Marietta,
and Orlando Central Park, Inc. and
Chesapeake Park, Inc., wholly owned
subsidiary of Martin Marietta; di-
rector of Carpenter Technology,
Inc.; member of Financial Executives
Institute, MAPI Finance Council and
The Economic Club of Washington;
serves as a director of the Private
Sector Council and as a member of
its CFO Task Force.
Vance D. Coffman Director Director since 1996; Executive Vice
(51) President and Chief Operating Offi-
cer since 1996; President and Chief
Operating Officer, Space and Strate-
gic Missiles Sector from March 1995
to December 1995; previously served
in Lockheed Corporation as Executive
Vice President, from 1992-1995; and
President of Lockheed Space Systems
Division from 1988-1992.
Robert B. Corlett Director Vice President, Human Resources, of
(56) Lockheed Martin Corporation since
March 1995, after having served in
the same capacity for Lockheed Cor-
poration since 1991; served as Vice
President, Human Resources, for the
former Lockheed Aeronautical Sys-
tems, Company in 1987, after leaving
the Corporation in 1980 and re-
joining the Corporation in 1987;
served as director of Industrial Re-
lations in 1979 and in 1971 trans-
ferred to the Lockheed California
Company, where he
</TABLE>
S-11
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND
NAME BUSINESS EXPERIENCE
(AGE AT POSITIONS AND OFFICES (PAST FIVE YEARS)
12/31/95) HELD WITH PURCHASER OUTSIDE DIRECTORSHIPS
--------- --------------------- ------------------------
<S> <C> <C>
held a variety of Human Resources
positions leading to his appointment
as Manager of Union Relations in
1975. Mr. Corlett serves on the
Board of Directors and Executive
Committee of the Labor Policy Asso-
ciation, and is a member of the Per-
sonnel Roundtable, the Aerospace Hu-
man Resources Council, and the Human
Resource Roundtable of the Univer-
sity of California at Los Angeles.
John F. Egan Director Vice President, Corporate Develop-
(60) ment, of Lockheed Martin Corporation
since March 1995, after having
served in a similar position at
Lockheed Corporation and served as
Vice President for planning and
technology for Lockheed Electronics
Group from 1986 to 1993 following
the acquisition of Sanders Associ-
ates, Inc., by Lockheed Corporation.
Joined Sanders Associates, Inc. in
1973 as Director of Business Devel-
opment for the Federal Systems
Group; became General Manager of two
product divisions in 1975 and became
Vice President, Corporate Develop-
ment in 1978. Dr. Egan is a member
of the Chief of Naval Operations Ex-
ecutive Panel and the Naval Studies
Board, National Research Council.
Frank H. Vice President; Director Vice President and General Counsel
Menaker, Jr. for Lockheed Martin Corporation
(55) since March 1995, after having
served in the same capacity for Mar-
tin Marietta Corporation since 1981.
He joined Martin Marietta Corpora-
tion in 1970 as an Assistant Divi-
sion Counsel for aerospace opera-
tions in Baltimore; became a Corpo-
rate Assistant General Counsel in
1973 and in 1977 was named General
Counsel of that corporation's aero-
space operations. Mr. Menaker is
Chair of the ABA Public Contract Law
Section, a member of the Board of
Directors of the National Chamber
Litigation Center, and a member of
the Steering Committee for the Law-
yer's Committee for Human Rights.
John E. Montague Director Vice President, Financial Strate-
(41) gies, for Lockheed Martin Corpora-
tion since March 1995, after having
served as Vice President
</TABLE>
S-12
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND
BUSINESS EXPERIENCE
NAME POSITIONS AND OFFICES (PAST FIVE YEARS)
(AGE AT 12/31/95) HELD WITH PURCHASER OUTSIDE DIRECTORSHIPS
----------------- --------------------- ------------------------
<S> <C> <C>
of Corporate Development and In-
vestor Relations for Martin Marietta
Corporation from 1991 to 1995;
served as Director of Corporate De-
velopment prior to being promoted to
Vice President in 1991; served as
Manager of Strategic Planning for
Martin Marietta Information & Commu-
nications Systems in Denver from
1984 to 1985; and joined Martin Mar-
ietta Corporation in 1977 as a mem-
ber of the Engineering staff of Mar-
tin Marietta Denver Aerospace. Mr.
Montague is a member of the Board of
Directors of Martin Marietta Corpo-
ration and of Rational Software Cor-
poration.
Walter E. Director Vice President and Treasurer of
Skowronski (47) Lockheed Martin Corporation since
March 1995, after having served in
the same capacity for Lockheed Cor-
poration since 1992, and as its
staff Vice President-Investor Rela-
tions since 1990. Prior to joining
Lockheed Corporation in 1990, Mr.
Skowronski was Assistant Treasurer
of Boston Edison Company and from
1987 to 1990 was an instructor of
Corporate Finance and Investor Rela-
tions at Northeastern University's
Graduate School of Business Adminis-
tration. Mr. Skowronski is a former
director of the National Investor
Relations Institute and served as
its Chairman and Chief Executive Of-
ficer.
Lillian M. Trippett Director Corporate Secretary and Associate
(42) General Counsel of Lockheed Martin
Corporation since March 1995, after
having served as Corporate Secretary
and Assistant General Counsel of
Martin Marietta Corporation since
April 1993. Ms. Trippett joined Mar-
tin Marietta Corporation in July
1989 as a Director of Washington Op-
erations. Prior to joining Martin
Marietta Corporation, she served for
fourteen years on the staff of the
Committee on Science, Space, and
Technology in the House of Repre-
sentatives.
</TABLE>
S-13
<PAGE>
SCHEDULE II
CERTAIN INFORMATION ABOUT PARENT REQUIRED BY NEW YORK LAW
EDUCATIONAL OPPORTUNITIES
Parent provides assistance to eligible employees participating in study
programs leading to an undergraduate or an advanced degree. Such study
programs must be consistent with Parent's business goals and objectives and
applicable to the employee's field of work. Parent may limit the reimbursement
of the academic costs of tuition.
RELOCATION ADJUSTMENTS
Parent may reimburse job applicants for reasonable and actual interview
expenses, and may reimburse new and existing employees for reasonable and
actual travel and relocation expenses in accordance with the provisions of
corporate policy.
CHARITABLE CONTRIBUTIONS
Parent supports a broad spectrum of public interest activities through a
gifts and grants program, with emphasis on recognized agencies in such fields
as health, education, civic affairs, and cultural activities. Individual
companies are authorized to make community contributions out of their
operating funds.
POST-EMPLOYMENT BENEFIT PLANS
Parent sponsors a number of retirement plans that cover substantially all
employees. Defined benefit plans for salaried and certain hourly employees
provide benefits based on employees' years of service and compensation, either
on a final or career average basis. Defined benefit plans for other hourly
employees generally provide benefits of stated amounts for specified periods
of service. Certain health care and life insurance benefits are provided to
eligible retirees by Parent. For recently retired participants, the health
benefits generally provide for cost sharing through participant contributions
and copayments. For certain groups of employees who recently retired there is
an annual limit on the Corporation's contribution per participant.
STOCK OPTION AND AWARD PLANS
Under Parent's 1995 Omnibus Performance Award Plan (the "Plan"), employees
of Parent may be granted stock-based incentive awards, including options to
purchase common stock, stock appreciation rights, restricted stock or other
stock-based incentive awards. Cash-based incentive awards such as performance
units may also be awarded. These awards may be granted singly or in
combination with other awards. To date, Parent has awarded stock options under
the Plan. The options to purchase its common stock were granted at a price
equal to the market value at the date of grant. These options become
exercisable in two approximately equal annual increments in multiples of 100
on the first and second anniversary dates of such grants and expire 10 years
from such date. The Plan allows Parent to provide financing for purchases,
subject to certain conditions, by interest-bearing notes payable to Parent.
S-14
<PAGE>
SCHEDULE III
CERTAIN BUSINESS RELATIONSHIPS
INVOLVING PARENT, COMPANY AND
THEIR RESPECTIVE AFFILIATES
<TABLE>
<CAPTION>
APPROXIMATE DOLLAR VALUE PERIOD OF BRIEF DESCRIPTION
OF TRANSACTION PERFORMANCE OF TRANSACTION
- ------------------------ ----------- -----------------
<S> <C> <C>
1. In excess of 11/91--10/98 (beyond Teaming agreement between Lockheed
$100 Million 1998 for production) Sanders, Inc. ("Sanders") and Loral
Infrared and Imaging Systems
("LIRIS"), on the U.S. Army's Ad-
vanced Threat Infrared Countermea-
sures Program pursuant to which
Sanders is the prime contractor and
LIRIS is the subcontractor.
2. $76.136 Million 9/92--7/96 Loral subcontractor to Lockheed Mar-
tin Missiles & Space Division on an
infrared seeker for the Theater High
Altitude Area Defense Program
(THAAD).
3. $37.2 Million 5/93--4/99 Loral Federal System ("LFS") devel-
oped and tested the service layer
software for the REARC Program. This
software was delivered to Management
& Data Systems ("M&DS") in August,
1995, and LFS is currently perform-
ing on the post-delivery activities,
which is essentially a level of sup-
port task in Valley Forge.
4. $295 Million 7/93--late 1999, with Prime contract between Space Sys-
options tems/
Loral and Lockheed-Khrunichev-
Energia International.
5. $81.5 Million 1/94--9/96 (Options
firm fixed could extend to late Prime contract between Space Sys-
price, $275 1999) tems/
Million in Loral and Lockheed Martin Commercial
options Launch Services, Inc.
6. $39.167 Million 1/94 -12/96 Subcontract from Company to Parent
for ground support operations and
maintenance.
7. $120.345 Mil- 1/96--12/2002 Teaming agreement between Sanders
lion and Company on the U.S. Army's
TACJAM-
A/IEWCS Program pursuant to which
Company is the prime contractor and
Sanders is the subcontractor.
</TABLE>
S-15
<PAGE>
The Letter of Transmittal, certificates for Shares and any other required
documents should be sent or delivered by each shareholder of the Company or his
broker, dealer, commercial bank or other nominee to the Depository at one of
its addresses set forth below.
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Mail: By Hand or Overnight Courier:
Tenders & Exchanges Tenders & Exchanges
P.O. Box 2564 14 Wall Street, Suite 4680--Loral
Suite 4660--Loral 8th Floor
Jersey City, New Jersey 07303-2564 New York, New York 10005
Any questions or requests for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery
may be directed to the Information Agent or the Dealer Manager at their
respective telephone numbers and locations listed below. You may also contact
your broker, dealer, commercial bank or trust company or nominee for assistance
concerning the Offer.
The Information Agent for the Offer is:
MORROW & CO., INC.
909 Third Avenue, 20th Floor
New York, New York 10022
(212) 754-8000
or
Call Toll Free: (800) 566-9058
Banks and Brokerage Firms, please call: (800) 662-5200
The Dealer Manager for the Offer is:
BEAR, STEARNS & CO. INC.
245 Park Avenue
New York, New York 10167
Call toll free: (800) 726-9849
