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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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LORAL CORPORATION
(Name of Subject Company)
LORAL CORPORATION
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $.25 PER SHARE
(Title of Class of Securities)
543859 10 2
(CUSIP Number of Class of Securities)
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MICHAEL B. TARGOFF
SENIOR VICE PRESIDENT AND SECRETARY
LORAL CORPORATION
600 THIRD AVENUE
NEW YORK, NEW YORK 10016
(212) 697-1105
(Name and address and telephone number of person
authorized to receive notice and communications on
behalf of the person(s) filing statement)
with a copy to:
BRUCE R. KRAUS, ESQ.
WILLKIE FARR & GALLAGHER
ONE CITICORP CENTER
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022
(212) 821-8000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Loral Corporation, a New York corporation
(the "Company"), and the address of the principal executive offices of the
Company is 600 Third Avenue, New York, New York 10016. The title of the class
of equity securities to which this statement relates is the common stock (the
"Common Stock"), par value $.25 per share, of the Company, and the associated
preferred stock purchase rights (the "Rights", and together with the Common
Stock, the "Shares"). The Rights will be issued on January 22, 1996 pursuant
to a Rights Agreement, dated as of January 10, 1996, as amended, between the
Company and The Bank of New York, as Rights Agent (the "Rights Agreement"),
and will be evidenced by and trade with certificates evidencing Common Stock.
See Section 3 for a brief description of the Rights Agreement and its
application to the Offer and the Merger (as hereinafter defined).
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to a tender offer (the "Offer") by LAC Acquisition
Corporation, a New York corporation (the "Purchaser") and a wholly-owned
subsidiary of Lockheed Martin Corporation, a Maryland corporation ("Parent"),
disclosed in a Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-
1"), dated January 12, 1996, for all outstanding Shares for a per Share
consideration of $38.00 net in cash to the seller, upon the terms and subject
to the conditions set forth in the Agreement and Plan of Merger, dated as of
January 7, 1996 (the "Merger Agreement"), among Parent, the Purchaser and the
Company.
Pursuant to the provisions of the Restructuring, Financing and Distribution
Agreement, dated as of January 7, 1996 (the "Distribution Agreement"), among
the Company, certain of its subsidiaries and Parent, immediately prior to the
consummation of the Offer, the Company intends to (i) transfer the space and
telecommunications businesses of the Company and its subsidiaries, including,
without limitation, the Company's direct and indirect interests in Globalstar,
L.P. ("Globalstar"), Space Systems/Loral, Inc. ("SS/L") and other affiliated
businesses, to Loral Space & Communications Ltd., a newly-formed Bermuda
company and a wholly-owned subsidiary of the Company ("Loral Space"), and (ii)
declare a dividend (conditioned upon consummation of the Offer) of one share
of common stock, par value $.01 per share, of Loral Space (the "Loral Space
Shares"), for each Share held of record as of a date (the "Spin-Off Record
Date") determined by the Board of Directors of the Company (the "Board"). The
transactions referred to in clauses (i) and (ii) of the previous sentence are
hereinafter referred to collectively as the "Spin-Off." In connection with the
Spin-Off, the Distribution Agreement also provides that Parent will contribute
to the Company, simultaneously with the consummation of the Offer, a cash
amount in immediately available funds of $712.4 million (subject to adjustment
under certain circumstances as set forth in the Merger Agreement), which
amount will be transferred to Loral Space. Of the total contributed, $344
million is designated as consideration for preferred stock of Loral Space that
is convertible into 20% of Loral Space's common stock. After giving effect to
the foregoing transactions, the assets of the Company will consist of the
defense electronics and systems integration businesses and other businesses of
the Company not transferred to Loral Space (collectively, the "Retained
Business") and a 20% equity interest in Loral Space in the form of the
preferred stock described above.
The Merger Agreement also provides that, following completion of the Offer
and the approval and adoption of the Merger Agreement by the shareholders of
the Company, if required by applicable law, and the satisfaction or waiver of
the other conditions to the Merger, the Purchaser will be merged (the
"Merger") with and into the Company, with the Company being the corporation
surviving the Merger (the "Surviving Corporation"). The Offer, the Spin-Off
and the Merger are hereinafter referred to collectively as the "Transaction."
Based on the information in the Schedule 14D-1, the principal executive
offices of the Purchaser and Parent are located at 6801 Rockledge Drive,
Bethesda, Maryland 20817.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
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(b) Certain contracts, agreements, arrangements or understandings between
the Company or its affiliates and (i) the Company, its executive officers,
directors or affiliates or (ii) the Purchaser, its executive officers,
directors or affiliates are described at pages 10 through 13 of the Company's
Proxy Statement, dated June 26, 1995, relating to the Company's 1995 Annual
Meeting of Stockholders (the "1995 Proxy Statement"). Copies of such pages are
filed as Exhibit 1 hereto and are incorporated herein by reference. As of the
date hereof, except as described below or as set forth in either Schedule I to
this Statement or pages 10 through 13 of the 1995 Proxy Statement (each of
which is incorporated herein by reference), there exists no material contract,
agreement, arrangement or understanding and no actual or potential conflict of
interest between the Company or its affiliates and (i) the Company's executive
officers, directors or affiliates, or (ii) Purchaser or Purchaser's executive
officers, directors or affiliates.
COMPENSATORY ARRANGEMENTS WITH EXECUTIVE OFFICERS
Annual Bonus Plan
The Company's executive officers participate in the Loral Corporation
Incentive Compensation Plan for Senior Executives (the "Annual Bonus Plan").
This Annual Bonus Plan was adopted by the Compensation and Stock Option
Committee of the Board (the "Compensation Committee") on June 23, 1994, and
approved by the Company's shareholders on July 26, 1994. The following is a
general description of the Annual Bonus Plan.
The Annual Bonus Plan is administered by the Compensation Committee.
Participants include the Company's executive officers and any other senior
officers of the Company designated by the Compensation Committee.
The Annual Bonus Plan authorizes the Compensation Committee to set such
performance targets as are appropriate relating to one or more of the
following: revenues, earnings per share, profit before or after taxes, net
income, or operating income; return on or growth in shareholders' equity;
return on assets, capital or investment; stock price performance; attainment
of expense reduction levels; and implementation or completion of critical
projects. The goals established by the Committee can be different each year
and different goals may be set for different participants.
The Committee may permit participants to elect that up to 100% of their
annual bonus, which would otherwise be paid in cash, be deferred and used to
fund acquisitions of restricted Common Stock awarded in accordance with the
incentive stock purchase provisions of the 1994 Stock Plan (described below).
The Annual Bonus Plan caps the maximum annual incentive compensation element
for any participant at $9 million, including the fair market value of any
Common Stock awarded under the incentive stock purchase provisions of the 1994
Stock Plan. This limit is adjusted according to changes in the Consumer Price
Index.
1994 Stock Option and Incentive Stock Purchase Plan
The Company's executive officers participate in the Loral Corporation 1994
Stock Option and Incentive Stock Purchase Plan (the "1994 Stock Plan"). This
1994 Stock Plan was adopted by the Compensation Committee on June 23, 1994,
and approved by the Company's shareholders on July 26, 1994. The following is
a general description of the 1994 Stock Plan.
Awards granted under the 1994 Stock Plan may be "incentive stock options"
within the meaning of Section 422 of the Internal Revenue Code of 1986 (the
"Code"), nonqualified stock options or incentive stock purchase awards. All
options and incentive stock purchase awards relate to Common Stock.
The 1994 Stock Plan is administered by the Compensation Committee, which
selects the participants, determines the number and duration of the options to
be granted and the terms and conditions of option agreements and sets
limitations on the extent to which a participant's earned annual bonus may be
deferred and applied to the funding of restricted stock. The Compensation
Committee may establish performance or other
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conditions which must be satisfied for options to become exercisable or for
incentive stock purchase awards to vest. The Compensation Committee may also
provide for accelerated vesting of options and incentive stock purchase awards
upon certain prescribed events, or in its discretion.
In addition to executive officers, participants may include all other senior
officers of the Company, all group and divisional officers and such other key
employees of the Company and its operating subsidiaries as are designated by
the Compensation Committee. Non-employee directors are not eligible to
participate in the 1994 Stock Plan.
The Compensation Committee may permit participants in the 1994 Stock Plan to
elect that up to 100% of their annual bonus which would otherwise be paid in
cash, either under the Annual Bonus Plan or under any other Company bonus
plan, be deferred into a Restricted Stock Purchase Account which will be used
to fund acquisitions of Common Stock, subject to such maximums as the
Committee may establish from time to time.
Other Stock Plans
In addition to the 1994 Stock Plan, executive officers of the Company hold
stock options granted under the Company's 1983 Stock Option Plan and 1986
Stock Option Plan, as well as shares of restricted stock acquired under the
Company's 1987 Restricted Stock Purchase Plan.
Options and Restricted Stock Held by Executive Officers and Directors
Information describing stock options and shares of restricted stock held by
the Company's five most highly-compensated executive officers as of the last
day of its fiscal year ending March 31, 1995 are set forth in the pages of the
1995 Proxy Statement which are incorporated herein by reference. The following
information gives effect to the two-for-one stock split distributed on
September 29, 1995. On June 6, 1995, the Company granted options to purchase
150,000 shares of Common Stock to Mr. Frank C. Lanza, and options to purchase
70,000 shares of Common Stock to each of Messrs. Michael P. DeBlasio, Robert
V. LaPenta, and Michael B. Targoff. All options were granted under the 1994
Stock Plan at a price of $23.8125 per share, the fair market value of the
Common Stock on the date of grant. On July 25, 1995, the Company granted an
option to purchase 400,000 shares to Mr. Bernard L. Schwartz. The option was
granted under the 1994 Stock Plan at a price of $27.2344 per share, the fair
market value of the Common Stock on the date of grant.
All non-employee directors of the Company other than Messrs. Gittis,
Lazarus, Shinn and Simon hold options to purchase 20,000 shares of the
Company's Common Stock at a price of $8.86 per share.
As of December 31, 1995, the executive officers of the Company held, as a
group, (i) an aggregate of 28,550 shares of restricted stock and (ii) options
to purchase an aggregate of 3,242,728 shares of Common Stock. Exercise prices
applicable to these options range from $3.00 per share to $27.2344 per share.
Treatment of Options and Restricted Stock in the Merger
The treatment of outstanding stock options and shares of restricted stock
upon consummation of the Offer is discussed below under the heading "The
Merger Agreement."
Supplemental Executive Retirement Plan
The Loral Supplemental Executive Retirement Plan (the "SERP"), adopted by
the Board effective April 1, 1995, provides supplemental retirement benefits
to Company employees which generally makes up for certain reductions in
retirement benefits caused by limitations imposed under the Code. Information
concerning the SERP is set forth on page 12 of the 1995 Proxy Statement which
is incorporated herein by reference. All executive officers of the Company
participate in the SERP. The description of the SERP referred to above does
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not purport to be complete and is qualified in its entirety by reference to
the Supplemental Executive Retirement Plan which is attached hereto as Exhibit
2 and incorporated by reference herein.
Supplemental Bonus Program
The Board has adopted the Loral Corporation Supplemental Bonus Program.
Under this program, the Company's Chief Executive Officer, Mr. Bernard L.
Schwartz, may designate key employees of the Company (including executive
officers) to receive bonuses (referred to below in the description of the
Merger Agreement as "Transaction Bonuses") in connection with the successful
consummation of the Offer. The aggregate amount payable under the program may
not exceed the difference between (1) $40 million and (2) the cash amount
payable to Mr. Schwartz pursuant to his Restated Employment Agreement with the
Company dated April 1, 1990, as amended June 14, 1994, as a result of the
consummation of the Offer. The amount so payable to Mr. Schwartz is
approximately $18 million (see discussion below under "The Merger Agreement").
The description of the Supplemental Bonus Program referred to above does not
purport to be complete and is qualified in its entirety by reference to the
Supplemental Bonus Program which is attached hereto as Exhibit 3 and
incorporated by reference herein.
Supplemental Severance Program
The Company has adopted the Loral Corporation Supplemental Severance Program
which will provide enhanced severance benefits for up to 150 Company employees
upon a dismissal without "cause" or a voluntary termination for "good reason"
within twenty-four months after the consummation of the Offer. The benefits
under this program, which are payable in addition to a participant's regular
severance benefits, will generally be equal to one year's base salary and
bonus, plus the cost of acquiring continued welfare benefits coverage for a
period of one year. Also, if a participant's regular severance benefits are
reduced after the consummation of the Offer, the benefits payable under the
program are increased by an equivalent amount. In no event may the payments
made to any participant exceed the maximum amount which can be so paid without
causing the payments to be treated as "excess parachute payments" for purposes
of Section 280G of the Code. The description of the Supplemental Severance
Program referred to above does not purport to be complete and is qualified in
its entirety by reference to the Supplemental Severance Program which is
attached hereto as Exhibit 4 and incorporated by reference herein.
Employment Protection Agreements
Effective as of January 7, 1996, the Company entered into "Employment
Protection Agreements" with each of Messrs. Frank C. Lanza, Michael P.
DeBlasio, Robert V. LaPenta, Michael B. Targoff, Eric J. Zahler, Nicholas C.
Moren, Lawrence H. Schwartz, Stephen L. Jackson, Harvey B. Rein, Frederick W.
Rhodes, Felix W. Fenter, Hugh Bennett, Jay A. Musselman, Arthur E. Johnson and
Jimmie V. Adams. The Employment Protection Agreements provide for certain
payments to be made to the executive in the event of a termination without
"cause" or a voluntary termination for "good reason" which occurs within three
years following a "Change of Control." The definition of "Change of Control"
for this purpose excludes (1) the consummation of the Offer or the
consummation of any transaction approved by the Company's incumbent directors
as a result of which Parent acquires substantially all of the Company's voting
securities or defense electronics and systems integration businesses, and (2)
any other transaction approved by the Company's incumbent directors. The
amount payable to an executive upon a termination without cause, or a
voluntary termination for good reason, is equal to all accrued compensation
and benefits, plus an amount equal to three times the sum of (1) the
executive's base salary and annual bonus, (2) the average annual compensation
received by the executive under the Company's restricted stock plan over the
three fiscal years prior to the Change of Control and (3) the present value of
the cost of obtaining continued welfare benefit coverage for a period of three
years. In addition, in the event such payments (together with any other
payments received by the Executive) would be considered "excess parachute
payments" under Section 280G of the Code subjecting the executive to an excise
tax imposed under Section 4999 of the Code (the "Excise Tax"), the Executive
would be entitled to receive an additional "gross
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up" payment in an amount which, after deduction of all income taxes and excise
taxes applicable thereto, is equal to the Excise Tax so imposed.
The Employment Protection Agreements will terminate upon the consummation of
the Offer or any transaction approved by the Company's incumbent directors as
a result of which Parent acquires substantially all of the Company's voting
securities or defense electronics and systems integration businesses.
The description of the Employment Protection Agreements referred to above
does not purport to be complete and is qualified in its entirety by reference
to the form of Employment Protection Agreement which is attached hereto as
Exhibit 5 and incorporated by reference herein.
Employment Protection Plan
The Company has adopted the Loral Corporation Employment Protection Plan
effective January 7, 1996. The Employment Protection Plan, like the Employment
Protection Agreements, provides for payments to participating employees upon a
termination without "cause" or a voluntary termination for "good reason"
occurring within three years after a "Change of Control." As with the
Employment Protection Agreements, the definition of Change of Control for this
purpose excludes (1) the consummation of the Offer or the consummation of any
transaction approved by the Company's incumbent directors as a result of which
Parent acquires substantially all of the Company's voting securities or
defense electronics and systems integration businesses and (2) any other
transaction approved by the Company's incumbent directors.
The amount payable to participants in the Employment Protection Plan upon an
eligible termination is equal to all accrued compensation and benefits, plus
an amount equal to two times the sum of (1) the employee's annual salary and
bonus and (2) the average annual compensation received by the employee under
the Company's restricted stock plan over the three fiscal years prior to the
change of control. Eligible employees are also entitled to continued welfare
benefits coverage, at the Company's expense, for a period of three years. The
maximum amounts payable to participants under the Employment Protection Plan,
however, may not exceed the maximum amount which can be paid without causing
such payments to be treated as "excess parachute payments" for purposes of
Section 280G of the Code.
The Employment Protection Plan will terminate upon the successful
consummation of the Offer or any transaction approved by the Company's
incumbent directors as a result of which Parent acquires substantially all of
the Company's voting securities or defense electronics and systems integration
businesses.
The description of the Employment Protection Plan referred to above does not
purport to be complete and is qualified in its entirety by reference to the
Employment Protection Plan which is attached hereto as Exhibit 6 and
incorporated by reference herein.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF LORAL SPACE
It is anticipated that the members of the Board, other than Mr. Lanza, will
become members of the Board of Directors of Loral Space, and that Mr. Schwartz
will serve as Chairman and Chief Executive Officer of Loral Space. Mr.
Schwartz's compensation arrangements are expected to be substantially similar
to his existing arrangements with the Company, with such changes as Mr.
Schwartz and the Compensation Committee of the Board of Directors of Loral
Space shall agree. Certain senior executive officers of the Company are
expected to serve in such positions with Loral Space.
INDEMNIFICATION
Pursuant to Section 722 of the New York Business Corporation Law ("NYBCL"),
a corporation incorporated under the laws of the State of New York is
permitted to indemnify its current and former directors, officers, employees
and agents under certain circumstances against certain liabilities and
expenses incurred by
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them by reason of their serving in such capacities, if such persons acted in
good faith and in a manner they reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe their conduct was
unlawful.
The Company's Restated Certificate of Incorporation (the "Charter")
provides, among other things, that the Company will indemnify each of its
directors and officers, against all reasonable expenses, including attorneys'
fees, actually and necessarily incurred by him in connection with the defense
of such action, suit or proceeding, or in connection with any appeal therein,
arising by reason of fact that he was a director or officer of the Company,
except in relation to matters as to which it shall be adjudged in such action,
suit or proceeding that such officer or director is liable for negligence or
misconduct in the performance of his duties.
EXISTING BUSINESS RELATIONSHIPS BETWEEN PARENT AND THE COMPANY
Parent and the Company regularly engage in arms' length purchases of goods
and services from one another in the ordinary course of their respective
businesses.
THE MERGER AGREEMENT
The following summary of the Merger Agreement does not purport to be
complete and is qualified in its entirety by reference to the text of the
Merger Agreement, a copy of which is filed as Exhibit 7 hereto and
incorporated herein by reference.
The Offer. The Merger Agreement provides for the making of the Offer by the
Purchaser. The Purchaser has agreed to accept for payment and pay for all
Shares tendered pursuant to the Offer as soon as practicable following the
date on which the Offer expires (the "Expiration Date") and to extend the
Offer until immediately following the Spin-Off Record Date and the expiration
or termination of any applicable waiting period under the Antitrust Laws (as
defined below). The obligation of Purchaser to accept for payment and pay for
Shares tendered pursuant to the Offer is subject to (i) the satisfaction or
waiver of all of the conditions to the Spin-Off, (ii) the tender and non-
withdrawal of Shares which, when added to the Shares then beneficially owned
by Parent, constitute two-thirds of the outstanding Shares and represent two-
thirds of the voting power of the outstanding Shares on a fully diluted basis,
and (iii) the satisfaction of certain other conditions described in Section 15
of the Schedule 14D-1. The Purchaser has agreed that, without the written
consent of the Company, no amendment to the Offer may be made which changes
the form of consideration to be paid or decreases the price per Share, the
number of Shares sought in the Offer or which imposes additional conditions to
the Offer other than those described in Section 15 of the Schedule 14D-1 or
amends any other term of the Offer in any manner materially adverse to holders
of Shares.
The Merger. The Merger Agreement provides that, following the purchase of
Shares pursuant to the Offer, and the satisfaction or waiver of the other
conditions to the Merger, the Purchaser will be merged with and into the
Company. The Merger will become effective at such time (the "Effective Time")
as a certificate of merger or, if applicable, a certificate of ownership and
merger, is filed with the Secretary of State of the State of New York in the
manner required by the NYBCL.
At the Effective Time, (i) except as provided in (ii) below, each Share
issued and outstanding immediately prior to the Effective Time will be
converted into the right to receive $38.00 in cash, or any higher price paid
per Share in the Offer, without interest (the "Merger Price"); (ii) (a) each
Share held in the treasury of the Company or held by any subsidiary of the
Company (other than a subsidiary that will be owned directly or indirectly by
the Company following the Spin-Off (each such company a "Retained
Subsidiary")) and each Share held by Parent or any subsidiary of Parent
immediately prior to the Effective Time will be cancelled and retired and
cease to exist; provided, that Shares held beneficially or of record by any
plan, program or arrangement sponsored or maintained for the benefit of
employees of Parent or the Company or any subsidiaries thereof will not be
deemed to be held by Parent or the Company regardless of whether Parent or the
Company has, directly or indirectly, the power to vote or control the
disposition of such shares; (b) each Share held by any
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holder who has not voted in favor of the Merger and has delivered a written
objection to the Merger and demanded fair value with respect to such Share in
accordance with Section 623 of the NYBCL will not be converted into or be
exchangeable for the right to receive the Merger Price (the "Dissenting
Shares"); and (iii) each share of common stock of the Purchaser issued and
outstanding immediately prior to the time of the Effective Time will be
converted into and exchangeable for one share of common stock of the Surviving
Corporation.
The Company will take all actions (including, but not limited to, obtaining
any and all consents from employees to the matters contemplated by Section
2.10 of the Merger Agreement) necessary to provide that all outstanding
options and other rights to acquire Shares ("Stock Options") granted under any
stock option plan, program or similar arrangement of the Company or any
subsidiary of the Company, each as amended (the "Option Plans"), will become
fully exercisable and vested on the date (the "Vesting Date") which will be
set by the Company and which, in any event, shall be not less than 30 days
prior to the consummation of the Offer, whether or not otherwise exercisable
and vested. All Stock Options which are outstanding immediately prior to
Purchaser's acceptance for payment and payment for Shares tendered pursuant to
the Offer will be cancelled as of the consummation of the Offer and the
holders thereof (other than holders who are subject to the reporting
requirements of Section 16(a) of the Securities Exchange Act of 1934 (the
"Exchange Act")) will be entitled to receive from the Company, for each Share
subject to such Stock Option, (1) an amount in cash equal to the difference
between the Merger Price and the exercise price per share of such Stock
Option, which amount will be payable upon consummation of the Offer, plus (2)
one share of common stock, par value $0.01 per share of Loral Space ("Loral
Space Common Stock"), which will be held by an escrow agent pending delivery
on the Distribution Date (as defined below). All applicable withholding taxes
attributable to the payments made hereunder or to distributions contemplated
hereby will be deducted from the amounts payable under clause (1) above and
all such taxes attributable to the exercise of Stock Options on or after the
Vesting Date will be withheld from the proceeds received in the Offer or the
Merger, as the case may be, in respect of the Shares issuable on such
exercise.
The Company will take all actions (including, but not limited to, obtaining
any and all consents from employees to the matters contemplated by the Merger
Agreement) necessary to provide that all restrictions on transferability with
respect to each Share which is granted pursuant to the Company's 1987
Restricted Stock Purchase Plan (the "1987 Plan") and which is outstanding and
not vested on the Vesting Date will lapse, and each such Share will become
free of restrictions as of the Vesting Date. All applicable withholding taxes
attributable to the vesting of restricted Shares will be withheld from the
proceeds received in respect of such Shares in the Offer or the Merger, as the
case may be.
Except as provided in the Merger Agreement or as otherwise agreed to by the
parties and to the extent permitted by the Option Plans and the 1987 Plan, (i)
the Option Plans and the 1987 Plan will terminate as of the Effective Time and
the provisions in any other plan, program or arrangement, providing for the
issuance or grant by the Company or any of its subsidiaries of any interest in
respect of the capital stock of the Company or any of its subsidiaries will be
deleted as of the Effective Time and (ii) the Company will use all reasonable
efforts to ensure that following the Effective Time no holder of Stock Options
or any participant in the Option Plans or any other such plans, programs or
arrangements will have any right thereunder to acquire any equity securities
of the Company, the Surviving Corporation or any subsidiary thereof.
The Merger Agreement provides that the Charter and by-laws of the Company at
the Effective Time will be the certificate of incorporation and by-laws of the
Surviving Corporation until amended in accordance with applicable law;
provided, that promptly following the Effective Time, the certificate of
incorporation of the Company will be amended to change the name of the
Surviving Corporation so that the word "Loral" will be deleted therefrom. The
Merger Agreement also provides that the directors and officers of the
Purchaser at the Effective Time will be the initial directors and officers of
the Surviving Corporation and will hold office from the Effective Time until
their respective successors are duly elected or appointed and qualify in the
manner provided in the certificate of incorporation and by-laws of the
Surviving Corporation, or as otherwise provided by applicable law.
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Recommendation. In the Merger Agreement, the Company states that the Board
has unanimously (i) determined that the Offer, the Merger and the Spin-Off are
fair to and in the best interests of the shareholders of the Company and (ii)
resolved to recommend acceptance of the Offer and approval and adoption of the
Merger Agreement and the Merger by the shareholders of the Company.
Interim Agreements of Parent, Purchaser and the Company. Pursuant to the
Merger Agreement, the Company has covenanted and agreed that, during the
period from the date of the Merger Agreement to the consummation of the Offer
and until such time as the directors designated by Parent in accordance with
the Merger Agreement constitute in their entirety a majority of the Company's
Board (the "Board Reorganization"), the Company and its subsidiaries (other
than Loral Space and the Loral Space Companies (as defined below)) will each
conduct its operations according to its ordinary course of business,
consistent with past practice, and will use commercially reasonable efforts to
(i) preserve intact its business organization, (ii) maintain its material
rights and franchises, (iii) keep available the services of its officers and
key employees, and (iv) keep in full force and effect insurance comparable in
amount and scope of coverage to that maintained as of the date of the Merger
Agreement (collectively the "Ordinary Course Obligations"); provided, that
Loral Space and the Loral Space Companies will comply with the Ordinary Course
Obligations to the extent that non-compliance therewith could adversely affect
the Retained Business or adversely affect (or materially delay) the
consummation of the Offer, the Merger or the Spin-Off. "Loral Space Companies"
means Loral General Partner, Inc., a Delaware corporation ("LGP"), SS/L,
Globalstar, Globalstar Telecommunications Limited, a company organized under
the laws of Bermuda ("GTL"), Loral Globalstar, L.P., a Delaware limited
partnership, Loral Globalstar Limited, a Cayman Islands corporation ("LGL"),
K&F Industries, Inc., a Delaware corporation ("K&F"), Loral/QUALCOMM
Partnership, L.P., a Delaware limited partnership ("LQP"), Loral/QUALCOMM
Satellite Services, L.P., a Delaware limited partnership ("LQSS"), Continental
Satellite Corporation, a California corporation ("Continental"), Loral Travel
Services Inc., a Delaware corporation, Loral Properties Inc., a Delaware
corporation and each of the subsidiaries of such companies.
Without limiting the generality of and in addition to the foregoing, and
except as otherwise contemplated by the Merger Agreement, the Tax Sharing
Agreement (as defined below) or the Distribution Agreement (the Tax Sharing
Agreement together with the Distribution Agreement, the "Ancillary
Agreements"), prior to the consummation of the Offer and the Board
Reorganization, neither the Company nor any of its subsidiaries (other than
Loral Space and the Loral Space Companies insofar as any action of the type
specified below could not adversely affect the Retained Business and could not
adversely affect (or materially delay) the Offer, the Spin-Off or the Merger)
will, without the prior written consent of Parent: (a) amend its charter or
by-laws other than filing a Certificate of Amendment of the Company's Charter
as contemplated by the Rights Agreement; (b) subject to certain exceptions,
authorize for issuance, issue, sell, deliver or agree to commit to issue, sell
or deliver (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock of any
class or any other securities or amend any of the terms of any such securities
or agreements (subject to certain exceptions); (c) split, combine or
reclassify any shares of its capital stock, declare, set aside or pay any
dividend or other distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock (other than pursuant to
the Rights Agreement) or redeem or otherwise acquire any of its securities or
any securities of its subsidiaries (other than pursuant to the Rights
Agreement); provided, that the Company may declare and pay to holders of
Shares regular quarterly dividends of not more than $0.08 per Share on the
dividend declaration and payment dates normally applicable to the Shares; (d)
(i) pledge or otherwise encumber shares of capital stock of the Company or any
of its subsidiaries; or (ii) except in the ordinary course of business
consistent with past practices, (A) incur, assume or prepay any long-term debt
or incur, assume, or prepay letters of credit or any material short-term debt;
(B) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for any material obligations of
any other person except wholly owned subsidiaries of the Company; (C) make any
material loans, advances or capital contributions to, or investments in, any
other person; (iii) change the practices of the Company and its Retained
Subsidiaries with respect to the timing of payments or collections; or (D)
mortgage or pledge any assets of the Retained Business, or create or permit to
exist any material lien thereupon; (e) except (i) as disclosed in
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the disclosure schedule to the Merger Agreement and except for arrangements
entered into in the ordinary course of business consistent with past
practices, (ii) as required by law or (iii) as specifically provided for in
the Merger Agreement or Distribution Agreement enter into, adopt or materially
amend any bonus, profit sharing, compensation, severance, termination, stock
option, stock appreciation right, restricted stock, performance unit, pension,
retirement, deferred compensation, employment, severance or other employee
benefit agreements, trusts, plans, funds or other arrangements of or for the
benefit or welfare of any Retained Employee (i.e., all current and former
officers and employees of the Company and its subsidiaries, other than Loral
Space employees) (or any other person for whom the Retained Business will have
liability), or (except for normal increases in the ordinary course of business
that are consistent with past practices) increase in any manner the
compensation or fringe benefits of any Retained Employee (or any other person
for whom the Retained Business will have liability), or pay any benefit not
required by any existing plan and arrangement (including, without limitation,
the granting of stock options, stock appreciation rights, shares of restricted
stock or performance units) or enter into any contract, agreement, commitment
or arrangement to do any of the foregoing; (f) transfer, sell, lease, license
or dispose of any lines of business, subsidiaries, divisions, operating units
or facilities (other than facilities currently closed or currently proposed to
be closed) relating to the Retained Business outside the ordinary course of
business or enter into any material commitment or transaction with respect to
the Retained Business outside the ordinary course of business; (g) acquire or
agree to acquire, by merging or consolidating with, by purchasing an equity
interest in or a portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets of any other person (other than the purchase of assets in the ordinary
course of business and consistent with past practice), in each case where such
action would be material to the Retained Business; (h) except as may be
required by law or as disclosed in the Disclosure Schedule to the Merger
Agreement, take any action to terminate or materially amend any of its pension
or retiree medical plans with respect to or for the benefit of Retained
Employees or any other person for whom the Retained Business will have
liability; (i) materially modify, amend or terminate (1) any significant
contract related to the Retained Business or waive any material rights or
claims of the Retained Business, except in the ordinary course of business
consistent with past practice; or (2) any contract having an aggregate
contract value of $100 million or greater, whether or not in the ordinary
course of business consistent with past practice, unless such modification,
amendment or termination does not materially diminish the projected profit or
materially increase the projected loss anticipated from such contract;
provided, that nothing contained in this clause shall limit the Company and
its subsidiaries in connection with programs or contracts with respect to
which Parent or a subsidiary of Parent has submitted, or is reasonably
expected to submit, a competing bid; provided further, that the provisions of
this clause will not apply to any arrangement, agreement or contract proposal
previously submitted by the Company or a subsidiary thereof which proposal,
upon acceptance thereof, cannot be revised or withdrawn; (j) effect any
material change in any of its methods of accounting in effect as of March 31,
1995, except as may be required by law or generally accepted accounting
principles; (k) except as expressly provided in the Merger Agreement, amend,
modify, or terminate the Rights Agreement or redeem any Rights thereunder;
provided, that if the Board by a majority vote determines in its good faith
judgment, based as to legal matters upon the written opinion of legal counsel,
that the failure to redeem any Rights would likely constitute a breach of the
Board's fiduciary duty, the Rights may be redeemed; (l) enter into any
material arrangement, agreement or contract that individually or in the
aggregate with other material arrangements, agreements and contacts entered
into after the date of the Merger Agreement, the Company reasonably expects
will adversely affect in a significant manner the Retained Business after the
date of the Merger Agreement; provided, that nothing contained in this clause
will limit the Company and its subsidiaries from submitting bids for programs
or contracts with respect to which the Company reasonably expects Parent or a
subsidiary of Parent to submit a bid; and (m) enter into a legally binding
commitment with respect to, or any agreement to take, any of the foregoing
actions.
Acquisition Proposals. In the Merger Agreement, the Company has agreed that
the Company and its officers, directors, employees, representatives and agents
will immediately cease any existing discussions or negotiations with any
parties conducted prior to the date of the Merger Agreement with respect to
any Acquisition Proposal (as defined below). The Company and its subsidiaries
may not, and will use their best efforts to cause their respective officers,
directors, employees and investment bankers, attorneys, accountants or
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other agents retained by the Company or any of its subsidiaries not to, (i)
initiate or solicit, directly or indirectly, any inquiries with respect to, or
the making of any Acquisition Proposal, or (ii) except as permitted below,
engage in negotiations or discussions with, or furnish any information or data
to any Third Party (as defined below) (other than the transactions
contemplated by the Merger Agreement and by the Ancillary Agreements).
Notwithstanding anything to the contrary contained in the Merger Agreement,
the Company may furnish information to, and participate in discussions or
negotiations (including, as a part thereof, making any counter-proposal) with,
any Third Party which submits an unsolicited written Acquisition Proposal to
the Company if the Board by a majority vote determines in its good faith
judgment, based as to legal matters upon the written opinion of legal counsel,
that the failure to furnish such information or participate in such
discussions or negotiations would likely constitute a breach of the Board's
fiduciary duties under applicable law; provided, that nothing in the Merger
Agreement will prevent the Board from taking, and disclosing to the Company's
shareholders, a position contemplated by Rules 14d-9 and 14e-2 promulgated
under the Exchange Act with regard to any tender offer; provided further, that
the Board will not recommend that the shareholders of the Company tender their
Shares in connection with any such tender offer unless the Board by a majority
vote determines in its good faith judgment, based as to legal matters on the
written opinion of legal counsel, that failing to take such action would
likely constitute a breach of the Board's fiduciary duty; provided further,
that the Company may not enter into any agreement with respect to any
Acquisition Proposal except concurrently with or after the termination of the
Merger Agreement (except with respect to confidentiality and standstill
agreements to the extent expressly permitted below). The Company will promptly
provide Parent with a copy of any written Acquisition Proposal received and a
written statement with respect to any non-written Acquisition Proposal
received, which statement shall include the identity of the parties making the
Acquisition Proposal and the terms thereof. The Company will promptly inform
Parent of the status and content of any discussions regarding any Acquisition
Proposal with a Third Party. In no event will the Company provide non-public
information regarding the Retained Business to any Third Party making an
Acquisition Proposal unless such party enters into a confidentiality agreement
containing provisions designed to reasonably protect the confidentiality of
such information. In the event that following the date of the Merger Agreement
the Company enters into a confidentiality agreement with any Third Party which
does not include terms and conditions which are substantially similar to the
"standstill" provisions of the confidentiality agreement between the Company
and Parent, dated as of December 4, 1995, then Parent and its affiliates will
be released from their obligations under such standstill provisions to the
same extent as such Third Party.
"Acquisition Proposal" means any bona fide proposal, whether in writing or
otherwise, made by a Third Party to acquire beneficial ownership (as defined
in Rule 13(d) under the Exchange Act) of all or a material portion of the
assets of, or any material equity interest in, any of the Company, a Retained
Subsidiary or the Retained Business pursuant to a merger, consolidation or
other business combination, sale of shares of capital stock, sale of assets,
tender offer or exchange offer or similar transaction involving either the
Company, a Retained Subsidiary or the Retained Business, including, without
limitation, any single or multi-step transaction or series of related
transactions which is structured to permit such Third Party to acquire
beneficial ownership of any material portion of the assets of, or any material
portion of the equity interest in, either the Company, a Retained Subsidiary
or the Retained Business (other than the transactions contemplated by the
Merger Agreement and the Ancillary Agreements); provided, however, that the
term "Acquisition Proposal" does not include any transactions which relate
solely to the businesses to be owned by Loral Space and the Loral Space
Companies following the Spin-Off and which do not have a material adverse
effect on the consummation of the Offer, the Merger, the Spin-Off or the
transactions contemplated by the Merger Agreement.
Board Representation. The Merger Agreement provides that in the event that
Purchaser acquires at least a majority of the Shares outstanding pursuant to
the Offer, Parent will be entitled to designate for appointment or election to
the Board upon written notice to the Company, such number of persons so that
such designees of Parent constitute the same percentage (but in no event less
than a majority) of the Board (rounded up to the next whole number) as the
percentage of Shares acquired in connection with the Offer. Prior to the
consummation of the Offer, the Board will obtain the resignation of such
number of directors as is necessary to enable such number of Parent designees
to be so elected. In connection therewith, the Company will mail to the
shareholders of the
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Company the information required by Section 14(f) of the Exchange Act and Rule
14f-1 thereunder unless such information has previously been provided to such
shareholders in the Schedule 14D-9. Parent and the Purchaser will provide to
the Company in writing, and be solely responsible for, any information with
respect to such companies and their nominees, officers, directors and
affiliates required by such Section and Rule. Notwithstanding the foregoing,
the parties to the Merger Agreement will use their respective best efforts to
ensure that at least three of the members of the Board will, at all times
prior to the Effective Time be, Continuing Directors (as defined in the Merger
Agreement).
Miscellaneous Agreements. Pursuant to the Merger Agreement, the Company has
agreed to amend, and has amended, the Rights Agreement as necessary (i) to
prevent the Merger Agreement or the transactions contemplated by the Merger
Agreement or Distribution Agreement (including, without limitation, the
publication or other announcement of the Offer and the consummation of the
Offer and the Merger) from resulting in the distribution of separate rights
certificates or the occurrence of a "Distribution Date" under the Rights
Agreement or being deemed to be a "Triggering Event" or a "Section 13 Event"
under the Rights Agreement and (ii) to provide that neither Parent nor the
Purchaser will be deemed to be an "Acquiring Person" under the Rights
Agreement by reason of such transactions.
Pursuant to the Merger Agreement, if required under applicable law in order
to consummate the Merger, the Company, acting through its Board, will, in
accordance with applicable law, its Charter and by-laws and the rules and
regulations of the NYSE: (a) duly call, give notice of, convene and hold a
special meeting of its shareholders as soon as practicable following the
consummation of the Offer for the purpose of considering and taking action on
the Merger Agreement (the "Stockholders' Meeting"); (b) subject to its
fiduciary duties under applicable laws as advised by counsel, include in the
Information Statement prepared by the Company for distribution to shareholders
of the Company in advance of the Stockholders' Meeting in accordance with
Regulation 14C promulgated under the Exchange Act (the "Information
Statement") the recommendation of its Board referred to above; and (c) use its
best efforts to (i) obtain and furnish the information required to be included
by it in the Information Statement, and, after consultation with Parent,
respond promptly to any comments made by the Commission with respect to the
Information Statement and any preliminary version thereof and cause the
Information Statement to be mailed to its shareholders following the
consummation of the Offer and (ii) obtain the necessary approvals of the
Merger Agreement by its shareholders. Parent will provide the Company with the
information concerning Parent and Purchaser required to be included in the
Information Statement and will vote, or cause to be voted, all Shares owned by
it or its subsidiaries in favor of approval and adoption of the Merger
Agreement.
In accordance with the Merger Agreement, simultaneously with the execution
of the Merger Agreement, the Company and certain of its subsidiaries entered
into the Distribution Agreement. Immediately prior to the Spin-Off Record
Date, the Company, Loral Space and certain other parties will enter into the
Tax Sharing Agreement (as defined below). From and after the Effective Time,
Parent shall cause the Surviving Corporation to perform any and all
obligations and agreements of the Company set forth in the Merger Agreement or
in the Ancillary Agreements or in any other agreements contemplated in the
Merger Agreement or in the Ancillary Agreements. Parent and Purchaser accept
and agree that, subject to the provisions of the Distribution Agreement, the
form of certificate of incorporation and by-laws of Loral Space adopted in
contemplation of the Spin-Off will be as agreed to by the Company and Loral
Space in their sole discretion; provided, that nothing in the certificates of
incorporation and by-laws will adversely affect or otherwise limit (i) Loral
Space's ability to perform its obligations under the Ancillary Agreements or
the other agreements contemplated by the Distribution Agreement or (ii) the
Company's or its affiliates' rights under the Stockholders Agreement. In no
event shall Parent or Purchaser or any of their subsidiaries be entitled to
receive any shares of Loral Space Common Stock as a distribution with respect
to Shares purchased upon consummation of the Offer. If, for any reason, any
shares of Loral Space Common Stock distributed in the Spin-Off are received by
Parent or Purchaser or any of their subsidiaries with respect to Shares
acquired by Purchaser in the Offer, then Parent or Purchaser will convey, on
behalf of the Company, such shares of Loral Space to the shareholders of the
Company who would have otherwise received such shares of Loral Space pursuant
to the Distribution Agreement; provided, that the
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foregoing provisions will not apply with respect to Shares held by Parent or
any of its subsidiaries prior to the date of the Merger Agreement. If the
Company reasonably determines that the Spin-Off may not be effected without
registering the shares of common stock of Loral Space to be distributed in the
Spin-Off pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), the Company, Parent and Purchaser, as promptly as practicable, will use
their respective best efforts to cause the shares of Loral Space to be
registered pursuant to the Securities Act and thereafter effect the Spin-Off
in accordance with the terms of the Distribution Agreement including, without
limitation, by preparing and filing on an appropriate form a registration
statement under the Securities Act covering the shares of Loral Space and
using their respective best efforts to cause such registration statement to be
declared effective and preparing and making such other filings as may be
required under applicable state securities laws. Parent will, and will cause
the Surviving Corporation to, treat the Spin-Off for purposes of all federal
and state taxes as an integrated transaction with the Offer and the Merger and
thus report the Spin-Off as a constructive redemption of a number of Shares
equal in value to the value of the Loral Space Common Stock distributed in the
Spin-Off.
Employment Agreements. Prior to the Spin-Off, the Company will use its best
efforts to, and will use its best efforts to cause its subsidiaries to, assign
to Loral Space or subsidiaries of Loral Space or terminate all employment
agreements with employees of the Company who are not Retained Employees (the
"Employment Agreements") and all individual severance agreements with
employees of the Company who are not Retained Employees (the "Severance
Agreements"). The parties acknowledge and agree that, whether or not such
Employment Agreements and Severance Agreements are so assigned or terminated,
all liabilities under or arising from such Employment Agreements and Severance
Agreements other than as expressly contemplated in the Distribution Agreement
or the Merger Agreement will be deemed to be Loral Space Liabilities (as
defined in Section 10 of the Schedule 14D-1), with respect to which Loral
Space will indemnify the Company and Parent as provided therein. Parent
acknowledges and agrees that all employment agreements and severance
agreements with the Retained Employees will be binding and enforceable
obligations of the Surviving Corporation, except as the parties thereto may
otherwise agree. The parties to the Merger Agreement acknowledge and agree
that all liabilities under or arising from such agreements with the Retained
Employees from and after the consummation of the Offer will be deemed to be
Company Liabilities (as defined in the Distribution Agreement), with respect
to which the Company and Parent will indemnify Loral Space as provided
therein.
Fiscal Year Ended March 31, 1996 Bonus. Parent agrees to cause the Company
to pay in cash to each Company Bonus Employee (as defined below) to the extent
not previously paid, all bonus compensation payable with respect to the fiscal
year of the Company ending March 31, 1996 under any bonus program of the
Company or its subsidiaries in which such Company Bonus Employee participated
prior to the consummation of the Offer or under any employment agreement. Such
bonus compensation will be paid at the time or times that comparable bonus
compensation was paid to a similarly situated employee after March 31, 1995
with respect to the fiscal year ended March 31, 1995. Bonus compensation which
is based on objective criteria will be calculated and paid in accordance with
such criteria. With respect to bonus compensation which is wholly or partially
discretionary, such bonus compensation will be determined and paid on a basis
consistent with past practices of the Company. Subject to the conditions
regarding the aggregate amount of discretionary bonuses as described below,
the amount of discretionary bonus compensation to be paid to any Company Bonus
Employee will be determined by the Chief Executive Officer of the Company in
office immediately prior to the date of the consummation of the Offer or by
his designee. "Company Bonus Employee" means a person (other than any current
or former officer or employee of Loral Space, any Loral Space Company or the
Loral Space Business (as defined below) (the "Loral Space Employees")),
employed by the Company or any of its subsidiaries immediately prior to the
date the Offer is consummated, who was eligible to receive a bonus under any
bonus program of the Company or any of its subsidiaries in effect at December
31, 1995, or under any employment agreement in effect on such date, with
respect to the fiscal year ending March 31, 1996.
Loral Space agrees to pay in cash to each Loral Space Bonus Employee (as
defined below) to the extent not previously paid, all bonus compensation
payable with respect to the fiscal year of the Company ending March 31, 1996
under any bonus program of the Company or its subsidiaries in which such Loral
Space Bonus
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Employee participated prior to the consummation of the Offer or under any
employment agreement. Such bonus compensation will be paid at the time or
times that comparable bonus compensation was paid to any similarly situated
employee after March 31, 1995 with respect to the fiscal year ended March 31,
1995. Bonus compensation which is based on objective criteria will be
calculated and paid in accordance with such criteria. With respect to bonus
compensation which is wholly or partially discretionary, such bonus
compensation will be determined and paid on a basis consistent with past
practices of the Company. Subject to the following paragraph, the amount of
discretionary bonus compensation to paid to any Loral Space Bonus Employee
will be determined by Loral Space. "Loral Space Bonus Employee" means any
Loral Space Employee employed by the Company or any of its subsidiaries
immediately prior to the date the Offer is consummated, who was eligible to
receive a bonus under any bonus program of the Company or any of its
subsidiaries in effect at December 31, 1995, or under any employment agreement
in effect on such date, with respect to the fiscal year ending March 31, 1996.
Upon payment of such bonuses to Loral Space Bonus Employees, Loral Space shall
submit to Parent a statement showing the individual and aggregate bonus
amounts paid to Loral Space Bonus Employees, and Parent will thereupon
promptly pay to Loral Space (or cause the Company to pay to Loral Space) the
aggregate amount of bonuses so paid; provided, that if the consummation of the
Offer occurs prior to March 31, 1996, the amount of such reimbursement will be
a prorated amount of the aggregate bonus amounts so paid, based on a fraction,
the numerator of which is the number of days of the Company's fiscal year
ending March 31, 1996 which had elapsed as of the consummation of the Offer,
and the denominator of which is 365.
The aggregate amount of discretionary bonuses payable to all Company Bonus
Employees and Loral Space Bonus Employees as a group for the fiscal year
ending March 31, 1996 will not exceed a dollar amount to be mutually agreed to
by the Chief Executive Officer of Parent and the Chief Executive Officer of
Loral Space; provided, that in the event the Chief Executive Officer of Parent
and the Chief Executive Officer of Loral Space cannot agree on such dollar
amount, the maximum aggregate amount of discretionary bonuses payable to
Company Bonus Employees and Loral Space Bonus Employees shall be based on the
aggregate amount of discretionary bonuses paid to all such employees for the
Company's fiscal year ending March 31, 1995, increased by a percentage equal
to the average of the percentage increases in discretionary bonuses paid to
all such employees over the Company's three fiscal years ending March 31,
1993, 1994 and 1995.
Transaction Bonus. Pursuant to the "change of control" provisions of the
Restated Employment Agreement between the Company and Bernard L. Schwartz
dated April 1, 1990, as amended June 14, 1994, the Company will, subject to
the following sentences of this paragraph, make a cash payment to Mr. Schwartz
upon consummation of or following the Offer, calculated in accordance with
such agreement, less $18 million waived by Mr. Schwartz. The net amount
payable to Mr. Schwartz, taking this waiver into account, is approximately $18
million. The Company also may make a cash payment of a bonus (inclusive of the
amount paid to Mr. Schwartz pursuant to the preceding sentence, the
"Transaction Bonus") to Transaction Bonus Employees (as defined below) other
than Mr. Schwartz; provided, that the aggregate Transaction Bonus paid will
not exceed $40 million; and provided further, that the Transaction Bonus
payable to any Transaction Bonus Employee will not exceed the maximum amount
which can be paid at such time without such amounts being treated as "excess
parachute payments" within the meaning of Section 280G of the Code, taking
into account all payments made on or prior to the time the Transaction Bonus
is paid (including the value of accelerated vesting of stock options or
restricted shares granted under the 1987 Plan determined in accordance with
proposed regulations promulgated under Section 280G of the Code) which
constitute parachute payments for purposes of Section 280G of the Code. The
Transaction Bonus may be paid by the Company, in its discretion, prior to, on
or immediately following, the date the Offer is consummated. "Transaction
Bonus Employee" means Mr. Schwartz and each person employed by the Company or
any of its subsidiaries on or prior to the date the Offer is consummated who
is selected by Mr. Schwartz to receive a Transaction Bonus.
Employment Protection Agreements. The Company may provide for employment
protection payments to be made to certain Company employees upon qualifying
terminations of employment pursuant to "Employment Protection Agreements" and
an "Employment Protection Plan" (each substantially in the forms attached to
the Merger Agreement as Exhibits C and D, respectively; together, the
"Employment Protection Arrangements")
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occurring after a change in control of the Company; provided that (i) neither
the execution of the Merger Agreement nor the Distribution Agreement, nor any
transaction contemplated thereby, will constitute a change in control of the
Company for any purpose under the Employment Protection Arrangements or give
rise to any rights thereunder and (ii) the Employment Protection Arrangements
will terminate as of the consummation of the Offer and no rights thereunder
will continue after the consummation of the Offer.
Supplemental Severance Program. Prior to the Effective Time, the Company
will adopt a severance plan substantially in the form attached to the Merger
Agreement as Exhibit E (the "Supplemental Severance Plan") covering up to 150
employees of the Company or its subsidiaries selected by the Company prior to
the Effective Time. The Supplemental Severance Program will provide enhanced
severance benefits to Company employees upon a dismissal without "cause" or a
voluntary termination for "good reason" within twenty-four months after the
consummation of the Offer. The benefits under this program, which are payable
in addition to a participant's regular severance benefits, will generally be
equal to one year's base salary and bonus, plus the cost of acquiring
continued welfare benefits coverage for a period of one year. Also, if a
participant's regular severance benefits are reduced after the consummation of
the Offer, the benefits payable under the program are increased by an
equivalent amount. In no event may the payments made to any participant exceed
the maximum amount which can be so paid without causing the payments to be
treated as "excess parachute payments" for purposes of Section 280G of the
Code.
Employee Benefits. Except with respect to accruals under any defined benefit
pension plans, Parent will, or will cause the Company to, give Retained
Employees full credit for purposes of eligibility, vesting and determination
of the level of benefits under any employee benefit plans or arrangements
maintained by the Parent, the Company or any subsidiary of Parent or Company
for such Retained Employees' service with the Company or any subsidiary of the
Company to the same extent recognized by the Company immediately prior to the
Effective Time. Parent will, or will cause the Company to, (i) waive all
limitations as to pre-existing conditions, exclusions and waiting periods with
respect to participation and coverage requirements applicable to the Retained
Employees under any welfare plans that such employees may be eligible to
participate in after the Effective Time, other than limitations or waiting
periods that are already in effect with respect to such employees and that
have not been satisfied as of the Effective Time under any welfare plan
maintained for the Retained Employees immediately prior to the Effective Time,
and (ii) provide each Retained Employee with credit for any co-payments and
deductibles paid prior to the Effective Time in satisfying any applicable
deductible or out-of-pocket requirements under any welfare plans that such
employees are eligible to participate in after the Effective Time.
Subject to the terms and conditions of the Merger Agreement and without
limitation to the provisions below, Parent, Purchaser and the Company agree to
use all reasonable efforts to take, or cause to be taken, all action, and to
do, or cause to be done, all things reasonably necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by the Merger Agreement and the Ancillary Agreements
(including, without limitation, (i) cooperating in the preparation and filing
of the Offer documents, the Schedule 14D-9, the Form 10, the Information
Statement and any amendments to any thereof; (ii) cooperating in making
available information and personnel in connection with presentations, whether
in writing or otherwise, to prospective lenders to Parent and Purchaser that
may be asked to provide financing for the transactions contemplated by the
Merger Agreement; (iii) taking of all action reasonably necessary, proper or
advisable to secure any necessary consents or waivers under existing debt
obligations of the Company and its subsidiaries or amend the notes, indentures
or agreements relating thereto to the extent required by such notes,
indentures or agreements or redeem or repurchase such debt obligations; (iv)
contesting any pending legal proceeding relating to the Offer, the Merger or
the Spin-Off; and (v) executing any additional instruments necessary to
consummate the transactions contemplated by the Merger Agreement and the
Ancillary Agreements). In case at any time after the Effective Time any
further action is necessary to carry out the purposes of the Merger Agreement,
the proper officers and directors of each party will use all reasonable
efforts to take all such necessary action.
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Each of the Company, Parent and Purchaser shall cooperate and use their
respective reasonable efforts to make all filings and obtain all consents and
approvals of governmental authorities (including, without limitation, the
Federal Communication Commission ("FCC")) and other third parties necessary to
consummate the transactions contemplated by the Merger Agreement and the
Ancillary Agreements. Each of the parties to the Merger Agreement will furnish
to the other party such necessary information and reasonable assistance as
such other persons may reasonably request in connection with the foregoing.
In addition to and without limiting the agreements of Parent and Purchaser
described in the immediately preceding paragraph, Parent, Purchaser and the
Company will (i) take promptly all actions necessary to make the filings
required of Parent, Purchaser or any of their affiliates under the applicable
Antitrust Laws, (ii) comply at the earliest practicable date with any request
for additional information or documentary material received by Parent,
Purchaser or any of their affiliates from the Federal Trade Commission ("FTC")
or the Antitrust Division of the Department of Justice (the "Antitrust
Division") pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") and from the Commission or other foreign
governmental or regulatory authority pursuant to the Antitrust Laws, and (iii)
cooperate with the Company in connection with any filing of the Company under
applicable Antitrust Laws and in connection with resolving any investigation
or other inquiry concerning the transactions contemplated by the Merger
Agreement or the Ancillary Agreements commenced by any of the FTC, the
Antitrust Division, state attorneys general, the Commission, or other foreign
governmental or regulatory authorities.
In furtherance and not in limitation of the covenants of Parent and
Purchaser described above, Parent, Purchaser and the Company shall each use
all reasonable efforts to resolve such objections, if any, as may be asserted
with respect to the Offer, the Spin-Off, the Merger or any other transactions
contemplated by the Merger Agreement or the Ancillary Agreements under any
Antitrust Law. If any administrative, judicial or legislative action or
proceeding is instituted (or threatened to be instituted) challenging the
Offer, the Spin-Off, the Merger or any other transactions contemplated by the
Merger Agreement or the Ancillary Agreements as violative of any Antitrust
Law, Parent, Purchaser and the Company will each cooperate to contest and
resist any such action or proceeding, and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order (whether temporary,
preliminary or permanent) (any such decree, judgment, injunction or other
order is hereafter referred to as an "Order") that is in effect and that
restricts, prevents or prohibits consummation of the Offer, the Spin-Off, the
Merger or any other transactions contemplated by the Merger Agreement or the
Ancillary Agreements, including, without limitation, by pursuing all
reasonable avenues of administrative and judicial appeal. Parent and Purchaser
will each also use their respective reasonable efforts to take all reasonable
action, including, without limitation, agreeing to hold separate or to divest
any of the businesses or assets of Parent or Purchaser or any of their
affiliates, or, following the consummation of the Offer or the Effective Time,
of the Company or any of the Retained Subsidiaries, as may be required (i) by
the applicable governmental or regulatory authority (including without
limitation the FTC, the Antitrust Division, any state attorney general or any
foreign governmental or regulatory authority) in order to resolve such
objections as such governmental or regulatory authority may have to such
transactions under any Antitrust Law, or (ii) by any domestic or foreign court
or other tribunal, in any action or proceeding brought by a private party or
governmental or regulatory authority challenging such transactions as
violative of any Antitrust Law, in order to avoid the entry of, or to effect
the dissolution, vacating, lifting, altering or reversal of, any Order that
has the effect of restricting, preventing or prohibiting the consummation of
the Offer, the Spin-Off, the Merger or any other transactions contemplated by
the Merger Agreement or the Ancillary Agreements; provided that Parent will
not be required to take any action, divest any asset or enter into any consent
decree if the taking of such action, disposing of such asset or entering into
such decree would have a Significant Adverse Effect. "Significant Adverse
Effect" means any change or effect that, in Parent's judgment, is reasonably
likely to adversely affect in a substantial way the benefits and opportunities
which Parent reasonably expects to receive from the acquisition of the
Retained Business or from Parent's current business.
Each of the Company, Parent and Purchaser will promptly inform the other
party of any material communication received by such party from the FTC, the
Antitrust Division, the Securities and Exchange
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Commission (the "Commission") or any other governmental or regulatory
authority regarding any of the transactions contemplated by the Merger
Agreement. Parent and/or Purchaser will promptly advise the Company with
respect to any understanding, undertaking or agreement (whether oral or
written) which it proposes to make or enter into with any of the foregoing
parties with regard to any of the transactions contemplated by the Merger
Agreement.
"Antitrust Law" means the Sherman Act, as amended, the Clayton Act, as
amended, the HSR Act, the Federal Trade Commission Act, as amended, EC Merger
Regulations and all other federal, state and foreign statutes, rules,
regulations, orders, decrees, administrative and judicial doctrines, and other
laws that are designed or intended to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of trade.
Representations and Warranties. The Merger Agreement contains certain
representations and warranties of the parties including, without limitation,
representations by the Company as to organization, capitalization, authority
relative to the Merger Agreement, consents and approvals, absence of certain
changes concerning the Company's business, undisclosed liabilities, reports,
offer documents, no default, litigation and compliance with law, employee
benefit plans, assets and intellectual property, certain contracts and
arrangements, taxes, Retained Business FCC licenses, labor matters, Rights
Agreement and certain fees.
Conditions to the Merger. Pursuant to the Merger Agreement, the obligations
of each of Parent, the Purchaser and the Company to effect the Merger are
subject to the satisfaction or waiver, at or prior to the Effective Time, of
certain conditions, including: (a) if required by applicable law, the Merger
Agreement will have been adopted by the affirmative vote of the shareholders
of the Company by the requisite vote in accordance with applicable law; (b) no
statute, rule, regulation, order, decree, or injunction will have been
enacted, entered, promulgated or enforced by any court or governmental
authority which prohibits or restricts the consummation of the Merger, (c) any
waiting period applicable to the Merger under the Antitrust Laws will have
terminated or expired and all approvals required under the Antitrust Laws will
have been received; (d) the Spin-Off will have been consummated in all
material respects; and (e) the Offer will not have been terminated in
accordance with its terms prior to the purchase of any Shares.
Except if the Purchaser has accepted for payment and paid for Shares validly
tendered pursuant to the Offer or fails to accept for payment any Shares
pursuant to the Offer in violation of the terms thereof, the obligation of the
Company to effect the Merger is further subject to the satisfaction at or
prior to the Effective Time of the following conditions: (a) the
representations and warranties of Parent and the Purchaser contained in the
Merger Agreement will be true and correct in all material respects at and as
of the Effective Time as if made at and as of such time; and (b) each of
Parent and the Purchaser will have performed in all material respects its
obligations under the Merger Agreement required to be performed by it at or
prior to the Effective Time pursuant to the terms thereof.
Except if the Purchaser has accepted for payment and paid for Shares validly
tendered pursuant to the Offer or fails to accept for payment any Shares
pursuant to the Offer in violation of the terms thereof, the obligations of
Parent and the Purchaser to effect the Merger are further subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) the representations and warranties of the Company contained in the Merger
Agreement will be true and correct in all material respects at and as of the
Effective Time as if made at and as of such time; (b) the Company will have
delivered to Purchaser certain legal opinions in connection with the Company's
public indebtedness; and (c) the Company will have performed in all material
respects each of its obligations under the Merger Agreement required to be
performed by it at or prior to the Effective Time pursuant to the terms
thereof.
Termination. The Merger Agreement may be terminated and the Offer and the
Merger may be abandoned at any time (notwithstanding approval of the Merger by
the shareholders of the Company) prior to the Effective Time: (a) by mutual
written consent of Parent, the Purchaser and the Company; (b) by Parent,
Purchaser or the Company if any court of competent jurisdiction in the United
States or other United States governmental body will have issued a final
order, decree or ruling or taken any other final action restraining, enjoining
or otherwise
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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 of
the Schedule 14D-1, Purchaser will have (i) failed to commence the Offer within
the time required by Regulation 14D under the Exchange Act, (ii) terminated the
Offer, or (iii) failed to pay for Shares pursuant to the Offer prior to June
30, 1996; (d) by the Company if (i) there is no material breach of any
representation, warranty, covenant or agreement on the part of the Company and
Purchaser has (A) failed to commence the Offer within the time required by
Regulation 14D under the Exchange Act, (B) terminated the Offer or (C) failed
to pay for Shares pursuant to the Offer prior to June 30, 1996 or (ii) prior to
the purchase of Shares pursuant to the Offer, a Third Party has made a bona
fide offer that the Board by a majority vote determines in its good faith
judgment and in the exercise of its fiduciary duties, based as to legal matters
on the written opinion of legal counsel, is a Higher Offer (as defined below);
provided, that such termination under this clause (ii) will not be effective
until payment of the fee discussed below; (e) by Parent or Purchaser prior to
the purchase of Shares pursuant to the Offer, if (i) there has been a breach of
any representation or warranty on the part of the Company or Loral Space
contained in the Merger Agreement or the Distribution Agreement resulting in a
Material Adverse Effect (as defined in the Merger Agreement) or materially
adversely affecting (or materially delaying) the consummation of the Offer,
(ii) there has been a breach of any covenant or agreement on the part of the
Company or Loral Space under either the Merger Agreement or the Distribution
Agreement resulting in a Material Adverse Effect or materially adversely
affecting (or materially delaying) the consummation of the Offer, which will
not have been cured prior to the earlier of (A) 10 days following notice of
such breach or (B) two business days prior to the date on which the Offer
expires, (iii) the Company engages in Active Negotiations (as defined below)
with a Third Party with respect to a Third Party Acquisition (as defined
below), (iv) the Board has withdrawn or modified (including effecting any
amendment of Schedule 14D-9) in a manner adverse to Purchaser, its approval or
recommendation of the Offer, the Spin-Off, the Merger, the Merger Agreement or
the Distribution Agreement, has recommended to the Company's shareholders
another offer, has authorized the redemption of any Rights (whether or not in
accordance with the Merger Agreement) after the Company's receipt of an
Acquisition Proposal, or has adopted any resolution to effect any of the
foregoing or (v) the number of shares validly tendered and not withdrawn when
added to the shares beneficially owned by Parent, prior to the expiration of
the Offer, does not constitute at least two-thirds of the Shares, determined on
a fully diluted basis, and on or prior to such date an entity or group (other
than Parent or Purchaser) has made and not withdrawn a proposal with respect to
a Third Party Acquisition; or (f) by the Company if (i) there has been a breach
of any representation or warranty in the Merger Agreement or the Distribution
Agreement on the part of Parent or Purchaser which materially adversely affects
(or materially delays) the consummation of the Offer or (ii) there has been a
material breach of any covenant or agreement in the Merger Agreement or the
Distribution Agreement on the part of Parent or Purchaser which materially
adversely affects (or materially delays) the consummation of the Offer which
has not been cured prior to the earlier of (A) 10 days following notice of such
breach or (B) two business days prior to the date on which the Offer expires.
Termination Fee. Pursuant to the Merger Agreement, (a) if: (i) Parent or
Purchaser terminates the Merger Agreement pursuant to Clause (e)(ii), (iii) or
(v) of the immediately preceding paragraph and within 12 months thereafter the
Company enters into an agreement with respect to a Third Party Acquisition, or
a Third Party Acquisition occurs, involving any party (or any affiliate
thereof) (A) with whom the Company (or its agents) had negotiations with a view
to a Third Party Acquisition, (B) to whom the Company (or its agents) furnished
information with a view to a Third Party Acquisition or (C) who had submitted a
proposal or expressed an interest in a Third Party Acquisition, in the case of
each of clauses (A), (B) and (C) after the date of the Merger Agreement and
prior to such termination; or (ii) Parent or Purchaser terminates the Merger
Agreement pursuant to clause (e)(iii) or (v) of the immediately preceding
paragraph and, within 12 months thereafter, a Third Party Acquisition will
occur involving a Higher Offer (as defined below); or (iii) Parent or Purchaser
terminates the Merger Agreement pursuant to Clause (e)(iv) of the immediately
preceding paragraph; or (iv) the Company terminates the Merger Agreement
pursuant to clause (d)(ii) of the immediately preceding paragraph; then, in
each case, the Company will pay to Parent, within one business day following
the execution and delivery of such agreement or such occurrence, as the case
may be, or simultaneously with such determination pursuant to
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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 shareholders, other than the provisions
relating to the termination fee, fees and expenses, governing law, brokerage
fees and commissions, indemnification and confidentiality of information,
provided, that a party will not be relieved from liability for any breach of
the Merger Agreement. Notwithstanding anything to the contrary contained in
the Merger Agreement, upon payment by the Company of the fees and expenses
referred to in the Merger Agreement, the Company will be released from all
liability thereunder, including any liability for any claims by Parent, the
Purchaser or any of their affiliates based upon or arising out of any breach
of the Merger Agreement or any Ancillary Agreements.
Fees and Expenses. If the Merger Agreement is terminated pursuant to Clause
(e)(i) or (e)(ii) above (the "Designated Termination Provisions") or Parent is
entitled to receive the $175 million fee under the Merger Agreement, then the
Company will reimburse Parent, Purchaser and their affiliates (not later than
one business day after submission of statements therefor) for actual
documented out-of-pocket fees and expenses, not to exceed $45 million,
actually incurred by any of them or on their behalf in connection with the
Offer, the proposed Merger and the proposed Spin-Off and the transactions
contemplated by the Merger Agreement and the Distribution Agreement
(including, without limitation, fees payable to financing sources, investment
bankers
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(including to the IB), counsel to any of the foregoing and accountants),
whether incurred prior to or after the date of the Merger Agreement. The
Company will in any event pay the amount requested (not to exceed $45 million)
within one business day of such request, subject to the Company's right to
demand a return of any portion as to which invoices are not received in due
course. Except as specifically provided in Section 8.3 of the Merger Agreement
and except as otherwise specifically provided in the Distribution Agreement,
each party shall bear its own respective expenses incurred in connection with
the Merger Agreement, the Offer and the Merger, including, without limitation,
the preparation, execution and performance of the Merger Agreement and the
Ancillary Agreements and the transactions contemplated thereby, and all fees
and expenses of investment bankers, finders, brokers, agents, representatives,
counsel and accountants.
THE DISTRIBUTION AGREEMENT
The following summary of the Distribution Agreement does not purport to be
complete and is qualified in its entirety by reference to the text of the
Distribution Agreement, a copy of which is filed as Exhibit 8 hereto and
incorporated herein by reference.
Pursuant to the Distribution Agreement, the Company and certain subsidiaries
of the Company, through a series of transactions, will transfer to Loral Space
all of their respective right, title and interest in and to the following
assets (such assets, the "Loral Space Assets"): (a) all shares of capital
stock or partnership interests, as the case may be, then owned in the Loral
Space Companies, (b) the $712,400,000 cash amount being transferred to the
Company pursuant to the Distribution Agreement, (c) the rights to the "Loral"
name, (d) all rights to receive management fees from certain of the Loral
Space Companies, (e) all rights and interests in any prospective domestic or
international direct broadcast satellite projects currently under
consideration, (f) certain service provider operations related to Globalstar,
(g) certain rights and liabilities with respect to certain litigation in which
the Company has an interest, (h) certain corporate aircraft, (i) a portion of
the leasehold interest in the Company's New York corporate offices, (j)
certain FCC license applications, and (k) certain Warrants to be received from
Globalstar in connection with the Company's guarantee of certain Globalstar
bank indebtedness, and (l) certain other assets described in the Distribution
Agreement, in exchange for the issuance by Loral Space to the Company and its
subsidiaries of a certain amount of Loral Space capital stock. Concurrently
with the actions in the immediately preceding sentence, Loral Space will
assume and will in due course pay, perform and discharge (or will cause to be
assumed and cause in due course to be paid, performed and discharged), all of
the various liabilities (the "Loral Space Liabilities") relating to (a) each
business and each former business which is or was conducted by Loral Space or
a Loral Space Company as of the date of the Distribution or which is or was
included within the Loral Space Assets (all such businesses, the "Loral Space
Business"), (b) the employees of Loral Space, and (c) certain other
liabilities relating to the Loral Space Companies or the Loral Space Business
or otherwise.
As promptly as practicable after the date of the Distribution Agreement and
prior to the Distribution Date, the Company and Loral Space will prepare an
Information Statement (which will set forth appropriate disclosure concerning
Loral Space and the Loral Space Companies, the Loral Space Business, the Spin-
Off and certain other matters) and Loral Space will file with the Commission a
registration statement on Form 10 (which will include or incorporate by
reference the Information Statement). The Company and Loral Space will use
their respective reasonable efforts to cause the Form 10 to be declared
effective under the Exchange Act or, if either the Company or Parent
reasonably determines that the Distribution may not be effected without
registering the Loral Space Common Stock pursuant to the Securities Act, the
Company shall use its best efforts to cause the Loral Space Common Stock to be
registered pursuant to the Securities Act and thereafter effect the
Distribution in accordance with the terms of the Distribution Agreement,
including, without limitation, by preparing and filing on an appropriate form
of registration statement under the Securities Act covering the Loral Space
Common Stock and using its best efforts to cause such registration statement
to be declared effective. Following the effectiveness of such Form 10 (or
registration statement, as the case may be), the Company will mail the
Information Statement to the holders of the Company Common Stock.
Subject to terms and conditions of the Distribution Agreement, the Board (or
any duly appointed committee thereof) will in its reasonable discretion
establish the Spin-Off Record Date and the Distribution Date and any
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appropriate procedures in connection with the Distribution (subject in each
case to the provisions of applicable law) as soon as reasonably practicable
following the date of the Distribution Agreement or on such other dates as
Parent may reasonably request; provided that (x) the Spin-Off Record Date may
not be earlier than the twentieth day following the date on which the Offer is
commenced and also may not be earlier than the tenth day following the date on
which this Board takes action to establish the Spin-Off Record Date (the
"Distribution Declaration Date") and (y) the parties hereto will use their
reasonable efforts to cause the Spin-Off Record Date to be established so as
to occur immediately prior to the acceptance for payment by the Purchaser of
the shares of Common Stock pursuant to the Offer (provided that in no event
will the Spin-Off Record Date be established so as to occur as of or at any
time after the acceptance for payment by the Purchaser of the shares of common
stock pursuant to the Offer); provided further that if all conditions to the
Offer have been satisfied or waived prior to the date on which all of the
Distribution Conditions (as defined below) have been satisfied (or waived, to
the extent expressly permitted by the provisions of the Distribution
Agreement), then the Purchaser will be permitted, but not required, to accept
for payment at such time the shares of Common Stock pursuant to the Offer
notwithstanding the fact that the Distribution Conditions have not been
satisfied or waived (provided that prior to such acceptance for payment
Purchaser first obtains the consent of the Company, which consent may not be
unreasonably withheld). The parties hereto acknowledge and agree that payment
of the Distribution will be conditioned on (x) the satisfaction (or waiver, to
the extent expressly permitted by the provisions of the Distribution
Agreement) of each of the Distribution Conditions on a date which is prior to
the fiftieth (50th) day following the Spin-Off Record Date and (y) Parent and
Purchaser not having taken any action, on or after the Distribution
Declaration Date, to extend or delay the expiration of the Offer to a date
which is later than the Spin-Off Record Date.
The obligations of each of the Company, its subsidiaries and Loral Space
under the Distribution Agreement are subject to the satisfaction of the
following conditions (the "Distribution Conditions"): (i) the Purchaser will
have notified the Company that it is prepared to immediately accept for
payment shares of Company Common Stock pursuant to the terms and conditions of
the Offer as set forth in Section 15 of the Schedule 14D-1, (ii) the Spin-Off
Record Date will have been set by the Board, (iii) the Form 10 (or any
registration statement filed in lieu thereof) will have been declared
effective by the Commission, (iv) the Loral Space Common Stock will have been
accepted for listing or quotation in accordance with the Distribution
Agreement, (v) no court order or law will have been enacted, promulgated,
issued or entered against any of the parties which (x) prohibits or materially
restricts consummation of any of the transactions contemplated by the
Distribution Agreement and (y) remains in effect as of the date on which the
satisfaction of this condition is determined, (vi) the Company and each of the
Retained Subsidiaries will have obtained all consents required to be obtained
by the Company as a result of or in connection with the transactions
contemplated by the Distribution Agreement in order to avoid a material
default under any material contract to or by which the Company, Loral Space or
any of their respective subsidiaries is a party or may be bound, or otherwise
necessary to permit the Company and each of the Retained Subsidiaries to
conduct their business in a manner consistent with its past practices,
(vii) all consents and approvals of, and notices to and filings with, any
governmental entity or any other person or entity arising out of or relating
to the consummation of the transactions contemplated by the Distribution
Agreement, will have been obtained or made (as the case may be), (viii) the
guarantee by the Company of certain bank indebtedness of Globalstar (the
"Globalstar Bank Guarantee") will have been amended so that the provisions
thereof shall, following the transactions described above (the
"Restructuring"), be amended in the manner contemplated pursuant to the
Distribution Agreement (with such changes thereto as Parent and the Company
may approve prior to the Offer Purchase Date), and (ix) certain Merchant
Banking Partnerships affiliated with Lehman Brothers Holdings Inc. (the
"Lehman Partnerships") and all other holders of the preferred stock of Loral
Aerospace Holdings, Inc. ("Holdings") (if any) will have exchanged all issued
and outstanding shares of such preferred stock for shares of capital stock or
other equity securities of either Loral Space, any Loral Space Company or any
subsidiary of Loral Space.
Following the Spin-Off, Loral Space will establish a qualified defined
benefit pension plan and trust ("Loral Space Pension Plan"). Thereafter, the
Company will direct the trustees of the trusts under the Loral Corporation
Pension Plan and the Retirement Plan of Loral Aerospace Corp. (the "Company
Pension Plans") to transfer in
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cash or in kind, as agreed to by the Company and Loral Space, to the trust
under the Loral Space Pension Plan, an amount determined by the certified
actuary of the Company Pension Plans to be equal to, with respect to each such
Company Pension Plan, (A) the product of (i) the fair market value of the
assets held under such Company Pension Plan as of the last day of the month
prior to the month in which the transfer occurs (the "Valuation Date") and
(ii) a fraction, the numerator of which is equal to the present value of all
accrued benefits under such Company Pension Plan as of the Distribution Date
in respect of Loral Space Employees and the denominator of which is equal to
the present value of all accrued benefits under such Company Pension Plan less
(B) the payments made by such Company Pension Plan between the Distribution
Date and the date of transfer in respect of Loral Space Employees. From the
Valuation Date to the date of transfer, the assets to be transferred will be
credited with interest at the interest rate available on a 30-day treasury
note at the auction date on or immediately preceding the Valuation Date.
Following the Distribution Date, Loral Space shall cause SSL to establish a
trust intended to qualify under Section 501(a) of the Code ("Loral Space SSL
Trust") and intended to hold the assets of the Retirement Plan of SSL (the
"SSL Plan"). Thereafter, the Company shall direct the Trustees of the Loral
Master Pension Trust (the "Master Trust") to transfer in cash or in kind as
agreed to by SSL and the Company from the Master Trust to the Loral Space SSL
Trust, the assets held by the Master Trust under the SSL Plan. Upon the
transfers described above, Loral Space agrees to indemnify and hold harmless
the Company, its officers, directors, employees, agents and affiliates from
and against any and all indemnifiable losses arising out of or related to the
Loral Space Pension Plan and the SSL Plan, including all benefits accrued by
Loral Space Employees prior to the Distribution Date under the Company Pension
Plans and the SSL Plan.
Loral Space will assume and be solely responsible for all liabilities and
obligations arising under the Company's retiree welfare plans (including
retiree medical plans) with respect to Loral Space Employees. The Company will
retain and be solely responsible for all liabilities and obligations arising
under the Company's retiree welfare plans (including retiree medical plans)
with respect to Retained Employees.
Loral Space represents and warrants to the Company that (i) except as
expressly provided in the Globalstar Bank Guarantee (as amended pursuant to
the Distribution Agreement), neither the Company nor any of the Retained
Subsidiaries will, after giving effect to the Restructuring, be liable
directly or indirectly, as borrower, surety, guarantor, indemnitor or
otherwise, with respect to (and that none of the assets of the Company other
than the Loral Space Assets (such assets the "Retained Assets") will be bound
by or subject to) any of the Loral Space Liabilities or any Loral Space
indebtedness, (ii) there are no intercompany agreements between the Company
and the Retained Subsidiaries, on the one hand and Loral Space and the Loral
Space Companies on the other in effect as of the date of the Distribution
Agreement, which, either individually or in the aggregate, are materially
adverse to (i) the business, properties, operations, prospects, results of
operations or condition (financial or otherwise) of the Retained Business or
(ii) the ability of the Company or any of the Retained Subsidiaries to perform
their respective obligations under the Distribution Agreement, the Tax Sharing
Agreement (as defined below) or the Stockholders Agreement (as defined below),
(iii) there are no Loral Space Assets which have been used within the Retained
Business within one year prior to the date of the Distribution Agreement,
other than those Loral Space Assets which are listed on the Disclosure
Schedule to the Distribution Agreement, (iv) except as set forth in the
Disclosure Schedule to the Distribution Agreement neither Loral Space nor any
Loral Space Company will, immediately after giving effect to the Restructuring
and the Distribution, own, hold or lease, in whole or in part, any of the
assets, properties, licenses and rights which are reasonably necessary to
carry on the Retained Business as presently conducted, and (v) prior to, on or
shortly after the Distribution Date, GTL or Globalstar (as the case may be)
will issue to the Company warrants to acquire equity of GTL or Globalstar (as
the case may be), which warrants will be on the terms and conditions described
in the December 21, 1995 memorandum from Michael B. Targoff to Enrique
Fernandez relating to, among other things, the Globalstar Bank Guarantee and
the Globalstar Credit Agreement (the "Globalstar Warrant Memorandum") and
shall otherwise be on such terms and conditions as are customary to
transactions of a similar nature.
Except as otherwise specified by Loral Space prior to the date on which the
Purchaser accepts for payment and pays for Shares tendered pursuant to the
Offer (the "Offer Purchase Date"), the executive officers of the Company shall
be the executive officers of Loral Space on and after the Distribution Date.
Effective as of the
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Distribution Date, (a) those current and former officers and employees of the
Company, other than the Loral Space Employees (as defined below) (the
"Retained Employees") who are employed by the Company or any of its
subsidiaries immediately prior to the Distribution Date will become employees
of the Company in the same capacities as then held by such employees (or in
such other capacities as the Company will determine in its sole discretion)
and (b) those persons who are employed as officers or employees of Loral Space
and the Loral Space Companies immediately prior to or effective as of the
Distribution Date and all former officers and employees of Loral Space, any
Loral Space Company or one Loral Space Business ("Loral Space Employees")
together with those persons whose primary employment is with the Loral Space
Business, who are employed by the Company or any of its subsidiaries
immediately prior to the Distribution Date will become employees of Loral
Space in the same capacities as then held by such employees (or in such other
capacities as Loral Space will determine in its sole discretion).
Prior to the Spin-Off, the Company will establish a rabbi trust or trusts
for the benefit of participants in the Company's Supplemental Executive
Retirement Plan ("SERP") and will deposit in such rabbi trust or trusts an
amount at least equal to the present value of the accrued benefits under the
SERP. This amount is not expected to exceed $11 million. The liabilities for
the accrued benefits under the SERP with respect to Loral Space Employees, and
any assets held in the rabbi trust or trusts relating to such liabilities,
will be transferred to Loral Space as soon as practicable after the
Distribution Date.
Each of the parties agrees that except as otherwise expressly provided in
Article IV of the Distribution Agreement, all existing intercompany agreements
in effect immediately prior to the Distribution Date will not be deemed
altered, amended or terminated as a result of the Distribution Agreement or
the consummation of the transactions contemplated by the Distribution
Agreement and will otherwise remain in effect immediately after giving effect
to the Restructuring.
In addition to any indemnification required by Articles II, VI and VIII of
the Distribution Agreement, subject to the terms and conditions set forth
therein, from and after the Distribution Date, Loral Space shall indemnify,
defend and hold harmless the Company, each Retained Subsidiary, the Purchaser
and Parent and each of their respective directors, officers, employees,
representatives, advisors, agents and affiliates (collectively, the "Parent
Indemnified Parties") from, against and in respect of any and all
indemnifiable losses of the Parent Indemnified Parties arising out of,
relating to or resulting from, directly or indirectly, (i) any
misrepresentations or breach of warranty made by or on behalf of Loral Space
or, on or prior to the Offer Purchase Date, made by or on behalf of the
Company which misrepresentation or breach of warranty is contained in the
Distribution Agreement or the Stockholders Agreement (as defined in this
Section 10), (ii) any breach of any agreement or covenant under the
Distribution Agreement or the Stockholders Agreement on the part of Loral
Space or, on or prior to the Offer Purchase Date, on the part of the Company,
(iii) any and all Loral Space Liabilities, (iv) the conduct of the Loral Space
Business or any part thereof on, prior to or following the Distribution Date,
(v) any transfer of Loral Space Assets to, or assumption of Loral Space
Liabilities by, Loral Space or any Loral Space Company in accordance with the
Distribution Agreement or otherwise in connection with the Restructuring
(other than any costs and expenses which have been expressly assumed by the
Company pursuant to the provisions of the Distribution Agreement), (vi) any
indemnifiable loss resulting from any claims that any statements or omissions
relating to or describing directly or indirectly, Loral Space, any Loral Space
Company, the Loral Space Business, any Loral Space Asset or any Loral Space
Liability, and which occur on or prior to the Offer Purchase Date (A) in the
Information Statement, the Form 10 or in any registration statement filed
pursuant to the Distribution Agreement (in each case other than with respect
to any statements or omissions made in reliance upon and in conformity with
information furnished in writing by Parent, the Purchaser or their affiliates,
representatives or advisors) and other than any statements or omissions which
relate solely to the Merger Agreement and the Distribution Agreement and the
transactions contemplated thereby), or (B) in any document(s) filed with the
Commission by Loral Space or any Loral Space Company after the date hereof
pursuant to either the Securities Act or the Exchange Act (in each case other
than with respect to any statements or omissions which relate solely to the
Merger Agreement and the Distribution Agreement and the transactions
contemplated thereby), which, in the case of either clause (A) or (B) above,
are false or misleading with respect
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to any material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, (vii) the failure of
the Company or Loral Space to obtain any final order or other consent or
approval of the FCC with respect to any of the transactions contemplated
pursuant to either the Distribution Agreement or the Merger Agreement and
(viii) any Excluded Indemnifiable Losses (as defined below). Notwithstanding
the foregoing, Loral Space's indemnification obligations pursuant to the
Distribution Agreement will not in any event include any indemnifiable losses
arising out of or relating to litigation relating to the Offer and the
transactions contemplated thereby, except to the extent of any indemnifiable
losses (such indemnifiable losses, the "Excluded Indemnifiable Losses") which
the Company is able to demonstrate resulted directly from (a) any statement or
omission on the part of Loral Space or any of its affiliates in the documents
referred to in clause (vi) above or (b) any business activities, assets or
liabilities of Loral Space, any of the Loral Space Companies or the Loral
Space Business.
Notwithstanding Loral Space's obligations to indemnify Parent Indemnified
Parties described above, Loral Space shall be obligated to indemnify the
Parent Indemnified Parties only for those indemnifiable losses under clauses
(i), (ii) or (vi) of the immediately preceding paragraph as to which the
Parent Indemnified Parties have given Loral Space written notice thereof on or
prior to the third anniversary of the Distribution Date (it being understood
that there shall be no corresponding time limitation with respect to any
Indemnifiable Losses arising under clauses (iii), (iv), (v), (vii) and (viii)
of the immediately preceding paragraph; provided further that claims with
respect to breaches of covenants and agreements set forth in the Distribution
Agreement or in the Stockholders Agreement will survive for the applicable
statute of limitations period. Notwithstanding the foregoing, if on or before
the expiration of such indemnification period any Parent Indemnified Party has
given notice to Loral Space pursuant to the Distribution Agreement of any
matter which would be the basis for a claim of indemnification by such Parent
Indemnified Party pursuant to the immediately preceding paragraph, such Parent
Indemnified Party will have the right after the expiration of such
indemnification period to assert or to continue to assert such claim and to be
indemnified with respect thereto.
In addition to any indemnification required by Articles II, VI and VIII of
the Distribution Agreement, subject to the terms and conditions set forth
therein, from and after the Distribution Date, the Company will indemnify,
defend and hold harmless Loral Space, each Loral Space Company and each of
their respective directors, officers, employees, representatives, advisors,
agents and affiliates (collectively, the "Loral Space Indemnified Parties")
from, against and in respect of any and all indemnifiable losses of the Loral
Space Indemnified Parties arising out of, relating to or resulting from,
directly or indirectly, (i) any breach of the Distribution Agreement or any
agreement or covenant set forth in the Distribution Agreement or in the
Stockholders Agreement on the part of Parent or the Purchaser or, following
the Offer Purchase Date, on the part of the Company, (ii) any and all
liabilities of the Company and the Retained Subsidiaries (such liabilities,
the "Retained Liabilities"), (iii) the conduct of the businesses of the
Company, the Retained Subsidiaries and the Retained Business or any part
thereof on, prior to or following the Distribution Date, (iv) any
Indemnifiable Loss resulting from any claims that any statements or omissions
(A) relating to or describing, directly or indirectly, Parent or the
Purchaser, and which occur on or prior to the Offer Purchase Date in any
Solicitation/Recommendation Statement on Schedule 14D-9 of the Company filed
in connection with the Offer, the Information Statement, the Form 10 or in any
registration statement filed pursuant to Section 3.1 or Section 3.3 of the
Distribution Agreement (in each case only to the extent of any statements or
omissions made in reliance upon and in conformity with information furnished
in writing by Parent, the Purchaser or their affiliates, representatives or
advisors), (B) in any Tender Offer Statement on Schedule 14D-1 of the
Purchaser or Parent filed in connection with the Offer (other than any
statements or omissions made in reliance upon and in conformity with
information furnished in writing by the Company, and Retained Subsidiary,
Loral Space, any Loral Space Company or any of their respective affiliates,
representatives or advisors), or (C) in any other document(s) filed after the
date of the Distribution Agreement by Parent or the Purchaser with the
Commission pursuant to either the Securities Act or the Exchange Act (e.g.,
statements or omissions made in a Current Report on Form 8-K filed by either
Parent or the Purchaser after the date of the Distribution Agreement pursuant
to the Exchange Act), which, in the case of either clauses (A), (B) or (C)
above, are false or misleading with respect to any material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the
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statements therein, in light of the circumstances under which they were made,
not misleading and (v) any Indemnifiable Loss arising out of or resulting from
litigation relating to the Offer and the transactions contemplated thereby
(other than Excluded Indemnifiable Losses). Notwithstanding the foregoing and
anything to the contrary in the Distribution Agreement or any other agreement
to be entered into pursuant to the Distribution Agreement, the Company shall
not be required to indemnify, defend and hold harmless any Loral Space
Indemnified Party from and against any Indemnifiable Loss resulting from any
claims that the statements included in the Information Statement, the Form 10
or in any registration statement filed pursuant to Section 3.1 or Section 3.3
of the Distribution Agreement (in each case other than statements or omissions
made in reliance upon and in conformity with information furnished in writing
by Parent, the Purchaser or their affiliates, representatives or advisors
expressly for use therein) are false or misleading with respect to any
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Notwithstanding the Company's obligations to indemnify the Loral Space
Indemnified Parties described in the preceding paragraph, the Company will be
obligated to indemnify the Loral Space Indemnified Parties only for those
Indemnifiable Losses under Clause (i) and (iv) of the immediately preceding
paragraph as to which the Loral Space Indemnified Parties have given the
Company written notice thereof on or prior to the expiration of any applicable
statute of limitations period (it being understood that there will be no
corresponding time limitation with respect to any Indemnifiable Losses arising
under clauses (ii) and (iii) of the immediately preceding paragraph).
Notwithstanding the foregoing, if on or before the expiration of such
indemnification period any Loral Space Indemnified Party has given notice to
the Company of any matter which would be the basis for a claim of
indemnification by such Loral Space Indemnified Party pursuant to the
immediately preceding paragraph, such Loral Space Indemnified Party will have
the right after the expiration of such indemnification period to assert or to
continue to assert such claim and to be indemnified with respect thereto.
THE TAX SHARING AGREEMENT
Pursuant to a tax sharing agreement, to be entered into prior to the
consummation of the Offer, between Parent, Purchaser, the Company and Loral
Space (the "Tax Sharing Agreement"), Parent generally has agreed, among other
things, to file all tax returns with respect to, and to pay all taxes imposed
upon or attributable to, the Company or the Retained Subsidiaries for all
taxable periods, including the taxes incurred in connection with the transfers
of the Loral Space Assets to Loral Space and the Spin-Off Loral Space. Loral
Space generally has agreed, among other things, to file all tax returns with
respect to Loral Space or the Loral Space Companies for all taxable periods
beginning after the Distribution Date and to pay all taxes imposed upon or
attributable to Loral Space or the Loral Space Companies for all taxable
periods. The Tax Sharing Agreement will become effective only upon
consummation of the Offer.
The foregoing summary of the Tax Sharing Agreement does not purport to be
complete and is qualified in its entirety by reference to the text of the Tax
Sharing Agreement, a copy of which is filed as Exhibit 9 hereto and is
incorporated herein by reference.
THE RIGHTS AGREEMENT
Pursuant to the Rights Agreement, on January 7, 1996 the Board of Directors
of the Company declared a dividend distribution of one Right for each share of
Common Stock outstanding at the close of business on January 22, 1996 (the
"Rights Record Date") and with respect to the Common Stock issued thereafter
until the Rights Distribution Date (as defined below) and, in certain
circumstances, with respect to Common Stock issued after the Distribution
Date. Except as set forth below, each Right, when it becomes exercisable,
entitles the registered holder to purchase from the Company a unit consisting
initially of one one-thousandth of a share (a "Unit") of Series A Preferred
Stock, par value $1.00 per share (the "Rights Preferred Stock"), of the
Company at a Purchase Price of $180 per Unit, subject to adjustment (the
"Rights Purchase Price"). The description and terms of the Rights are set
forth in the Rights Agreement.
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Initially, the Rights were and are attached to all certificates representing
shares of Common Stock then outstanding, and no separate certificates
evidencing the Rights (the "Rights Certificates") were or have been
distributed. The Rights will separate from the Common Stock and a "Rights
Distribution Date" will occur upon the earlier of (i) ten days (or such later
date as the Board shall determine) following public disclosure that a person
or group of affiliated or associated persons has become an "Acquiring Person"
(as defined below), or (ii) ten business days (or such later date as the Board
shall determine) following the commencement of a tender offer or exchange
offer that would result in a person or group becoming an "Acquiring Person".
Except as set forth below, an "Acquiring Person" is a person or group of
affiliated or associated persons who has acquired beneficial ownership of 20%
or more of the outstanding shares of Common Stock. The term "Acquiring Person"
excludes (i) the Company, (ii) any subsidiary of the Company , (iii) any
employee benefit plan of the Company or any subsidiary of the Company or (iv)
any person or entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan.
Until the occurrence of the Rights Distribution Date, (i) the Rights will be
evidenced by the Common Stock certificates and will be transferred with and
only with such Common Stock certificates, (ii) new Common Stock certificates
issued after the Rights Record Date will contain a notation incorporating the
Rights Agreement by reference, and (iii) the surrender for transfer of any
certificates for Common Stock outstanding will also constitute the transfer of
the Rights associated with the Common Stock represented by such certificate.
Pursuant to the Rights Agreement, the Company reserves the right to require
prior to the occurrence of a Triggering Event (as defined below) that, upon
any exercise of Rights, a number of Rights be exercised so that only whole
shares of Preferred Stock will be issued.
As soon as practicable after the occurrence of the Rights Distribution Date,
Rights Certificates will be mailed to holders of record of Common Stock as of
the close of business on the Rights Distribution Date and, thereafter, the
separate Rights Certificates alone will represent the Rights. Except in
certain circumstances specified in the Rights Agreement or as otherwise
determined by the Board of Directors, only shares of Common Stock issued prior
to the Rights Distribution Date will be issued with Rights.
The Rights are not exercisable until the occurrence of the Rights
Distribution Date. The Rights will expire at the close of business on January
22, 2006, unless extended or earlier redeemed by the Company as described
below.
In the event that, at any time following the Rights Distribution Date, a
person becomes an Acquiring Person, each holder of a Right will thereafter
have the right to receive, upon exercise of the Right, Common Stock (or, in
certain circumstances, cash, property or other securities of the Company)
having a value equal to two times the exercise price of the Right.
Notwithstanding the foregoing, following the occurrence of the event set forth
in this paragraph, all Rights that are, or (under certain circumstances
specified in the Rights Agreement) were, beneficially owned by any Acquiring
Person will be null and void and nontransferable and any holder of any such
Right (including any purported transferee or subsequent holder) will be unable
to exercise or transfer any such Right. For example, at an exercise price of
$200 per Right, each Right not owned by an Acquiring Person (or by certain
related parties) following an event set forth in this paragraph would entitle
its holder to purchase $400 worth of Common Stock (or other consideration, as
noted above) for $200. Assuming that the Common Stock had a per share value of
$40 at such time, the holder of each valid Right would be entitled to purchase
ten shares of Common Stock for $200.
In the event that, at any time following the date on which there has been
public disclosure that, or of facts indicating that, a person has become an
Acquiring Person (the "Stock Acquisition Date"), (i) the Company is acquired
in a merger or other business combination transaction in which the Company is
not the surviving corporation (other than a merger which follows an offer
described in the preceding paragraph), or (ii) 50% or more of the Company's
assets or earning power is sold, mortgaged or transferred, each holder of a
Right (except Rights which previously have been voided as set forth above)
shall thereafter have the right to receive, upon exercise, common stock of the
acquiring company having a value equal to two times the exercise price of the
Right. The events set forth in this paragraph and in the preceding paragraph
are referred to as the "Triggering Events."
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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 of Common Stock. Shares of Rights Preferred
Stock purchasable upon exercise of the Rights will not be redeemable. Each
share of Rights Preferred Stock will be entitled to a quarterly dividend
payment of 1,000 times the dividend declared per share of Common Stock. In the
event of liquidation, each share of Rights Preferred Stock will be entitled to
a $1.00 preference and, thereafter the holders of the shares of Rights
Preferred Stock will be entitled to an aggregate payment of 1,000 times the
aggregate payment made per share of Common Stock. Each share of Rights
Preferred Stock will have one vote, voting together with the shares of Common
Stock. These rights are protected by customary antidilution provisions.
At any time until ten days following the Stock Acquisition Date, the Company
may redeem the Rights in whole, but not in part, at a price (the "Redemption
Price") of $.0001 per Right (payable in cash Common Stock or other
consideration deemed appropriate by the Board of Directors) by resolution of
the Board of Directors. The redemption of the Rights may be made effective at
such time, on such basis, and with such conditions as the Board of Directors
in its sole discretion may establish. Immediately upon such action of the
Board of Directors ordering redemption of the Rights, the Rights will
terminate and the only right of the holders of Rights will be to receive the
Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a shareholder of the Company including, without limitation, the right to
vote or to receive dividends. While the distribution of the Rights will not be
taxable to shareholders or to, shareholders may, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for
common stock of the acquiring company as set forth above.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by
resolution of the Company's Board of Directors. After the Rights Distribution
Date, the provisions of the Rights Agreement may be amended by resolution of
the Company's Board of Directors in order to cure any ambiguity, to make
changes which do not adversely affect the interests of holders of Rights
(excluding the interests of any Acquiring Person or its affiliates or
associates), or to shorten or lengthen any time period under the Rights
Agreement; provided, however, that no amendment to adjust the time period
governing redemption shall be made at such time as the Rights are not
redeemable.
Because (i) the Offer is an offer to purchase all of the outstanding Shares
and the Board has unanimously determined that the Offer described herein is
fair to and in the best interests of the Company's shareholders and (ii) on
January 7, 1996, the Board approved amending the Rights Agreement in
accordance with the terms of the Merger Agreement, the acquisition of Shares
pursuant to the Offer or the consummation of the Merger will not (a) cause any
person to become an Acquiring Person or, (b) cause a Rights Distribution Date
or a Stock Acquisition Date to occur or cause or require the distribution of
any Rights Certificates to the record holders of Common Stock or, (c) give
rise to a Triggering Event.
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The foregoing summary of the Rights Agreement does not purport to be
complete and is qualified in its entirety by reference to the text of the
Rights Agreement and Amendment No. 1 thereto, copies of which are filed as
Exhibit 10 and Exhibit 11 hereto, respectively, and is incorporated herein by
reference.
THE STOCKHOLDERS AGREEMENT
On or prior to the Distribution Date, the Company and Loral Space will enter
into a Stockholders Agreement (the "Stockholders Agreement"), which
establishes, among other things, certain conditions with respect to the
relationship between Loral Space, on the one hand, and the Company and its
affiliates (the "Subject Stockholders"), on the other hand. The Stockholders
Agreement limits the ability of the Subject Stockholders, during the term of
the Stockholders Agreement, to acquire any voting securities or assets of, or
solicit proxies or make a public announcement of a proposal for any
extraordinary transaction with respect to, Loral Space. The Stockholders
Agreement provides that, subject to certain exceptions, the Subject
Stockholders are obligated to vote any equity securities of Loral Space, at
the option of the Subject Stockholders, either (i) as recommended by the Board
of Directors or management of Loral Space, or (ii) in the same proportions as
the holders of equity securities of Loral Space vote their securities. The
Stockholders Agreement also limits the ability of the Subject Stockholders to
transfer the equity securities of Loral Space held by the Subject Stockholders
except pursuant to a registered public offering or the provisions of Rule 144
under the Exchange Act or pursuant to certain permitted transfers. The
Stockholders Agreement provides that if, within one year following the date
thereof, the Subject Stockholders vote against certain business combination
transactions, Loral Space shall have the right to purchase from the Subject
Stockholders all of the equity securities of Loral Space held by the Subject
Stockholders at an agreed upon price. The Stockholders Agreement also provides
that if, within one year following the date thereof certain transactions
occur, the Company shall have the right to purchase from Loral Space
(including any successor to the rights and obligations of Loral Space) a
certain number of shares of Loral Space (or such successor) at an agreed upon
price. The Stockholders Agreement also provides that in the event of certain
transactions, the Subject Stockholders shall have the right to require Loral
Space to purchase the Globalstar Warrants (as defined in the Stockholders
Agreement) for an agreed upon price. The Stockholders Agreement further
provides that under certain circumstances and subject to certain conditions
the Subject Stockholders may require Loral Space to register under the
Securities Act any Loral Space securities held by the Subject Stockholders.
The Stockholders Agreement provides, subject to certain exceptions, that, in
the event of a tender offer, if Subject Stockholders wish to sell or transfer
any Loral Space securities pursuant to the tender offer the Subject
Stockholders must first offer the shares for sale to Loral Space. The term of
the Stockholders Agreement will continue until the earlier of (x) the date on
which the voting power of the equity securities owned by the Subject
Stockholders represents, on a fully-diluted basis, less than five percent (5%)
of the total voting power, (y) the seventh anniversary of the date of the
agreement, or (z) a change of control in Loral Space.
The foregoing summary of the Stockholders Agreement does not purport to be
complete and is qualified in its entirety by reference to the text of the
Stockholders Agreement, a copy of which is filed as Exhibit 12 hereto and is
incorporated herein by reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors has unanimously (i) approved the Merger Agreement,
the Distribution Agreement and the transactions contemplated thereby, (ii)
determined that the Offer, the Merger and the Spin-Off are fair to
and in the best interests of the shareholders of the Company and (iii)
determined to recommend acceptance of the Offer and approval and adoption of
the Merger Agreement and the Merger by the shareholders of the Company.
(b)(1) BACKGROUND
The Company has been able to achieve substantial growth and profitability
over the past ten years through a strategy of strategic acquisitions and
internal growth. This strategy was aided by the consolidation of the defense
industry and the availability of acquisition opportunities at reasonable
prices.
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As presently constituted, the Company principally depends on sales of
advanced electronic systems, components and services to United States and
foreign governments for defense-related applications. Since the end of the
Cold War, the needs of the Company's primary customer, the United States
Department of Defense, have changed significantly, military budgets have been
sharply reduced and, in the future, expenditures in the defense area are
likely to be inhibited by the same factors. At the same time, the Company's
ability to grow through acquisitions is less certain. Due to rapid
consolidation in the defense industry, the number of suitable potential
acquisition candidates is dwindling while the cost of such potential
acquisitions has increased substantially. As a result, the Company's
opportunities for continued growth through acquisitions are already under
substantial and continuing pressure.
The Company has also been faced with increased competition from larger
competitors, particularly prime contractor suppliers of platform systems such
as aircraft, ships and combat vehicles. In particular, there has been a trend
toward vertical integration in the defense industry, with platform
manufacturers integrating backward through the acquisition of defense
electronics companies, a trend which the Company believes will continue, and
which would have the effect of placing the Company at a competitive
disadvantage as the prime contractors retain more and more subsystem work.
Alongside its strategy of growth through defense and government systems
integration businesses, the Company has pursued a parallel strategy of
leveraging the capabilities of its satellite manufacturing affiliate, SS/L,
and the resources of SS/L's strategic partners to integrate forward into
satellite-based telecommunications operations. The Company's most notable and
advanced effort in this regard is the Globalstar low-earth orbit worldwide
telecommunications system, which to date has raised the majority of its
projected $2 billion in construction financing requirements, in part through
its publicly-traded affiliate, Globalstar Telecommunications Limited.
Over the last several years, the Company has considered how the changing
nature of the defense industry has affected the Company and its markets and
has considered several strategies in order to maximize shareholder value,
maintain and enhance its position within the United States military/industrial
base and maximize the security, career and employment opportunities of its
employees. Recognizing the high growth potential of its space and
telecommunications businesses, their high capital requirements, and the
differing segments of the capital market to which the Company's defense and
communications businesses appealed, the Company developed a long-term
strategic plan to separate these two businesses and thereby unlock for
shareholders the values inherent in Globalstar, SS/L and future possible
satellite telecommunications, direct broadcast and broadband data operating
ventures.
On July 31, 1995, representatives of Bear, Stearns & Co. Inc. ("Bear
Stearns") met with Mr. Bernard L. Schwartz, the Chairman and Chief Executive
Officer of the Company, to review certain recent developments in the defense
industry, including certain current trends and opportunities with respect to
the consolidation of the defense industry. At this meeting, Mr. Schwartz
stated to the Bear Stearns representatives that if Parent were interested in
exploring the possibility of a transaction between the two companies, he would
be interested as well.
On September 14, 1995, Mr. Augustine and Mr. Schwartz were attending a
meeting at the Pentagon with certain government officials on an unrelated
matter. At this September 14th meeting, Mr. Augustine and Mr. Schwartz briefly
discussed the general topic of a possible transaction between Parent and the
Company and agreed to meet at a subsequent date to discuss the matter further.
During the course of discussions between the parties continuing through the
month of October, the parties discussed a stock-for-stock transaction whereby
the Company would combine its defense and systems integration businesses with
Parent. In particular, the parties discussed valuation levels in relation to a
possible acquisition of the Company's defense and systems integration
businesses for Parent stock valued at $32 per share in a stock-for-stock
transaction (assuming pooling-of-interests accounting treatment). During this
time, the Company consulted with its legal advisors as to a variety of issues
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concerning a possible spin-off to its shareholders of a new company that would
own and manage the Company's space and telecommunications businesses.
At a meeting on October 31, 1995, and at later meetings in early November,
1995, representatives of both parties, including Messrs. Schwartz, Tellep and
Augustine, met to further discuss the possibility of such a transaction. The
parties discussed certain management and organizational issues, as well as
certain broad transaction valuation parameters. Messrs. Schwartz, Tellep and
Augustine agreed that representatives of the two companies should meet to
continue discussions.
At subsequent meetings later in November, members of the management of
Parent and the Company, together with their respective legal counsel and
representatives of Bear Stearns, met to discuss possible transaction
structures and various financial, operational, accounting and legal issues.
The discussions at these meetings focused initially on structuring the
proposed transaction as a stock-for-stock merger, but due to pooling-of-
interests accounting and other concerns raised by the proposed Spin-Off, the
parties agreed to pursue a transaction in which the Company's shareholders
would receive cash and Shares of the company now known as Loral Space. The
parties also discussed the possibility of Parent acquiring a 20% equity
interest in Loral Space.
On December 4, 1995, Parent and the Company entered into a Confidentiality
and Standstill Agreement (the "Confidentiality and Standstill Agreement"),
relating to, among other things, the information to be provided by each
company to the other and limiting the ability of each party for three years to
acquire any voting securities or assets of, or solicit proxies or make a
public announcement of a proposal for any extraordinary transaction with
respect to, the other party. Parent and the Company subsequently obtained
various financial and other information regarding each other's business.
At a meeting on December 5, 1995, Messrs. Schwartz, Tellep, Augustine, and
Mr. Frank C. Lanza, the President and Chief Operating Officer of the Company,
met to further discuss the proposed transaction between Parent and the
Company, and various operational and management issues related thereto. On the
same day, other officers and legal representatives of the two companies and
Bear Stearns met to discuss structure and business issues and commenced
financial due diligence.
On December 7, 1995, at a meeting of the Board, Mr. Schwartz informed the
Board of the current discussions between senior management of the Company and
members of Parent's management. After Mr. Schwartz presented the transaction,
there was a discussion of the transaction's merits. At this meeting the Board
discussed and adopted the Rights Plan and authorized the Executive Committee
to set certain terms thereof and to implement the plan. The Board also
authorized management to approach Lazard Freres & Co. LLC ("Lazard Freres")
regarding an engagement to advise the Company with respect to the proposed
transaction with Parent and to provide a fairness opinion in regard thereto
and also authorized management to approach Lehman Brothers Inc. ("Lehman
Brothers") regarding an engagement to advise the Company with respect to the
proposed transaction, and in particular, with respect to Loral Space and the
proposed Spin-Off. Following the meeting, management contacted Lazard Freres
and Lehman Brothers regarding such engagements.
At meetings held in early December, Messrs. Schwartz, Tellep and Augustine,
together with representatives of Bear Stearns and counsel, continued their
discussions as to specific organizational and operational issues related to
the proposed transaction, but ultimately acknowledged that there were still
very significant issues that were not yet resolved and that it might therefore
be advisable to suspend the current discussions pending further study.
On December 12, 1995, the Board held a regular meeting. Among other items,
the Board discussed the status of negotiations with Parent. Mr. Schwartz
indicated that the parties had not agreed upon price and certain management
and other issues.
Following renewed valuation discussions between Messrs. Schwartz, Tellep and
Augustine and representatives of Bear Stearns, during the week commencing
December 18, 1995, Parent and its legal advisers delivered initial drafts of
the principal transaction documents to the Company and its legal advisers, and
over the next two weeks the parties and their respective legal counsel met to
discuss and negotiate with respect to the principal transaction documents.
30
<PAGE>
At subsequent meetings on December 21, 1995 and December 22, 1995 involving
Messrs. Schwartz, Tellep and Augustine and various other members of the
management of both Parent and the Company, along with representatives of Bear
Stearns and certain legal counsel to Parent and the Company, the parties
continued to discuss the structure of the proposed transaction, various
operational and management issues relating to the transaction, and various
price, timing and other significant terms and conditions related thereto.
Although progress was made at these latter meetings with respect to a number
of outstanding issues, many issues remained unresolved.
Commencing on January 2, 1996, members of Parent's management met with
members of the Company's management to review various information relating to
the Company and to conduct a detailed due diligence review of the Company's
defense and systems integration business. In addition, during this period,
legal representatives of each company and various outside financial and
accounting advisors of Parent and the Company met to conduct business,
financial, accounting and legal due diligence, to discuss outstanding legal
and other issues and to continue to negotiate the terms of the Merger
Agreement and the Merger, the Distribution Agreement and the other transaction
documents.
Letter agreements with Lazard Freres and Lehman Brothers formally engaging
them were entered into on January 4 and 5, 1996, respectively.
On January 5, 1996, the Board met to discuss the proposed transaction. At
that meeting, representatives of Lazard Freres gave a presentation analyzing
the financial terms of the proposed transaction, and representatives of Lehman
Brothers gave a presentation analyzing Loral Space and the proposed Spin-Off.
The Company's legal counsel summarized for the Board the legal aspects of the
proposed transaction.
At a special meeting of the Board on January 7, 1996, the Board received
summaries of their earlier presentations from representatives of Lazard Freres
and Lehman Brothers and received the written fairness opinion of Lazard
Freres. The Board deliberated as to the transaction and its merits and
effects. After consideration of the presentations made by the Company's
management and its financial and legal advisers at the January 5 and January 7
meetings of the Board, the Board unanimously (i) approved the Merger
Agreement, the Distribution Agreement and the transactions contemplated
thereby, (ii) determined that the Offer, the Merger and the Spin-Off, taken as
a whole, are fair to and in the best interests of the shareholders of the
Company and (iii) determined to recommend acceptance of the Offer and approval
and adoption of the Merger Agreement and the Merger by the shareholders of the
Company.
On January 7, 1996, the Company was informed that the Parent Board had
unanimously approved the terms and conditions of the proposed transaction with
the Company, including the terms and conditions of the Merger Agreement, the
Distribution Agreement and the other transaction documents contemplated
thereby.
The parties executed the Merger Agreement and the Distribution Agreement as
of January 7, 1996 and publicly announced the transaction on January 8.
On January 12, 1996, Purchaser commenced the Offer.
(b)(2) REASONS FOR THE RECOMMENDATION
In reaching the conclusions and recommendations described above, the Board
considered a number of factors, including, without limitation, the following:
31
<PAGE>
The proposed transaction provides a unique opportunity for the Company to
consolidate its defense and systems integration businesses with those of
Parent on very favorable terms, while refocusing the Company's future through
Loral Space on space-based telecommunications services and satellite design,
manufacture and systems integration.
The creation and financing of Loral Space in connection with the transaction
realized the important long-term strategy of the Board described above, and
was, therefore, a significant factor leading to the Board's approval and
recommendation of the transaction. Loral Space will emerge as a company with
the management and the financial and technical resources needed to complete
its current projects and to take advantage of the promising growth
opportunities present in the satellite and telecommunications services
businesses on a world-wide scale. In this regard, the Board considered the
benefits to Loral Space of the technology sharing arrangement included in the
Distribution Agreement. Loral Space will be permitted to purchase at cost
research and development, technological and technical consulting and support
services from all parts of Parent (subject to any applicable legal
constraints). In addition, Loral Space will continue its ongoing access to
certain intellectual property rights of the Company and its defense and
systems integration subsidiaries.
The proposed transaction will allow the Company to accomplish this
fundamental redirection of its business on terms which are very favorable to
the Company's shareholders in a transaction that has also been structured to
take all due account of the interests of Company employees and the communities
in which the Company operates. In addition, the proposed transaction preserves
for Company shareholders the growth potential of Loral Space and enhances its
prospects by affording it sufficient liquidity to ensure the completion of the
Globalstar system and support other satellite telecommunications ventures.
In considering the transaction, the Board considered the presentations of
Lehman Brothers with respect to Loral Space and of Lazard Freres as to the
financial terms of the proposed transaction and the written opinion of Lazard
Freres that the aggregate consideration to be received by holders of Shares in
the Offer, the Merger and the Spin-Off is fair to the holders of Shares from a
financial point of view. Lazard Freres's presentation included a comparative
analysis of the financial terms of the transaction with those of comparable
transactions. A copy of the opinion of Lazard Freres is attached hereto as
Schedule III and filed as Exhibit 14 and incorporated herein by reference.
SHAREHOLDERS ARE URGED TO READ THE OPINION OF LAZARD FRERES IN ITS ENTIRETY.
The Board concluded that the value of the consideration to be received by
the shareholders, including the cash price to be paid to the shareholders of
the Company in connection with the Offer and the Merger, taken together with
the shares of Loral Space stock to be received pursuant to the Spin-Off,
represented a substantial premium over the recent market prices for Shares of
Common Stock of the Company. The Board also concluded that the financial terms
of the proposed transaction were very favorable when compared to the
consideration received by shareholders in recent comparable transactions in
the defense industry.
The Board noted that it is contemplated that, following consummation of the
transaction, Mr. Bernard L. Schwartz would become Vice-Chairman of Parent's
Board of Directors and Mr. Frank C. Lanza would become a director and serve as
one of two executive vice presidents and co-COO's of Parent with
responsibility for the Parent business segment that will comprise Parent's
existing electronics, systems integration, information and technical services
businesses, including those Company businesses to be acquired in the
transaction. The Board concluded that these provisions offered the best
available reasonable assurance that the Company's defense and systems
integration personnel and facilities would be integrated with those of Parent
in a fair and reasonable manner from the point of view of the Company's
transferred employees and the communities in which its defense and systems
integration business operates.
The Board did not assign relative weights to the factors or determine that
any factor was of particular importance. Rather, the Board viewed its position
and recommendations as being based on the totality of the information
presented to and considered by it.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company entered into a letter agreement (the "Lazard Advisory
Agreement") with Lazard Freres dated January 4, 1996, pursuant to which Lazard
Freres agreed to act as financial advisor to the Company in connection
32
<PAGE>
with a potential transaction involving the possible sale of a substantial
interest in the Company or of a substantial portion of the Company's assets to
another corporation or other business entity, which transaction may take the
form of a merger or a sale of assets or equity securities or other interests
and may also include the retention of certain assets and liabilities by the
Company's shareholders (a "transaction"). As financial advisor, Lazard Freres
agreed, among other things, to assist the Company as necessary to analyze the
business and financial condition of the Company, formulate appropriate
strategy and structural alternatives, advise in connection with negotiations
and aid in the consummation of a transaction.
Pursuant to the Lazard Advisory Agreement, the Company agreed to pay Lazard
Freres a cash fee equal to $12 million upon the earlier to occur of (a) the
acquisition by a buyer of beneficial ownership of more than 50% of the
Company's outstanding stock (or other common equity interest equivalent
thereto) or 50% of the Company's assets and (b) consummation of a transaction,
either during the term of the Lazard Advisory Agreement or during the one-year
period following the expiration or termination thereof. 25% of such fee is
payable upon the announcement of a definitive agreement. If a transaction is
not completed, the Company agreed to reimburse Lazard Freres for its out-of-
pocket expenses, including fees and expenses of legal counsel. In addition,
pursuant to a letter agreement dated January 5, 1996, the Company also has
agreed to indemnify Lazard Freres against certain liabilities, including fees
and expenses of legal counsel, whether or not a transaction is completed.
Lazard Freres has provided certain investment banking services to the
Company from time to time for which it has received customary compensation.
Lazard Freres has also in the past provided financial advisory and financing
services to Parent unrelated to the foregoing proposed transactions and has
received fees for the rendering of such services. In the ordinary course of
its business, Lazard Freres may from time to time effect transactions and hold
positions in securities of the Company and Parent.
The Company entered into a letter agreement (the "Lehman Advisory
Agreement") with Lehman Brothers dated January 5, 1996, pursuant to which
Lehman Brothers agreed to provide financial advisory services to the Company
in connection with the possible sale of the Company, or a substantial interest
in the Company or a substantial portion of the Company's assets to another
business entity, and in particular in connection with the transaction. In this
connection, Lehman Brothers agreed, among other things, to provide general
business and financial advice to the Company with regard to the transaction,
consult with and advise the Company concerning the transaction and, if so
requested by the Company, participate on the Company's behalf in negotiations
related thereto, advise the Company and Loral Space generally with respect to
valuation, capital structure and financing for Loral Space and advise the
Company and Loral Space concerning the distribution of Loral Space common
stock to the Company's shareholders.
Pursuant to the Lehman Advisory Agreement, the Company agreed to pay Lehman
Brothers a fee of $12 million payable if a transaction occurs either (i)
during the term of Lehman Brothers' engagement or (ii) at any time during a
period of 12 months following the effective date of termination or expiration
of Lehman Brothers' engagement, with such fee payable 25% upon the
announcement of a definitive agreement with respect to a transaction and the
remaining 75% upon the earlier to occur of (a) the purchase of 50% of the
Company's outstanding common stock or assets and (b) the consummation of a
sale transaction. The 25% of the fee paid upon announcement of a definitive
agreement shall be returned by Lehman Brothers if 50% of the Company's
outstanding stock or assets are not sold and a sale transaction is not
consummated within a period of 12 months following termination or expiration
of Lehman Brothers' engagement. The Company also agreed to reimburse Lehman
Brothers for its reasonable expenses, including professional and legal fees
and disbursements, and to indemnify Lehman Brothers against certain
liabilities, including legal fees and disbursements, whether or not a sale
transaction is completed.
Certain Merchant Banking Partnerships affiliated with Lehman Brothers (the
"Lehman Partnerships") own 731.85 shares of Series S Preferred Stock of Loral
Aerospace Holdings, Inc. ("LAH"), representing approximately an 18% indirect
beneficial interest in LAH's 51%-owned affiliate, SS/L. Each share of Series S
33
<PAGE>
Preferred Stock represents a beneficial interest in one share of common stock
of SS/L. If the Lehman Partnerships continue to hold Series S Preferred Stock
after January 1, 1998, or after a change of control of the Company, they will
have the right to request that the Company purchase their Series S Preferred
Stock at an appraised fair market value ("Appraised Value"). In such event,
the Company may elect to purchase such Series S Preferred Stock at Appraised
Value, or, if the Company elects not to purchase the stock, the Lehman
Partnerships may require the combined interests of the Company and the Lehman
Partnerships in SS/L to be sold to a third party. It is a condition to the
transaction that the Lehman Partnerships exchange their shares of Series S
Preferred Stock in LAH for equity securities in Loral Space which will have
terms substantially equivalent to those of the Series S Preferred Stock.
The Lehman Partnerships also have an aggregate equity interest of
approximately 48% in K&F Industries, Inc. ("K&F"), a corporation of which Mr.
Bernard L. Schwartz, Chairman and Chief Executive Officer of the Company, is a
27% stockholder and the Company is a 22% stockholder, and which acquired the
Company's Aircraft Braking Systems and Engineered Fabrics divisions in 1989.
Following the transaction, Loral Space will own the Company's 22% equity
interest in K&F.
From time to time, Lehman Brothers has provided certain investment banking,
underwriting, financial advisory and other services to the Company and its
affiliates (including Globalstar Telecommunications Limited, for which Lehman
Brothers acted as lead managing underwriter for its initial public offering in
February 1995), for which it has received customary compensation. Lehman
Brothers also has in the past provided, and is currently providing, financial
advisory and financing services to Parent unrelated to the foregoing proposed
transactions, and has received, and will receive, fees for the rendering of
such services. Lehman Brothers may trade debt and equity securities of the
Company, Parent, Globalstar and K&F in the ordinary course of its business for
its own account and the account of its customers and, accordingly, may at any
time hold a long or short position in such securities.
Except as disclosed herein, neither the Company nor any person acting on its
behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to security holders on its behalf
concerning the Spin-Off, the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except as set forth in Schedule II hereto, no transactions in the Shares
have been effected during the past 60 days by the Company or, to the best of
the Company's knowledge, by any executive officer, director, affiliate or
subsidiary of the Company.
(b) To the best of the Company's knowledge, except for Shares the sale of
which may trigger liability for the holder(s) under Section 16(b) of the
Exchange Act, each executive officer, director and affiliate of the Company
currently intends to tender all Shares over which he or she has sole
dispositive power to the Purchaser.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth above or in Items 3(b) and 4(b), the Company is not
engaged in any negotiation in response to the Offer which relates to or would
result in (i) an extraordinary transaction, such as a merger or
reorganization, involving the Company or any subsidiary of the Company; (ii) a
purchase, sale or transfer of a material amount of assets by the Company or
any subsidiary of the Company; (iii) a tender offer for or other acquisition
of securities by or of the Company; or (iv) any material change in the present
capitalization or dividend policy of the Company.
(b) Except as set forth above or in Items 3(b) or 4(b) above, there are no
transactions, Board resolutions, agreements in principle or signed contracts
in response to the Offer that relate to or would result in one or more of the
events referred to in Item 7(a) above.
34
<PAGE>
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The Information Statement attached as Schedule I hereto is being furnished
in connection with the possible designation by the Purchaser, pursuant to the
Merger Agreement, of certain persons to be appointed to the Board other than
at a meeting of the Company's shareholders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1. Pages 10 through 13 of Loral Corporation's Proxy Statement dated
June 26, 1995 relating to its 1995 Annual Meeting of Stockholders.
Exhibit 2. Loral Supplemental Executive Retirement Plan.
Exhibit 3. Loral Corporation Supplemental Bonus Program.
Exhibit 4. Loral Corporation Supplemental Severance Program.
Exhibit 5. Form of Employment Protection Agreement between Loral Corporation
and executive officers of Loral.
Exhibit 6. Loral Corporation Employment Protection Plan.
Exhibit 7. Agreement and Plan of Merger dated as of January 7, 1996 among
Lockheed Martin Corporation, LAC Acquisition Corporation and Loral
Corporation.
Exhibit 8. Restructuring, Financing and Distribution Agreement dated as of
January 7, 1996 among Loral Corporation, certain of its
subsidiaries and Lockheed Martin Corporation.
Exhibit 9. Form of Tax Sharing Agreement by and among Loral Corporation,
Loral Space & Communications Ltd., Lockheed Martin Corporation and
LAC Acquisition Corporation.
Exhibit 10. Rights Agreement dated as of January 10, 1996 between Loral
Corporation and The Bank of New York, as Rights Agent.
Exhibit 11. Amendment No. 1 to Rights Agreement dated as of January 10, 1996
between Loral Corporation and The Bank of New York, as Rights
Agent.
Exhibit 12. Form of Stockholders Agreement between Loral Corporation and Loral
Space & Communications Ltd.
Exhibit 13. Confidentiality and Standstill Agreement dated December 4, 1995
between Loral Corporation and Lockheed Martin Corporation.
Exhibit 14. Opinion of Lazard Freres & Co. LLC dated January 7, 1996.*
Exhibit 15. Form of Letter to Shareholders of Loral Corporation dated January
12, 1996.*
Exhibit 16. Press Release issued by Loral Corporation and Lockheed Martin
Corporation on January 8, 1996.
- --------
* Included in copies mailed to shareholders.
35
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: January 12, 1996
Loral Corporation
/s/ Michael B. Targoff
By: _________________________________
Name: Michael B. Targoff
Title: Senior Vice President and
Secretary
36
<PAGE>
SCHEDULE I
LORAL CORPORATION
600 THIRD AVENUE
36TH FLOOR
NEW YORK, NEW YORK 10016
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER
----------------
This Information Statement ("Information Statement") is being mailed on or
about January 12, 1996, as a part of the Company's Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") to the holders of record of
Common Stock at the close of business on or about January 12, 1996. You are
receiving this Information Statement in connection with the possible election
of persons designated by Parent to a majority of the seats on the Board of
Directors of the Company.
The Merger Agreement provides that in the event the Purchaser acquires at
least a majority of the Shares on a fully diluted basis pursuant to the Offer,
Parent shall be entitled to designate for appointment or election to the Board
upon written notice to the Company, such number of persons so that the
designees of the Parent (the "Parent Designees") constitute the same
percentage (but in no event less than a majority) of the Company's Board of
Directors (rounded up to the next whole number) as the percentage of Shares
acquired in connection with the Offer. Prior to consummation of the Offer, the
Board of Directors of the Company will obtain the resignation of such number
of directors as is necessary to enable such number of Parent Designees to be
so elected. Notwithstanding the foregoing, the parties have agreed to use
their respective best efforts to ensure that at least three of the members of
the Company's Board of Directors shall, at all times prior to the Effective
Time (as defined in Section 2.2 of the Merger Agreement) be, Continuing
Directors (as defined in Section 8.4 of the Merger Agreement).
The following information is based on the Company's Proxy Statement dated as
of June 26, 1995, and, except as indicated, such information is given as of
such date.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used herein and not
otherwise defined herein shall have the meaning set forth in the Schedule 14D-
9.
The information contained in this Information Statement concerning Parent
has been furnished to the Company by Parent, and the Company assumes no
responsibility for the accuracy or completeness of such information.
INFORMATION WITH RESPECT TO THE COMPANY
OUTSTANDING VOTING STOCK
There were 173,068,379 shares of common stock, par value $.25 per share
("Common Stock"), of the Company outstanding on December 31, 1995 and each
share is entitled to one vote on each matter and provides the holder with
certain preferred stock purchase rights.
As of December 31, 1995, the only officer or Director owning 1% or more of
the Company's Common Stock was Bernard L. Schwartz, Chairman of the Board of
Directors and Chief Executive Officer of the Company, who owned beneficially
3,574,402 shares constituting approximately 2.0% of the Company's outstanding
voting securities. All Directors and current executive officers as a group (27
persons) owned beneficially 5,864,853 shares constituting approximately 3.3%
of outstanding voting securities.
I-1
<PAGE>
Based upon filings made with the Company, the only reported 5% Stockholder as
of [June 16, 1995] is Fidelity Investments, FMR Corp. ("FMR") on behalf of
advisory accounts and/or investment companies. FMR reported ownership of
10,710,508 (6.3%) shares of the Company's Common Stock, as adjusted to reflect
the two-for-one stock split distributed on September 29, 1995. FMR represented
that the shares were acquired for investment purposes for managed accounts,
trusts or employee benefit plans.
BOARD OF DIRECTORS
The Company has three classes of Directors serving staggered three-year
terms. Class I currently consists of three Directors and Classes II and III
consist of four Directors. The terms of the Class I, Class II and Class III
Directors expire on the date of the Annual Meeting in 1998, 1996 and 1997,
respectively.
The Company has a standing Audit and Government Compliance Committee (the
"Audit Committee"), Nominating Committee, and Compensation and Stock Option
Committee (the "Compensation Committee"). The Audit Committee, which met three
times during fiscal 1995, is comprised of four members: Messrs. Hodes,
Ruderman, Shapiro and Stanton. The Audit Committee reviews and acts or reports
to the Board with respect to government procurement compliance matters as well
as various auditing and accounting matters, including the selection of the
Company's independent auditors, the accounting and financial practices and
controls of the Company, audit procedures and findings, and the nature of
services performed for the Company by, and the fees paid to, the independent
auditors. The Nominating Committee, which met once in fiscal 1995, is comprised
of Messrs. Kekst, Shapiro and Stanton. The Nominating Committee is chartered to
establish criteria for recommendations for director nominees and in connection
therewith, to consider the participation and contribution of current Directors.
The Nominating Committee does not generally accept nominees randomly received
from third parties, including Stockholders. The Compensation Committee, which
met twice during fiscal 1995, is comprised of four members: Messrs. Gittis,
Hodes, Kekst and Shapiro. The Compensation Committee reviews and provides
recommendations to the Board of Directors regarding executive compensation
matters. The Compensation Committee is also responsible for the administration
of the Company's Stock Option and Incentive Stock Purchase Plans, Restricted
Stock Purchase Plan and the Incentive Compensation Plan for Senior Executives.
The Board of Directors held seven meetings during fiscal 1995. No Director
attended fewer than 75% of the meetings of the Board of Directors and of its
committees. Directors are paid a fixed fee of $25,000 per year. Non-employee
Directors are also paid $6,000 for personal attendance at each meeting. Audit
Committee members are paid $2,000 per year and $1,000 per meeting. Compensation
Committee members are paid $500 per year. The Company provides certain life
insurance and medical benefits to certain non-employee Directors. For fiscal
1995 the value of these benefits was $13,565 for Mr. Gittis, $15,515 for Mr.
Hodes, $14,553 for Mr. Kekst, $14,223 for Mr. Ruderman, $12,928 for Mr. Shapiro
and $14,170 for Mr. Yankelovich. In addition, Mr. Shapiro received compensation
in the amount of $35,570 with respect to early cancellation of a prior life
insurance policy.
The Company has purchased insurance from the Reliance Insurance Company
insuring the Company against obligations it might incur as a result of its
indemnification of its officers and Directors for certain liabilities they
might incur, and insuring such officers and Directors for additional
liabilities against which they might not be indemnified by the Company. The
insurance expires on April 1, 1996, and costs $321,300. Pursuant to the New
York Business Corporation Law, the Company has entered into Indemnity
Agreements with its Directors and executive officers. The Indemnity Agreements
are intended to provide the full indemnity protection authorized by New York
law.
I-2
<PAGE>
The following table provides certain relevant information as of June 26,
1995 concerning the Directors and their principal occupations:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND SERVED AS DIRECTOR
NAME AGE DIRECTORSHIPS CONTINUOUSLY SINCE
---- --- ------------------------ ------------------
<C> <C> <S> <C>
Bernard L. Schwartz(1).. 70 Chairman of the Board of 1972
(Class III) Directors and Chief
Executive Officer
Chairman of the Board of
Directors and Chief
Executive Officer of K&F
Industries, Inc.
Director of Globalstar
Telecommunications Limited,
Reliance Group Holdings,
Inc., and certain
subsidiaries, Sorema
International Holding N.V.,
First Data Corporation, and
Trustee of N.Y. University
Medical Center
Frank C. Lanza.......... 63 President and Chief 1981
Operating Officer
(Class II) Director of Globalstar
Telecommunications Limited
Howard Gittis........... 61 Director, Vice Chairman and 1990
(Class I) Chief Administrative
Officer of MacAndrews &
Forbes Holdings Inc.
Director of Andrews Group
Incorporated, Consolidated
Cigar Corporation, First
Nationwide Holdings, Inc.,
First Nationwide Bank,
Jones Apparel Group, Inc.,
Mafco Worldwide
Corporation, National
Health Laboratories
Holdings, Inc., NWCG
Holdings Corporation, New
World Communications Group
Incorporated, New World
Television Incorporated,
Revlon Consumer Products
Corporation, and Revlon
Worldwide Corporation.
Robert B. Hodes (1)(2).. 70 Of Counsel to Willkie Farr & 1959
(Class II) Gallagher, law firm, New
York, N.Y.
Director of
Aerointernational, Inc.,
W.R. Berkley Corporation,
Crystal Oil Company,
Globalstar
Telecommunications Limited,
R.V.I. Guaranty, Ltd., LCH
Investments N.V., Mueller
Industries, Inc. and
Restructured Capital
Holdings, Ltd.
Gershon Kekst (1)....... 60 President of Kekst and 1972
(Class I) Company Incorporated,
corporate and financial
communications consultants,
New York, N.Y.
Charles Lazarus......... 71 Chairman of Toys "R" Us, 1994
(Class II) Inc.
Director of Automatic Data
Processing, Inc.
Malvin A. Ruderman...... 68 Professor of Physics, 1975
(Class III) Columbia University, New
York, N.Y.
E. Donald Shapiro....... 63 The Joseph Solomon 1973
(Class III) Distinguished Professor of
Law since 1983 and
Dean/Professor of Law
(1973-1983), New York Law
School
Director of Bank Leumi Trust
Co., Eyecare Products PLC,
Vasomedical, Inc., Kranzco
Realty Trust, MacroChem
Corporation and Premier
Laser Systems
Vice Admiral Allen M. 87 Independent Consultant 1973
Shinn, U.S.N. (Ret.).... Director Emeritus of
(Class II) Pennzoil Company
</TABLE>
I-3
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND SERVED AS DIRECTOR
NAME AGE DIRECTORSHIPS CONTINUOUSLY SINCE
---- --- ------------------------ ------------------
<C> <C> <S> <C>
Arthur L. Simon......... 63 Independent Consultant 1995
(Class I) Partner, Coopers & Lybrand
L.L.P., Certified Public
Accountants, from 1968 to
1994
Thomas J. Stanton, Jr. 67 Chairman Emeritus of 1988
(2)..................... National Westminster
(Class III) Bancorp NJ
Director of Reliance Group
Holdings, Inc., and
Reliance Insurance Co.
Daniel Yankelovich (2).. 70 Chairman of DYG, Inc., 1982
(Class I) market, consumer and
opinion research, New
York, N.Y.
Director of U.S. West Inc.,
Meredith Corporations and
Arkla, Inc.
</TABLE>
- --------
(1) Member of Executive Committee.
(2) Member of Pension Advisory Committee.
I-4
<PAGE>
SECURITIES OWNED BY DIRECTORS AND EXECUTIVE OFFICERS
The following table presents the number of shares of Common Stock
beneficially owned by the Directors, the named executive officers in the
Summary Compensation Table ("NEOs"), and all Directors and officers as a group
on December 31, 1995. Individuals have sole voting and investment power over
the stock unless otherwise indicated in the footnotes.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME OF INDIVIDUAL BENEFICIAL OWNERSHIP(1)(2) OF CLASS
------------------ -------------------------- --------
<S> <C> <C>
Bernard L. Schwartz....................... 3,574,402(3) 2.0%
Michael P. DeBlasio....................... 180,926(4) *
Howard Gittis............................. 6,000 *
Robert B. Hodes........................... 28,800(5) *
Gershon Kekst............................. 26,400 *
Frank C. Lanza............................ 1,231,618(6) *
Robert V. LaPenta......................... 206,350(7) *
Charles Lazarus........................... 14,000(8) *
Malvin A. Ruderman........................ 32,000(9) *
E. Donald Shapiro......................... 28,000(10) *
Allen M. Shinn............................ 22,341 *
Arthur L. Simon........................... 2,000 *
Thomas J. Stanton, Jr..................... 24,000 *
Michael B. Targoff........................ 93,264(11) *
Daniel Yankelovich........................ 33,000 *
All Directors and Executive Officers as a
Group (27 persons)....................... 5,864,853(12) 3.3%
</TABLE>
- --------
* Represents holdings of less than one percent.
(1) Includes shares which, as of December 31, 1995, may be acquired within
sixty days pursuant to the exercise of options (which shares are treated
as outstanding for the purposes of determining beneficial ownership and
computing the percentage set forth); shares held by trusts of which
Directors and their wives are trustees; shares held by a trust in which
an officer and Director is a trustee; and shares held for the benefit of
officers as of March 31, 1995 in the Loral Master Savings Plan (the
"Savings Plan").
(2) Except as noted, all shares are owned directly with sole investment and
voting power. All Directors other than Messrs. Schwartz, Lanza, Gittis,
Lazarus, Shinn and Simon have the right to exercise Loral stock options
for 20,000 shares at $8.86 per share; such exercisable shares are
included in the table.
(3) Includes 160,000 shares held by Mr. Schwartz's wife, 2,400,000 shares
exercisable under Company Stock Option Plans, and 12,224 shares in the
Savings Plan.
(4) Includes 63,428 shares exercisable under Company Stock Option Plans,
7,310 shares in the Savings Plan, and 3,936 shares restricted under the
Company's Restricted Stock Purchase Plan.
(5) Includes 800 shares as to which Mr. Hodes disclaims beneficial ownership
held by Mr. Hodes' minor child.
(6) Includes 525,700 shares exercisable under Company Stock Option Plans,
4,254 shares in the Savings Plan, and 9,362 shares restricted under the
Company's Restricted Stock Purchase Plan.
(7) Includes 6,222 shares in the Savings Plan, and 3,936 shares restricted
under the Company's Restricted Stock Purchase Plan.
(8) Includes 4,000 shares held by Mr. Lazarus' wife.
(9) Includes 12,000 shares owned jointly with Mr. Ruderman's wife.
(10) Includes 8,000 shares as to which Mr. Shapiro disclaims beneficial
ownership held by Mr. Shapiro's wife.
(11) Includes 44 shares in the Savings Plan, and 3,936 shares restricted under
the Company's Restricted Stock Purchase Plan.
(12) Includes 3,242,728 shares exercisable under Company Stock Option Plans,
52,614 shares in the Savings Plan, and 28,550 shares restricted under the
Company's Restricted Stock Purchase Plan.
I-5
<PAGE>
FISCAL YEAR 1995
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
------------------- --------------------------------------
RESTRICTED SECURITIES ALL OTHER
NAME AND STOCK UNDERLYING COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS AWARD(a)(b) STOCK OPTIONS(d) SATION(d)
------------------ ---- -------- ---------- ----------- ---------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Bernard L. Schwartz..... 1995 $908,300 $5,335,891 -- -- $88,252
Chairman of the Board of
Directors 1994 $884,000 $3,604,237 -- 1,200,000 $97,399
and Chief Executive
Officer 1993 $859,000 $3,525,669 -- 800,000 $86,266
Frank C. Lanza.......... 1995 $635,964 $2,611,215 -- -- $31,965
President and Chief
Operating Officer 1994 $618,925 $1,751,404 -- 300,000 $25,000
1993 $600,924 $1,200,000 $1,623,019 -- $25,000
Michael P. DeBlasio..... 1995 $427,527 $ 527,106 -- -- $ 8,813
Senior Vice President--
Finance 1994 $402,973 $ 355,584 -- 140,000 $ 5,385
1993 $402,973 $ 330,556 $ 682,500 -- $ 5,284
Robert V. LaPenta....... 1995 $357,753 $ 526,226 -- -- $ 7,246
Senior Vice President
and Controller 1994 $337,723 $ 311,069 -- 140,000 $ 8,620
1993 $337,723 $ 290,917 $ 682,500 -- $ 7,881
Michael B. Targoff...... 1995 $347,715 $ 526,712 -- -- $ 9,117
Senior Vice President
and Secretary 1994 $327,684 $ 311,495 -- 140,000 $10,758
1993 $327,684 $ 291,301 $ 682,500 -- $ 9,692
</TABLE>
- --------
(a) Value of shares awarded under the Restricted Stock Purchase Plan in 1993.
Shares awarded under the plan vest and become freely transferable in
accordance with a formula based upon Loral earnings. The total number of
shares vesting under the plan each year is equal to 3% of the Company's
pre-tax profit divided by the grant value (currently $52.50 per share) of
restricted shares outstanding. Any shares not earned at the earlier of
completion of the seventh year or termination of employment, will be
forfeited. Dividends are paid on the restricted shares awarded. As of
March 31, 1995, the number, as adjusted to reflect the two-for-one stock
split distributed on September 29, 1995, and value of restricted stock
holdings, respectively, were 9,362 shares and $198,357 for Mr. Lanza,
3,936 shares and $83,394 for each of Messrs. DeBlasio, LaPenta, and
Targoff.
(b) Under the 1994 Incentive Stock Purchase Plan, the Compensation Committee
may permit participants to defer up to 100% of their annual bonus into a
Restricted Stock Purchase Account (the "Restricted Account"). The
Restricted Account will be used to purchase Loral Common Stock equal to
150% of the deferred bonus, subject to limits the Committee may establish
from time to time. The shares in the Restricted Account earn dividends and
generally vest 25% per year commencing upon the second anniversary of the
grant date. The Committee may establish specified performance conditions
that, if attained, will result in accelerated vesting. All non-vested
shares are forfeited upon termination of employment and the remaining
balance of the Restricted Account equal to the lesser of the original cost
or the market value of the shares is returned to the participant. No
shares have been issued under this plan.
(c) Stock options, which have been adjusted to reflect a two-for-one stock
split distributed on October 7, 1993 and a two-for-one stock split
distributed on September 29, 1995, generally vest over a four and one-half
to six year period.
(d) Includes annual Board of Directors fee in 1995, 1994 and 1993 of $25,000
for Messrs. Schwartz and Lanza, company matching contributions of $3,100
in 1995, $3,598 in 1994 and $3,722 in 1993 to the Savings Plan for Messrs.
DeBlasio, LaPenta and Targoff and the value of supplemental life insurance
programs attributable to 1995, 1994 and 1993 in the amounts of $63,252,
$72,399 and $61,266 for Mr. Schwartz, $5,713, $1,787 and $1,562 for Mr.
DeBlasio, $4,146, $5,022 and $4,159 for Mr. LaPenta, and $6,017, $7,160
and $5,970 for Mr. Targoff, respectively, and $6,965 attributable to 1995
for Mr. Lanza.
I-6
<PAGE>
FISCAL YEAR 1995
OPTION EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
NUMBER OF AT YEAR-END(a) AT YEAR-END(b)
SHARES ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE(a) REALIZED(b) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bernard L. Schwartz..... -- -- 2,000,000 -- $23,500,000 --
Frank C. Lanza.......... 112,000 $1,802,500 428,560 391,440 $ 6,672,850 $5,511,525
Michael P. DeBlasio..... -- -- 56,856 190,288 $ 937,785 $2,694,305
Robert V. LaPenta....... 27,996 $ 398,745 8,000 207,448 $ 130,000 $2,986,025
Michael B. Targoff...... -- -- 49,428 218,288 $ 845,205 $3,191,305
</TABLE>
- --------
(a) As adjusted to reflect the two-for-one stock split distributed on
September 29, 1995.
(b) Market value of underlying securities at exercise date or year-end, as the
case may be, minus the exercise price.
EMPLOYMENT AGREEMENTS AND OTHER ARRANGEMENTS
The Company has an employment agreement with Mr. Schwartz, which expires on
March 31, 2000. Pursuant to the agreement, Mr. Schwartz's annual base salary
was $908,300 for fiscal 1995, to be increased annually by the percentage
change in a specified consumer price index. Under the agreement, Mr. Schwartz
is entitled to annual incentive compensation equal to 3% of the increase over
9 1/4% in the Company's shareholders' equity as adjusted for stock issuances,
other non-operating charges or credits and before dividends. In accordance
with the incentive bonus provisions, Mr. Schwartz received fiscal 1995
incentive compensation of $5,214,426. The agreement also includes a cap on
maximum annual incentive compensation of $9 million, as adjusted for
inflation.
Pursuant to the agreement, if Mr. Schwartz is removed as Chairman of the
Board of Directors or as Chief Executive Officer other than for cause, or if
his duties, authorities or responsibilities are diminished, or if there is a
change of control (as defined to encompass the Company becoming a subsidiary
of another company, the acquisition of 35% or more of the voting securities of
the Company by a particular stockholder or group, or a change in 35% of the
Company's directors at the insistence of the shareholder group), Mr. Schwartz
may elect to terminate the contract. In any such event, or upon his death or
disability, Mr. Schwartz will be entitled to receive a lump sum payment
discounted at 9% per annum, in an amount equal to his base salary as adjusted
for defined consumer price index changes for the remainder of the term, an
amount of incentive compensation equal to the highest received by Mr. Schwartz
in any of the prior three years, times the number of years (including partial
fiscal years) remaining during the term, and an amount calculated to
approximate the annual compensation element reflected in the difference
between fair market value and exercise price of stock options granted to Mr.
Schwartz. All such sums are further increased to offset any tax due by Mr.
Schwartz under the excise tax and related provisions of Section 4999 of the
Internal Revenue Code but subject to a cap equal to 200% of any such tax.
The Company also has an employment agreement with Mr. Lanza for a five year
term expiring March 31, 1997. Pursuant to the agreement, Mr. Lanza's annual
base salary was $634,500 for fiscal 1995, to be increased annually by the
percentage change in a specified consumer price index. Under the agreement,
Mr. Lanza is entitled to annual incentive compensation under the growth in
shareholders' equity formula applicable under Mr. Schwartz's employment
agreement, but at 1 1/2% of the increase over the 9 1/4% threshold. As a
result, Mr. Lanza received fiscal 1995 incentive compensation of $2,607,213.
If Mr. Lanza becomes disabled, he will receive 50% of his salary for the
remainder of the term.
The Company has established Supplemental Life Insurance Programs for certain
key employees including the executives listed in the Summary Compensation
Table. For Messrs. Schwartz, Lanza, DeBlasio, LaPenta and
I-7
<PAGE>
Targoff, the Plans are funded with "Split-Dollar" insurance policies in the
face amounts of $20,500,000, $1,000,000, $1,060,000, $1,200,000 and $1,450,000
respectively. In the event of death, the Company will be entitled to receive
an amount not less than the Company's cumulative contributions. If any of such
officers terminates his employment prior to the time that the Company's
contributions equal the cash value of the insurance policy, he will be
responsible for repayment of the remainder of the Company's contribution to
the extent cash becomes available in the policy. Such officers contribute to
the payment for this program.
PENSION PLANS
The individuals named in the Summary Compensation Table participate in a
pension plan that generally provides an annual benefit for each year of
membership for the first 14 years of Loral service, of 1.2% of such
remuneration up to the Social Security Wage Base and 1.45% of such
remuneration in excess of that Base, and for 15 or more years of Loral
service, 1.5% of such remuneration up to the Social Security Wage Base and
1.75% of such remuneration in excess of that Base, all subject to certain
vesting and other requirements. These individuals also participate in a
supplemental plan which generally makes up for certain reductions in such
benefits caused by Internal Revenue Code limitations. Remuneration covered by
the plans primarily includes salary and bonus.
Estimated annual benefits upon retirement for Messrs. Schwartz, Lanza,
DeBlasio, LaPenta and Targoff under the pension and supplemental plans are
$1,117,000, $486,000, $249,000, $344,000 and $295,000, respectively. The
retirement benefits have been computed assuming that (i) employment will be
continued until normal retirement, or until the expiration of current
employment agreements, if later; and (ii) current levels of creditable
compensation and the Social Security Wage Base will continue without increases
or adjustments throughout the remainder of the computation period.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Schwartz is Chairman, Chief Executive Officer, 27% owner, and
controlling shareholder of K&F Industries, Inc. ("K&F"), which acquired the
Company's Aircraft Braking and Engineered Fabrics businesses in April 1989.
Certain other individuals named in the Summary Compensation Table are
directors of K&F's operating subsidiaries. Mr. Schwartz and the other
individuals named in the Summary Compensation Table receive compensation from
K&F for rendering advisory services to K&F. Such compensation is not included
in the Summary Compensation Table but is considered by the Compensation
Committee regarding compensation from Loral. In September 1994, the Company
exchanged its $30 million 14.75% pay-in-kind subordinated convertible K&F
debenture due in 2004 for $11,514,000 in cash, net of expenses, and a 22.5%
voting equity interest in K&F. Pursuant to agreements between the Company and
K&F, the parties provide services to each other and share certain expenses
relating to a production program, real property occupancy, benefits
administration, treasury, accounting and legal services. The related charges
agreed upon by the parties were established to reimburse each party for the
actual cost incurred without profit or fee. The Company believes that the
arrangements with K&F are as favorable to the Company as could have been
obtained from unaffiliated parties. The Company's billings to and from K&F in
fiscal 1995 were $3,014,000 and $15,000, respectively. The Company's sales to
K&F in fiscal 1995 were $4,181,000.
Mr. Robert B. Hodes, a Director and a member of the Executive, Audit,
Pension Advisory, and Compensation Committees, is of counsel to the law firm
of Willkie Farr & Gallagher, which is general counsel to the Company.
For the fiscal year ended March 31, 1995, the Company paid fees and
disbursements in the amount of $182,000 for corporate communications
consultations to Kekst and Company Incorporated, of which company Mr. Gershon
Kekst, a Director and member of the Executive, Nominating, and Compensation
Committees, is President and the principal stockholder. Kekst and Company
Incorporated continues to render such services to the Company.
I-8
<PAGE>
INFORMATION WITH RESPECT TO PARENT
PARENT DESIGNEES
Set forth below are the names, ages, present principal occupations, five year
employment history and other directorships held in public companies of the
Parent Designees.
MARCUS C. BENNETT, 60, Director since 1995; Senior Vice President and Chief
Financial Officer of Parent since March 16, 1995; Vice President and Chief
Financial Officer of Martin Marietta Corporation since 1988; served as Vice
President of Finance of Martin Marietta Corporation from 1984 to 1988; serves
as Chairman of Martin Marietta Materials, Inc., a majority owned subsidiary of
Martin Marietta Corporation, and Orlando Central Park, Inc. and Chesapeake
Park, Inc., wholly owned subsidiaries of Martin Marietta Corporation; director
of Carpenter Technology, Inc.; member of the Financial Executives Institute,
MAPI Finance Council and The Economic Club of Washington; serves as a director
of the Private Sector Council and as a member of its CFO Task Force.
VANCE D. COFFMAN, (51), Director since 1996; Executive Vice President and
Chief Operating Officer since 1996; President and Chief Operating Officer,
Space and Strategic Missiles Sector from March 1995 to December 1995;
previously served in Lockheed Corporation as Executive Vice President, from
1992-1995; and President of Lockheed Space Systems Division from 1988-1992.
JOHN F. EGAN, 60, Vice President, Corporate Development, of Lockheed Martin
Corporation since March 1995, after having served in a similar position at
Lockheed Corporation and served as Vice President for planning and technology
for Lockheed Electronics Group from 1986 to 1993 following the acquisition of
Sanders Associates, Inc., by Lockheed Corporation. Joined Sanders Associates,
Inc. in 1973 as Director of Business Development for the Federal Systems Group;
became General Manager of two product divisions in 1975 and became Vice
President, Corporate Development in 1978. Dr. Egan is a member of the Chief of
Naval Operations Executive Panel and the Naval Studies Board, National Research
Council.
JOHN E. MONTAGUE, 41, Vice President, Financial Strategies, for Lockheed
Martin Corporation since March 1995, after having served as Vice President of
Corporate Development and Investor Relations for Martin Marietta Corporation
from 1991 to 1995; served as Director of Corporate Development prior to being
promoted to Vice President in 1991; served as Manager of Strategic Planning for
Martin Marietta Information & Communications Systems in Denver from 1984 to
1985; and joined Martin Marietta Corporation in 1977 as a member of the
Engineering staff of Martin Marietta Denver Aerospace. Mr. Montague is a member
of the Board of Directors of Martin Marietta Corporation and of Rational
Software Corporation.
FRANK H. MENAKER, JR., 55, Vice President and General Counsel for Lockheed
Martin Corporation since March 1995, after having served in the same capacity
for Martin Marietta Corporation since 1981. He joined Martin Marietta
Corporation in 1970 as an Assistant Division Counsel for aerospace operations
in Baltimore; became a Corporate Assistant General Counsel in 1973 and in 1977
was named General Counsel of that corporation's aerospace operations. Mr.
Menaker is Chair of the ABA Public Contract Law Section, a member of the Board
of Directors of the National Chamber Litigation Center, and a member of the
Steering Committee for the Lawyer's Committee for Human Rights.
LILLIAN M. TRIPPETT, 42, Corporate Secretary and Associate General Counsel of
Lockheed Martin Corporation since March 1995, after having served as Corporate
Secretary and Assistant General Counsel of Martin Marietta Corporation since
April 1993. Ms. Trippett joined Martin Marietta Corporation in July 1989 as a
Director of Washington Operations. Prior to joining Martin Marietta
Corporation, she served for fourteen years on the staff of the Committee on
Science, Space, and Technology in the House of Representatives. From 1983-1989
she served as Counsel to the Subcommittee on Space, Science and Applications,
specializing in space commercialization. Ms. Trippett is a member of the
International Institute of Space Law of the International Astronautical
Federation, American Bar Association and the American Society of Corporate
Secretaries.
ROBERT B. CORLETT, 56, Vice President, Human Resources, of Lockheed Martin
Corporation since March 1995, after having served in the same capacity for
Lockheed Corporation since 1991; served as Vice President, Human Resources, for
the former Lockheed Aeronautical Systems, Company in 1987, after leaving the
Corporation in 1980 and rejoining the Corporation in 1987; served as Director
of Industrial Relations in 1979 and in 1971 transferred to the Lockheed
California Company, where he held a variety of Human Resources
I-9
<PAGE>
positions leading to his appointment as Manager of Union Relations in 1975.
Mr. Corlett serves on the Board of Directors and Executive Committee of the
Labor Policy Association, and is a member of the Personnel Roundtable, the
Aerospace Human Resources Council, and the Human Resource Roundtable of the
University of California at Los Angeles.
WALTER E. SKOWRONSKI, 47, Vice President and Treasurer of Lockheed Martin
Corporation since March 1995, after having served in the same capacity for
Lockheed Corporation since 1992, and as its staff Vice President--Investor
Relations since 1990. Prior to joining Lockheed Corporation in 1990, Mr.
Skowronski was Assistant Treasurer of Boston Edison Company and from 1987 to
1990 was an instructor of Corporate Finance and Investor Relations at
Northeastern University's Graduate School of Business Administration. Mr.
Skowronski is a former director of the National Investor Relations Institute
and served as its Chairman and Chief Executive Officer.
SECURITY OWNERSHIP OF NOMINATED DIRECTORS
No Parent Designee directly or beneficially owns shares of Common Stock of
the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There have been no transactions or series of transactions, since April 1,
1995, to which the Company or any of its subsidiaries was or is to be a party
in which the amount involved exceeds $60,000 and in which any of the Parent
Designees had or will have a direct or indirect material interest, nor has any
Parent Designee been indebted to the Company or its subsidiaries in an amount
in excess of $60,000 or been involved in a material business relationship with
the Company or its subsidiaries.
I-10
<PAGE>
SCHEDULE II
CERTAIN TRANSACTIONS IN SHARES OF COMMON STOCK OF
LORAL CORPORATION EFFECTED DURING THE PAST 60 DAYS
There have been no transactions in the Shares during the past 60 days by the
Company or, to the best of the Company's knowledge, by any executive officer,
director, affiliate or subsidiary of the Company, except that the following
stock options have been exercised by the Company's executive officers:
<TABLE>
<CAPTION>
PARTY DATE NUMBER OF PRICE
EFFECTING OF SHARES PER
TRANSACTION TRANSACTION PURCHASED SHARE
----------- ----------- --------- --------
<S> <C> <C> <C>
Michael Targoff.............................. 12/19/1995 16,000 $4.43750
Michael Targoff.............................. 12/19/1995 13,976 5.00000
Michael Targoff.............................. 12/19/1995 12,000 2.25000
Michael Targoff.............................. 12/19/1995 2,300 5.00000
Michael Targoff.............................. 12/19/1995 28,000 7.90625
Eric Zahler.................................. 12/26/1995 8,000 3.00000
Eric Zahler.................................. 12/26/1995 10,000 8.00000
Eric Zahler.................................. 12/26/1995 2,400 7.90625
Nicholas Moren............................... 12/28/1995 6,400 7.90625
Nicholas Moren............................... 12/28/1995 7,200 4.28125
Nicholas Moren............................... 12/28/1995 12,000 9.28125
Robert LaPenta............................... 12/28/1995 8,000 4.43750
Robert LaPenta............................... 12/28/1995 8,568 4.25000
Robert LaPenta............................... 12/28/1995 11,428 5.00000
Robert LaPenta............................... 12/28/1995 4,000 5.00000
Robert LaPenta............................... 12/28/1995 4,000 5.00000
Robert LaPenta............................... 12/28/1995 28,000 7.90625
</TABLE>
<PAGE>
SCHEDULE III
[Letterhead of Lazard Freres & Co. LLC]
January 7, 1996
The Board of Directors
Loral Corporation
600 Third Avenue
New York, NY 10016
Dear Members of the Board:
We understand that Lockheed Martin Corporation (the "Company"), LAC
Acquisition Corporation ("LM Sub") and Loral Corporation ("Loral") have
entered into an Agreement and Plan of Merger, dated as of January 7, 1996 (the
"Agreement"), pursuant to which the Company will commence a tender offer (the
"Offer") to purchase all the issued and outstanding shares of Common Stock of
Loral ("Loral Common Stock") and associated preferred stock purchase rights
for $38.00 per share in cash. Pursuant to the Agreement, following
consummation of the Offer, LM Sub will merge (the "Merger") with and into
Loral, and each remaining outstanding share of Loral Common Stock, with the
exception of holders of dissenting shares, will be converted into the right to
receive $38.00 in cash, all as more fully provided in the Agreement. In
accordance with the Agreement and the Restructuring, Financing and
Distribution Agreement (the "Distribution Agreement") referred to therein,
immediately prior to the consummation of the Offer, Loral will declare a
distribution (the "Distribution") to holders of shares of Loral Common Stock
of shares in a newly formed corporation ("New Loral") which will hold certain
assets, including Loral's investments in Globalstar, L.P., Space
Systems/Loral, Inc. ("SS/L"), and K&F Industries, Inc. and $712 million in
cash to be provided to the Company pursuant to the Agreement, and be subject
to certain liabilities. Such consideration to be received by the holders of
shares of Loral Common Stock in the Offer, the Merger and the Distribution is
hereinafter defined as the "Consideration". Also pursuant to the Agreement,
the Company will retain a preferred stock interest in New Loral convertible
into 20% of the common stock of New Loral, and will assume certain guarantees
of Globalstar, L.P. bank debt. The Merger Agreement and the Distribution
Agreement assume, with respect to the distributions to holders of Loral Common
Stock, that all options, restricted shares and other securities convertible
into or exchangeable for shares of Loral Common Stock are exercised or
otherwise participate in the distributions.
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of shares of Loral Common Stock of the aggregate
Consideration. In connection with this opinion, we have:
(i) Reviewed the financial terms and conditions of the proposed form of the
Agreement;
(ii) Reviewed the financial terms and conditions of the proposed form of
the Distribution Agreement;
(iii) Analyzed certain publicly available historical business and financial
information relating to Loral and Globalstar Telecommunications
Limited (together with Loral, a general partner of Globalstar, L.P.)
and certain non-public financial information regarding Loral and the
assets that will comprise New Loral;
(iv) Reviewed certain projected financial information for Loral and New
Loral furnished by Loral and New Loral;
(v) Held discussions with members of the senior management of Loral and New
Loral with respect to the businesses and prospects of Loral and New
Loral;
(vi) Considered certain terms of the agreements which govern the interests
in SS/L and Globalstar, L.P., including certain put rights with
respect to SS/L and certain restrictions on transfers relating to
Globalstar, L.P.;
<PAGE>
(vii) Reviewed public information with respect to certain other companies
in lines of businesses we believe to be generally comparable to the
businesses of Loral and New Loral;
(viii) Reviewed the terms of selected transactions in industries generally
comparable to the businesses of Loral and New Loral;
(ix) Reviewed the historical stock prices and trading volumes of Loral
Common Stock and Globalstar Telecommunications Limited common stock;
(x) Reviewed the presentation by Lehman Brothers Inc. to Loral's Board of
Directors dated January 7, 1996 concerning New Loral; and
(xi) Conducted such other financial studies, analyses and investigations as
we deemed appropriate.
We have not had the opportunity to review the final documents that may be
used in connection with the Offer, the Merger or the Distribution, as such
materials have not yet been prepared or, in certain cases, finalized. Neither
have we had the opportunity to review the financial statements, pro forma
financial statements or registration statement for New Loral, which have also
not yet been prepared.
We have relied upon the accuracy and completeness of the foregoing
information, and have not assumed any responsibility for any independent
verification of such information or any independent valuation or appraisal of
any of the assets or liabilities of Loral or New Loral. With respect to
financial forecasts, we have assumed that they have been reasonably prepared
on bases reflecting the best currently available estimates and judgments of
management of each of Loral and New Loral as to the future financial
performance of Loral and New Loral. We assume no responsibility for and
express no view as to such forecasts or the assumptions on which they are
based.
Further, our opinion is necessarily based on economic, monetary, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof. Loral has not authorized us to solicit third party
indications of interest in acquiring Loral, New Loral or portions thereof.
In rendering our opinion, we have assumed that the transactions described
above will be consummated on the terms described in the forms of the
agreements reviewed by us, without any waiver of any material terms or
conditions by Loral, and that obtaining the necessary regulatory approvals for
the transactions will not have an adverse effect on New Loral.
Lazard Freres & Co. LLC is acting as financial advisor to Loral in
connection with the transactions and will receive a fee for our services that
is contingent in part upon the consummation of the transactions. We have in
the past provided investment banking services to Loral, for which we have been
paid customary fees.
Our engagement and the opinion expressed herein are solely for the benefit
of Loral's Board of Directors and the holders of Loral Common Stock. It is
understood that this letter may not be disclosed or otherwise referred to
without our prior consent, except as may otherwise be required by law or by a
court of competent jurisdiction.
Based on and subject to the foregoing, we are of the opinion that the
aggregate Consideration is fair to the holders of Loral Common Stock from a
financial point of view.
Very truly yours, LAZARD FRERES &
CO. LLC
/s/ Felix G. Rohatyn
By___________________________________
Managing Director
2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE
EXHIBIT NUMBER DOCUMENT NO.
-------------- -------- ----
<C> <S> <C>
Exhibit 99.1. Pages 10 through 13 of Loral Corporation's Proxy
Statement dated June 26, 1995 relating to its 1995
Annual Meeting of Stockholders.
Exhibit 99.2. Loral Supplemental Executive Retirement Plan.
Exhibit 99.3. Loral Corporation Supplemental Bonus Program.
Exhibit 99.4. Loral Corporation Supplemental Severance Program.
Exhibit 99.5. Form of Employment Protection Agreement between Loral
Corporation and executive officers of Loral.
Exhibit 99.6. Loral Corporation Employment Protection Plan.
Exhibit 99.7. Agreement and Plan of Merger dated as of January 7, 1996
among Lockheed Martin Corporation, LAC Acquisition
Corporation and Loral Corporation.
Exhibit 99.8. Restructuring, Financing and Distribution Agreement
dated as of January 7, 1996 among Loral Corporation,
certain of its subsidiaries and Lockheed Martin
Corporation.
Exhibit 99.9. Form of Tax Sharing Agreement by and among Loral
Corporation, Loral Space & Communications Ltd., Lockheed
Martin Corporation and LAC Acquisition Corporation.
Exhibit 99.10. Rights Agreement dated as of January 10, 1996 between
Loral Corporation and The Bank of New York, as Rights
Agent.
Exhibit 99.11. Amendment No. 1 to Rights Agreement dated as of January
10, 1996 between Loral Corporation and The Bank of New
York, as Rights Agent.
Exhibit 99.12. Form of Stockholders Agreement between Loral Corporation
and Loral Space & Communications Ltd.
Exhibit 99.13. Confidentiality and Standstill Agreement dated December
4, 1995 between Loral Corporation and Lockheed Martin
Corporation.
Exhibit 99.14. Opinion of Lazard Freres & Co. LLC dated January 7,
1996.*
Exhibit 99.15. Form of Letter to Shareholders of Loral Corporation
dated January 12, 1996.*
Exhibit 99.16. Press Release issued by Loral Corporation and Lockheed
Martin Corporation on January 8, 1996.
</TABLE>
- --------
* Included in copies mailed to shareholders.
<PAGE>
Exhibit 99.1
FISCAL YEAR 1995
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION AWARDS
ANNUAL ------------------------------------
NAME AND PRINCIPAL COMPENSATION SECURITIES
-------------------- RESTRICTED UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS STOCK AWARD(A)(B) STOCK OPTIONS(C) COMPENSATION(D)
- ------------------------ ---- -------- ---------- ------------------ ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Bernard L. Schwartz 1995 $908,300 $5,335,891 -- -- $88,252
Chairman of the Board 1994 $884,000 $3,604,237 -- 600,000 $97,399
of Directors and Chief 1993 $859,000 $3,525,669 -- 400,000 $86,266
Executive Officer
Frank C. Lanza 1995 $635,964 $2,611,215 -- -- $31,965
President and 1994 $618,925 $1,751,404 -- 150,000 $25,000
Chief Operating 1993 $600,924 $1,200,000 $1,623,019 -- $25,000
Officer
Michael P. DeBlasio 1995 $427,527 $ 527,106 -- -- $ 8,813
Senior Vice 1994 $402,973 $ 355,584 -- 70,000 $ 5,385
President - 1993 $402,973 $ 330,556 $ 682,500 -- $ 5,284
Finance
Robert V. LaPenta 1995 $357,753 $ 526,226 -- -- $ 7,246
Senior Vice President 1994 $337,723 $ 311,069 -- 70,000 $ 8,620
and Controller 1993 $337,723 $ 290,917 $ 682,500 -- $ 7,881
Michael B. Targoff 1995 $347,715 $ 526,712 -- -- $ 9,117
Senior Vice President 1994 $327,684 $ 311,495 -- 70,000 $10,758
and Secretary 1993 $327,684 $ 291,301 $ 682,500 -- $ 9,692
</TABLE>
__________
(a) Value of shares awarded under the Restricted Stock Purchase Plan in 1993.
Shares awarded under the plan vest and become freely transferable in
accordance with a formula based upon Loral earnings. The total number of
shares vesting under the plan each year is equal to 3% of the Company's
pre-tax profit divided by the grant value (currently $105 per share) of
restricted shares outstanding. Any shares not earned at the earlier of
completion of the seventh year or termination of employment, will be
forfeited. Dividends are paid on the restricted shares awarded. As of March
31, 1995, the number and value of restricted stock holdings, respectively,
were 4,681 shares and $198,357 for Mr. Lanza, 1,968 shares and $83,394 for
each of Messrs. DeBlasio, LaPenta, and Targoff.
(b) Under the 1994 Incentive Stock Purchase Plan, the Compensation Committee
may permit participants to defer up to 100% of their annual bonus into a
Restricted Stock Purchase Account (the "Restricted Account"). The
Restricted Account will be used to purchase Loral Common Stock equal to
150% of the deferred bonus, subject to limits the Committee may establish
from time to time. The shares in the Restricted Account earn dividends and
generally vest 25% per year commencing upon the second anniversary of the
grant date. The Committee may establish specified performance conditions
that, if attained, will result in accelerated vesting. All non-vested
shares are forfeited upon termination of employment and the remaining
balance of the Restricted Account equal to the lesser of the original cost
or the market value of the shares is returned to the participant. No shares
have been issued under this plan.
<PAGE>
(c) Stock options, which have been adjusted to reflect a two-for-one stock
split distributed on October 7, 1993, generally vest over a four and one-
half to six year period.
(d) Includes annual Board of Directors fee in 1995, 1994 and 1993 of $25,000
for Messrs. Schwartz and Lanza, company matching contributions of $3,100 in
1995, $3,598 in 1994 and $3,722 in 1993 to the Savings Plan for Messrs.
DeBlasio, LaPenta and Targoff and the value of supplemental life insurance
programs attributable to 1995, 1994 and 1993 in the amounts of $63,252,
$72,399 and $61,266 for Mr. Schwartz, $5,713, $1,787 and $1,562 for Mr.
DeBlasio, $4,146, $5,022 and $4,159 for Mr. LaPenta, and $6,017, $7,160 and
$5,970 for Mr. Targoff, respectively, and $6,965 attributable to 1995 for
Mr. Lanza.
FISCAL YEAR 1995
OPTION EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
NUMBER OF UNEXERCISED OPTIONS OPTIONS AT
SHARES AT YEAR-END YEAR-END(A)
ACQUIRED ON VALUE -------------------------- --------------------------
NAME EXERCISE REALIZED(A) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------- ----------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bernard L. Schwartz -- -- 1,000,000 -- $23,500,000 --
Frank C. Lanza 56,000 $1,802,500 214,280 195,720 $ 6,672,850 $5,511,525
Michael P. DeBlasio -- -- 28,428 95,144 $ 937,785 $2,694,305
Robert V. LaPenta 13,998 $ 398,745 4,000 103,724 $ 130,000 $2,986,025
Michael B. Targoff -- -- 24,714 109,144 $ 845,205 $3,191,305
- ----------
</TABLE>
(a) Market value of underlying securities at exercise date or year-end, as the
case may be, minus the exercise price.
EMPLOYMENT AGREEMENTS AND OTHER ARRANGEMENTS
The Company has an employment agreement with Mr. Schwartz, which expires on
March 31, 2000. Pursuant to the agreement, Mr. Schwartz' annual base salary was
$908,300 for fiscal 1995, to be increased annually by the percentage change in a
specified consumer price index. Under the agreement, Mr. Schwartz is entitled to
annual incentive compensation equal to 3% of the increase over 9 1/4% in the
Company's shareholders' equity as adjusted for stock issuances, other non-
operating charges or credits and before dividends. In accordance with the
incentive bonus provisions, Mr. Schwartz received fiscal 1995 incentive
compensation of $5,214,426. The agreement also includes a cap on maximum annual
incentive compensation of $9 million, as adjusted for inflation.
Pursuant to the agreement, if Mr. Schwartz is removed as Chairman of the Board
of Directors or as Chief Executive Officer other than for cause, or if his
duties, authorities or responsibilities are diminished, or if there is a change
of control (as defined to encompass the Company becoming a subsidiary of another
company, the acquisition of 35% or more of the voting securities of the Company
by a particular stockholder or group, or a change in 35% of the Company's
directors at the insistence of the shareholder group), Mr. Schwartz may elect to
terminate the contract. In any such event, or upon his death or disability, Mr.
Schwartz will be entitled to receive a lump sum payment discounted at 9% per
annum, in an amount equal to his base salary as adjusted for defined consumer
price index changes for the remainder of the term,
<PAGE>
an amount of incentive compensation equal to the highest received by Mr.
Schwartz in any of the prior three years, times the number of years (including
partial fiscal years) remaining during the term, and an amount calculated to
approximate the annual compensation element reflected in the difference between
fair market value and exercise price of stock options granted to Mr. Schwartz.
All such sums are further increased to offset any tax due by Mr. Schwartz under
the excise tax and related provisions of Section 4999 of the Internal Revenue
Code but subject to a cap equal to 200% of any such tax.
The Company also has an employment agreement with Mr. Lanza for a five year
term expiring March 31, 1997. Pursuant to the agreement, Mr. Lanza's annual base
salary was $634,500 for fiscal 1995, to be increased annually by the percentage
change in a specified consumer price index. Under the agreement, Mr. Lanza is
entitled to annual incentive compensation under the growth in shareholders'
equity formula applicable under Mr. Schwartz' employment agreement, but at
1 1/2% of the increase over the 9 1/4% threshold. As a result, Mr. Lanza
received fiscal 1995 incentive compensation of $2,607,213. If Mr. Lanza becomes
disabled, he will receive 50% of his salary for the remainder of the term.
The Company has established Supplemental Life Insurance Programs for certain
key employees including the executives listed in the Summary Compensation Table.
For Messrs. Schwartz, Lanza, DeBlasio, LaPenta and Targoff, the Plans are funded
with "Split-Dollar" insurance policies in the face amounts of $20,500,000,
$1,000,000, $1,060,000, $1,200,000 and $1,450,000 respectively. In the event of
death, the Company will be entitled to receive an amount not less than the
Company's cumulative contributions. If any of such officers terminates his
employment prior to the time that the Company's contributions equal the cash
value of the insurance policy, he will be responsible for repayment of the
remainder of the Company's contribution to the extent cash becomes available in
the policy. Such officers contribute to the payment for this program.
PENSION PLANS
The individuals named in the Summary Compensation Table participate in a
pension plan that generally provides an annual benefit for each year of
membership for the first 14 years of Loral service, of 1.2% of such remuneration
up to the Social Security Wage Base and 1.45% of such remuneration in excess of
that Base, and for 15 or more years of Loral service, 1.5% of such remuneration
up to the Social Security Wage Base and 1.75% of such remuneration in excess of
that Base, all subject to certain vesting and other requirements. These
individuals also participate in a supplemental plan which generally makes up for
certain reductions in such benefits caused by Internal Revenue Code limitations.
Remuneration covered by the plans primarily includes salary and bonus.
Estimated annual benefits upon retirement for Messrs. Schwartz, Lanza,
DeBlasio, LaPenta and Targoff under the pension and supplemental plans are
$1,117,000, $486,000, $249,000, $344,000 and $295,000, respectively. The
retirement benefits have been computed assuming that (i) employment will be
continued until normal retirement, or until the expiration of current employment
agreements, if later; and (ii) current levels of creditable compensation and the
Social Security Wage Base will continue without increases or adjustments
throughout the remainder of the computation period.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Schwartz is Chairman, Chief Executive Officer, 27% owner, and controlling
shareholder of K&F Industries, Inc. ("K&F"), which acquired the Company's
Aircraft Braking and Engineered Fabrics businesses in April 1989. Certain other
individuals named in the Summary Compensation Table are directors of K&F's
operating subsidiaries. Mr. Schwartz and the other individuals named in the
Summary Compensation Table receive compensation from K&F for rendering advisory
services to K&F. Such compensation is not included in the Summary Compensation
Table but is considered by the Compensation Committee regarding compensation
from Loral. In September 1994, the Company exchanged its $30 million 14.75% pay-
in-kind subordinated convertible K&F debenture due in 2004 for $11,514,000 in
cash, net of expenses, and a 22.5% voting equity interest in K&F. Pursuant to
agreements between the Company
<PAGE>
and K&F, the parties provide services to each other and share certain expenses
relating to a production program, real property occupancy, benefits
administration, treasury, accounting and legal services. The related charges
agreed upon by the parties were established to reimburse each party for the
actual cost incurred without profit or fee. The Company believes that the
arrangements with K&F are as favorable to the Company as could have been
obtained from unaffiliated parties. The Company's billings to and from K&F in
fiscal 1995 were $3,014,000 and $15,000, respectively. The Company's sales to
K&F in fiscal 1995 were $4,181,000.
Mr. Robert B. Hodes, a Director and a member of the Executive, Audit, Pension
Advisory, and Compensation Committees, is a partner in the law firm of Willkie
Farr & Gallagher, which is general counsel to the Company.
For the fiscal year ended March 31, 1995, the Company paid fees and
disbursements in the amount of $182,000 for corporate communications
consultations to Kekst and Company Incorporated, of which company Mr. Gershon
Kekst, a Director and member of the Executive, Nominating, and Compensation
Committees, is President and the principal stockholder. Kekst and Company
Incorporated continues to render such services to the Company.
<PAGE>
EXHIBIT 99.2
LORAL SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN
Informally Known As
The Loral SERP
Effective April 1, 1995
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
<C> <S> <C>
INTRODUCTION........................................................ iii
Article I - Definitions............................................. 1
1.1 Annuity Starting Date........................... 1
1.2 Basic Plan...................................... 2
1.3 Basic Plan Benefit.............................. 2
1.4 Beneficiary..................................... 2
1.5 Board........................................... 2
1.6 Code............................................ 2
1.7 Committee....................................... 2
1.8 ERISA........................................... 3
1.9 Loral........................................... 3
1.10 Participant..................................... 3
1.11 Plan............................................ 3
1.12 Proper Application.............................. 3
1.13 QDRO or Qualified Domestic Relations Order...... 4
1.14 Trust Agreement or Trust........................ 4
1.15 Trustee......................................... 4
Article II - Benefits............................................. 5
2.1 Amount of Benefits.............................. 5
2.1.1 Formula Benefit................................. 5
2.1.2 Actual Benefit.................................. 5
2.2 Post-Retirement Death Benefits.................. 6
2.3 Pre-Retirement Death Benefits................... 6
2.4 Special Rules................................... 6
2.4.1 Small Benefit Cashout........................... 7
2.4.2 Lump Sum Benefit Limitation..................... 7
2.4.3 No Insured Death Benefit........................ 7
2.5 Benefits under Multiple Qualified Plans......... 8
2.5.1 Different Annuity Starting Dates................ 8
2.5.2 Same Annuity Starting Dates..................... 8
2.5.3 Death Benefits.................................. 9
Article III - Administration; Accrued Benefits; Right to Amend...... 10
3.1 Committee's Discretionary Power to Interpret and
Administer the Plan............................. 10
3.1.1 Appointment..................................... 10
3.1.2 Role under ERISA................................ 10
3.1.3 Committee establishes Plan procedures........... 10
3.1.4 Role of Human Resource and Benefits Personnel... 10
3.1.5 Discretionary Power to Interpret Plan........... 11
3.2 Rules of the Committee.......................... 11
3.3 Claims Procedure................................ 13
3.4 QDRO Claim...................................... 15
</TABLE>
i
<PAGE>
<TABLE>
<C> <S> <C>
3.5 Indemnification of Committee Members........... 16
3.6 Power to Execute Plan and Other Documents...... 16
3.7 Conclusiveness of Records...................... 16
3.8 No Personal Liability.......................... 17
3.9 How Plan Benefits are Accrued.................. 17
3.10 Right to Amend................................. 17
3.10.1 General Power to Amend......................... 17
3.10.2 No Cut-Back of Accrued Benefits................ 18
Article IV - Vesting and Forfeiture................................ 19
4.1 Vesting........................................ 19
4.2 Dismissed for Cause............................ 20
4.3 Forfeiture after Plan Benefits have Commenced.. 20
4.4 Determinations by Committee.................... 20
Article V - General Provisions..................................... 21
5.1 No Assignment or Alienation of Benefits........ 21
5.2 Withholding Taxes.............................. 21
5.3 No Right to Continue Employment................ 21
5.4 Unfunded Plan.................................. 22
5.5 Governing Law.................................. 22
5.6 Payment of Benefits............................ 22
5.7 Section Headings............................... 22
5.8 Payment to a Minor or Incompetent.............. 23
5.9 Doubt as to Right to Payment................... 24
5.10 Missing Payees................................. 24
5.11 Mistaken Payments.............................. 25
5.12 Receipt and Release for Payments............... 25
5.13 Illegality of Particular Provisions............ 26
5.14 Discharge of Liability......................... 26
</TABLE>
ii
<PAGE>
INTRODUCTION
In response to certain limitations under the Internal Revenue
Code, as amended, on the maximum amount of compensation that can be taken
into account and the maximum amount of benefits that can be paid from a
qualified defined benefit plan, Loral Corporation ("Loral") has adopted
this Plan effective April 1, 1995 to permit employees and their
beneficiaries to be able to enjoy the benefits that would have been
provided to them but for these limitations. The Plan shall be known as
the Loral Supplemental Executive Retirement Plan, or the Loral SERP, and
reads as follows:
iii
<PAGE>
Article I - Definitions
The following terms shall have the designated meaning, unless a
different meaning is clearly required by the context:
1.1 Annuity Starting Date.
Subject to Section 2.5, "Annuity Starting Date" shall mean:
(a) generally, the "Annuity Starting Date" defined in the
Basic Plan, provided that the Participant is fully vested
under Article IV, and Proper Application has been made.
(b) With respect to any lump sum, the first day of the month
coincident with or next following the date as of which the
Participant is both (1) eligible to receive Plan payment
and (2) has completed his Proper Application.
(c) With respect to any one of a series of payments over the
life or life expectancy of one or more distributees, the
first day of the month for which the Plan benefit is paid,
even if this date is not the date of actual payment.
(d) The term "Annuity Starting Date" shall be determined with
respect to Plan payments made to the Participant, rather
than with respect to any survivor benefit payments.
(e) The term "Annuity Starting Date" shall, in all events, be
defined by Code Regulation Section
<PAGE>
1.401(a)-20.
1.2 Basic Plan.
The qualified defined benefit pension plan sponsored by Loral
(or its subsidiaries or affiliates) in which an employee participates.
If an employee has an interest in more than one such plan, then the term
"Basic Plan" shall refer to such plans collectively except as the context
shall otherwise require.
1.3 Basic Plan Benefit.
The amount accrued by a Participant from a Basic Plan.
1.4 Beneficiary.
Beneficiary means the person, trust, estate, or other entity
entitled to receive benefits (if any) after the Participant's death under
the Plan, which Beneficiary shall be the same as such Participant's
beneficiary under the Basic Plan.
1.5 Board.
The Board of Directors of Loral Corporation or the Executive
Committee thereof.
1.6 Code.
The Internal Revenue Code of 1986, as amended from time to
time, and all appropriate regulations and administrative guidance.
1.7 Committee.
The administrative Committee appointed to administer the Plan
pursuant to Article III.
2
<PAGE>
1.8 ERISA.
The Employee Retirement Income Security Act of 1974, as
amended, and all appropriate regulations and administrative guidance.
1.9 Loral.
Loral Corporation, and depending on the context, its
subsidiaries or affiliates. Loral shall act by resolution of the Board.
1.10 Participant.
A Participant in a Basic Plan who accrues benefits thereunder
on or after April 1, 1995 and whose Basic Plan Benefit is limited by
(S) 415 of the Code or whose compensation for purposes of calculating a
Basic Plan Benefit is limited by (S) 401(a)(17) of the Code. As context
demands, the term "Participant" shall also include a former Participant.
1.11 Plan.
This Loral Supplemental Executive Retirement Plan, as amended,
and as from time to time in effect.
1.12 Proper Application.
For all Plan purposes, making any election, granting any
consent, giving any notice or information, and making any communication
whatsoever to the Committee or its delegates, in compliance with all Plan
procedures, on forms provided by the Committee, and providing all
information required by the
3
<PAGE>
Committee. A Proper Application will be deemed to have been made only if
it is properly completed, as determined by the Committee.
1.13 QDRO or Qualified Domestic Relations Order.
A QDRO shall mean an order as defined in Code Section 414(p)
and ERISA Section 206(d)(3), and shall be subject to all administrative
rules established under the Basic Plan. The Committee shall have full
discretionary authority to determine whether any court order is a QDRO.
1.14 Trust Agreement or Trust.
The document executed by Loral and by the Trustee fixing the
rights and liabilities of each with respect to holding assets to be used
to pay Plan benefits, should any such assets be held in the Trust. The
Trust is established pursuant to Loral's intention that the Plan shall be
an unfunded plan, as detailed in Section 5.4.
1.15 Trustee.
The trustee or trustees that may, from time to time, be in
office, pursuant to the Trust Agreement.
4
<PAGE>
Article II - Benefits
2.1 Amount of Benefits.
The benefit payable from this Plan shall be in the form of a
monthly annuity equal to the amount determined under Section 2.1.1 minus
the amount determined under Section 2.1.2. Subject to Section 2.2, such
benefit shall be payable as of the Participant's Annuity Starting Date
and continue for the remainder of the Participant's life.
2.1.1 Formula Benefit. The benefit that would be payable
to a Participant under the Basic Plan, in the form elected by the
Participant pursuant to the provisions of the Basic Plan,
irrespective of any limitations imposed by (S) 415 or (S) 401(a)(17)
of the Code.
2.1.2 Actual Benefit. The Basic Plan Benefit actually
paid to the Participant in whichever form he elects, after
compliance with (S)(S) 415 and 401(a)(17) of the Code, plus any
additional benefits paid to the Participant under any non-qualified
defined benefit plan (besides this Plan) sponsored by Loral or any
of its subsidiaries or affiliates.
If benefits under the Basic Plan are increased as a result of an increase
in the limitations under Code (S)(S) 415 or 401(a)(17) (or corresponding
provisions of applicable law), benefits under this Plan shall be reduced
by the amount of any such increase.
5
<PAGE>
2.2 Post-Retirement Death Benefits.
Upon the death of the Participant after his Annuity Starting
Date, benefits will continue to be paid to such Participant's Beneficiary
in an amount equal to the benefit determined under Section 2.1 multiplied
by a fraction, the numerator of which is the benefit payable from the
Basic Plan after the Participant's death, and the denominator of which is
the benefit payable from the Basic Plan immediately before the
Participant's death. No amount will be paid after the Participant's
death under this Plan if no such benefits are paid under the Basic Plan.
2.3 Pre-Retirement Death Benefits.
Upon the death of the Participant prior to his Annuity Starting
Date, his Beneficiary shall receive a benefit equal to the difference
between the benefit received by such Beneficiary under the Basic Plan and
the benefit that would have been paid under the Basic Plan irrespective
of any limitations imposed by (S)(S) 415 or 401(a)(17) of the Code. No
amount will be paid under this Plan on account of the Participant's death
prior to his Annuity Starting Date unless such benefits are paid under
the Basic Plan.
2.4 Special Rules.
The following rules shall apply notwithstanding any other
provision of this Plan.
6
<PAGE>
2.4.1 Small Benefit Cashout. If the actuarial present
value (utilizing the assumptions set forth in the small benefit
cashout provisions of the Basic Plan) of a Participant's benefit
under Section 2.1 or a Beneficiary's benefit under Section 2.3 is
$3,500 or less, payment will be made from this Plan in a single lump
sum as soon as practicable after the Annuity Starting Date (with
respect to a benefit paid pursuant to Section 2.1) and the death of
the Participant (with respect to a benefit paid pursuant to Section
2.3).
2.4.2 Lump Sum Benefit Limitation. Unless special
approval of the Committee is obtained, and except for benefits paid
pursuant to Section 2.4.1, no benefits under this Plan shall be paid
in a lump sum. Accordingly, if any benefits are paid under the
Basic Plan to a Participant in a lump sum, the amount payable under
this Plan pursuant to the methodology set forth in Section 2.1 shall
nevertheless be paid in the form of a straight life annuity for the
Participant, beginning on the Annuity Starting Date and ending with
the payment for the month in which the Participant dies.
2.4.3 No Insured Death Benefit. No benefit pursuant to
Section 2.3 shall be paid with respect to any death benefit under
the Basic Plan which is provided by insurance, to the extent that
such benefit exceeds the minimum benefit required to be provided
under the Basic Plan
7
<PAGE>
under Code (S) 401(a)(11).
2.5 Benefits under Multiple Qualified Plans.
The following rules shall apply if a Participant has a benefit
under more than one Basic Plan:
2.5.1 Different Annuity Starting Dates. Benefits under
this Plan shall be payable as of the Participant's earliest Annuity
Starting Date under all such Basic Plans. In the event that the
Participant has benefits payable under different Basic Plans, with
different Annuity Starting Dates, then the amount of his benefit
under this Plan shall initially be determined based only on the
Basic Plans for which the Participant's Annuity Starting Date has
occurred, as though such Plans were the only Basic Plans in which
the Participant had accrued a benefit. When benefits later begin
under the other Basic Plans, benefits hereunder shall be increased
to reflect the intent of this Plan to fully make up to the
Participant the benefits he had not received under all Basic Plans,
as a result of the Code's limitations.
2.5.2 Same Annuity Starting Dates. If a Participant's
Annuity Starting Date is the same under all Basic Plans, then
benefits under this Plan shall generally be payable as of such date,
provided the Participant is fully vested under Article IV, and that
Proper Application has been made.
8
<PAGE>
2.5.3 Death Benefits. If benefits are paid under the
Basic Plans in different forms, the death benefits pursuant to
Section 2.2 shall be determined with respect to each individual
plan.
9
<PAGE>
Article III - Administration; Accrued Benefits; Right to Amend
3.1 Committee's Discretionary Power to Interpret and
Administer the Plan
3.1.1 Appointment. The Committee shall be appointed from
time to time by the Board to serve at its pleasure. Any member of
the Committee may resign by delivering his written resignation to
the Board.
3.1.2 Role under ERISA. The Committee is the "named
fiduciary" for operation and administration of the Plan, and the
"administrator" under ERISA. The Committee is designated as agent
for service of legal process.
3.1.3 Committee establishes Plan procedures. The
Committee and its delegates shall from time to time establish rules
and procedures for the administration and interpretation of the Plan
and the transaction of its business.
3.1.4 Role of Human Resource and Benefits Personnel.
Employees of Loral and its subsidiaries and affiliates who are human
resources personnel or benefits representatives are the Committee's
delegates and shall, under the authority of the Committee, perform
the routine administration of the Plan, such as distributing and
collecting forms and providing information about Plan procedures.
They shall also establish Plan rules and procedures.
10
<PAGE>
3.1.5 Discretionary Power to Interpret Plan.
3.1.5.1 The Committee has complete discretionary and
final authority to (1) determine all questions concerning
eligibility, elections, contributions, and benefits under the
Plan, (2) construe all terms under the Plan and the Trust,
including any uncertain terms, and (3) determine all questions
concerning Plan administration. All administrative decisions
made by the Committee, and all its interpretations of the Plan
documents, shall be given full deference by any court of law.
3.1.5.2 Information that concerns an interpretation
of the Plan or a discretionary determination, can be properly
provided only by the Committee, and not by any delegate (other
than legal counsel).
3.1.5.3 Should any individual receive oral or
written information concerning the Plan, which is contradicted
by a subsequent determination by the Committee, then the
Committee's final determination shall control.
3.2 Rules of the Committee.
3.2.1 Any act which the Plan authorizes or requires the
Committee to do may be done by a majority of
11
<PAGE>
its members. The action of such majority, shall constitute the
action of the Committee and shall have the same effect for all
purposes as if made by all members of the Committee at the time in
office. The Committee may act without any writing that records its
decisions, and need not document its meetings or teleconferences.
The Committee may also act through any authorized representative.
3.2.2 The members of the Committee may authorize one or
more of their number to execute or deliver any instrument, make any
payment or perform any other act which the Plan authorizes or
requires the Committee to do.
3.2.3 The Committee may employ counsel and other agents
and may procure such clerical, accounting, actuarial and other
services as they may require in carrying out the provisions of the
Plan. Legal counsel are authorized as the Committee's delegates.
3.2.4 No member of the Committee shall receive any
compensation for his services as such. All expenses of
administering the Plan, including, but not limited to, fees of
accountants, counsel and actuaries shall be paid by Loral, to the
extent that they are not paid under the Trust.
3.2.5 Each member of the Committee may delegate Committee
responsibilities among Loral directors, officers, or employees, and
may consult with or hire outside experts.
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The expenses of such experts shall be paid by Loral, to the extent
that they are not paid under the Trust.
3.3 Claims Procedure.
3.3.1 The Committee shall determine Participants' and
Beneficiaries' rights to benefits under the Plan. In the event that
a Participant or Beneficiary disputes an initial determination made
by the Committee, then he may dispute the determination only by
filing a written claim for benefits.
3.3.2 If a claim is wholly or partially denied, the
Committee shall provide the claimant with a notice of denial,
generally within 90 days of receipt, written in a manner calculated
to be understood by the claimant and setting forth:
3.3.2.1 The specific reason(s) for such denial;
3.3.2.2 Specific references to the pertinent Plan
provisions on which the denial is based;
3.3.2.3 A description of any additional material or
information necessary for the claimant to perfect the claim
with an explanation of why such material or information is
necessary (if applicable); and
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3.3.2.4 Appropriate information as to the steps to
be taken if the claimant wishes the Committee to revise its
initial denial. The notice of denial shall be given within a
reasonable time period but no later than 90 days after the
claim is received, unless circumstances require an extension of
time for processing the claim. If such extension is required,
written notice shall be furnished to the claimant within 90
days of the date the claim was received stating that an
extension of time and the date by which a decision on the claim
can be expected, which shall be no more than 180 days from the
date the claim was filed.
3.3.2.5 If no written notice of denial is provided
by the Committee, then the claim shall be deemed to be denied,
and the claimant may appeal the claim as though the claim had
been denied.
3.3.3 The claimant and/or his representative may appeal
the denied claim and may:
3.3.3.1 Request a review by making a written request
to the Committee provided that such a request is made, within
65 days of the date of the notification of the denied claim;
3.3.3.2 Review pertinent documents.
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3.3.4 Upon receipt of a request for review, the Committee
shall within a reasonable time period but not later than 60 days
after receiving the request, provide written notification of its
decision to the claimant stating the specific reasons and
referencing specific plan provisions on which its decision is based,
unless special circumstances require an extension for processing the
review. If such an extension is required, the Committee shall
notify the claimant of the date, no later than 120 days after
receiving the request for review, on which the Committee will notify
the claimant of its decision.
3.3.5 In the event of any dispute over benefits under
this Plan, all remedies available to the disputing individual under
this Article must be exhausted, within the specified deadlines,
before legal recourse of any type is sought.
3.4 QDRO Claim.
Claims relating to or affected by a domestic relations order as
defined by Code (S) 414(p) ("QDROs") or draft order shall be determined
under the Basic Plan Committee's procedures concerning domestic relations
orders. The claims procedure described in the preceding section shall
not apply to any such domestic relations order claim.
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<PAGE>
3.5 Indemnification of Committee Members.
To the fullest extent permitted by law, Loral agrees to
indemnify, to defend, and hold harmless the members of the Committee and
its delegates, individually and collectively, against any liability
whatsoever for any action taken or omitted by them in good faith in
connection with this Plan or their duties hereunder and for any expenses
or losses for which they may become liable as a result of any such
actions or non-actions unless resultant from their own willful
misconduct; and Loral will purchase insurance for the Committee and its
delegates to cover any of their potential liabilities with regard to the
Plan.
3.6 Power to Execute Plan and Other Documents.
The Vice President of Administration of Loral Corporation shall
have the authority to execute governmental filings or other documents
relating to the Plan (including the Plan document), or this authority may
be delegated to another officer or employee of Loral or a subsidiary or
affiliate, by either the Vice President of Administration of Loral
Corporation or the Board.
3.7 Conclusiveness of Records.
In administering the Plan, the Committee may conclusively rely
upon the Basic Plan employer's payroll and personnel records maintained
in the ordinary course of business.
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3.8 No Personal Liability.
No Committee member or delegate shall be personally liable by
reason of any contract or other instrument executed by him or on his
behalf in his capacity as a member or delegate of a Committee nor for any
mistake of judgment made in good faith, and Loral shall indemnify and
hold harmless each member of the Committee and each other officer,
employee, or director of Loral to whom any duty or power relating to the
administration or interpretation of the Plan may be allocated or
delegated, against any cost or expenses (including counsel fees) or
liability (including any sum in settlement of a claim with the approval
of the Board) arising out of any act or omission to act in connection
with the Plan unless arising out of such person's own fraud or bad faith.
3.9 How Plan Benefits are Accrued.
Benefits that would be accrued under the Basic Plan, but for
the limiting provisions of Code (S)(S) 415 and/or 401(a)(17), shall be
deemed to be accrued under the Plan.
3.10 Right to Amend.
3.10.1 General Power to Amend. The Board may at any time
amend the Plan in any respect or suspend or terminate the Plan in
whole or in part without the consent of any Participant or
Beneficiary or any subsidiary of Loral whose employees are covered
by this Plan, subject to Section 3.10.2. Any such amendment,
suspension or termination may be made with or without retroactive
effect, save as provided
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in Section 3.10.2.
3.10.2 No Cut-Back of Accrued Benefits.
Notwithstanding the previous Section 3.10.1, this Plan may not be
amended or terminated in any respect that has the effect of reducing
or eliminating any Plan benefit that had accrued as of the effective
date of the amendment or termination, unless the affected
Participants or Beneficiaries each gives his consent. That is, there
shall be no retroactive cut-backs of accrued Plan benefits, without
individual consent.
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Article IV - Vesting and Forfeiture
4.1 Vesting.
4.1.1. A Participant shall be entitled to a benefit under
this Plan only upon satisfying the vesting requirements set out in
this Section 4.1.
4.1.2. Vesting, as defined by this Section 4.1, shall
occur only when the Participant has (i) satisfied the vesting
requirements of the Basic Plan and made any contributions that are
required to receive benefits under the Basic Plan, (ii) terminated
employment with Loral, (iii) satisfied all eligibility requirements
for benefits under this Plan, and (iv) applied and received
Committee approval to receive Plan benefits, with respect to the
forfeiture issues addressed by Section 4.1.3.
4.1.3. A Participant shall not be fully vested under this
Section 4.1 until, following his termination and application for
Plan benefits, the Committee has determined that he is not subject
to forfeiture of his Plan benefits under this Section 4.1.
Forfeiture of all Plan benefits (including death benefits and Plan
benefits previously paid) under this Section 4.1 shall take place,
notwithstanding any contrary Plan provision, if a Participant: (i)
is Dismissed for Cause, as defined in Section 4.2, (ii) becomes
employed by a company in substantial competition with Loral, or
(iii) engages in conduct detrimental or contrary to the best
interests of Loral.
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4.2 Dismissed for Cause.
"Dismissed for Cause" means termination of employment for (a)
theft, embezzlement, or malicious destruction of Loral's property; (b)
fraud or other wrongdoing against Loral; or (c) improper disclosure of
Loral's trade secrets.
4.3 Forfeiture after Plan Benefits have Commenced.
Even though the Committee has made an initial favorable vesting
determination under Section 4.1., it may nevertheless determine that a
Participant's Plan benefits, after payment has commenced, are forfeited,
if the Committee reconsiders the issues addressed in Section 4.1.3 and
determines that forfeiture is in fact warranted. Such a forfeiture shall
be effective as of the date that the Committee determines the events of
forfeiture have occurred, as set out in Section 4.1.3. The Committee may
therefore make a retroactive forfeiture determination. Any Plan benefits
that have been paid after the effective date of the retroactive
forfeiture determination shall be considered a mistaken payment under
Section 5.11.
4.4 Determinations by Committee.
The Committee shall have full, final, and discretionary
authority to make determinations under this Article IV. Any forfeiture
determination made by the Committee shall be final, binding, and
conclusive upon the Participant and his Beneficiaries.
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Article V - General Provisions
5.1 No Assignment or Alienation of Benefits.
Subject to Sections 2.2 and 2.3, and to any QDROs, payment of
benefits pursuant to this Plan shall be made only to Participants. Such
benefits shall not be subject in any manner to the debts or other
obligations of the person to whom they are payable and shall not be
subject to transfer, anticipation, sale, assignment, bankruptcy, pledge,
attachment, charge or encumbrance in any manner, either voluntarily or
involuntarily.
5.2 Withholding Taxes.
Whenever under the Plan payment is made to a Participant or
Beneficiary, Loral shall be entitled to require as a condition of payment
that the recipient remit an amount, sufficient in Loral's opinion, to
satisfy all FICA, federal and other withholding tax requirements related
thereto. Loral shall be entitled to deduct such amount from any payment.
5.3 No Right to Continue Employment.
This Plan is voluntary on the part of Loral and shall not be
deemed to constitute an employment contract between Loral and a
Participant and/or consideration for or an inducement for or condition of
employment of any Participant. Nothing in this Plan shall be deemed to
give any employee the right to be retained in the service of Loral or to
interfere with the right of Loral to discharge, terminate or lay off any
Participant at any time for any reason.
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5.4 Unfunded Plan.
The Plan is intended to constitute an unfunded, nonqualified
pension plan for a select group of management or highly compensated
employees, for the purposes of ERISA.
5.5 Governing Law.
It is intended that the Plan conform to and meet the applicable
requirements of ERISA and the Code. Except to the extent preempted by
ERISA, the validity of the Plan or of any of its provisions shall be
determined under, and it shall be construed and administered according
to, the laws of the State of New York (including its statute of
limitations and all substantive and procedural law, and without regard to
its conflict of laws provisions).
5.6 Payment of Benefits.
All benefits payable under the Plan shall be paid under the
Trust Agreement. The rights or entitlement of any Participant or
Beneficiary shall be no greater than those of an unsecured general
creditor of Loral, subject to the Trust Agreement.
5.7 Section Headings.
The section headings contained in the Plan are for purposes of
convenience only and are not intended to define or limit the contents of
said sections.
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5.8 Payment to a Minor or Incompetent.
If any amount is payable under this Plan to a minor or other
legally incompetent person, such amount may be paid in any one or more of
the following ways, as the Committee in its sole discretion shall
determine:
5.8.1 To the legal representatives of such minor or other
incompetent person;
5.8.2 Directly to such minor or other incompetent person;
5.8.3 To a parent or guardian of such minor or other
incompetent person, to the person with whom such minor or other
incompetent person shall reside, or to a custodian for such minor
under the Uniform Gifts to Minors Act (or similar statute) of any
jurisdiction. Payment to any person in accordance with the
foregoing provisions shall pro tanto discharge Loral, the members of
the Committee, and any person or corporation making such payment
pursuant to the direction of the Committee, and none of the
foregoing shall be required to see to the proper application of any
such payment to such person pursuant to the provisions of this
Section 5.8. Without in any manner limiting or qualifying the
provisions of this Section 5.8, if any amount is payable under this
Plan to a minor or any other legally incompetent person, the
Committee may in its discretion utilize the procedures described in
Section 5.8.
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<PAGE>
5.9 Doubt as to Right to Payment.
If at any time any doubt exists as to the right of any person
to any payment under this Plan or the amount or time of such payment
(including, without limitation, any case of doubt as to identity, or any
case in which any notice has been received from any other person claiming
any interest in amounts payable hereunder, or any case in which a claim
from other persons may exist by reason of community property or similar
laws), the Committee shall be entitled, in its discretion, to direct that
such sum be held as a segregated amount in trust until such right or
amount or time is determined or until order of a court of competent
jurisdiction, or to pay such sum into court in accordance with
appropriate rules of law in such case then provided, or to make payment
only upon receipt of a bond or similar indemnification (in such amount
and in such form as is satisfactory to the Committee).
5.10 Missing Payees.
If all or portion of a Participant's vested Plan benefit
becomes payable and the Committee after a reasonable search cannot locate
the Participant (or his Beneficiary if such Beneficiary is entitled to
payment), then, 5 years after the Participant's benefit first became
payable under the Plan, a notice shall be mailed to the last known
address of the Participant. If the Participant does not respond within
three months, the Committee may elect, upon advice of counsel, to remove
all records of the Participant's accrued benefit from the
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<PAGE>
Plan's current records and that benefit shall be used to offset future
employer contributions. If the Participant or his Beneficiary
subsequently presents a valid claim for benefits to the Committee, the
Committee shall restore and pay the appropriate Plan benefit.
5.11 Mistaken Payments.
No Participant or Beneficiary shall have any right to any
payment made (1) in error, (2) in contravention to the terms of the Plan,
the Code, or ERISA, or (3) because the Committee or its delegates were
not informed of any death. The Committee shall have full rights under
the law and ERISA to recover any such mistaken payment, and the right to
recover attorney's fees and other costs incurred with respect to such
recovery. Recovery shall be made from future Plan payments, or by any
other available means.
5.12 Receipt and Release for Payments.
Any payment to any Participant, Beneficiary, or to any such
person's legal representative, parent, guardian, or any person or entity
specified by Section 5.8 or under any other Plan provision, shall be in
full satisfaction of all claims that can be made under the Plan against
the Trustee and Loral. The Trustee and Loral may require such
Participant, Beneficiary, legal representative, or any other person or
entity described in this Section 5.12, as a condition precedent to such
payment, to execute a receipt and release thereof in such form as shall
be determined by the Trustee or Loral.
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<PAGE>
5.13 Illegality of Particular Provisions.
The illegality of any particular provision of this Plan shall
not affect the other provisions thereof, but the Plan shall be construed
in all respects as if such invalid provision were omitted.
5.14 Discharge of Liability.
If distribution in respect of a Participant is made under this
Plan in a form, or to a person, reasonably believed by the Committee or
its delegate to be proper, the Plan shall have no further liability with
respect to the Participant (or his spouse or Beneficiary) to the extent
of such distribution.
IN WITNESS WHEREOF, LORAL CORPORATION, on its own behalf and as
agent for each of its subsidiaries, has caused this Plan to be executed
by its duly authorized officer, this ____________ day of
__________________, 1995.
LORAL CORPORATION
By:____________________________________
Title: Vice-President of Administration
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Exhibit 99.3
LORAL CORPORATION SUPPLEMENTAL BONUS PROGRAM
Purpose
The purpose of the Loral Corporation Supplemental Bonus Program (the "Program")
is to provide supplemental bonus compensation to selected key executives of
Loral Corporation (the "Company") in recognition of their dedication, service
and contributions to the Company's business. Bonuses will be paid under the
Program in connection with the successful consummation of the offer (the
"Offer") described in Section 1.1(a) of the Agreement and Plan of Merger dated
as of January 7, 1996 By and Among Loral Corporation, Lockheed Martin
Corporation and LAC Acquisition Corporation.
Participation
Key employees of the Company and its subsidiaries who are selected by the
Company's Chief Executive Officer (the "CEO") or his designee ("Eligible
Employees") shall be eligible to receive bonuses under the Program. The CEO
shall not be paid a bonus under the Program.
Amount of Bonus
The amount of bonus compensation to be paid to an Eligible Employee (the "Bonus
Award") shall be determined by the CEO. The aggregate amount of Bonus Awards
payable pursuant to the Program shall not exceed the difference between (i) $40
million, and (ii) the cash amount actually paid to the CEO pursuant to Section 5
of his Restated Employment Agreement with the Company dated April 1, 1990, as
amended June 14, 1994, as a result of the consummation of the Offer.
Obligation to Pay Bonuses
Effective as of the successful consummation of the Offer, the Company shall have
a binding obligation to pay Bonus Awards to the Eligible Employees who have been
selected for participation in the Program, in the amounts determined by the CEO.
Such obligation shall be binding upon any successor of the Company. Bonus Awards
shall be paid to Eligible Employees immediately prior to, contemporaneously
with, or as soon as practicable after, the successful consummation of the Offer;
provided, that, the Board of Directors may approve arrangements for the deferral
of such payments in its discretion.
Effective Date
The Program is effective as of January 7, 1996.
Amendment and Termination
Prior to the successful consummation of the Offer, the Board of Directors of the
Company may amend or terminate the Program in any respect, with or without the
consent of any Eligible Employee; provided, however, that as of the successful
consummation of the Offer, the Program may not be amended or terminated in any
manner which would reduce or otherwise
<PAGE>
adversely affect the Bonus Award payable to any Eligible Employee without such
Eligible Employee's express written consent.
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<PAGE>
Exhibit 99.4
LORAL CORPORATION
SUPPLEMENTAL SEVERANCE PROGRAM
(EFFECTIVE JANUARY 7, 1996)
<PAGE>
LORAL CORPORATION
SUPPLEMENTAL SEVERANCE PROGRAM
(Effective January 7, 1996)
Loral Corporation (the "Company") believes that the best interests of the
Company and its shareholders will be served if certain key employees who have
historically been engaged in or associated with the operations of the Company
are encouraged to remain with the Company after the consummation of the Offer
for the Common Stock of the Company pursuant to the Agreement and Plan of Merger
Dated as of January 7, 1996 By and Among the Company, Lockheed Martin
Corporation and LAC Acquisition Corporation (the "Merger Agreement").
Accordingly, the Company hereby establishes this "Loral Corporation Supplemental
Severance Program" (the "Program") for the benefit of such key employees.
SECTION 1. DEFINITIONS
In addition to the terms defined in the preceding paragraph, the following
definitions shall apply for purposes of the Program.
1.1. "Annual Salary" means an Eligible Employee's annual rate of base
salary as in effect immediately prior to the Effective Date.
2.2. "Board" means the Board of Directors of Lockheed Martin.
3.3. "Cause" means any of the following, other than due to an Eligible
Employee's Permanent Disability or death:
(a) an Eligible Employee's continuing willful neglect of, or refusal to
perform, the duties required or associated with the Eligible Employee's
employment;
(b) an Eligible Employee's willful disclosure of confidential information
or trade secrets of Lockheed Martin which results in material harm to the
business or reputation of Lockheed Martin;
(c) conviction of a felony, or a misdemeanor involving dishonesty, fraud,
theft, larceny, or embezzlement, or any Federal offense of the type described in
Article 14 of the Administrative Agreement between Lockheed Martin and the
United States Air Force dated June, 1995; or
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<PAGE>
(d) a violation of Lockheed Martin' Standards of Conduct and Code of
Ethics, which shall be provided to each Eligible Employee.
1.4. "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
1.5. "Committee" means the Committee of the Board designated to
administer the Plan.
1.6. "Company" means the Loral Corporation and any successor or
successors thereto.
1.7. "Company Board" means the Board of Directors of the Company.
1.8. "Effective Date" means the date of the successful consummation of
the Offer as set forth in the Merger Agreement.
1.9. "Eligible Employee" means each full-time employee of either the
Company or another Loral Company selected by the Company Board prior to the
Effective Date for participation in the Program.
1.10. "Eligible Termination" means an involuntary termination of employment
without Cause (other than by reason of Permanent Disability or death), or a
resignation for Good Reason, which occurs on or within the two-year period
following the Effective Date; provided, however, that the transfer of employment
to another employer that is a member of the Lockheed Martin Companies shall not
in itself constitute an Eligible Termination (but any such transfer will not
preclude another or accompanying event or reason from constituting or causing an
Eligible Termination, and the protections of the Program and corresponding
obligations of the Company will remain in effect following any such transfer of
employment).
1.11. "Good Reason" means any one or more of the following actions, without
an Eligible Employee's express prior written consent or approval, other than due
to an Eligible Employee's Permanent Disability or death:
(a) any removal of the Eligible Employee from any of the positions he or
she holds immediately prior to the Effective Date or an elimination of any such
positions, when the effect of such removal or elimination is a material
diminution of status, responsibilities or duties, or any lowering of job grade,
excluding for this purpose a removal from responsibility for, or involvement
with, U.S. Government business affairs which removal is mandated by reason of an
indictment, suspension or proposed debarment of the type described in Article 14
of the
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<PAGE>
Administrative Agreement between Lockheed Martin and the United States Air Force
dated June, 1995; or
(b) any reduction of an Eligible Employee's Annual Salary.
1.12. "Permanent Disability" means an Eligible Employee's inability, by
reason of any physical or mental impairment, to substantially perform the
significant aspects of his or her regular duties, which inability is reasonably
contemplated to continue for at least one (1) year from its incurrence.
1.13. "Offer" means the Offer as defined in Section 1.1(a) of the Merger
Agreement.
1.14. "Program" means the Loral Corporation Supplemental Severance
Program, as set forth herein and as amended from time to time.
1.15. "Severance Period" means the period commencing on the date of an
Eligible Employee's Eligible Termination and continuing for a period of twelve
months.
1.16. "Lockheed Martin" means Lockheed Martin Corporation.
1.17. "Lockheed Martin Companies" means Lockheed Martin and its
subsidiaries and affiliates, and any successor or successors thereto.
1.18. "Target Bonus" means the annual bonus which would be payable to an
Eligible Employee for the calendar year in which an Eligible Termination occurs,
calculated on the assumption that the Eligible Employee and one or more Loral
Companies or the Lockheed Martin Companies (or those entities or business units
within the Loral Companies or the Lockheed Martin Companies) on whose
performance the Eligible Employee's bonus depends achieve the applicable target
performance goals established under the applicable bonus plan with respect to
that year. If no target performance goals for the year in which the Eligible
Termination occurs have been set prior to the Eligible Termination, the Target
Bonus shall be determined by substituting, in the previous sentence, the highest
annual bonus paid to the Eligible Employee during the three years immediately
preceding the year in which an Eligible Termination occurs.
1.19. "Loral Companies" means the Company and its subsidiaries and
affiliates, and any successor or successors thereto.
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<PAGE>
SECTION 2. EFFECT OF AN ELIGIBLE TERMINATION
2.1. If an Eligible Employee incurs an Eligible Termination, the Eligible
Employee shall be entitled to all applicable benefits provided hereafter in this
Section 2 or as otherwise set forth in this Program.
(a) Payment of Salary Amount: Within twenty (20) business days after
the date of his or her Eligible Termination, the Company shall pay or cause to
be paid to the Eligible Employee a single lump sum amount, in cash, equal to the
sum of (i) the Eligible Employee's Annual Salary, and (ii) the Eligible
Employee's Target Bonus.
(b) Welfare Benefits: Within thirty (30) days after the date of his or
her Eligible Termination, the Company shall pay to the Eligible Employee a
single lump sum amount equal to the full cost of coverage for such Eligible
Employee (taking into account any special medical or other conditions applicable
to such Eligible Employee) during the Severance Period (or, if the Eligible
Employee is provided with such coverage at no additional cost to him or her
under any other severance plan or arrangement, for the period from the date such
coverage terminates until the end of the Severance Period) for medical, dental,
life insurance, disability and accidental death and dismemberment benefits at
the level provided to such Eligible Employee immediately prior to such Eligible
Termination.
(c) Payment of Accrued But Unpaid Amounts: Within twenty (20) business
days after the date of his or her Eligible Termination, the Company shall pay
the Eligible Employee any unpaid portion of the Eligible Employee's bonus
accrued with respect to the full calendar year ended prior to the date of the
Eligible Termination and all compensation earned by such Eligible Employee but
not yet paid (including cash compensation for vacation days accrued but not
taken as of the date of the Eligible Termination, based on the Annual Salary
amount converted to a per diem equivalent in accordance with the Company's
normal payroll practices as in effect prior to the Effective Date), except that
any compensation deferred by the Eligible Employee under any qualified or non-
qualified deferred compensation plans shall be paid in accordance with the terms
and provisions of such plans.
(d) Payment for Other Reduced Severance Benefits. The amounts payable
to an Eligible Employee under this Section 2 are supplemental to any other
severance benefits to which the Eligible Employee is entitled under any
severance plan or program of the Loral Companies in effect as of the Effective
Date (collectively, "Other Severance Benefits"). In the event that an Eligible
Employee's Other Severance Benefits are reduced or eliminated after the
Effective Date without his or her written
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<PAGE>
consent, the amount otherwise payable to an Eligible Employee hereunder upon an
Eligible Termination shall be increased by the amount of such reduction or
elimination.
2.2. Maximum Benefits: Anything in Section 2.1 to the contrary
notwithstanding, payments under Section 2.1 shall not exceed the maximum amount
which can be paid to an Eligible Employee without causing such payments to be
treated as "excess parachute payments" for purposes of Section 280G of the Code
taking into account all payments made to the Eligible Employee which constitute
"parachute payments" for purposes of Section 280G.
2.3. Mitigation: An Eligible Employee shall not be required to mitigate
damages or the amount of any payment provided for under this Program by seeking
other employment or otherwise, and compensation earned from such employment or
otherwise shall not reduce the amounts otherwise payable under this Program. No
amounts payable under this Program shall be subject to reduction or offset in
respect of any claims which the Company or any member of the Loral Companies (or
any other person or entity) may have against the Eligible Employee.
2.4. Withholding: The Company may, to the extent required by law,
withhold applicable federal and state income, employment and other taxes from
any payments due to any Eligible Employee hereunder.
SECTION 3. LIMITS ON AMENDMENT OR TERMINATION; EFFECT ON
OTHER PLANS
3.1. The Company Board may terminate this Program prior to the Effective
Date. As of the Effective Date, this Program (expressly including, but not
limited to, this Section 3) shall remain in effect, and may not be altered or
amended in any way which would adversely affect the rights of any Eligible
Employee hereunder, for at least two (2) years following the Effective Date, and
for such additional time as may be necessary to give effect to the terms of the
Program as in effect at the Effective Date. Thereafter, the Company may amend
or terminate this Program in any manner which does not adversely affect the
rights of any Eligible Employee who has incurred an Eligible Termination.
3.2. An Eligible Employee shall, after the date of his or her Eligible
Termination, retain all rights (to the extent any such rights existed at any
time prior to the Effective Date) to indemnification under applicable law or
under the applicable Loral Companies' Certificate of Incorporation or By-Laws,
as they may be amended or restated from time to time. In addition, to the
extent coverage had been otherwise available to the Eligible
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<PAGE>
Employee prior to the Effective Date, the Company shall maintain Director's and
Officer's liability insurance on behalf of the Eligible Employee, at the level
in effect immediately prior to the date of his or her Eligible Termination.
SECTION 4. ADMINISTRATION OF THE PROGRAM
4.1. The Committee shall be the Administrator of this Program and shall
have the exclusive right, power and authority to:
(a) interpret, in its sole discretion, any and all of the provisions of
the Program;
(b) establish a claims review procedure, if necessary and advisable; and
(c) consider and decide conclusively any questions (whether of fact or
otherwise) arising in connection with the administration of the Program or any
claim for a benefit arising under the Program.
Any decision or action of the Committee pursuant to this Section 4.1 shall be
conclusive and binding.
SECTION 5. MISCELLANEOUS
5.1. Neither the establishment of the Program nor any action of the
Company, any other member of the Loral Companies or the Lockheed Martin
Companies, the Committee, or any fiduciary shall be held or construed to confer
upon any person any legal right to continued employment with the Company or with
any member of the Loral Companies or the Lockheed Martin Companies.
Nothing in the Program shall be construed to prevent the Company or any
member of the Loral Companies or the Lockheed Martin Companies from terminating
an Eligible Employee's employment for Cause. If an Eligible Employee is
terminated for Cause, the Company shall have no obligation to make any payments
under this Program, except for payments that may otherwise be payable under then
existing employee benefit plans, programs and arrangements of the Company or of
any other member of the Loral Companies or the Lockheed Martin Companies.
5.2. Benefits payable under the Program shall be paid out of the general
assets of the Company. The Company is not required to fund the benefits payable
under this Program; provided, however, nothing in this Section 5.2 shall be
interpreted as
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precluding the Company from funding or setting aside amounts in anticipation of
paying any such benefits.
5.3. Benefits payable under the Program shall not be subject to
assignment, alienation, transfer, pledge, encumbrance, commutation or
anticipation by any Eligible Employee. Any attempt to assign, alienate,
transfer, pledge, encumber, commute or anticipate Program benefits shall be
void. In addition, no rights or interest under the Program shall be in any
manner subject to levy, attachment or other legal process to enforce payment of
any claim against any Eligible Employee except to the extent required by law.
5.4. Except as otherwise provided herein, this Program shall be binding
upon, inure to the benefit of and be enforceable by the Company and the Eligible
Employees and their respective heirs, legal representatives, successors and
assigns. If the Company shall be merged into or consolidated with another
entity, the provisions of this Program shall be binding upon and inure to the
benefit of the entity surviving such merger or resulting from such
consolidation, and such provisions shall also be binding upon and inure to the
benefit of any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of the Company, and such successor shall assume and perform the
obligations, responsibilities and liabilities to which the Company or any member
of the Loral Companies is subject under this Program in the same manner and to
the same extent that the Company or any member of the Loral Companies would be
required to perform if no such succession had taken place. The provisions of
this Section 5.4 shall continue to apply to each subsequent employer of any
Eligible Employee in the event of any subsequent merger, consolidation or
transfer of assets of any such subsequent employer.
5.5. This Program shall be governed by and construed in accordance with
the laws of the State of New York (without reference to rules relating to
conflicts of laws), except to the extent superseded by applicable federal law.
5.6. Any action required or permitted to be taken by the Company under
this Plan shall be taken by the Company Board, the Board or by the Committee, or
any designee of the Committee pursuant to Section 4, in each case subject to the
limits on amendment and termination contained in Section 3 hereof.
5.7. Entitlement to any benefits under this Program is expressly subject
to and conditioned upon the Eligible Employee agreeing to and signing (i) a
customary exit letter that may contain confidentiality, future cooperation and
other provisions, if requested, and (ii) the Company's standard form general
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release of employment and other claims that the Eligible Employee may have.
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Exhibit 99.5
[FORM OF]
EMPLOYMENT PROTECTION AGREEMENT
-------------------------------
THIS AGREEMENT between Loral Corporation, a New York corporation (the
"Company"), and ______________________ (the "Executive"), dated as of this 7th
day of January 1996.
W I T N E S S E T H :
-------------------
WHEREAS, the Company and the Executive have agreed to enter into an
agreement providing the Company and the Executive with certain rights upon the
occurrence of a Change of Control (as defined below) to assure the Company of
continuity of management;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is hereby agreed by and between the Company and the
Executive as follows:
1. Effective Date; Term. This Agreement shall be effective as of
January 7, 1996. The Company may terminate this Agreement upon five (5) days
advance written notice to the Executive; except that if this Agreement is in
effect immediately prior to the date of a Change of Control (the "Effective
Date"), it shall remain in effect for at least three (3) years following such
Change of Control, and such additional time as may be necessary to give effect
to the terms of this Agreement. This Agreement may also terminate as provided
in Section 2(b) hereof.
2. Change of Control. (a) Except as provided in Section 2(b)
hereof, for purposes of this Agreement, a "Change of Control" shall be deemed to
have occurred if: (i) any person (as defined in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended from time to time (the "Exchange
Act"), and as used in Sections 13(d) and 14(d) thereof)), excluding the Company,
any majority owned subsidiary of the Company (a "Subsidiary") and any employee
benefit plan sponsored or maintained by the Company or any Subsidiary (including
any trustee of such plan acting as trustee), but including a "group" as defined
in Section 13(d)(3) of the Exchange Act (a "Person"), becomes the beneficial
owner of shares of the Company having at least 50% of the total number of votes
that may be cast for the election of directors of the Company (the "Voting
Shares") provided, however, that such an event shall not constitute a Change of
Control if such acquisition has been approved by a majority of the Incumbent
Directors (as defined in subsection 2(a)(iii)); (ii) the shareholders of the
Company shall approve
<PAGE>
any merger or other business combination of the Company, sale of the Company's
assets or combination of the foregoing transactions (a "Transaction") other than
a Transaction involving only the Company and one or more of its Subsidiaries, a
Transaction approved by a majority of the Incumbent Directors, or a Transaction
immediately following which the shareholders of the Company immediately prior to
the Transaction, excluding for this purpose any shareholder owning directly or
indirectly more than 10% of the shares of the other company involved in the
Transaction, continue to have a majority of the voting power in the resulting
entity, or (iii) within any 24-month period beginning on or after January 7,
1996, the persons who were directors of the Company immediately before the
beginning of such period (the "Incumbent Directors") shall cease (for any reason
other than death) to constitute at least a majority of the Board of Directors of
the Company (the "Board") or the board of directors of any successor to the
Company, provided that any director who was not a director as of January 7, 1996
shall be deemed to be an Incumbent Director if such director was elected to the
Board by, or on the recommendation of or with the approval of, at least two-
thirds of the directors who then qualified as Incumbent Directors either
actually or by prior operation of this subsection 2(a)(iii).
(b) This Agreement shall terminate upon, and no Change of Control shall be
deemed to occur as a result of, the successful consummation of the "Offer" (as
defined in Section 1.1(a) of the Agreement and Plan of Merger Dated as of
January 7, 1996 By and Among the Company, Lockheed Martin Corporation and LAC
Acquisition Corporation), or upon the successful consummation of any transaction
which is approved by the Incumbent Directors and as a result of which Lockheed
Martin Corporation or a wholly owned subsidiary thereof acquires substantially
all of the Company's voting securities or substantially all of the Company's
defense businesses.
3. Retention Period. If the Executive is employed on the Effective
Date, the Company agrees to continue the Executive in its employ, and the
Executive agrees to remain in the employ of the Company, for the period (the
"Retention Period") commencing on the Effective Date and ending on the earliest
to occur of (i) the third anniversary of the Effective Date, and (ii) the date
of any termination of the Executive's employment in accordance with Section 6 of
this Agreement.
Position and Duties. (a) No Reduction in Position. During the
Retention Period, the Executive's position (including titles), authority and
responsibilities shall be at least commensurate with the highest of those held
or exercised by him at any time during the 90-day period immediately preceding
the Effective Date.
(b) Business Time. During the Retention Period, the Executive shall
devote his full business time during normal
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business hours to the business and affairs of the Company and use his best
efforts to perform faithfully and efficiently the responsibilities assigned to
him hereunder, to the extent necessary to discharge such responsibilities,
except for
(i) reasonable time spent in serving on corporate, civic or
charitable boards or committees of the nature similar to those on which the
Executive served prior to the Change of Control, or otherwise approved by
the Board, in each case only if and to the extent not substantially
interfering with the performance of such responsibilities, and
(ii) periods of vacation and sick leave to which he is entitled.
It is expressly understood and agreed that the Executive's continuing to serve
on any boards and committees on which he is serving or with which he is
otherwise associated immediately preceding the Effective Date shall not be
deemed to interfere with the performance of the Executive's services to the
Company.
5. Compensation. (a) Base Salary. During the Retention Period,
the Executive shall receive a base salary ("Base Salary") at a monthly rate at
least equal to the monthly salary paid to the Executive by the Company and any
of its affiliated companies immediately prior to the Effective Date. The Base
Salary shall be reviewed at least once each year after the Effective Date, and
may be increased (but not decreased) at any time and from time to time by action
of the Board or any committee thereof or any individual having authority to take
such action in accordance with the Company's regular practices. Neither payment
of the Base Salary nor payment of any increased Base Salary after the Effective
Date shall serve to limit or reduce any other obligation of the Company
hereunder. For purposes of the remaining provisions of this Agreement, the term
"Base Salary" shall mean Base Salary as defined in this Section 5(a) or, if
increased after the Effective Date, the Base Salary as so increased.
(b) Annual Bonus. In addition to the Base Salary, the Executive shall
be awarded for each fiscal year of the Company ending during the Retention
Period an annual bonus (either pursuant to a bonus plan or program of the
Company or otherwise) in cash at least equal to the greater of the two most
recent fiscal year bonuses (annualized, if awarded in respect of a partial year)
awarded to the Executive prior to the Effective Date under the bonus program of
the Company applicable to such Executive ("Annual Bonus"). If a fiscal year of
the Company begins, but does not end, during the Retention Period, the Executive
shall receive an amount with respect to such fiscal year at least equal to the
amount of the Annual Bonus multiplied by a fraction, the numerator of which is
the number of days in
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such fiscal year occurring during the Retention Period and the denominator of
which is 365. Each amount payable in respect of the Executive's Annual Bonus
shall be paid not later than 90 days after the fiscal year next following the
fiscal year for which the Annual Bonus (or pro-rated portion) is earned or
awarded, unless electively deferred by the Executive pursuant to any deferral
programs or arrangements that the Company may make available to the Executive,
in which event such deferred amount shall be payable in accordance with the
terms of such deferral program or arrangement. Neither the Annual Bonus nor any
bonus amount paid in excess thereof after the Effective Date shall serve to
limit or reduce any other obligation of the Company hereunder.
(c) Incentive and Savings Plans and Retirement Programs. In addition
to the Base Salary and Annual Bonus payable as hereinabove provided, during the
Retention Period, the Executive shall be entitled to participate in all
incentive and savings plans and programs, including stock option plans and other
equity based compensation plans, and in all retirement plans, on a basis
providing him with the opportunity to receive compensation (without duplication
of the amount payable as an Annual Bonus) and benefits equal to those provided
by the Company to the Executive on an annualized basis under such plans and
programs as in effect at any time during the 90-day period immediately preceding
the Effective Date. With respect to participation in stock option plans,
Executive shall receive annual grants during the Retention Period at least equal
to the average annual grants made to Executive during the two fiscal years
immediately preceding the Effective Date.
(d) Benefit Plans. During the Retention Period, the Executive and his
family shall be entitled to participate in or be covered under all welfare
benefit plans and programs of the Company and its affiliated companies,
including all medical, dental, disability, group life, accidental death and
travel accident insurance plans and programs, as in effect at any time during
the 90-day period immediately preceding the Effective Date.
(e) Expenses. During the Retention Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the policies and procedures of the Company as
in effect at any time during the 90-day period immediately preceding the
Effective Date.
(f) Vacation and Fringe Benefits. During the Retention Period, the
Executive shall be entitled to paid vacation and fringe benefits in accordance
with the policies of the Company as in effect at any time during the 90-day
period immediately preceding the Effective Date.
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(g) Office and Support Staff. During the Retention Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to secretarial and other assistance, at
least equal to the most favorable of the foregoing provided to the Executive at
any time during the 90-day period immediately preceding the Effective Date.
6. Termination. (a) Death or Disability. The Executive's
employment shall terminate automatically upon his death. The Company may
terminate Executive's employment during the Retention Period, after having
established the Executive's Disability, by giving the Executive written notice
of its intention to terminate his employment, and his employment with the
Company shall terminate effective on the 90th day after receipt of such notice
if, within 90 days after such receipt, the Executive shall fail to return to
full-time performance of his duties. For purposes of this Agreement,
"Disability" means disability which, after the expiration of more than 26 weeks
after its commencement, is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or his
legal representatives (such agreement to acceptability not to be withheld
unreasonably).
(b) Voluntary Termination. Notwithstanding anything in this Agreement
to the contrary, the Executive may, upon not less than 30 days' written notice
to the Company, voluntarily terminate employment during the Retention Period for
any reason, provided that any termination by the Executive pursuant to Section
6(d) of this Agreement on account of Good Reason (as defined therein) shall not
be treated as a voluntary termination under this Section 6(b).
(c) Cause. The Company may terminate the Executive's employment
during the Retention Period for Cause. For purposes of this Agreement, "Cause"
means (i) gross misconduct on the Executive's part which is demonstrably willful
and deliberate and which results in material damage to the Company's business or
reputation or (ii) repeated material violations by the Executive of his
obligations under Section 4 of this Agreement which violations are demonstrably
willful and deliberate.
(d) Good Reason. The Executive may terminate his employment during
the Retention Period for Good Reason. For purposes of this Agreement, "Good
Reason" means
(i) a good faith determination by the Executive that, without his
prior written consent, the Company or any of its officers has taken or
failed to take any action (including, without limitation, (A) exclusion of
the Executive from consideration of material matters within his area of
responsibility, other than an insubstantial or inadvertent exclusion
remedied by the Company promptly after receipt of notice thereof from the
Executive, (B) statements
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or actions which undermine the Executive's authority with respect to
persons under his supervision or reduce his standing with his peers, other
than an insubstantial or inadvertent statement or action which is remedied
by the Company promptly after receipt of the notice thereof from the
Executive, (C) a pattern of discrimination against or harassment of the
Executive or persons under his supervision and (D) the subjection of the
Executive to procedures not generally applicable to other similarly
situated executives) which changes the Executive's position (including
titles), authority or responsibilities under Section 4 of this Agreement or
reduces the Executive's ability to carry out his duties and
responsibilities under Section 4 of this Agreement;
(ii) any failure by the Company to comply with any of the
provisions of Section 5 of this Agreement, other than an insubstantial or
inadvertent failure remedied by the Company promptly after receipt of
notice thereof from the Executive;
(iii) the Company's requiring the Executive to be employed at
any location more than 35 miles further from his principal residence than
the location at which the Executive was employed immediately preceding the
Effective Date; or
(iv) any failure by the Company to obtain the assumption of and
agreement to perform this Agreement by a successor as contemplated by
Section 14(b) of this Agreement.
(e) Notice of Termination. Any termination by the Company for Cause
or by the Executive for Good Reason during the Retention Period shall be
communicated by Notice of Termination to the other party hereto given in
accordance with Section 15(c) of this Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice given, in the case
of a termination for Cause, within 10 business days of the Company's having
actual knowledge of all of the events giving rise to such termination, and in
the case of a termination for Good Reason, within 180 days of the Executive's
having actual knowledge of the events giving rise to such termination, and which
(i) indicates the specific termination provision in this Agreement relied upon,
(ii) sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated, and (iii) if the termination date is other than the date
of receipt of such notice, specifies the termination date of this Agreement
(which date shall be not more than 15 days after the giving of such notice).
The failure by the Executive to set forth in the Notice of Termination any fact
or circumstance which contributes to a showing of Good Reason shall not waive
any right of the Executive hereunder or preclude the Executive from asserting
such fact or circumstance in enforcing his rights hereunder.
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(f) Date of Termination. For purposes of this Agreement, the term
"Date of Termination" means (i) in the case of a termination for which a Notice
of Termination is required, the date of receipt of such Notice of Termination
or, if later, the date specified therein and (ii) in all other cases, the actual
date on which the Executive's employment terminates during the Retention Period.
7. Obligations of the Company upon Termination. (a) Death. If
the Executive's employment is terminated during the Retention Period by reason
of the Executive's death, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this Agreement other
than those obligations accrued hereunder at the date of his death, including,
for this purpose (i) the Executive's full Base Salary through the Date of
Termination, (ii) the product of the Annual Bonus and a fraction, the numerator
of which is the number of days in the current fiscal year of the Company through
the Date of Termination, and the denominator of which is 365 (the "Pro-rated
Bonus Obligation"), (iii) any compensation previously deferred by the Executive
(together with any accrued earnings thereon) and not yet paid by the Company and
(iv) any other amounts or benefits owing to the Executive under the then
applicable employee benefit plans or policies of the Company (such amounts
specified in clauses (i), (ii), (iii) and (iv) are hereinafter referred to as
"Accrued Obligations"). Unless otherwise directed by the Executive (or, in the
case of any employee benefit plan qualified (a "Qualified Plan") under Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), as may be
required by such plan), all such Accrued Obligations shall be paid to the
Executive's legal representatives in a lump sum in cash within 30 days of the
Date of Termination. Anything in this Agreement to the contrary
notwithstanding, the Executive's family shall be entitled to receive benefits at
least equal to the most favorable level of benefits available to surviving
families of executives of the Company and its affiliates under such plans,
programs and policies relating to family death benefits, if any, of the Company
and its affiliates in effect at any time during the 90-day period immediately
preceding the Effective Date.
(b) Disability. If the Executive's employment is terminated by reason
of the Executive's Disability, the Executive shall be entitled, after the Date
of Termination until the date when the Retention Period would otherwise have
terminated, to continue to participate in or be covered under the benefit plans
and programs referred to in Section 5(d) of this Agreement or, at the Company's
option, to receive equivalent benefits by alternate means at least equal to
those provided in accordance with Section 5(d) of this Agreement. Unless
otherwise directed by the Executive (or, in the case of any Qualified Plan, as
may be required by such plan), the Executive shall also be paid all Accrued
Obligations in a lump sum in cash within 30 days of the
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Date of Termination. Anything in this Agreement to the contrary notwithstanding,
the Executive shall be entitled to receive disability and other benefits at
least equal to the most favorable level of benefits available to disabled
employees and/or their families in accordance with the plans, programs and
policies maintained by the Company or its affiliates relating to disability at
any time during the 90-day period immediately preceding the Effective Date.
(c) Cause and Voluntary Termination. If, during the Retention Period,
the Executive's employment shall be terminated for Cause or voluntarily
terminated by the Executive (other than on account of Good Reason), the Company
shall pay the Executive the Accrued Obligations other than the Pro-rated Bonus
Obligation. Unless otherwise directed by the Executive (or, in the case of any
Qualified Plan, as may be required by such plan), the Executive shall be paid
all such Accrued Obligations in a lump sum in cash within 30 days of the Date of
Termination and the Company shall have no further obligations to the Executive
under this Agreement.
(d) Termination by Company other than for Cause or Disability and
Termination by Executive for Good Reason. (i) Lump Sum Payment. If, during the
Retention Period, the Company terminates the Executive's employment other than
for Cause or Disability, or the Executive terminates his employment for Good
Reason, the Company shall pay to the Executive in a lump sum in cash within 15
days after the Date of Termination the aggregate of the following amounts:
(A) if not theretofore paid, the Executive's Base Salary through the
Date of Termination at the rate specified in Section 5(a) of this
Agreement;
(B) a cash amount equal to three times the sum of
(1) the Executive's annual Base Salary at the rate specified in
Section 5(a) of this Agreement;
(2) the Annual Bonus; and
(3) an amount equal to the average annual compensation received
by the Executive (determined as the sum of the amount includable as
current income to the Executive for tax purposes plus any amount which
would have been so includable but for a deferral election) under the
Company's restricted stock plan over the three fiscal years prior to
the Change of Control; and
(4) the present value, calculated using the annual federal
short-term rate as determined under Section 1274(d) of the Code, of
(without duplication) (x) the annual cost to the Company (based on the
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premium rates or other costs to it) of obtaining coverage equivalent
to the coverage under the plans and programs described in Section 5(d)
of this Agreement, and (y) the annualized value of the fringe benefits
described under Section 5(f) of this Agreement;
provided, however, that with respect to the life and medical insurance
coverage referred to in Section 5(d) of this Agreement, at the Executive's
election made prior to the Date of Termination, the Company shall use its
best efforts to secure conversion coverage and shall pay the cost of such
coverage in lieu of paying the lump sum amount attributable to such life or
medical insurance coverage; and
(C) a cash amount equal to any amounts (other than amounts
payable to the Executive under any Qualified Plans) described in Sections
7(a)(iii) and (iv) of this Agreement.
(ii) Discharge of Company's Obligations. Subject to the performance
of its obligations under this Section 7(d), the Company shall have no further
obligations to the Executive in respect of any termination by the Executive for
Good Reason or by the Company other than for Cause or Disability, except to the
extent expressly provided under any of the plans referred to in Section 5(c) or
5(d) of this Agreement.
8. Non-exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
benefit, bonus, incentive or other plan or program provided by the Company or
any of its affiliated companies and for which the Executive may qualify, nor
shall anything herein limit or otherwise prejudice such rights as the Executive
may have under any stock option or other plans or agreements with the Company or
any of its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan or program of the
Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan or program.
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9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of
the Code (or any successor provision) or any interest or penalties are incurred
by the Executive with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes with respect to the Gross-Up Payment (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by Coopers &
Lybrand or such other nationally recognized accounting firm then auditing the
accounts of the Company (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change of Control, or is unwilling or unable to perform
its obligations pursuant to this Section 9, the Executive shall appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, determined pursuant to this Section
9, shall be paid by the Company to the Executive within five days of the receipt
of the Accounting Firm's determination. Any determination by the Accounting Firm
shall be binding upon the Company and the Executive. As a result of the
potential uncertainty in the application of Section 4999 of the Code (or any
successor provision) at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments which will not have been
made by the Company should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
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exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than 20 business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which he gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively
to contest such claim, and
(iv) permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing provisions of
this Section 9(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate
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courts, as the Company shall determine; provided, however, that if the Company
directs the Executive to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to the Executive, on an interest-free basis,
and shall indemnify and hold the Executive harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that any extension of
the statute of limitations relating to payment of taxes for the taxable year of
the Executive with respect to which such contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, the Company's control
of the contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Executive shall be entitled to settle
or contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 9(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 9(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Executive or others whether by reason of the
subsequent employment of the Executive or otherwise. In no event shall the
Executive be obligated to seek other employment by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement,
and no amount payable under this Agreement shall be reduced on account of any
compensation received by the Executive from other employment. In the event that
the Executive shall in good faith give a Notice of Termination for Good Reason
and it shall thereafter be determined by mutual consent of the Executive and the
Company or by a tribunal having jurisdiction over the matter that Good Reason
did not exist, the employment of the Executive shall, unless the Company and the
Executive shall otherwise
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mutually agree, be deemed to have terminated, at the date of giving such
purported Notice of Termination, by mutual consent of the Company and the
Executive and, except as provided in the last preceding sentence, the Executive
shall be entitled to receive only those payments and benefits which he would
have been entitled to receive at such date otherwise than under this Agreement.
11. Disputes; Legal Fees and Expenses. (a) Any dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively and finally by expedited arbitration, conducted before a single
arbitrator in New York, New York, in accordance with the rules governing
employment disputes then in effect of the American Arbitration Association and
the procedures set forth on Exhibit A hereto. The arbitrator shall be approved
by both the Company and the Executive. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
(b) In the event that any claim by the Executive under this Agreement
is disputed, the Company shall pay all reasonable legal fees and expenses
incurred by the Executive in pursuing such claim, provided that the Executive is
successful as to at least part of the disputed claim by reason of arbitration,
settlement or otherwise.
12. Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, (i) obtained by the Executive during
his employment by the Company or any of its affiliated companies and (ii) not
otherwise public knowledge (other than by reason of an unauthorized act by the
Executive). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company,
unless compelled pursuant to an order of a court or other body having
jurisdiction over such matter, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those designated by it.
In no event shall an asserted violation of the provisions of this Section 12
constitute a basis for deferring or withholding any amounts otherwise payable to
the Executive under this Agreement.
13. Employment Contract or Severance Benefits. Notwithstanding
anything else in this Agreement to the contrary, any amount payment to the
Executive hereunder on account of his termination of employment shall be reduced
on a dollar for dollar basis by each dollar actually paid to the Executive with
respect to such termination under the terms of any employment contract between
the Executive and the Company or under any severance program or policy
applicable to the Executive. Nothing in this Agreement shall be construed to
require duplication of any compensation, benefits or other entitlements provided
to the
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Executive by the Company under the terms of any employment contract which may
address similar matters.
14. Successors. (a) This Agreement is personal to the Executive
and, without the prior written consent of the Company, shall not be assignable
by the Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors. The Company shall require any successor to all
or substantially all of the business and/or assets of the Company, whether
direct or indirect, by purchase, merger, consolidation, acquisition of stock, or
otherwise, by an agreement in form and substance satisfactory to the Executive,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent as the Company would be required to perform if no such
succession had taken place.
15. Miscellaneous. (a) Applicable Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
applied without reference to principles of conflict of laws.
(b) Amendments. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
(c) Notices. All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive: at the address listed below
(with a copy to ____________ )
If to the Company: _____________________________
_____________________________
_____________________________
Attention: Secretary
(with a copy to the attention of
the General Counsel)
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
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(d) Tax Withholding. The Company may withhold from any amounts
payable under this Agreement such Federal, State or local taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(e) Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(f) Captions. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and the
Company has caused this Agreement to be executed in its name on its behalf, and
its corporate seal to be hereunto affixed and attested by its Corporate Counsel,
all as of the day and year first above written.
LORAL CORPORATION
By_______________________
Name:
Title:
EXECUTIVE:
_________________________
Address:
_________________________
_________________________
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EXHIBIT 99.6
LORAL CORPORATION
EMPLOYMENT PROTECTION PLAN
(EFFECTIVE JANUARY 7, 1996)
<PAGE>
LORAL CORPORATION
EMPLOYMENT PROTECTION PLAN
(Effective January 7, 1996)
Loral Corporation (the "Company") believes that the best interests of the
Company and its shareholders will be served if certain key employees of the
Company are provided with certain rights upon a Change of Control (as
hereinafter defined). Accordingly, the Company hereby establishes this "Loral
Corporation Employment Protection Plan" (the "Plan") for the benefit of such key
employees.
SECTION 1. DEFINITIONS
In addition to the terms defined in the preceding paragraph, the following
definitions shall apply for purposes of the Plan.
1.1. "Annual Bonus" means the greater of the two most recent fiscal year
bonuses (annualized, if awarded in respect of a partial year) awarded to an
Eligible Employee prior to a Change of Control under the bonus program of any
Loral Company applicable to such Executive.
1.2. "Annual Salary" means an Eligible Employee's annual rate of regular
salary as in effect immediately prior to the Change of Control.
1.3. "Board" means the Board of Directors of the Company.
1.4. "Cause" means any of the following, other than due to an Eligible
Employee's Permanent Disability or death:
(a) an Eligible Employee's gross misconduct which is demonstrably
willful and deliberate and which results in material damage to the
Company's business or reputation; or
(b) an Eligible Employee's repeated willful and deliberate neglect
of, or refusal to perform, the duties required or associated with the
Eligible Employee's employment.
1.5. "Change of Control" means the occurrence of any of the following
events: (i) any person (as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended from time to time (the "Exchange Act"), and as
used in Sections 13(d) and 14(d) thereof)), excluding the Company, any majority
owned subsidiary of the Company (a "Subsidiary") and any employee benefit plan
sponsored or maintained by the Company or any Subsidiary (including any trustee
of such plan acting as trustee), but including a "group" as defined in Section
13(d)(3) of the Exchange Act (a "Person"), becomes the beneficial owner of
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shares of the Company having at least 50% of the total number of votes that may
be cast for the election of directors of the Company (the "Voting Shares")
provided, however, that such an event shall not constitute a Change of Control
if such acquisition has been approved by a majority of the Incumbent Directors
(as defined in subsection 1.4 (iii)); (ii) the shareholders of the Company shall
approve any merger or other business combination of the Company, sale of the
Company's assets or combination of the foregoing transactions (a "Transaction")
other than a Transaction involving only the Company and one or more of its
Subsidiaries, a Transaction approved by a majority of the Incumbent Directors,
or a Transaction immediately following which the shareholders of the Company
immediately prior to the Transaction, excluding for this purpose any shareholder
owning directly or indirectly more than 10% of the shares of the other company
involved in the Transaction, continue to have a majority of the voting power in
the resulting entity, or (iii) within any 24-month period beginning on or after
January 7, 1996, the persons who were directors of the Company immediately
before the beginning of such period (the "Incumbent Directors") shall cease (for
any reason other than death) to constitute at least a majority of the Board or
the board of directors of any successor to the Company, provided that any
director who was not a director as of January 7, 1996 shall be deemed to be an
Incumbent Director if such director was elected to the Board by, or on the
recommendation of or with the approval of, at least two-thirds of the directors
who then qualified as Incumbent Directors either actually or by prior operation
of this subsection 1.4 (iii); provided, however, that no Change of Control shall
be deemed to occur as a result of the successful consummation of the "Offer" (as
defined in Section 1.1(a) of the Agreement and Plan of Merger Dated as of
January 7, 1996 By and Among the Company, Lockheed Martin Corporation and LAC
Acquisition Corporation), or upon the successful consummation of any transaction
which is approved by the Incumbent Directors and as a result of which Lockheed
Martin Corporation or any wholly owned subsidiary thereof acquires
substantially all of the Company's voting securities or substantially all of the
Company's defense businesses (the "Lockheed Martin Merger").
1.6. "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
1.7. "Committee" means the Compensation Committee of the Board.
1.8. "Common Stock" means the common stock of the Company, $.25 par value
per share.
1.9. "Company" means the Loral Corporation and any successor or successors
thereto.
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1.10. "Eligible Employee" means each full-time employee of either the
Company or another Loral Company whose name appears on Schedule A hereto.
1.11. "Eligible Termination" means an involuntary termination of employment
without Cause, or a resignation for Good Reason, which occurs as of or within
the three-year period following a Change of Control; provided, however, that the
transfer of employment to another employer that is a member of the Loral
Companies shall not in itself constitute an Eligible Termination (but any such
transfer will not preclude another or accompanying event or reason from
constituting or causing an Eligible Termination, and the protections of the Plan
and corresponding obligations of the Company will remain in effect following any
such transfer of employment).
1.12. "Good Reason" means any one or more of the following events, which
occurs without an Eligible Employee's express prior written consent or approval,
other than due to an Eligible Employee's Permanent Disability or death:
(i) a good faith determination by the Eligible Employee that the
Company or any of its officers has taken or failed to take any action
(including, without limitation, (A) exclusion of the Eligible Employee from
consideration of material matters within his area of responsibility, other
than an insubstantial or inadvertent exclusion remedied by the Company
promptly after receipt of notice thereof from the Eligible Employee, (B)
statements or actions which undermine the Eligible Employee's authority
with respect to persons under his supervision or reduce his standing with
his peers, other than an insubstantial or inadvertent statement or action
which is remedied by the Company promptly after receipt of the notice
thereof from the Eligible Employee, (C) a pattern of discrimination against
or harassment of the Eligible Employee or persons under his supervision and
(D) the subjection of the Eligible Employee to procedures not generally
applicable to other similarly situated executives) which changes the
Eligible Employee's position (including titles), authority or
responsibilities under Section 4 of this Agreement or reduces the Eligible
Employee's ability to carry out his duties and responsibilities under
Section 4 of this Agreement;
(ii) any reduction in an Eligible Employee's Annual Salary or any
material reduction in his annual bonus opportunity or employee benefits
from the level in effect immediately prior to the Change of Control, other
than an insubstantial or inadvertent failure remedied by the Company
promptly after receipt of notice thereof from the Eligible Employee; or
(iii) the Company's requiring the Eligible Employee to be
employed at any location more than 35 miles further
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from his principal residence than the location at which the Eligible
Employee was employed immediately preceding the Effective Date.
1.13. "Permanent Disability" means an Eligible Employee's inability, by
reason of any physical or mental impairment, to substantially perform the
significant aspects of his or her regular duties, which inability is reasonably
contemplated to continue for at least one (1) year from its incurrence.
1.14. "Plan" means the Loral Corporation Employment Protection Plan, as
set forth herein and as amended from time to time.
1.15. "Severance Period" means the period commencing on the date of an
Eligible Employee's Eligible Termination and continuing for a period of twenty-
four months.
1.16. "Loral Companies" means the Company and its subsidiaries and
affiliates, and any successor or successors thereto.
SECTION 2. EFFECT OF AN ELIGIBLE TERMINATION
2.1. If an Eligible Employee incurs an Eligible Termination, the
Eligible Employee shall be entitled to all applicable benefits provided
hereafter in this Section 2 or as otherwise set forth in this Plan.
(a) Salary and Bonus: Within two (2) business days after the date of his or
her Eligible Termination, the Company shall pay or cause to be paid to the
Eligible Employee a single lump sum amount, in cash, equal to two times the sum
of
(1) the Eligible Employee's Annual
Salary,
(2) the Eligible Employee's Annual Bonus, and
(3) an amount equal to the average annual compensation received by
the Eligible Employee (determined as the sum of the amount
includable as current income to the Eligible Employee for tax
purposes plus any amount which would have been so includable
but for a deferral election) under the Company's restricted
stock plan over the three fiscal years prior to the Change of
Control.
(b) Continued Welfare Benefits: Until the earlier of the end of an Eligible
Employee's Severance Period or the date on which such Eligible Employee becomes
employed by a new employer, the Company shall, at its expense, provide such
Eligible Employee with medical, dental, life insurance, disability and
accidental death and dismemberment benefits at the highest level provided to
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such Eligible Employee during the period beginning immediately prior to the
Change of Control and ending on the date of such Eligible Employee's Eligible
Termination; provided, however, that if the Eligible Employee becomes employed
by a new employer which maintains a major medical plan (or its equivalent) that
either (i) does not cover the Eligible Employee with respect to a pre-existing
condition which was covered under the Company's major medical plan, or (ii) does
not cover the Eligible Employee for a designated waiting period, the Eligible
Employee's coverage under the Company's major medical plan shall continue (but
shall be limited in the event of noncoverage due to a preexisting condition, to
the preexisting condition itself) until the earlier of the end of the applicable
period of noncoverage under the new employer's plan or the end of the Severance
Period. Following such Severance Period or the date of new employment, if
earlier, the regular rights of an Eligible Employee to continuation of benefits
under COBRA coverage, if any, shall apply.
(c) Payment of Accrued But Unpaid Amounts: Within two (2) business days after
the date of his or her Eligible Termination, the Company shall pay the Eligible
Employee (i) any unpaid portion of the Eligible Employee's bonus accrued with
respect to the full calendar year ended prior to the date of the Eligible
Termination, and (ii) all compensation earned or previously deferred by such
Eligible Employee but not yet paid (including cash compensation for vacation
days accrued but not taken as of the date of the Eligible Termination, based on
the Annual Salary amount converted to a per diem equivalent in accordance with
the Company's normal payroll practices as in effect prior to the Change of
Control).
(d) Payment for Other Reduced Severance Benefits. The amounts payable to an
Eligible Employee under this Section 2 are supplemental to any other severance
benefits to which the Eligible Employee is entitled under any severance plan or
Plan of the Loral Companies in effect as of the Change of Control (collectively,
"Other Severance Benefits"). In the event that an Eligible Employee's Other
Severance Benefits are reduced or eliminated after the Change of Control, the
amount otherwise payable to an Eligible Employee hereunder upon an Eligible
Termination shall be increased by the amount of such reduction or elimination.
2.2. Maximum Benefits: Anything in Section 2.1 to the contrary
notwithstanding, payments under Section 2.1 shall not exceed the maximum amount
which can be paid to an Eligible Employee without causing such payments to be
treated as "excess parachute payments" for purposes of Section 280G of the Code
taking into account all payments made to the Eligible Employee which constitute
"parachute payments" for purposes of Section 280G.
2.3 Mitigation: An Eligible Employee shall not be required to
mitigate damages or the amount of any payment provided for
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under this Plan by seeking other employment or otherwise, and compensation
earned from such employment or otherwise shall not reduce the amounts otherwise
payable under this Plan. No amounts payable under this Plan shall be subject to
reduction or offset in respect of any claims which the Company or any member of
the Loral Companies (or any other person or entity) may have against the
Eligible Employee.
2.4. Withholding: The Company may, to the extent required by law, withhold
applicable federal and state income, employment and other taxes from any
payments due to any Eligible Employee hereunder.
SECTION 3. LIMITS ON AMENDMENT OR TERMINATION; EFFECT ON
OTHER PLANS
3.1. This Plan shall terminate automatically and without further action by
the Board upon the successful consummation of the Lockheed Martin Merger.
3.2. The Board may amend or terminate this Plan at any time; provided,
however, that upon occurrence of a Change of Control, this Plan (expressly
including, but not limited to, this Section 3) shall remain in effect, and may
not be altered or amended in any way which would adversely affect the rights of
any Eligible Employee hereunder, for at least three (3) years following the
Change of Control, and for such additional time as may be necessary to give
effect to the terms of the Plan as in effect at the Change of Control.
Thereafter, the Board may amend or terminate this Plan in any manner which does
not adversely affect the rights of any Eligible Employee who has incurred an
Eligible Termination.
3.3. An Eligible Employee shall, after the date of his or her Eligible
Termination, retain all rights (to the extent any such rights existed at any
time prior to the Change of Control) to indemnification under applicable law or
under the applicable Loral Companies' Certificate of Incorporation or By-Laws,
as they may be amended or restated from time to time. In addition, to the
extent coverage had been otherwise available to the Eligible Employee prior to
the Change of Control, the Company shall maintain Director's and Officer's
liability insurance on behalf of the Eligible Employee, at the level in effect
immediately prior to the date of his or her Eligible Termination.
SECTION 4. ADMINISTRATION OF THE PLAN
4.1. The Committee shall be the Administrator of this Plan and shall have
the exclusive right, power and authority to:
(a) interpret, in its sole discretion, any and all of the
provisions of the Plan;
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(b) establish a claims review procedure, if necessary and
advisable; and
(c)
consider and decide conclusively any questions (whether of fact
or otherwise) arising in connection with the administration of the
Plan or any claim for a benefit arising under the Plan.
Any decision or action of the Committee pursuant to this Section 4.1 shall be
conclusive and binding.
4.2. The Company shall pay all costs and expenses, including
attorneys' fees and disbursements, at least monthly, of any Eligible Employee in
connection with any legal proceeding (including arbitration), whether or not
instituted by a member of the Loral Companies or an Eligible Employee, relating
to the interpretation or enforcement of any provision of this Plan, except that
if such Eligible Employee instituted the proceeding and the judge, arbitrator or
other individual presiding over the proceeding affirmatively finds that the
Eligible Employee instituted the proceeding in bad faith, the Eligible Employee
shall pay all costs and expenses, including attorney's fees and disbursements,
of such Eligible Employee.
SECTION 5. MISCELLANEOUS
5.1. Neither the establishment of the Plan nor any action of the
Company, any other member of the Loral Companies, the Committee, or any
fiduciary shall be held or construed to confer upon any person any legal right
to continued employment with the Company or with any member of the Loral
Companies.
Nothing in the Plan shall be construed to prevent the Company or any member
of the Loral Companies from terminating an Eligible Employee's employment for
Cause. If an Eligible Employee is terminated for Cause, the Company shall have
no obligation to make any payments under this Plan, except for payments that may
otherwise be payable under then existing Employee benefit plans, Plans and
arrangements of the Company or of any other member of the Loral Companies.
5.2. Benefits payable under the Plan shall be paid out of the general
assets of the Company. The Company is not required to fund the benefits payable
under this Plan; provided, however, nothing in this Section 5.2 shall be
interpreted as precluding the Company from funding or setting aside amounts in
anticipation of paying any such benefits.
5.3. Benefits payable under the Plan shall not be subject to
assignment, alienation, transfer, pledge, encumbrance, commutation or
anticipation by any Eligible Employee. Any attempt to assign, alienate,
transfer, pledge, encumber, commute or anticipate Plan benefits shall be void.
In addition, no rights or interest under the Plan shall be in any manner subject
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to levy, attachment or other legal process to enforce payment of any claim
against any Eligible Employee except to the extent required by law.
5.4. Except as otherwise provided herein, this Plan shall be binding upon,
inure to the benefit of and be enforceable by the Company and the Eligible
Employees and their respective heirs, legal representatives, successors and
assigns. If the Company shall be merged into or consolidated with another
entity, the provisions of this Plan shall be binding upon and inure to the
benefit of the entity surviving such merger or resulting from such
consolidation, and such provisions shall also be binding upon and inure to the
benefit of any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of the Company, and such successor shall assume and perform the
obligations, responsibilities and liabilities to which the Company or any member
of the Loral Companies is subject under this Plan in the same manner and to the
same extent that the Company or any member of the Loral Companies would be
required to perform if no such succession had taken place. The provisions of
this Section 5.4 shall continue to apply to each subsequent employer of any
Eligible Employee in the event of any subsequent merger, consolidation or
transfer of assets of any such subsequent employer.
5.5. This Plan shall be governed by and construed in accordance with the
laws of the State of New York (without reference to rules relating to conflicts
of laws), except to the extent superseded by applicable federal law.
5.6. Any action required or permitted to be taken by the Company under this
Plan shall be taken by the Board or by the Committee, or any designee of the
Committee pursuant to Section 4, in each case subject to the limits on amendment
and termination contained in Section 3 hereof.
5.7. Entitlement to any benefits under this Plan is expressly subject to
and conditioned upon the Eligible Employee agreeing to and signing (i) a
customary exit letter that may contain confidentiality, future cooperation and
other provisions, if requested, and (ii) the Company's standard form general
release of employment and other claims that the Eligible Employee may have.
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Exhibit 99.7
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
DATED AS OF JANUARY 7, 1996
BY AND AMONG
LORAL CORPORATION,
LOCKHEED MARTIN CORPORATION
AND
LAC ACQUISITION CORPORATION
<PAGE>
ARTICLE I
THE OFFER
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<C> <S> <C>
Section 1.1. The Offer................................................. 2
Section 1.2. Company Actions........................................... 3
Section 1.3. Stockholder Lists......................................... 3
Section 1.4. Composition of the Board of Directors; Section 14(f)...... 3
ARTICLE II
THE MERGER
Section 2.1. The Merger................................................ 3
Section 2.2. Effective Time............................................ 4
Section 2.3. Effects of the Merger..................................... 4
Section 2.4. Certificate of Incorporation and By-Laws.................. 4
Section 2.5. Directors................................................. 4
Section 2.6. Officers.................................................. 4
Section 2.7. Conversion of Shares...................................... 4
Section 2.8. Reserved.................................................. 4
Section 2.9. Conversion of Purchaser's Common Stock.................... 4
Section 2.10. Stock Options and Stock Awards........................... 4
Section 2.11. Stockholders' Meeting..................................... 5
Section 2.12. Filing of Certificate of Merger........................... 6
ARTICLE III
DISSENTING SHARES; EXCHANGE OF SHARES
Section 3.1. Dissenting Shares......................................... 6
Section 3.2. Exchange of Shares........................................ 6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.1. Organization.............................................. 7
Section 4.2. Capitalization............................................ 7
Section 4.3. Authority Relative to this Agreement...................... 8
Section 4.4. Consents and Approvals; No Violations..................... 8
Section 4.5. Absence of Certain Changes................................ 9
Section 4.6. No Undisclosed Liabilities................................ 9
Section 4.7. Reports................................................... 9
Schedule 14D-9; Offer Documents; Form 10; Information
Section 4.8. Statement................................................. 10
Section 4.9. No Default................................................ 10
Section 4.10. Litigation; Compliance with Law........................... 11
Section 4.11. Employee Benefit Plans; ERISA............................. 11
</TABLE>
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Section 4.12. Assets; Intellectual Property............................... 12
Section 4.13. Reserved.................................................... 12
Section 4.14. Reserved.................................................... 12
Section 4.15. Certain Contracts and Arrangements.......................... 12
Section 4.16. Taxes....................................................... 12
Section 4.17. Retained Business FCC Licenses.............................. 14
Section 4.18. Labor Matter................................................ 14
Section 4.19. Rights Agreement............................................ 14
Section 4.20. Certain Fees................................................ 14
Section 4.21. No Additional Approvals Necessary........................... 14
Section 4.22. Materiality................................................. 14
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Section 5.1. Organization................................................ 14
Section 5.2. Authority Relative to this Agreement........................ 15
Section 5.3. Consents and Approvals; No Violations....................... 15
Section 5.4. Information Statement; Schedule 14D-9....................... 15
Section 5.5. Sufficient Funds............................................ 16
Section 5.6. Brokers..................................................... 16
ARTICLE VI
COVENANTS
Section 6.1. Conduct of Business of the Company.......................... 16
Section 6.2. Acquisition Proposals....................................... 18
Section 6.3. Access to Information....................................... 19
Section 6.4. Reasonable Efforts.......................................... 19
Section 6.5. Consents.................................................... 20
Section 6.6. Antitrust Filings........................................... 20
Section 6.7. Public Announcements........................................ 21
Section 6.8. Employee Agreements......................................... 21
Section 6.9. Employee Benefits........................................... 23
Section 6.10. Ancillary Agreements; Spin-Off.............................. 23
Section 6.11. Retained Business Financial Statements...................... 24
Section 6.12. Redemption of Rights........................................ 24
Section 6.13. Pre-Closing Consultation.................................... 24
Section 6.14. Indemnification............................................. 24
Section 6.15 Board of Directors of Parent................................ 25
Section 6.16 Standstill Provisions....................................... 25
Section 6.17 Effectiveness of Rights Agreement........................... 25
</TABLE>
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ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
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Conditions to Each Party's Obligation to Effect the
Section 7.1. Merger.................................................... 26
Conditions to the Obligation of the Company to Effect the
Section 7.2. Merger.................................................... 26
Conditions to Obligations of Parent and Purchaser to
Section 7.3. Effect the Merger......................................... 26
Section 7.4. Exception................................................. 27
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
Section 8.1. Termination............................................... 27
Section 8.2 Effect of Termination..................................... 28
Section 8.3 Fees and Expenses......................................... 28
Section 8.4. Amendment................................................. 29
Section 8.5. Extension; Waiver......................................... 30
ARTICLE IX
MISCELLANEOUS
Section 9.1. Survival.................................................. 30
Section 9.2. Entire Agreement.......................................... 30
Section 9.3. Governing Law............................................. 30
Section 9.4. Notices................................................... 30
Section 9.5. Successors and Assigns; No Third Party Beneficiaries...... 31
Section 9.6. Counterparts.............................................. 31
Section 9.7. Interpretation............................................ 31
Section 9.8. Schedules................................................. 32
Section 9.9. Legal Enforceability...................................... 32
Section 9.10. Specific Performance...................................... 32
Section 9.11. Brokerage Fees and Commissions............................ 32
</TABLE>
iii
<PAGE>
EXHIBITS
Exhibit A................................................. Tax Sharing Agreement
Exhibit B................................................... Conditions to Offer
Exhibit C............................... Form of Employment Protection Agreement
Exhibit D............................................ Employment Protection Plan
Exhibit E........................................ Supplemental Severance Program
iv
<PAGE>
TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM SECTION NO.
- ---- -----------------
<S> <C> <C>
1987 Plan..................................................... 2.10(b)
Active Negotiations........................................... 8.3(e)
Acquisition Proposal.......................................... 6.2(b)
Ancillary Agreements.......................................... Recitals
Antitrust Law................................................. 6.6(e)
Asset................................................. Distribution Agreement
Audit......................................................... 4.16(j)(1)
Business Day.......................................... Distribution Agreement
Certificates.................................................. 3.2(b)
Code.......................................................... 4.11(a)
Commission.................................................... 4.4
Company....................................................... Recitals
Company Bonus Employee........................................ 6.8(c)
Company Representative........................................ 6.13
Company SEC Documents......................................... 4.7(a)
Confidentiality Agreement..................................... 6.2(a)
Continuing Director........................................... 8.4
Contracting Subsidiary........................................ 4.3
Credit Agreement.............................................. 4.9
Defense Financial Statements.................................. 4.7(c)
Designated Directors.......................................... 8.4
Disclosure Schedule........................................... 4.2(a)
Dissenting Shares............................................. 3.1
Distribution Agreement........................................ Recitals
Distribution Date..................................... Distribution Agreement
EC Merger Regulations......................................... 4.4
Effective Time................................................ 2.2
Employment Agreements......................................... 6.8(a)
Employment Protection Arrangement............................. 6.8(e)
ERISA......................................................... 4.11(a)
ERISA Affiliate............................................... 4.11(a)
Exchange Act.................................................. 4.4
Exchange Agent................................................ 3.2(a)
Form 10-K..................................................... 4.5
Higher Offer.................................................. 8.3(b)
HSR Act....................................................... 4.4
IB............................................................ 8.3(b)(v)
Important Licenses............................................ 4.17
Information Statement......................................... 2.11(b)
Intellectual Property......................................... 4.12(b)
IRS........................................................... 4.11(a)
LAH........................................................... Recitals
Law................................................... Distribution Agreement
Liabilities........................................... Distribution Agreement
Lien.................................................. Distribution Agreement
Material Adverse Effect....................................... 4.1, 5.1
Merger........................................................ 2.1
Merger Price.................................................. 2.7(a)
NYBCL......................................................... 1.2
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
TERM SECTION NO.
- ---- ---------------------
<S> <C> <C>
Offer..................................................... 1.1(a)
Offer Documents........................................... 1.1(d)
Order..................................................... 6.6(b)
Ordinary Course Obligations............................... 6.1
Parent.................................................... Recitals
Parent Representative..................................... 6.13
PBGC...................................................... 4.11(b)
Person........................................ Distribution Agreement, 8.3(b)
Plans..................................................... 4.11(a)
Preferred Stock........................................... 4.2(a)
Public Indenture Merger Opinions.......................... 7.3(b)
Public Indentures......................................... 4.9
Purchaser................................................. Recitals
Recent SEC Documents...................................... 4.10(b)
Record Date................................... Distribution Agreement
Retained Business......................................... 4.1
Retained Business Financial Statements.................... 6.11
Retained Employees............................ Distribution Agreement
Retained Subsidiaries..................................... 4.1
Rights Agreement.......................................... 4.19
Rights Amendment.......................................... 4.19
Schedule 14D-9............................................ 1.2
SEC....................................................... 1.1(d)
Securities Act............................................ 4.4
Severance Agreements...................................... 6.8(a)
Shares.................................................... 1.1(a)
Significant Adverse Effect................................ 6.6(b)
Spin-Off.................................................. Recitals
Spinco.................................................... Recitals
Spinco Bonus Employee..................................... 6.8(c)
Spinco Business............................... Distribution Agreement
Spinco Common Stock........................... Distribution Agreement
Spinco Companies.............................. Distribution Agreement
Standstill Provisions..................................... 6.2(a)
Stock Options............................................. 2.10(a)
Stockholders' Meeting..................................... 2.11(a)
Subsidiaries.................................. Distribution Agreement
Supplemental Severance Plan............................... 6.9(a)
Surviving Corporation..................................... 2.1
Taxes..................................................... 4.16(j)(2)
Tax Returns............................................... 4.16(j)(3)
Tax Sharing Agreement..................................... Recitals
Third Party............................................... 8.3(b)
Third Party Acquisition................................... 8.3(b)
Transaction Bonus......................................... 6.8(d)
Transaction Bonus Employee................................ 6.8(d)
Vesting Date.............................................. 2.10(a)
</TABLE>
vi
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of January 7, 1996, is among
LOCKHEED MARTIN CORPORATION, a Maryland corporation ("PARENT"), LAC
ACQUISITION CORPORATION, a New York corporation and a wholly-owned subsidiary
of Parent ("PURCHASER"), and LORAL CORPORATION, a New York corporation (the
"COMPANY").
RECITALS
WHEREAS, the Boards of Directors of the Company, Parent and Purchaser deem
it advisable and in the best interests of their respective stockholders that
Parent acquire the Company (other than certain businesses thereof) pursuant to
the terms and conditions set forth in this Agreement;
WHEREAS, as provided in the Restructuring, Financing and Distribution
Agreement dated as of the date hereof herewith among Parent, the Company,
Loral Telecommunications Acquisition, Inc. (to be renamed Spinco &
Communications Corporation), a Delaware corporation and wholly-owned
subsidiary of the Company (including any successor in interest, "SPINCO"),
Loral Aerospace Holdings, Inc., a Delaware corporation and wholly-owned
subsidiary of the Company ("LAH"), and Loral Aerospace Corp., a Delaware
corporation and wholly-owned subsidiary of LAH (the "DISTRIBUTION AGREEMENT"),
prior to the expiration of the Offer (as defined in Section 1.1 hereof) the
Company will cause Spinco to be restructured so that as a result thereof the
Company's direct and indirect interests in Space Systems/Loral, Inc., a
Delaware corporation, Globalstar L.P., a Delaware limited partnership, K&F
Industries, Inc., a Delaware corporation, all rights to receive management and
certain (but not all) guarantee fees therefrom, several commercial satellite
and telecommunications projects in progress (including related FCC (as defined
in Section 6.5 hereof) applications), a certain portion of the Company's
leased corporate headquarters office space, the Company's corporate aircraft,
certain rights and liabilities with respect to certain litigation in which the
Company has an interest, the nonexclusive right to use certain intellectual
property of the Company, the exclusive right, subject to a limited license
granted to the Company, to the "Loral" name and such other rights and assets
as shall be deemed Spinco Assets (as defined in the Distribution Agreement),
will be owned directly or indirectly by Spinco and substantially all of the
Company's other assets, liabilities and businesses will be owned directly by
the Company or by Subsidiaries (as defined in the Distribution Agreement) of
the Company other than Spinco and Subsidiaries of Spinco; and
WHEREAS, as provided in the Distribution Agreement, the Company will make a
distribution to the Company's stockholders and to holders of Stock Options (as
defined in Section 2.10 hereof) as of the Record Date (as defined in the
Distribution Agreement), on a pro rata basis, of 100% of the shares of common
stock, par value $.01 per share, of Spinco issued and outstanding immediately
prior to such distribution (the "SPIN-OFF"); and
WHEREAS, as set forth in Section 6.10 hereof, as a condition to and in
consideration of the transactions contemplated hereby, following the date
hereof (a) the Company, Spinco and certain other parties will enter into a Tax
Sharing Agreement substantially in the form attached hereto as Exhibit A with
such changes as shall have been approved prior to the consummation of the
Offer by the Company and Parent (or, following the consummation of the Offer,
by a majority of the Continuing Directors (as defined in Section 8.4 hereof),
if any, and Parent) (the "TAX SHARING AGREEMENT" and, together with the
Distribution Agreement, hereafter are collectively referred to as the
"ANCILLARY AGREEMENTS");
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, Parent, Purchaser and the Company hereby agree as
follows:
1
<PAGE>
ARTICLE I
THE OFFER
SECTION 1.1. THE OFFER.
(a) Subject to this Agreement not having been terminated in accordance with
the provisions of Section 8.1 hereof, Purchaser shall, and Parent shall cause
Purchaser to, as promptly as practicable, but in no event later than five
Business Days (as defined in the Distribution Agreement) from the date of the
public announcement of the terms of this Agreement, commence an offer to
purchase for cash (as it may be amended in accordance with the terms of this
Agreement, the "OFFER") all of the Company's outstanding shares of common
stock, par value $.25 per share, together with all preferred stock purchase
rights associated therewith (the "SHARES"), subject to the conditions set
forth in Exhibit B attached hereto, at a price of not less than $38.00 per
Share, net to the seller in cash. Subject only to the conditions set forth in
Exhibit B hereto and the express provisions of the Distribution Agreement, the
Purchaser shall, and Parent shall cause Purchaser to, (i) accept for payment
and pay for all Shares tendered pursuant to the terms of the Offer as promptly
as practicable following the expiration date of the Offer, and (ii) extend the
period of time the Offer is open until the first Business Day following the
date on which the conditions set forth in clause (i)(A) and clause (i)(B) of
Exhibit B hereto are satisfied or waived in accordance with the provisions
thereof; provided, that the Purchaser shall be permitted, but shall not be
obligated, to extend the period of time the Offer is open beyond June 30,
1996. Subject to the preceding sentence of this Section 1.1, neither Purchaser
nor Parent will extend the expiration date of the Offer beyond the twentieth
Business Day following commencement thereof unless one or more of the
conditions set forth in Exhibit B hereto shall not be satisfied or unless
Parent reasonably determines that such extension is necessary to comply with
any legal or regulatory requirements relating to the Offer or the Spin-Off.
Purchaser expressly reserves the right to amend the terms or conditions of the
Offer; provided, that without the consent of the Company, no amendment may be
made which (i) decreases the price per Share or changes the form of
consideration payable in the Offer, (ii) decreases the number of Shares
sought, or (iii) imposes additional conditions to the Offer or amends any
other term of the Offer in any manner materially adverse to the holders of
Shares. Upon the terms and subject to the conditions of the Offer, the
Purchaser will accept for payment and purchase, as soon as permitted under the
terms of the Offer, all Shares validly tendered and not withdrawn prior to the
expiration of the Offer.
(b) Parent will not, nor will it permit any of its affiliates to, tender
into the Offer any Shares beneficially owned by it; provided, that Shares held
beneficially or of record by any plan, program or arrangement sponsored or
maintained for the benefit of employees of Parent or any of its Subsidiaries
shall not be deemed to be held by Parent or an affiliate thereof regardless of
whether Parent has, directly or indirectly, the power to vote or control the
disposition of such Shares. The Company will not, nor will it permit any of
its Subsidiaries (other than Retained Subsidiaries (as defined in Section 4.1
hereof)) to, tender into the Offer any Shares beneficially owned by it;
provided, that Shares held beneficially or of record by any plan, program or
arrangement sponsored or maintained for the benefit of employees of the
Company or any of its Subsidiaries shall not be deemed to be held by the
Company regardless of whether the Company has, directly or indirectly, the
power to vote or control the disposition of such Shares.
(c) Notwithstanding anything to the contrary contained in this Agreement,
Parent and Purchaser shall not be required to commence the Offer in any
foreign country where the commencement of the Offer, in Parent's reasonable
opinion, would violate the applicable Law (as defined in the Distribution
Agreement) of such jurisdiction.
(d) On the date of the commencement of the Offer, Purchaser shall file with
the Securities and Exchange Commission (the "SEC") a Tender Offer Statement on
Schedule 14D-1 with respect to the Offer which will contain an offer to
purchase and form of the related letter of transmittal (together with any
supplements or amendments thereto, the "OFFER DOCUMENTS"). The Company and its
counsel shall be given a reasonable opportunity to review and comment on the
Offer Documents prior to the filing of such Offer Documents with the SEC.
Purchaser agrees to provide the Company and its counsel in writing with any
comments Purchaser and its counsel may receive from the SEC or its staff with
respect to the Offer Documents promptly after the receipt thereof.
2
<PAGE>
SECTION 1.2. COMPANY ACTIONS. The Company hereby consents to the Offer and
represents that its Board of Directors (at a meeting duly called and held) has
unanimously (a) determined as of the date hereof that the Offer, the Merger
(as defined in Section 2.1 hereof) and the Spin-Off are fair to the
stockholders of the Company and are in the best interests of the stockholders
of the Company and (b) resolved to recommend acceptance of the Offer and
approval and adoption of this Agreement and the Merger by the stockholders of
the Company which approval constitutes approval of each of the transactions
contemplated by this Agreement for purposes of Sections 902 and 912 of the New
York Business Corporation Law ("NYBCL"). The Company further represents that
Lazard Freres & Co. LLC has delivered to the Board of Directors of the Company
its opinion that the consideration to be received by the holders of Shares in
the Offer, the Merger and the Spin-Off is fair to the holders of the Company's
common stock from a financial point of view. The Company hereby agrees to file
a Solicitation/Recommendation Statement on Schedule 14D-9 (the "SCHEDULE 14D-
9") containing such recommendation with the SEC (and the information required
by Section 14(f) of the Exchange Act if Parent shall have furnished such
information to the Company in a timely manner) and to mail such Schedule 14D-9
to the stockholders of the Company; provided, that subject to the provisions
of Section 6.2(a) hereof, such recommendation may be withdrawn, modified or
amended. Such Schedule 14D-9 shall be, if so requested by Purchaser, filed on
the same date as Purchaser's Schedule 14D-1 is filed and mailed together with
the Offer Documents; provided, that in any event the Schedule 14D-9 shall be
filed and mailed no later than 10 Business Days following the commencement of
the Offer. Purchaser and its counsel shall be given a reasonable opportunity
to review and comment on such Schedule 14D-9 prior to the Company's filing of
the Schedule 14D-9 with the SEC. The Company agrees to provide Parent and its
counsel in writing with any comments the Company or its counsel may receive
from the SEC or its staff with respect to such Schedule 14D-9 promptly after
the receipt thereof.
SECTION 1.3. STOCKHOLDER LISTS. In connection with the Offer, at the request
of Parent or Purchaser, from time to time after the date hereof, the Company
will promptly furnish Purchaser with mailing labels, security position
listings and any available listing or computer file containing the names and
addresses of the record holders of the Shares as of a recent date and shall
furnish Purchaser with such information and assistance as Purchaser or its
agents may reasonably request in communicating the Offer to the record and
beneficial holders of Shares.
SECTION 1.4. COMPOSITION OF THE BOARD OF DIRECTORS; SECTION 14(F). In the
event that Purchaser acquires at least a majority of the Shares outstanding
pursuant to the Offer, Parent shall be entitled to designate for appointment
or election to the Company's Board of Directors, upon written notice to the
Company, such number of persons so that the designees of Parent constitute the
same percentage (but in no event less than a majority) of the Company's Board
of Directors (rounded up to the next whole number) as the percentage of Shares
acquired in connection with the Offer. Prior to consummation of the Offer, the
Board of Directors of the Company will obtain the resignation of such number
of directors as is necessary to enable such number of Parent designees to be
so elected. In connection therewith, the Company will mail to the stockholders
of the Company the information required by Section 14(f) of the Exchange Act
and Rule 14f-1 thereunder unless such information has previously been provided
to such stockholders in the Schedule 14D-9. Parent and Purchaser will provide
to the Company in writing, and be solely responsible for, any information with
respect to such companies and their nominees, officers, directors and
affiliates required by such Section and Rule. Notwithstanding the provisions
of this Section 1.4, the parties hereto shall use their respective best
efforts to ensure that at least three of the members of the Company's Board of
Directors shall, at all times prior to the Effective Time (as defined in
Section 2.2 hereof) be, Continuing Directors (as defined in Section 8.4
hereof).
ARTICLE II
THE MERGER
SECTION 2.1. THE MERGER. Upon the terms and subject to the conditions
hereof, and in accordance with the NYBCL, Purchaser shall be merged (the
"MERGER") with and into the Company as soon as practicable following the
satisfaction or waiver of the conditions set forth in Article VII hereof or on
such other date as the parties
3
<PAGE>
hereto may agree (such agreement to require the approval of a majority of the
Continuing Directors if at the time there shall be any Continuing Directors).
Following the Merger the Company shall continue as the surviving corporation
(the "SURVIVING CORPORATION") and the separate corporate existence of
Purchaser shall cease.
SECTION 2.2. EFFECTIVE TIME. The Merger shall be consummated by filing with
the New York Secretary of State a certificate of merger or, if applicable, a
certificate of ownership and merger, executed in accordance with the relevant
provisions of the NYBCL (the time the Merger becomes effective being the
"EFFECTIVE TIME").
SECTION 2.3. EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in the NYBCL. As of the Effective Time the Company shall be a wholly-
owned subsidiary of Parent.
SECTION 2.4. CERTIFICATE OF INCORPORATION AND BY-LAWS. The Restated
Certificate of Incorporation and By-Laws of the Company as in effect at the
Effective Time, shall be the Certificate of Incorporation and By-Laws of the
Surviving Corporation until amended in accordance with applicable Law;
provided, that promptly following the Effective Time, the Certificate of
Incorporation shall be amended to change the name of the Surviving Corporation
so that the word "Loral" shall be deleted therefrom.
SECTION 2.5. DIRECTORS. The directors of Purchaser at the Effective Time
shall be the initial directors of the Surviving Corporation and will hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualify in the manner provided in the Certificate of
Incorporation and By-Laws of the Surviving Corporation, or as otherwise
provided by Law.
SECTION 2.6. OFFICERS. The officers of Purchaser at the Effective Time shall
be the initial officers of the Surviving Corporation and will hold office from
the Effective Time until their respective successors are duly elected or
appointed and qualify in the manner provided in the Certificate of
Incorporation and By-Laws of the Surviving Corporation, or as otherwise
provided by Law.
SECTION 2.7. CONVERSION OF SHARES. At the Effective Time:
(a) Each Share issued and outstanding immediately prior to the Effective
Time (other than Shares held in the treasury of the Company or held by any
Subsidiary of the Company (other than a Retained Subsidiary), and other than
Dissenting Shares (as defined in Section 3.1 hereof)) shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive $38.00 in cash, or any higher price paid per Share
in the Offer (the "MERGER PRICE"), payable to the holder thereof, without
interest thereon, upon the surrender of the certificate formerly representing
such Share (except as provided in Section 2.10(c) hereof).
(b) Each Share held in the treasury of the Company or held by any Subsidiary
of the Company (other than a Retained Subsidiary) and each Share held by
Parent or any Subsidiary of Parent immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the
holder thereof, be cancelled and retired and cease to exist; provided, that
Shares held beneficially or of record by any plan, program or arrangement
sponsored or maintained for the benefit of employees of Parent or the Company
or any Subsidiaries thereof shall not be deemed to be held by Parent or the
Company regardless of whether Parent or the Company has, directly or
indirectly, the power to vote or control the disposition of such Shares.
SECTION 2.8. RESERVED.
SECTION 2.9. CONVERSION OF PURCHASER'S COMMON STOCK. Each share of common
stock, par value $.01 per share, of Purchaser issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into and
exchangeable for one share of common stock of the Surviving Corporation.
SECTION 2.10. STOCK OPTIONS AND STOCK AWARDS.
(a) The Company shall take all actions (including, but not limited to,
obtaining any and all consents from employees to the matters contemplated by
this Section 2.10) necessary to provide that all outstanding options and other
rights to acquire Shares ("STOCK OPTIONS") granted under any stock option
plan, program or similar
4
<PAGE>
arrangement of the Company or any Subsidiaries, each as amended (the "OPTION
PLANS"), shall become fully exercisable and vested on the date (the "VESTING
DATE") which shall be set by the Company and which, in any event, shall be not
less than 30 days prior to the consummation of the Offer, whether or not
otherwise exercisable and vested. All Stock Options which are outstanding
immediately prior to Purchaser's acceptance for payment and payment for Shares
tendered pursuant to the Offer shall be cancelled as of the consummation of
the Offer and the holders thereof (other than holders who are subject to the
reporting requirements of Section 16(a) of the Exchange Act) shall be entitled
to receive from the Company, for each Share subject to such Stock Option, (1)
an amount in cash equal to the difference between the Merger Price and the
exercise price per share of such Stock Option, which amount shall be payable
upon consummation of the Offer, plus (2) one share of Loral Space Common Stock
(as defined in the Distribution Agreement), which shall be held by an escrow
agent pending delivery on the Distribution Date. All applicable withholding
taxes attributable to the payments made hereunder or to distributions
contemplated hereby shall be deducted from the amounts payable under clause
(1) above and all such taxes attributable to the exercise of Stock Options on
or after the Vesting Date shall be withheld from the proceeds received in the
Offer or the Merger, as the case may be, in respect of the Shares issuable on
such exercise.
(b) The Company shall take all actions (including, but not limited to,
obtaining any and all consents from employees to the matters contemplated by
this Section 2.10) necessary to provide that all restrictions on
transferability with respect to each Share which is granted pursuant to the
Company's 1987 Restricted Stock Purchase Plan (the "1987 PLAN") and which is
outstanding and not vested on the Vesting Date shall lapse, and each such
Share shall become free of restrictions as of the Vesting Date. All applicable
withholding taxes attributable to the vesting of restricted Shares shall be
withheld from the proceeds received in respect of such Shares in the Offer or
the Merger, as the case may be.
(c) Except as provided herein or as otherwise agreed to by the parties and
to the extent permitted by the Option Plans and the 1987 Plan, (i) the Option
Plans and the 1987 Plan shall terminate as of the Effective Time and the
provisions in any other plan, program or arrangement, providing for the
issuance or grant by the Company or any of its Subsidiaries of any interest in
respect of the capital stock of the Company or any of its Subsidiaries shall
be deleted as of the Effective Time and (ii) the Company shall use all
reasonable efforts to ensure that following the Effective Time no holder of
Stock Options or any participant in the Option Plans or any other such plans,
programs or arrangements shall have any right thereunder to acquire any equity
securities of the Company, the Surviving Corporation or any Subsidiary
thereof.
SECTION 2.11. STOCKHOLDERS' MEETING. If required by applicable Law in order
to consummate the Merger, the Company, acting through its Board of Directors,
shall, in accordance with applicable Law, its Restated Certificate of
Incorporation and By-Laws and the rules and regulations of the New York Stock
Exchange:
(a) duly call, give notice of, convene and hold a special meeting of its
stockholders as soon as practicable following the consummation of the Offer
for the purpose of considering and taking action upon this Agreement (the
"STOCKHOLDERS' MEETING");
(b) subject to its fiduciary duties under applicable Laws as advised by
counsel, include in the Information Statement prepared by the Company for
distribution to stockholders of the Company in advance of the Stockholders'
Meeting in accordance with Regulation 14C promulgated under the Exchange Act
(the "INFORMATION STATEMENT") the recommendation of its Board of Directors
referred to in Section 1.2 hereof; and
(c) use its best efforts to (i) obtain and furnish the information required
to be included by it in the Information Statement, and, after consultation
with Parent, respond promptly to any comments made by the SEC with respect to
the Information Statement and any preliminary version thereof and cause the
Information Statement to be mailed to its stockholders following the
consummation of the Offer and (ii) obtain the necessary approvals of this
Agreement by its stockholders.
Parent will provide the Company with the information concerning Parent and
Purchaser required to be included in the Information Statement and will vote,
or cause to be voted, all Shares owned by it or its Subsidiaries in favor of
approval and adoption of this Agreement.
5
<PAGE>
SECTION 2.12. FILING OF CERTIFICATE OF MERGER. Upon the terms and subject to
the conditions hereof, as soon as practicable following the satisfaction or
waiver of the conditions set forth in Article VII hereof, the Company shall
execute and file a certificate of merger or, if applicable, a certificate of
ownership and merger, in the manner required by the NYBCL and the parties
hereto shall take all such other and further actions as may be required by Law
to make the Merger effective. Prior to the filings referred to in this Section
2.12, a closing will be held at the offices of O'Melveny & Myers, 153 East
53rd Street, New York, New York (or such other place as the parties may
agree), for the purpose of confirming all of the foregoing.
ARTICLE III
DISSENTING SHARES; EXCHANGE OF SHARES
SECTION 3.1. DISSENTING SHARES. Notwithstanding anything in this Agreement
to the contrary, Shares which are issued and outstanding immediately prior to
the Effective Time and which are held by stockholders who have not voted such
Shares in favor of the Merger and shall have delivered a written demand for
appraisal of such Shares in the manner provided in the NYBCL (the "DISSENTING
SHARES") shall not be converted into or be exchangeable for the right to
receive the consideration provided in Section 2.7 of this Agreement, unless
and until such holder shall have failed to perfect or shall have effectively
withdrawn or lost such holder's right to appraisal and payment under the
NYBCL. If such holder shall have so failed to perfect or shall have
effectively withdrawn or lost such right, such holder's Shares shall thereupon
be deemed to have been converted into and to have become exchangeable for, at
the Effective Time, the right to receive the consideration provided for in
Section 2.7(a) of this Agreement, without any interest thereon.
SECTION 3.2. EXCHANGE OF SHARES.
(a) Prior to the Effective Time, Parent shall designate a bank or trust
company to act as exchange agent in the Merger (the "EXCHANGE AGENT").
Immediately prior to the Effective Time, Parent will take all steps necessary
to enable and cause the Company to deposit with the Exchange Agent the funds
necessary to make the payments contemplated by Section 2.7 on a timely basis.
(b) Promptly after the Effective Time, the Exchange Agent shall mail to each
record holder, as of the Effective Time, of an outstanding certificate or
certificates which immediately prior to the Effective Time represented Shares
(the "CERTIFICATES") a form letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the Exchange
Agent) and instructions for use in effecting the surrender of the Certificates
for payment therefor. Upon surrender to the Exchange Agent of a Certificate,
together with such letter of transmittal duly executed, and any other required
documents, the holder of such Certificate shall be entitled to receive in
exchange therefor the consideration set forth in Section 2.7(a) hereof, and
such Certificate shall forthwith be cancelled. No interest will be paid or
accrued on the cash payable upon the surrender of the Certificates. If payment
is to be made to a person other than the person in whose name the Certificate
surrendered is registered, it shall be a condition of payment that the
Certificate so surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a person other
than the registered holder of the Certificate surrendered or establish to the
satisfaction
of the Surviving Corporation that such tax has been paid or is not applicable.
Until surrendered in accordance with the provisions of this Section 3.2, each
Certificate (other than Certificates representing Shares held by Parent or any
subsidiary of Parent, Shares held in the treasury of the Company or held by
any subsidiary of the Company and Dissenting Shares) shall represent for all
purposes only the right to receive the consideration set forth in Section
2.7(a) hereof, without any interest thereon.
(c) After the Effective Time there shall be no transfers on the stock
transfer books of the Surviving Corporation of the Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation, they shall be
cancelled and exchanged for the consideration provided in Article II hereof in
accordance with the procedures set forth in this Article III.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Purchaser as follows:
SECTION 4.1. ORGANIZATION. Each of the Company and its Subsidiaries that
will be owned, directly or indirectly, by the Company following the Spin-Off
(the "RETAINED SUBSIDIARIES") is a corporation duly organized, validly
existing and in good standing under the Laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted, except in the case of Retained Subsidiaries where the failure to be
so existing and in good standing or to have such power and authority would not
in the aggregate have a Material Adverse Effect (as defined below). For
purposes of this Agreement (except as provided in Section 5.1 hereof), (a) the
term "MATERIAL ADVERSE EFFECT" shall mean any change or effect that is
reasonably likely to be materially adverse to (i) the business, properties,
operations, prospects, results of operations or condition (financial or
otherwise) of the Retained Business (as hereinafter defined) taken as a whole,
or (ii) the ability of (A) the Company to perform its obligations under this
Agreement or the Distribution Agreement, or (B) Spinco to perform its
obligations under the Distribution Agreement; and (b) the term "RETAINED
BUSINESS" shall mean all of the businesses (and the Assets and Liabilities
thereof (each as defined in the Distribution Agreement)) of the Company and
its Subsidiaries, other than the Spinco Business (as defined in the
Distribution Agreement). Each of the Company and the Retained Subsidiaries is
duly qualified or licensed and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed and in good standing would not in the aggregate have a
Material Adverse Effect. The Company has heretofore delivered or made
available to Parent accurate and complete copies of the Certificate of
Incorporation and By-Laws (or other similar organizational documents in the
event of any entity other than a corporation), as currently in effect of the
Company and each of the Retained Subsidiaries.
SECTION 4.2. CAPITALIZATION.
(a) As of December 31, 1995, the authorized capital stock of the Company
consisted of (i) 300,000,000 Shares, of which 173,068,379 Shares were issued
and outstanding (inclusive of Shares subject to restrictions under the
Company's 1987 Restricted Stock Purchase Plan), and (ii) 2,000,000 shares of
Preferred Stock, par value $1.00 per share ("PREFERRED STOCK"), of which
250,000 shares were designated as Series A Preferred Stock, of which no shares
were issued and outstanding. All of the issued and outstanding Shares are
validly issued, fully paid and non-assessable and free of preemptive rights.
As of December 31, 1995, 11,131,234 Shares were issuable upon the exercise of
outstanding vested and non-vested Stock Options. Since December 31, 1995, the
Company has not granted any Stock Options or issued any shares of its capital
stock except as set forth on Schedule 4.2(a) of the disclosure schedule
delivered by the Company to Parent on or prior to the date hereof (the
"DISCLOSURE SCHEDULE") or except upon exercise of Stock Options or pursuant to
any existing Plan in accordance with the current terms of such Plan. Except as
set forth above and as otherwise provided for in this Agreement, there are not
now, and at the Effective Time there will not be, any shares of capital stock
of the Company issued or outstanding or any subscriptions, options, warrants,
calls, rights, convertible securities or other agreements or commitments of
any character obligating the Company to issue, transfer or sell any of its
securities other than the Rights (as defined in the Rights Agreement). Except
as permitted by this Agreement, following the Merger, the Company will have no
obligation to issue, transfer or sell any shares of its capital stock pursuant
to any employee benefit plan or otherwise.
(b) All of the outstanding shares of capital stock of, or ownership interest
in, each of the Retained Subsidiaries have been validly issued and are fully
paid and non-assessable and are owned by either the Company or another of the
Retained Subsidiaries free and clear of all Liens (as defined in the
Distribution Agreement). There are not now, and at the Effective Time there
will not be, any outstanding subscriptions, options, warrants, calls, rights,
convertible securities or other agreements or commitments of any character
relating to the issued or
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unissued capital stock or other securities of any of the Retained
Subsidiaries, or otherwise obligating the Company or any such subsidiary to
issue, transfer or sell any such securities.
(c) There are not now, and at the Effective Time there will not be, any
voting trusts or other agreements or understandings to which the Company or
any of the Retained Subsidiaries is a party or is bound with respect to the
voting of the capital stock of the Company or any of the Retained
Subsidiaries.
SECTION 4.3. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of the Company and
each Company Subsidiary which is a party to any of the Ancillary Agreements
(each such subsidiary, a "CONTRACTING SUBSIDIARY") has full corporate power
and authority to execute and deliver this Agreement and the Ancillary
Agreements and to consummate the transactions contemplated hereby and thereby
(but only to the extent it is a party thereto). The execution and delivery of
this Agreement by the Company and of the Ancillary Agreements by the Company
and each Contracting Subsidiary (to the extent it is a party thereto) and the
consummation of the transactions contemplated hereby and thereby have been, or
with respect to Contracting Subsidiaries will be prior to the Record Date,
duly and validly authorized by the Boards of Directors of the Company and each
Contracting Subsidiary (to the extent it is a party thereto) and no other
corporate proceedings on the part of the Company or each Contracting
Subsidiary (to the extent it is a party thereto), including, without
limitation, any approval by the stockholders of the Company, are, or with
respect to Contracting Subsidiaries will be prior to the Record Date,
necessary to authorize this Agreement or the Ancillary Agreements or to
consummate the transactions contemplated hereby or thereby (other than (a)
with respect to the Merger, the approval and adoption of this Agreement by the
holders of the requisite number of the outstanding Shares and (b) the
establishment of the Record Date and the Distribution Date (each as defined in
the Distribution Agreement) by the Board of Directors of the Company). This
Agreement has been, and each of the Ancillary Agreements have been or will
prior to the Record Date be, duly and validly executed and delivered by the
Company and each Contracting Subsidiary (to the extent it is a party thereto)
and constitute or (to the extent such agreement is not being entered into as
of the date hereof) will constitute a valid and binding agreement of the
Company and each Contracting Subsidiary (to the extent it is a party thereto),
enforceable against the Company and each Contracting Subsidiary (to the extent
it is a party thereto) in accordance with its terms except to the extent that
enforcement thereof may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws, now
or hereafter in effect, relating to the creditors' rights generally and (b)
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity). The affirmative vote of the
holders of two-thirds of the Shares, determined on a fully-diluted basis, is
the only vote of the holders of any class or series of Company capital stock
necessary to approve the Merger.
SECTION 4.4. CONSENTS AND APPROVALS; NO VIOLATIONS. Except for any
applicable requirements of the Securities Exchange Act of 1934, as amended,
and all rules and regulations thereunder (the "EXCHANGE ACT"), the Securities
Act of 1933, as amended, and all rules and regulations thereunder (the
"SECURITIES ACT"), the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR ACT"), the EC Merger Regulations (as defined below), and
the Communications Act of 1934, as amended, and all rules and regulations
promulgated thereunder (the "COMMUNICATIONS ACT"), the filing and recordation
of a certificate of merger, or a certificate of ownership and merger, as
required by the NYBCL, filing with and approval of the New York Stock
Exchange, Inc. and the SEC with respect to the delisting and deregistering of
the Shares, such filings and approvals as may be required under the "takeover"
or "blue sky" Laws of various states, and as disclosed in Section 4.4 of the
Disclosure Schedule or as contemplated by this Agreement and the Ancillary
Agreements, neither the execution and delivery of this Agreement or the
Ancillary Agreements by the Company or any Contracting Subsidiary (to the
extent it is a party thereto) nor the consummation by the Company or any
Contracting Subsidiary (to the extent it is a party thereto) of the
transactions contemplated hereby or thereby will (i) conflict with or result
in any breach of any provision of the Certificate of Incorporation or By-Laws
of the Company or any Contracting Subsidiary or Retained Subsidiary (other
than those Retained Subsidiaries which, when taken together, would not be a
"significant subsidiary" within the meaning of Regulation S-X promulgated
under the Securities Act) (any such Retained Subsidiary, other than those
described in the preceding parenthetical, herein called a "SIGNIFICANT
RETAINED SUBSIDIARY"), (ii) require on the part of the Company or any
Contracting Subsidiary or a Significant Retained Subsidiary any filing with,
or the obtaining of any permit,
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authorization, consent or approval of, any governmental or regulatory
authority or any third party, (iii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation, acceleration
or payment, or to the creation of a lien or encumbrance) under any of the
terms, conditions or provisions of any note, mortgage, indenture, other
evidence of indebtedness, guarantee, license, agreement or other contract,
instrument or obligation to which the Company, any Contracting Subsidiary or
Retained Subsidiary or any of their respective Subsidiaries is a party or by
which any of them or any of their Assets may be bound or (iv) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or any Contracting Subsidiary or Retained Subsidiary, any of their
respective Subsidiaries or any of their Assets, except for such requirements,
defaults, rights or violations under clauses (ii), (iii) and (iv) above (x)
which relate to jurisdictions outside the United States or which would not in
the aggregate have a Material Adverse Effect or materially impair the ability
of the Company or any Contracting Subsidiary to consummate the transactions
contemplated by this Agreement, or (y) which become applicable as a result of
the business or activities in which Parent or Purchaser is or proposes to be
engaged (other than the business or activities of the Retained Business to be
acquired by Purchaser, considered independently of the ownership thereof by
Parent and Purchaser) or as a result of other facts or circumstances specific
to Parent or Purchaser. For purposes of this Agreement, "EC MERGER
REGULATIONS" mean Council Regulation (EEC) No. 4064/89 of December 21, 1989 on
the Control of Concentrations Between Undertakings, OJ (1989) L 395/1 and the
regulations and decisions of the Councilor Commission of the European
Community (the "COMMISSION") or other organs of the European Union or European
Community implementing such regulations.
SECTION 4.5. ABSENCE OF CERTAIN CHANGES. Except (a) as set forth in Section
4.5 of the Disclosure Schedule, (b) as set forth in the Company's Annual
Report on Form 10-K for the year ended March 31, 1995 (the "FORM 10-K") or any
other document filed prior to the date hereof pursuant to Section 13(a) or
15(d) of the Exchange Act, or (c) as contemplated by this Agreement or any of
the Ancillary Agreements, from April 1, 1995 until the date hereof, neither
the Company nor any of its Subsidiaries has taken any of the prohibited
actions set forth in Section 6.1 (other than clause (l) thereof) hereof or
suffered any changes that, in each case, either individually or in the
aggregate, would result in a Material Adverse Effect or conducted its business
or operations in any material respect other than in the ordinary and usual
course of business, consistent with past practices.
SECTION 4.6. NO UNDISCLOSED LIABILITIES. Except (a) for Liabilities and
obligations incurred in the ordinary and usual course of business consistent
with past practice since April 1, 1995, (b) for Liabilities incurred in
connection with the Offer, the Merger and the Spin-Off and (c) as set forth in
Section 4.6 of the Disclosure Schedule, from April 1, 1995 until the date
hereof neither the Company nor any of its Subsidiaries has incurred any
Liabilities that, individually or in the aggregate, would have a Material
Adverse Effect and that would be required to be reflected or reserved against
in a consolidated balance sheet of the Company and its Subsidiaries prepared
in accordance with generally accepted accounting principles as applied in
preparing the consolidated balance sheet of the Company and its Subsidiaries
as of March 31, 1995 contained in the Form 10-K.
SECTION 4.7. REPORTS.
(a) The Company has filed all reports, forms, statements and other documents
required to be filed with the SEC pursuant to the Exchange Act since April 1,
1991 (collectively, including, without limitation, any financial statements or
schedules included or incorporated by reference therein, the "COMPANY SEC
DOCUMENTS"). Each of the Company SEC Documents, as of its filing date and at
each time thereafter when the information included therein was required to be
updated pursuant to the rules and regulations of the SEC, complied in all
material respects with all applicable requirements of the Securities Act and
the Exchange Act. None of the Company SEC Documents, as of their respective
filing dates or any date thereafter when the information included therein was
required to be updated pursuant to the rules and regulations of the SEC,
contained or will contain any untrue statement of a material fact or omitted
or will omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of the
consolidated balance sheets (including the related notes) included in the
Company SEC Documents filed prior to or after the date of this Agreement (but
prior to the date on which the Offer is consummated, and excluding the Company
SEC Documents described in Section 4.8 hereof) fairly presents or
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will fairly present in all material respects the consolidated financial
position of the Company and its Subsidiaries as of the respective dates
thereof, and the other related statements (including the related notes)
included therein fairly present or will fairly present in all material
respects the results of operations and the cash flows of the Company and its
Subsidiaries for the respective periods or as of the respective dates set
forth therein. Each of the financial statements (including the related notes)
included in the Company SEC Documents filed prior to or after the date of this
Agreement (but prior to the date on which the Offer is consummated, and
excluding the Company SEC Documents described in Section 4.8 hereof) has been
prepared or will be prepared in all material respects in accordance with
generally accepted accounting principles consistently applied during the
periods involved, except (i) as otherwise noted therein, (ii) to the extent
required by changes in generally accepted accounting principles or (iii) in
the case of unaudited financial statements, normal recurring year-end audit
adjustments.
(b) The Company has heretofore made available or promptly will make
available to Purchaser a complete and correct copy of any amendments or
modifications, which have not yet been filed with the SEC, to agreements,
documents or other instruments which previously had been filed by the Company
with the SEC pursuant to the Exchange Act.
(c) Except as and to the extent set forth in Section 4.7(c) of the
Disclosure Schedule, the pro forma consolidated balance sheet and the pro
forma statement of operations (including the related notes) of the Retained
Business attached as Annex 1 to Section 4.7(c) of the Disclosure Schedule (the
"DEFENSE FINANCIAL STATEMENTS") fairly presents on a pro forma basis in all
material respects the consolidated financial position of the Retained Business
as of the date thereof, and fairly presents on a pro forma basis in all
material respects the consolidated results of operations of the Retained
Business for the period set forth therein, respectively. The Defense Financial
Statements have been prepared in all material respects in accordance with
generally accepted accounting principles consistently applied during the
periods involved, except as otherwise disclosed therein or in the notes
thereto.
SECTION 4.8. SCHEDULE 14D-9; OFFER DOCUMENTS; FORM 10; INFORMATION
STATEMENT. None of the information (other than information provided in writing
by Parent or Purchaser for inclusion therein) included in the Schedule 14D-9,
the Form 10 (as defined in the Distribution Agreement (or any registration
statement contemplated pursuant to Section 3.1(a) of the Distribution
Agreement) or the Information Statement or supplied by the Company for
inclusion in the Offer Documents, including any amendments thereto, will be
false or misleading with respect to any material fact or will omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are
made, not misleading. Except for information supplied by Parent in writing for
inclusion therein, the Schedule 14D-9, the Form 10 (or any registration
statement contemplated pursuant to Section 3.1(a) of the Distribution
Agreement) and the Information Statement, including any amendments thereto,
will comply in all material respects with the Exchange Act and the Securities
Act.
SECTION 4.9. NO DEFAULT. Except as set forth in Section 4.9 of the
Disclosure Schedule, neither the Company nor any of its Subsidiaries is in
default or violation (and no event has occurred which with notice or the lapse
of time or both would constitute a default or violation) of any term,
condition or provision of (i) its charter or its by-laws, (ii) any note,
mortgage, indenture (including, without limitation, the Indenture dated
January 15, 1992 with respect to the Company's 9 1/8% Senior Debentures due
2022, the Indenture dated September 1, 1993 with respect to the Company's 7
5/8% Senior Notes due 2004, 8 3/8% Senior Debentures due 2024 and 7 5/8%
Senior Debentures due 2025, and the Indenture dated November 1, 1992 with
respect to the Company's 7% Senior Debentures due 2023 and 8 3/8% Senior
Debentures due 2023 (collectively, the "PUBLIC INDENTURES")), other evidence
of indebtedness, guarantee, license, agreement or other contract, instrument
or contractual obligation to which the Company or any of its Subsidiaries is
now a party or by which they or any of their Assets may be bound, or (iii) any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or any of its Subsidiaries, except for defaults or violations under
clause (i) (with respect to Company Subsidiaries other than the Retained
Subsidiaries), clause (ii) (other than defaults under or violations of any of
the Public Indentures or the Amended and Restated Credit Agreement dated as of
November 23, 1994 between the Company and the
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banks party thereto (the "CREDIT AGREEMENT")), and clause (iii) above which,
(A) in the aggregate would not have a Material Adverse Effect and would not
have a material adverse effect on the ability of the Company or Spinco to
consummate the transactions contemplated by this Agreement or the Distribution
Agreement, or (B) become applicable as a result of the business or activities
in which Parent or Purchaser is or proposes to be engaged (other than the
business or activities of the Retained Business to be acquired by Purchaser,
considered independently of the ownership thereof by Parent and Purchaser) or
as a result of any other facts or circumstances specific to Parent or
Purchaser.
SECTION 4.10. LITIGATION; COMPLIANCE WITH LAW.
(a) Except as set forth in Section 4.10(a) of the Disclosure Schedule, as of
the date hereof (except as provided in the following sentence), there are no
actions, suits, claims, proceedings or investigations pending or, to the best
knowledge of the Company, threatened, involving the Company or any of its
Subsidiaries or any of their respective Assets (or any person or entity whose
liability therefrom may have been retained or assumed by the Company or any of
its Subsidiaries either contractually or by operation of Law), by or before
any court, governmental or regulatory authority or by any third party which,
either individually or in the aggregate, would have a Material Adverse Effect.
None of the Company, any of its Subsidiaries or any of their respective Assets
is subject to any outstanding order, writ, injunction or decree which, insofar
as can be reasonably foreseen, individually or in the aggregate, in the future
would have a Material Adverse Effect.
(b) Except as disclosed by the Company in the Company SEC Documents filed
since April 1, 1995 (the "RECENT SEC DOCUMENTS") or Section 4.10(b) of the
Disclosure Schedule, the Company and its Retained Subsidiaries are now being
and in the past have been operated in substantial compliance with all Laws
except for violations which individually or in the aggregate do not, and,
insofar as reasonably can be foreseen, will not, have a Material Adverse
Effect.
SECTION 4.11. EMPLOYEE BENEFIT PLANS; ERISA.
(a) Except for those matters set forth in Section 4.11(a) of the Disclosure
Schedule, (i) each "employee benefit plan" (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and
all other employee benefit, bonus, incentive, stock option (or other equity-
based), severance, change in control, welfare (including post-retirement
medical and life insurance) and fringe benefit plans (whether or not subject
to ERISA) maintained or sponsored by the Company or its Subsidiaries or any
trade or business, whether or not incorporated, that would be deemed a "single
employer" within the meaning of Section 4001 of ERISA (an "ERISA AFFILIATE"),
for the benefit of any employee or former employee of the Company or any of
its ERISA Affiliates (the "PLANS") is, and has been, operated in all material
respects in accordance with its terms and in substantial compliance (including
the making of governmental filings) with all applicable Laws, including,
without limitation, ERISA and the applicable provisions of the Internal
Revenue Code of 1986, as amended (the "CODE"), (ii) each of the Plans intended
to be "qualified" within the meaning of Section 401(a) of the Code has been
determined by the Internal Revenue Service (the "IRS") to be so qualified and
is not under audit by the IRS or the Department of Labor and the Company knows
of no fact or set of circumstances that is reasonably likely to adversely
affect such qualification prior to the Effective Time, (iii) no material
withdrawal liability with respect to any "multiemployer pension plan" (as
defined in Section 3(37) of ERISA) would be incurred by the Company and its
ERISA Affiliates if withdrawal from such plan were to occur on the Effective
Time, (iv) no "reportable event", as such term is defined in Section 4043(c)
of ERISA (for which the 30-day notice requirement to the PBGC has not been
waived), has occurred with respect to any Plan that is subject to Title IV of
ERISA, and (v) there are no material pending or, to the best knowledge of
Company, threatened claims (other than routine claims for benefits) by, on
behalf of or against any of the Plans or any trusts related thereto other than
routine benefit claim matters.
(b) (i) No Plan has incurred an "Accumulated Funding Deficiency" (as defined
in Section 302 of ERISA or Section 412 of the Code), whether or not waived,
(ii) neither the Company nor any ERISA Affiliate has incurred any Liability
under Title IV of ERISA except for required premium payments to the Pension
Benefit Guaranty Corporation ("PBGC"), which payments have been made when due,
and no events have occurred
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which are reasonably likely to give rise to any Liability of the Company or an
ERISA Affiliate under Title IV of ERISA or which could reasonably be
anticipated to result in any claims being made against Buyer by the PBGC, and
(iii) the Company has not incurred any material withdrawal liability
(including any contingent or secondary withdrawal liability) within the
meaning of Section 4201 and 4204 of ERISA to any multiemployer plan (within
the meaning of Section 3(37) of ERISA) which has not been satisfied in full.
(c) Except as set forth in Section 4.11(c) of the Disclosure Schedule, with
respect to each Plan that is subject to Title IV of ERISA (i) the Company has
provided to Purchaser copies of the most recent actuarial valuation report
prepared for such Plan, (ii) the assets and liabilities in respect of the
accrued benefits as set forth in the most recent actuarial valuation report
prepared by the Plan's actuary fairly present the funded status of such Plan
in all material respects, and (iii) since the date of such valuation report
there has been no material adverse change in the funded status of any such
Plan.
(d) Neither the Company nor any ERISA Affiliate has failed to make any
contribution or payment to any Plan or multiemployer plan which, in either
case has resulted or could result in the imposition of a material lien or the
posting of a material bond or other material security under ERISA or the Code.
(e) Except as otherwise set forth on Section 4.11(e) of the Disclosure
Schedule or as expressly provided for in this Agreement, the consummation of
the transactions contemplated by this Agreement or the Distribution Agreement
will not (i) entitle any current or former employee or officer of the Company
or any ERISA Affiliate to severance pay, unemployment compensation or any
other payment, or (ii) accelerate the time of payment or vesting, or increase
the amount of compensation due any such employee or officer.
SECTION 4.12. ASSETS; INTELLECTUAL PROPERTY.
(a) Except as set forth in Section 4.12(a) of the Disclosure Schedule, upon
consummation of the Spin-Off, the Company and the Retained Subsidiaries will
own or have rights to use all Assets necessary to permit the Company and the
Retained Subsidiaries to conduct the Retained Business as it is currently
being conducted except where the failure to own or have the right to use such
Assets would not, individually or in the aggregate, have a Material Adverse
Effect.
(b) To the knowledge of the Company, based solely upon inquiry of the
Company's General Counsel and Chief Patent Counsel, the Company does not now
and has not in the past used Intellectual Property in the Retained Business
which conflicts with or infringes upon any proprietary rights of others except
where such conflict or infringement would not have, individually or in the
aggregate, a Material Adverse Effect. "INTELLECTUAL PROPERTY" means
trademarks, trade names, service marks, service names, mark registrations,
logos, assumed names, copyright registrations, patents and all applications
therefor and all other similar proprietary rights.
SECTION 4.13. RESERVED.
SECTION 4.14. RESERVED.
SECTION 4.15. CERTAIN CONTRACTS AND ARRANGEMENTS. During the twelve months
immediately prior to the date hereof, no significant contracts of the Retained
Business have been cancelled or otherwise terminated and during such time the
Company has not been threatened with any such cancellation or termination
except, in each case, for cancelled or terminated contracts which,
individually or in the aggregate, would not constitute a Material Adverse
Effect.
SECTION 4.16. TAXES. Except as otherwise disclosed in Section 4.16 of the
Disclosure Schedule and except for those matters which, either individually or
in the aggregate, would not result in a Material Adverse Effect:
(a) The Company and each of its Subsidiaries have filed (or have had filed
on their behalf) or will file or cause to be filed, all Tax Returns (as
defined in Section 4.16(j)(3) hereof) required by applicable Law to be filed
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by any of them prior to the consummation of the Offer, and all such Tax
Returns and amendments thereto are or will be true, complete and correct.
(b) The Company and each of its Subsidiaries have paid (or have had paid on
their behalf) all Taxes (as defined in Section 4.16(j)(2) hereof) due with
respect to any period ending prior to or as of the expiration of the Offer),
or where payment of Taxes is not yet due, have established (or have had
established on their behalf and for their sole benefit and recourse), or will
establish or cause to be established before the consummation of the Offer, an
adequate accrual for the payment of all such Taxes which have accrued prior to
expiration of the Offer other than Taxes directly attributable to the
transactions contemplated by the Distribution Agreement.
(c) There are no Liens for any Taxes upon the Assets of the Company or any
of its Subsidiaries used primarily in the Retained Business, other than
statutory liens for Taxes not yet due and payable and Liens for real estate
Taxes being contested in good faith.
(d) No Audit (as defined in Section 4.16(j)(3)) is pending with respect to
any Taxes due from the Company or any Subsidiary. There are no outstanding
waivers extending the statutory period of limitation relating to the payment
of Taxes due from the Company or any Subsidiary for any taxable period ending
prior to the expiration of the Offer which are expected to be outstanding as
of the expiration of the Offer.
(e) Neither the Company nor any subsidiary is a party to, is bound by, or
has any obligation under, a tax sharing contract or other agreement or
arrangement for the allocation, apportionment, sharing, indemnification, or
payment of Taxes, other than the Tax Sharing Agreement.
(f) Neither the Company nor any of its Subsidiaries has made an election
under Section 341(f) of the Code.
(g) The statute of limitations for all Tax Returns of the Company and each
of its Subsidiaries for all years through 1987 have expired for all federal,
state, local and foreign tax purposes, or such Tax Returns have been subject
to a final Audit.
(h) Neither the Company nor any of its Subsidiaries has received any written
notice of deficiency, assessment or adjustment from the Internal Revenue
Service or any other domestic or foreign governmental taxing authority that
has not been fully paid or finally settled, and any such deficiency,
adjustment or assessment shown on such schedule is being contested in good
faith through appropriate proceedings and adequate reserves have been
established on the Company's financial statements therefor. To the best of
their knowledge, there are no other deficiencies, assessments or adjustments
threatened, pending or assessed with respect to the Company or any of its
Subsidiaries.
(i) Except as contemplated by this Agreement and the Ancillary Documents or
as disclosed in the Recent SEC Documents, neither the Company nor any of its
Subsidiaries is a party to any agreement, contract or other arrangement that
would result, separately or in the aggregate, in the requirement to pay any
"excess parachute payments" within the meaning of Section 280G of the Code or
any gross-up in connection with such an agreement, contract or arrangement.
(j) For purposes of this Section 4.16, capitalized terms have the following
meaning:
(1) "AUDIT" shall mean any audit, assessment or other examination of
Taxes or Tax Returns by the IRS or any other domestic or foreign
governmental authority responsible for the administration of any Taxes,
proceeding or appeal of such proceeding relating to Taxes.
(2) "TAXES" shall mean all Federal, state, local and foreign taxes, and
other assessments of a similar nature (whether imposed directly or through
withholding) including, but not limited to income, excise, property, sales,
use (or any similar taxes), gains, transfer, franchise, payroll, value-
added, withholding, Social Security, business license fees, customs, duties
and other taxes, assessments, charges, or other fees imposed by a
governmental authority, including any interest, additions to tax, or
penalties applicable thereto.
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(3) "TAX RETURNS" shall mean all Federal, state, local and foreign tax
returns, declarations, statements, reports, schedules, forms and
information returns and any amended Tax Return relating to Taxes.
SECTION 4.17. RETAINED BUSINESS FCC LICENSES. The licenses and permits
issued to the Company or its Subsidiaries by the Federal Communications
Commission and used in connection with the Retained Business are not
individually or in the aggregate Important Licenses. "IMPORTANT LICENSES"
means licenses or permits which are important to the Retained Business and
which, if terminated, forfeited or otherwise not available to the Retained
Business after the consummation of any of the transactions contemplated by
this Agreement, would adversely affect the Retained Business in a significant
manner.
SECTION 4.18. LABOR MATTERS. Except as set forth in Section 4.18 of the
Disclosure Schedule, neither the Company nor any of the Retained Subsidiaries
has, since April 1, 1993, (i) been subject to, or threatened with, any
material strike, lockout or other labor dispute or engaged in any unfair labor
practice, the result of which could have a Material Adverse Effect, or (ii)
received notice of any pending petition for certification before the National
Labor Relations Board with respect to any material group of Retained Employees
(as defined in the Distribution Agreement) who are not currently organized.
SECTION 4.19. RIGHTS AGREEMENT. The Board of Directors of the Company has
approved a form of Rights Agreement between the Company and the Rights Agent
thereunder (the "RIGHTS AGREEMENT"), and a form of amendment thereto (the
"RIGHTS AMENDMENT"); the Rights Agreement, as amended by the Rights Amendment,
when each are executed and delivered by the Company and the Rights Agent,
shall (a) prevent this Agreement or the consummation of any of the
transactions contemplated hereby or by the Distribution Agreement, including
without limitation, the publication or other announcement of the Offer and the
consummation of the Offer and the Merger, from resulting in the distribution
of separate rights certificates or the occurrence of a Distribution Date (as
defined in the Rights Agreement) or being deemed to be a Triggering Event (as
defined in the Rights Agreement) or a Section 13 Event (as defined in the
Rights Agreement) and (b) provide that neither Parent nor Purchaser shall be
deemed to be an Acquiring Person (as defined in the Rights Agreement) by
reason of the transactions expressly provided for in this Agreement.
SECTION 4.20. CERTAIN FEES. Except for Lazard Freres & Co. LLC and Lehman
Brothers Inc., neither the Company nor any Subsidiary has employed any
financial advisor or finder or incurred any Liability for any financial
advisory or finders' fees in connection with this Agreement or the Ancillary
Agreements or the transactions contemplated hereby or thereby.
SECTION 4.21. NO ADDITIONAL APPROVALS NECESSARY. The Board of Directors of
the Company has taken all actions necessary under the Company's Restated
Certificate of Incorporation and the NYBCL, including approving the
transactions contemplated in this Agreement, to ensure that Section 912 of the
NYBCL will not, prior to any termination of this Agreement, apply to this
Agreement, the Offer, the Merger, the Spin-Off or the transactions
contemplated hereby.
SECTION 4.22. MATERIALITY. The representations and warranties set forth in
this Article IV would in the aggregate be true and correct even without the
materiality exceptions or qualifications contained therein except for such
exceptions and qualifications which, in the aggregate for all such
representations and warranties, are not and could not reasonably be expected
to constitute a Material Adverse Effect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser represent and warrant to the Company as follows:
SECTION 5.1. ORGANIZATION. Each of Parent and Purchaser is a corporation
duly organized, validly existing and in good standing under the Laws of the
state of its incorporation and has all requisite corporate power and
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authority to own, lease and operate its properties and to carry on its
business as now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power and authority would not,
in the aggregate, have a Material Adverse Effect (as defined below) on Parent
or Purchaser. When used in connection with Parent or Purchaser, the term
"MATERIAL ADVERSE EFFECT" means any change or effect that is materially
adverse to the business, properties, operations, prospects results of
operations or condition (financial or otherwise) of Parent and its
Subsidiaries, taken as a whole.
SECTION 5.2. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and
Purchaser has full corporate power and authority to execute and deliver this
Agreement and the Ancillary Agreements (to the extent it is a party thereto)
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the Ancillary Agreements (to the
extent it is a party thereto) and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by the
Boards of Directors of Purchaser and Parent and no other corporate or other
proceedings on the part of Parent, Purchaser or any of their affiliates are
necessary to authorize this Agreement or the Ancillary Agreements (to the
extent it is a party thereto) or to consummate the transactions so
contemplated. This Agreement has been, and each of the Ancillary Agreements
have been, or will prior to the Record Date be, duly and validly executed and
delivered by each of Parent and Purchaser (to the extent it is a party
thereto) and constitute or (to the extent such agreement is not being entered
into as of the date hereof) will constitute valid and binding agreements of
each of Parent and Purchaser, enforceable against each of Parent and Purchaser
in accordance with their respective terms, except to the extent that
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar Laws, now or hereafter in
effect, relating to creditors' rights generally and general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).
SECTION 5.3. CONSENTS AND APPROVALS; NO VIOLATIONS. Except for applicable
requirements of the Securities Act, the Exchange Act, Antitrust Laws, the
Communications Act, the filing and recordation of a certificate of merger, or
a certificate of ownership and merger, as required by the NYBCL, any filings
required by the Investment Canada Act, such filings and approvals as may be
required under the "takeover" or "blue sky" Laws of various states, and as
contemplated by this Agreement and the Ancillary Agreements, neither the
execution and delivery of this Agreement or the Ancillary Agreements by Parent
or Purchaser (to the extent it is a party thereto) nor the consummation by
Parent or Purchaser of the transactions contemplated hereby or thereby will
(i) conflict with or result in any breach of any provision of the charter or
by-laws of Parent or Purchaser, (ii) require on the part of Parent or
Purchaser any filing with, or the obtaining of any permit, authorization,
consent or approval of, any governmental or regulatory authority or any third
party, (iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation, acceleration or payment, or to
the creation of a lien or encumbrance) under any of the terms, conditions or
provisions of any note, mortgage, indenture, other evidence of indebtedness,
guarantee, license, agreement or other contract, instrument or contractual
obligation to which Parent, Purchaser or any of their respective Subsidiaries
is a party or by which any of them or any of their Assets may be bound, or
(iv) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Parent, Purchaser, any of their Subsidiaries or any of their
Assets, except for such requirements, defaults, rights or violations under
clauses (ii), (iii) and (iv) above which would not in the aggregate have a
material adverse effect on the ability of Parent or Purchaser to consummate
the Offer and the Merger.
SECTION 5.4. INFORMATION STATEMENT; SCHEDULE 14D-9. Neither the Offer
Documents nor any other document filed or to be filed by or on behalf of
Parent or Purchaser with the SEC or any other governmental entity in
connection with the transactions contemplated by this Agreement contained when
filed or will, at the respective times filed with the SEC or other
governmental entity, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements made therein, in light of the circumstances under which
they were made, not misleading; provided, that the foregoing shall not apply
to information supplied by or on behalf of the Company specifically for
inclusion or incorporation by reference in any such document. The Offer
Documents will comply as to form in all material respects with
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the provisions of the Exchange Act. None of the information supplied by Parent
or Purchaser in writing for inclusion in the Information Statement or the
Schedule 14D-9 will, at the respective times that the Information Statement
and the Schedule 14D-9 or any amendments or supplements thereto are filed with
the SEC and are first published or sent or given to holders of Shares, and in
the case of the Information Statement, at the time that it or any amendment or
supplement thereto is mailed to the Company's shareholders, at the time of the
Shareholders' Meeting or at the Effective Time, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
SECTION 5.5. SUFFICIENT FUNDS. Parent and its lenders are negotiating the
terms of a credit facility to provide Purchaser with financing sufficient to
permit Purchaser to consummate the Offer. Parent is highly confident that such
financing will be available and has no reason to believe that Purchaser will
not have sufficient funds available prior to the satisfaction of the
conditions to the Offer set forth in Exhibit B hereto to purchase all Shares
on a fully diluted basis at the Merger Price.
SECTION 5.6. BROKERS. Except for Bear, Stearns & Co. Inc. no broker, finder
or investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by and on behalf of Parent or Purchaser.
ARTICLE VI
COVENANTS
SECTION 6.1. CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated by
this Agreement or the Ancillary Agreements, during the period from the date of
this Agreement to the consummation of the Offer and, if Parent has made a
prompt request therefor pursuant to Section 1.4 hereof, until its Designated
Directors (as defined in Section 8.4 hereof) shall constitute in their
entirety a majority of the Company's Board of Directors, the Company and its
Subsidiaries (other than Spinco and the Spinco Companies (as defined in the
Distribution Agreement)) will each conduct its operations according to its
ordinary course of business, consistent with past practice, will use its
commercially reasonable efforts to (i) preserve intact its business
organization, (ii) maintain its material rights and franchises, (iii) keep
available the services of its officers and key employees, and (iv) keep in
full force and effect insurance comparable in amount and scope of coverage to
that maintained as of the date hereof (collectively, the "ORDINARY COURSE
OBLIGATIONS"); provided, that Spinco and the Spinco Companies shall comply
with the Ordinary Course Obligations to the extent that non-compliance
therewith could adversely affect the Retained Business or adversely affect (or
materially delay) the consummation of the Offer, the Merger or the Spin-Off.
Without limiting the generality of and in addition to the foregoing, and
except as otherwise contemplated by this Agreement or the Ancillary
Agreements, prior to the time specified in the preceding sentence, neither the
Company nor any of its Subsidiaries (other than Spinco and the Spinco
Companies insofar as any action of the type specified below could not
adversely affect the Retained Business and could not adversely affect (or
materially delay) the Offer, the Spin-Off or the Merger) will, without the
prior written consent of Parent:
(a) amend its charter or by-laws other than filing a Certificate of
Amendment of the Company's Restated Certificate of Incorporation as
contemplated by the Rights Agreement;
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any
stock of any class or any other securities (except by the Company in
connection with Stock Options, pursuant to the Rights Agreement as
contemplated by the Distribution Agreement or pursuant to the current terms of
any existing Plan) or amend any of the terms of any such securities or
agreements (other than such securities or agreements of any Subsidiary other
than any of the Retained Subsidiaries, or amendments of the Distribution
Agreement as permitted thereunder) outstanding on the date hereof;
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(c) split, combine or reclassify any shares of its capital stock, declare,
set aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock (other
than pursuant to the Rights Agreement) or redeem or otherwise acquire any of
its securities or any securities of its Subsidiaries (other than pursuant to
the Rights Agreement); provided, that the Company may declare and pay to
holders of Shares regular quarterly dividends of not more than $.08 per Share
on the dividend declaration and payment dates normally applicable to the
Shares.
(d) (i) pledge or otherwise encumber shares of capital stock of the Company
or any of its Subsidiaries; or (ii) except in the ordinary course of business
consistent with past practices, (A) incur, assume or prepay any long-term debt
or incur, assume, or prepay any obligations with respect to letters of credit
or any material short-term debt; (B) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
any material obligations of any other person except wholly owned Subsidiaries
of the Company; (C) make any material loans, advances or capital contributions
to, or investments in, any other person; (iv) change the practices of the
Company and its Retained Subsidiaries with respect to the timing of payments
or collections; or (D) mortgage or pledge any Assets of the Retained Business
or create or permit to exist any material Lien thereupon;
(e) except (i) as disclosed in Section 6.1(e) of the Disclosure Schedule and
except for arrangements entered into in the ordinary course of business
consistent with past practices, (ii) as required by Law or (iii) as
specifically provided for in the Agreement or Distribution Agreement, enter
into, adopt or materially amend any bonus, profit sharing, compensation,
severance, termination, stock option, stock appreciation right, restricted
stock, performance unit, pension, retirement, deferred compensation,
employment, severance or other employee benefit agreements, trusts, plans,
funds or other arrangements of or for the benefit or welfare of any Retained
Employee (or any other person for whom the Retained Business will have
Liability), or (except for normal increases in the ordinary course of business
that are consistent with past practices) increase in any manner the
compensation or fringe benefits of any Retained Employee (or any other person
for whom the Retained Business will have Liability) or pay any benefit not
required by any existing plan and arrangement (including, without limitation,
the granting of stock options, stock appreciation rights, shares of restricted
stock or performance units) or enter into any contract, agreement, commitment
or arrangement to do any of the foregoing;
(f) transfer, sell, lease, license or dispose of any lines of business,
Subsidiaries, divisions, operating units or facilities (other than facilities
currently closed or currently proposed to be closed) relating to the Retained
Business outside the ordinary course of business or enter into any material
commitment or transaction with respect to the Retained Business outside the
ordinary course of business;
(g) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the Assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or agree
to acquire any Assets of any other person (other than the purchase of Assets
in the ordinary course of business and consistent with past practice), in each
case where such action would be material to the Retained Business;
(h) except as may be required by Law or as disclosed in Section 6.1(e) of
the Disclosure Schedule, take any action to terminate or materially amend any
of its pension plans or retiree medical plans with respect to or for the
benefit of Retained Employees or any other person for whom the Retained
Business will have Liability;
(i) materially modify, amend or terminate (1) any significant contract
related to the Retained Business or waive any material rights or claims of the
Retained Business except in the ordinary course of business consistent with
past practice; or (2) any contract having an aggregate contract value of $100
million or greater, whether or not in the ordinary course of business
consistent with past practice, unless such modification, amendment or
termination does not materially diminish the projected profit or materially
increase the projected loss anticipated from such contract; provided, that
nothing contained in this Section 6.1(i) shall limit the Company and its
Subsidiaries in connection with programs or contracts with respect to which
Parent or a Subsidiary of Parent has submitted, or is reasonably expected to
submit, a competing bid; provided further, that the provisions of this
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Section 6.1(i) shall not apply to any arrangement, agreement or contract
proposal previously submitted by the Company or a Subsidiary thereof which
proposal, upon acceptance thereof, cannot be revised or withdrawn;
(j) effect any material change in any of its methods of accounting in effect
as of March 31, 1995, except as may be required by Law or generally accepted
accounting principles;
(k) except as expressly provided in this Agreement, amend, modify, or
terminate the Rights Agreement or redeem any Rights thereunder; provided, that
if the Board of Directors of the Company by a majority vote determines in its
good faith judgment, based as to legal matters upon the written opinion of
legal counsel, that the failure to redeem any Rights would likely constitute a
breach of the Board's fiduciary duty, the Rights may be redeemed;
(l) enter into any material arrangement, agreement or contract that
individually or in the aggregate with other material arrangements, agreements
and contracts entered into after the date hereof, the Company reasonably
expects will adversely affect in a significant manner the Retained Business
after the date hereof; provided, that nothing contained in this Section 6.1(l)
shall limit the Company and its Subsidiaries from submitting bids for programs
or contracts with respect to which the Company reasonably expects Parent or a
Subsidiary of Parent to submit a bid; and
(m) enter into a legally binding commitment with respect to, or any
agreement to take, any of the foregoing actions.
SECTION 6.2. ACQUISITION PROPOSALS.
(a) The Company and its officers, directors, employees, representatives and
agents shall immediately cease any existing discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Proposal (as
defined in Section 6.2(b) hereof). The Company and its Subsidiaries will not,
and will use their best efforts to cause their respective officers, directors,
employees and investment bankers, attorneys, accountants or other agents
retained by the Company or any of its Subsidiaries not to, (i) initiate or
solicit, directly or indirectly, any inquiries with respect to, or the making
of, any Acquisition Proposal, or (ii) except as permitted below, engage in
negotiations or discussions with, or furnish any information or data to any
Third Party (as defined in Section 8.3(b) hereof) relating to an Acquisition
Proposal (other than the transactions contemplated hereby and by the Ancillary
Agreements). Notwithstanding anything to the contrary contained in this
Section 6.2, the Company may furnish information to, and participate in
discussions or negotiations (including, as a part thereof, making any counter-
proposal) with, any Third Party which submits an unsolicited written
Acquisition Proposal to the Company if the Company's Board of Directors by a
majority vote determines in its good faith judgment, based as to legal matters
upon the written opinion of legal counsel, that the failure to furnish such
information or participate in such discussions or negotiations would likely
constitute a breach of the Board's fiduciary duties under applicable Law;
provided, that nothing herein shall prevent the Board from taking, and
disclosing to the Company's shareholders, a position contemplated by Rules
14D-9 and 14e-2 promulgated under the Exchange Act with regard to any tender
offer; provided further, that the Board shall not recommend that the
shareholders of the Company tender their Shares in connection with any such
tender offer unless the Board by a majority vote determines in its good faith
judgment, based as to legal matters on the written opinion of legal counsel,
that failing to take such action would likely constitute a breach of the
Board's fiduciary duty; provided further, that the Company shall not enter
into any agreement with respect to any Acquisition Proposal except
concurrently with or after the termination of this Agreement (except with
respect to confidentiality and standstill agreements to the extent expressly
provided below). The Company shall promptly provide Parent with a copy of any
written Acquisition Proposal received and a written statement with respect to
any non-written Acquisition Proposal received, which statement shall include
the identity of the parties making the Acquisition Proposal and the terms
thereof. The Company shall promptly inform Parent of the status and content of
any discussions regarding any Acquisition Proposal with a Third Party. In no
event shall the Company provide non-public information regarding the Retained
Business to any Third Party making an Acquisition Proposal unless such party
enters into a confidentiality agreement containing provisions designed to
reasonably protect the confidentiality of such
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information. In the event that following the date hereof the Company enters
into a confidentiality agreement with any Third Party which does not include
terms and conditions which are substantially similar to the provisions of
Paragraph No. 7 (the "STANDSTILL PROVISIONS") of the letter agreement, dated
as of December 4, 1995, between the Company and Parent (the "CONFIDENTIALITY
AGREEMENT"), then Parent and its affiliates shall be released from their
obligations under such Standstill Provisions to the same extent as such third
party.
(b) For purposes of this Agreement, the term "ACQUISITION PROPOSAL" shall
mean any bona fide proposal, whether in writing or otherwise, made by a Third
Party to acquire beneficial ownership (as defined under Rule 13(d) of the
Exchange Act) of all or a material portion of the Assets of, or any material
equity interest in, any of the Company, a Retained Subsidiary or the Retained
Business pursuant to a merger, consolidation or other business combination,
sale of shares of capital stock, sale of Assets, tender offer or exchange
offer or similar transaction involving either the Company, a Retained
Subsidiary or the Retained Business, including, without limitation, any single
or multi-step transaction or series of related transactions which is
structured to permit such third party to acquire beneficial ownership of any
material portion of the Assets of, or any material portion of the equity
interest in, either the Company, a Retained Subsidiary or the Retained
Business (other than the transactions contemplated by this Agreement and the
Ancillary Agreements); provided, that the term "ACQUISITION PROPOSAL" shall
not include any transactions which relate solely to the businesses to be owned
by Spinco and the Spinco Companies following the Spin-Off and which could not
have an adverse effect on the consummation of the Offer, the Merger, the Spin-
Off or the transactions contemplated hereby.
SECTION 6.3. ACCESS TO INFORMATION.
(a) Between the date of this Agreement and the Effective Time, upon
reasonable notice and at reasonable times, and subject to any access,
disclosure, copying or other limitations imposed by applicable Law or any of
the Company's or its Subsidiaries' contracts, the Company will give Parent and
its authorized representatives reasonable access to all offices and other
facilities and to all books and records of it and its Subsidiaries, and will
permit Parent to make such inspections as it may reasonably require, and will
cause its officers and those of its Subsidiaries to furnish Parent with (i)
such financial and operating data and other information with respect to the
Company and its Subsidiaries as Parent may from time to time reasonably
request, or (ii) any other financial and operating data which materially
impacts the Company and its Subsidiaries. Parent and its authorized
representatives will conduct all such inspections in a manner which will
minimize any disruptions of the business and operations of the Company and its
Subsidiaries.
(b) Parent, Purchaser and the Company agree that the provisions of the
Confidentiality Agreement shall remain binding and in full force and effect
(subject, however, to the provisions of Section 6.2(a) hereof) and that the
terms of the Confidentiality Agreement are incorporated herein by reference.
SECTION 6.4. REASONABLE EFFORTS. Subject to the terms and conditions of this
Agreement and without limitation to the provisions of Section 6.6 hereof, each
of the parties hereto agrees to use all reasonable efforts to take, or cause
to be taken, all action, and to do, or cause to be done, all things reasonably
necessary, proper or advisable under applicable Laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Ancillary Agreements (including, without limitation, (i) cooperating
in the preparation and filing of the Offer Documents, the Schedule 14D-9, the
Form 10, the Information Statement and any amendments to any thereof; (ii)
cooperating in making available information and personnel in connection with
presentations, whether in writing or otherwise, to prospective lenders to
Parent and Purchaser that may be asked to provide financing for the
transactions contemplated by this Agreement; (iii) taking of all action
reasonably necessary, proper or advisable to secure any necessary consents or
waivers under existing debt obligations of the Company and its Subsidiaries or
amend the notes, indentures or agreements relating thereto to the extent
required by such notes, indentures or agreements or redeem or repurchase such
debt obligations; (iv) contesting any pending legal proceeding relating to the
Offer, the Merger or the Spin-Off; and (v) executing any additional
instruments necessary to consummate the transactions contemplated hereby and
thereby). In case at any time after the Effective Time any further action is
necessary to carry out the purposes of this Agreement, the proper officers and
directors of each party hereto shall use all reasonable efforts to take all
such necessary action.
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SECTION 6.5. CONSENTS. Each of the Company, Parent and Purchaser shall
cooperate and use their respective reasonable efforts to make all filings and
obtain all consents and approvals of governmental authorities (including,
without limitation, the Federal Communication Commission ("FCC")) and other
third parties necessary to consummate the transactions contemplated by this
Agreement and the Ancillary Agreements. Each of the parties hereto will
furnish to the other party such necessary information and reasonable
assistance as such other persons may reasonably request in connection with the
foregoing.
SECTION 6.6. ANTITRUST FILINGS.
(a) In addition to and without limiting the agreements of Parent and
Purchaser contained in Section 6.5 hereof, Parent, Purchaser and the Company
will (i) take promptly all actions necessary to make the filings required of
Parent, Purchaser or any of their affiliates under the applicable Antitrust
Laws (as defined in Section 6.6(e) hereof), (ii) comply at the earliest
practicable date with any request for additional information or documentary
material received by Parent, Purchaser or any of their affiliates from the
Federal Trade Commission or the Antitrust Division of the Department of
Justice pursuant to the HSR Act and from the Commission or other foreign
governmental or regulatory authority pursuant to Antitrust Laws, and (iii)
cooperate with the Company in connection with any filing of the Company under
applicable Antitrust Laws and in connection with resolving any investigation
or other inquiry concerning the transactions contemplated by this Agreement or
the Ancillary Agreements commenced by any of the Federal Trade Commission, the
Antitrust Division of the Department of Justice, state attorneys general, the
Commission, or other foreign governmental or regulatory authorities.
(b) In furtherance and not in limitation of the covenants of Parent and
Purchaser contained in Section 6.5 and Section 6.6(a) hereof, Parent,
Purchaser and the Company shall each use all reasonable efforts to resolve
such objections, if any, as may be asserted with respect to the Offer, the
Spin-Off, the Merger or any other transactions contemplated by this Agreement
or the Ancillary Agreements under any Antitrust Law. If any administrative,
judicial or legislative action or proceeding is instituted (or threatened to
be instituted) challenging the Offer, the Spin-Off, the Merger or any other
transactions contemplated by this Agreement or the Ancillary Agreements as
violative of any Antitrust Law, Parent, Purchaser and the Company shall each
cooperate to contest and resist any such action or proceeding, and to have
vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order (whether temporary, preliminary or permanent) (any such decree,
judgment, injunction or other order is hereafter referred to as an "ORDER")
that is in effect and that restricts, prevents or prohibits consummation of
the Offer, the Spin-Off, the Merger or any other transactions contemplated by
this Agreement or the Ancillary Agreements, including, without limitation, by
pursuing all reasonable avenues of administrative and judicial appeal. Parent
and Purchaser shall each also use their respective reasonable efforts to take
all reasonable action, including, without limitation, agreeing to hold
separate or to divest any of the businesses or Assets of Parent or Purchaser
or any of their affiliates, or, following the consummation of the Offer or the
Effective Time, of the Company or any of the Retained Subsidiaries, as may be
required (i) by the applicable governmental or regulatory authority (including
without limitation the Federal Trade Commission, the Antitrust Division of the
Department of Justice, any state attorney general or any foreign governmental
or regulatory authority) in order to resolve such objections as such
governmental or regulatory authority may have to such transactions under any
Antitrust Law, or (ii) by any domestic or foreign court or other tribunal, in
any action or proceeding brought by a private party or governmental or
regulatory authority challenging such transactions as violative of any
Antitrust Law, in order to avoid the entry of, or to effect the dissolution,
vacating, lifting, altering or reversal of, any Order that has the effect of
restricting, preventing or prohibiting the consummation of the Offer, the
Spin-Off, the Merger or any other transactions contemplated by this Agreement
or the Ancillary Agreements; provided, that Parent shall not be required to
take any action, divest any Asset or enter into any consent decree if the
taking of such action, disposing of such Asset or entering into such decree
would have a Significant Adverse Effect. "SIGNIFICANT ADVERSE EFFECT" shall
mean any change or effect that, in Parent's judgment, is reasonably likely to
adversely affect in a substantial way the benefits and opportunities which
Parent reasonably expects to receive from the acquisition of the Retained
Business or from Parent's current business.
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(c) Each of the Company, Parent and Purchaser shall promptly inform the
other party of any material communication received by such party from the
Federal Trade Commission, the Antitrust Division of the Department of Justice,
the Commission or any other governmental or regulatory authority regarding any
of the transactions contemplated hereby. Parent and/or Purchaser will promptly
advise the Company with respect to any understanding, undertaking or agreement
(whether oral or written) which it proposes to make or enter into with any of
the foregoing parties with regard to any of the transactions contemplated
hereby.
(d) "ANTITRUST LAW" means the Sherman Act, as amended, the Clayton Act, as
amended, the HSR Act, the Federal Trade Commission Act, as amended, EC Merger
Regulations and all other federal, state and foreign statutes, rules,
regulations, orders, decrees, administrative and judicial doctrines, and other
Laws that are designed or intended to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of trade.
SECTION 6.7. PUBLIC ANNOUNCEMENTS. Parent, Purchaser and the Company will
consult with each other before issuing any press release or otherwise making
any public statements with respect to the Offer, the Spin-Off or the Merger
and shall not issue any such press release or make any such public statement
prior to such consultation, except as may be required by Law or by obligations
pursuant to any listing agreement with any securities exchange.
SECTION 6.8. EMPLOYEE AGREEMENTS.
(a) Prior to the Spin-Off, the Company shall use its best efforts to, and
shall use its best efforts to cause its Subsidiaries to, assign to Spinco or
Subsidiaries of Spinco or terminate all employment agreements with employees
of the Company who are not Retained Employees (the "EMPLOYMENT AGREEMENTS")
and all individual severance agreements with employees of the Company who are
not Retained Employees (the "SEVERANCE AGREEMENTS"). The parties hereto
acknowledge and agree that, whether or not such Employment Agreements and
Severance Agreements are so assigned or terminated, all Liabilities under or
arising from such Employment Agreements and Severance Agreements other than as
expressly contemplated in the Distribution Agreement or by this Section 6.8
shall be deemed to be Spinco Liabilities (as defined in the Distribution
Agreement), with respect to which Spinco shall indemnify the Company and
Parent as provided therein.
(b) Parent acknowledges and agrees that all employment agreements and
severance agreements with the Retained Employees will be binding and
enforceable obligations of the Surviving Corporation, except as the parties
thereto may otherwise agree. The parties hereto acknowledge and agree that all
Liabilities under or arising from such agreements with the Retained Employees
from and after the consummation of the Offer shall be deemed to be Company
Liabilities (as defined in the Distribution Agreement), with respect to which
the Company and Parent shall indemnify Spinco as provided therein.
(c) (i) Parent agrees to cause the Company to pay in cash to each Company
Bonus Employee (as defined below) to the extent not previously paid, all bonus
compensation payable with respect to the fiscal year of the Company ending
March 31, 1996 under any bonus program of the Company or its Subsidiaries in
which such Company Bonus Employee participated prior to the consummation of
the Offer or under any employment agreement. Such bonus compensation shall be
paid at the time or times that comparable bonus compensation was paid to any
similarly situated employee after March 31, 1995 with respect to the fiscal
year ended March 31, 1995. Bonus compensation which is based on objective
criteria shall be calculated and paid in accordance with such criteria. With
respect to bonus compensation which is wholly or partially discretionary, such
bonus compensation shall be determined and paid on a basis consistent with
past practices of the Company. Subject to Section 6.8(c)(iii), the amount of
discretionary bonus compensation to be paid to any Company Bonus Employee
shall be determined by the Chief Executive Officer of the Company in office
immediately prior to the date of the consummation of the Offer or by his
designee. "COMPANY BONUS EMPLOYEE" means a person, other than a Spinco
Employee, employed by the Company or any of its Subsidiaries immediately prior
to the date the Offer is consummated, who was eligible to receive a bonus
under any bonus program of the Company or any of its Subsidiaries in effect at
December 31, 1995, or under any employment agreement in effect on such date,
with respect to the fiscal year ending March 31, 1996.
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(ii) Spinco agrees to pay in cash to each Spinco Bonus Employee (as
defined in this Section 6.8(c)(ii)) to the extent not previously paid, all
bonus compensation payable with respect to the fiscal year of the Company
ending March 31, 1996 under any bonus program of the Company or its
Subsidiaries in which such Spinco Bonus Employee participated prior to the
consummation of the Offer or under any employment agreement. Such bonus
compensation shall be paid at the time or times that comparable bonus
compensation was paid to any similarly situated employee after March 31,
1995 with respect to the fiscal year ended March 31, 1995. Bonus
compensation which is based on objective criteria shall be calculated and
paid in accordance with such criteria. With respect to bonus compensation
which is wholly or partially discretionary, such bonus compensation shall
be determined and paid on a basis consistent with past practices of the
Company. Subject to Section 6.8(c)(iii), the amount of discretionary bonus
compensation to be paid to any Spinco Bonus Employee shall be determined by
Spinco. "SPINCO BONUS EMPLOYEE" means any Spinco Employee employed by the
Company or any of its Subsidiaries immediately prior to the date the Offer
is consummated, who was eligible to receive a bonus under any bonus program
of the Company or any of its Subsidiaries in effect at December 31, 1995,
or under any employment agreement in effect on such date, with respect to
the fiscal year ending March 31, 1996. Upon payment of such bonuses to
Spinco Bonus Employees, Spinco shall submit to Parent a statement showing
the individual and aggregate bonus amounts paid to Spinco Bonus Employees,
and Parent shall thereupon promptly pay to Spinco (or cause the Company to
pay to Spinco) the aggregate amount of bonuses so paid; provided, that if
the consummation of the Offer occurs prior to March 31, 1996, the amount of
such reimbursement shall be a prorated amount of the aggregate bonus
amounts so paid, based on a fraction, the numerator of which is the number
of days of the Company's fiscal year ending March 31, 1996 which had
elapsed as of the consummation of the Offer, and the denominator of which
is 365.
(iii) The aggregate amount of discretionary bonuses payable to all
Company Bonus Employees and Spinco Bonus Employees as a group for the
fiscal year ending March 31, 1996 shall not exceed a dollar amount to be
mutually agreed to by the Chief Executive Officer of Parent and the Chief
Executive Officer of Spinco; provided, that in the event the Chief
Executive Officer of Parent and the Chief Executive Officer of Spinco
cannot agree on such dollar amount, the maximum aggregate amount of
discretionary bonuses payable to Company Bonus Employees and Spinco Bonus
Employees shall be based on the aggregate amount of discretionary bonuses
paid to all such employees for the Company's fiscal year ending March 31,
1995, increased by a percentage equal to the average of the percentage
increases in discretionary bonuses paid to all such employees over the
Company's three fiscal years ending March 31, 1993, 1994 and 1995.
(d) Pursuant to the "change of control" provisions of the Restated
Employment Agreement between the Company and Bernard L. Schwartz dated April
1, 1990, as amended June 14, 1994, the Company shall, subject to the following
sentences of this Section 6.8(d), make a cash payment to Mr. Schwartz upon
consummation of the Offer, calculated in accordance with such agreement, less
$18 million. The Company also may make a cash payment of a bonus (inclusive of
the amount paid to Mr. Schwartz pursuant to the preceding sentence, the
"TRANSACTION BONUS") to Transaction Bonus Employees (as defined below) other
than Mr. Schwartz; provided, that the aggregate Transaction Bonus paid shall
not exceed $40 million; and provided further, that the Transaction Bonus
payable to any Transaction Bonus Employee shall not exceed the maximum amount
which can be paid at such time without such amounts being treated as "excess
parachute payments" within the meaning of Section 280G of the Code, taking
into account all payments made on or prior to the time the Transaction Bonus
is paid (including the value of accelerated vesting of stock options or
restricted shares granted under the 1987 Plan determined in accordance with
proposed regulations promulgated under Section 280G of the Code) which
constitute parachute payments for purposes of Section 280G of the Code. The
Transaction Bonus may be paid by the Company, in its discretion, prior to, on
or immediately following, the date the Offer is consummated. "TRANSACTION
BONUS EMPLOYEE" means Mr. Schwartz and each person employed by the Company or
any of its Subsidiaries on or prior to the date the Offer is consummated who
is selected by Mr. Schwartz to receive a Transaction Bonus.
(e) The Company may provide for employment protection payments to be made to
certain Company employees upon qualifying terminations of employment pursuant
to "Employment Protection Agreements" and
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an "Employment Protection Plan," (each substantially in the forms attached
hereto as Exhibits C and D, respectively; together, the "EMPLOYMENT PROTECTION
ARRANGEMENTS") occurring after a change in control of the Company; provided,
that (i) neither the execution of this Agreement and the Distribution
Agreement, nor any transaction contemplated thereby, shall constitute a change
in control of the Company for any purpose under the Employment Protection
Arrangements or give rise to any rights thereunder and (ii) the Employment
Protection Arrangements shall terminate as of the consummation of the Offer and
no rights thereunder shall continue after the consummation of the Offer.
SECTION 6.9. EMPLOYEE BENEFITS.
(a) Prior to the Effective Time, the Company shall adopt a severance plan
substantially in the form attached hereto as Exhibit E (the "SUPPLEMENTAL
SEVERANCE PLAN") covering up to 150 employees of the Company or its
Subsidiaries selected by the Company prior to the Effective Time.
(b) Except with respect to accruals under any defined benefit pension plans,
Parent will, or will cause the Company to, give Retained Employees full credit
for purposes of eligibility, vesting and determination of the level of benefits
under any employee benefit plans or arrangements maintained by the Parent, the
Company or any Subsidiary of Parent or Company for such Retained Employees'
service with the Company or any Subsidiary of the Company to the same extent
recognized by the Company immediately prior to the Effective Time. Parent will,
or will cause the Company to, (i) waive all limitations as to pre-existing
conditions exclusions and waiting periods with respect to participation and
coverage requirements applicable to the Retained Employees under any welfare
plans that such employees may be eligible to participate in after the Effective
Time, other than limitations or waiting periods that are already in effect with
respect to such employees and that have not been satisfied as of the Effective
Time under any welfare plan maintained for the Retained Employees immediately
prior to the Effective Time, and (ii) provide each Retained Employee with
credit for any co-payments and deductibles paid prior to the Effective Time in
satisfying any applicable deductible or out-of-pocket requirements under any
welfare plans that such employees are eligible to participate in after the
Effective Time.
SECTION 6.10. ANCILLARY AGREEMENTS; SPIN-OFF.
(a) Simultaneously with the execution hereof, the Company and certain of its
Subsidiaries are entering into the Distribution Agreement. Immediately prior to
the Record Date, the Company, Spinco and certain other parties will enter into
the Tax Sharing Agreement. From and after the Effective Time, Parent shall
cause the Surviving Corporation to perform any and all obligations and
agreements of the Company set forth herein or in the Ancillary Agreements or in
any other agreements contemplated herein or therein.
(b) Parent and Purchaser accept and agree that, subject to the provisions of
the Distribution Agreement, the form of certificate of incorporation and by-
laws of Spinco adopted in contemplation of the Spin-Off shall be as agreed to
by the Company and Spinco in their sole discretion; provided, that nothing in
the certificates of incorporation and by-laws shall adversely affect or
otherwise limit (i) Spinco's ability to perform its obligations under the
Ancillary Agreements or the other agreements contemplated by the Distribution
Agreement or (ii) the Company's or its affiliates' rights under the
Stockholders Agreement.
(c) In no event shall Parent or Purchaser or any of their Subsidiaries be
entitled to receive any shares of Spinco Common Stock as a distribution with
respect to Shares purchased upon consummation of the Offer. If, for any reason,
any shares of Spinco Common Stock distributed in the Spin-Off are received by
Parent or Purchaser or any of their Subsidiaries with respect to Shares
acquired by Purchaser in the Offer, then Parent or Purchaser shall convey, on
behalf of the Company, such shares of Spinco to the stockholders of the Company
who would have otherwise received such shares of Spinco pursuant to the
Distribution Agreement; provided, that the foregoing provisions shall not apply
with respect to Shares held by Parent or any of its Subsidiaries prior to the
date hereof.
(d) If the Company reasonably determines that the Spin-Off may not be
effected without registering the shares of common stock of Spinco to be
distributed in the Spin-Off pursuant to the Securities Act, the Company,
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Parent and Purchaser, as promptly as practicable, shall use their respective
best efforts to cause the shares of Spinco to be registered pursuant to the
Securities Act and thereafter effect the Spin-Off in accordance with the terms
of the Distribution Agreement including, without limitation, by preparing and
filing on an appropriate form a registration statement under the Securities Act
covering the shares of Spinco and using their respective best efforts to cause
such registration statement to be declared effective and preparing and making
such other filings as may be required under applicable state securities Laws.
(e) Parent shall, and shall cause the Surviving Corporation to, treat the
Spin-Off for purposes of all federal and state taxes as an integrated
transaction with the Offer and the Merger and thus report the Spin-Off as a
constructive redemption of a number of Shares equal in value to the value of
the Spinco Common Stock distributed in the Spin-Off.
SECTION 6.11. RETAINED BUSINESS FINANCIAL STATEMENTS. The Company will
forthwith prepare, and retain Coopers & Lybrand L.L.P. to audit, balance sheets
for the Retained Business as at March 31, 1993, March 31, 1994, March 31, 1995
and the Effective Time, together with statements of operations and cash flows
for the periods then ended (collectively, the "RETAINED BUSINESS FINANCIAL
STATEMENTS"). The Company hereby agrees to use its best efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable to assist and otherwise cause Coopers & Lybrand
L.L.P. to complete the audit of the Retained Business Financial Statements as
promptly as reasonably practicable, but in no event later than 45 days after
the date of this Agreement; provided, that with respect to the period ended the
Effective Time, the information will be provided no later than 15 days prior to
the latest date on which Parent may file a Current Report on Form 8-K with
respect to the Merger and still be in compliance with the regulations
promulgated by the SEC under the Exchange Act. The Company will pay the fees
and expenses for auditing the Retained Business Financial Statements. The
Company also agrees to provide promptly to Parent such quarterly unaudited
financial information relating to the Retained Business and covering the period
ending December 31, 1995 and the quarterly and annual periods following the
date hereof within five days after the filing by the Company with the SEC of
its quarterly reports on Form 10-Q and Annual Report on Form 10-K, as the case
may be.
SECTION 6.12. REDEMPTION OF RIGHTS. At Parent's request, the Company will
take such action as Parent may request to effectuate the redemption, at any
time before the purchase by Purchaser pursuant to the Offer of at least a
majority of the outstanding Shares, of the Rights (as defined in the Rights
Agreement).
SECTION 6.13. PRE-CLOSING CONSULTATION. Following the date hereof and prior
to the Effective Time, the Company shall designate a senior officer of the
Company (the "COMPANY REPRESENTATIVE") to consult with an officer of Parent
designated by Parent (the "PARENT REPRESENTATIVE") with respect to major
business decisions to be made concerning the operation of the Retained
Business. Such consultation shall be made on as frequent a basis as may be
reasonably requested by Parent. The parties hereto acknowledge and agree that
the agreements set forth in this Section 6.13 shall be subject to any
restrictions or limitations required under applicable Law.
SECTION 6.14. INDEMNIFICATION.
(a) From and after the Effective Time, Parent shall cause the Surviving
Corporation to indemnify, defend and hold harmless the present and former
officers, directors, employees and agents of the Company and its Subsidiaries
(the "INDEMNIFIED PARTIES") against all losses, claims, damages, expenses or
liabilities arising out of or related to actions or omissions or alleged
actions or omissions occurring at or prior to the Effective Time to the same
extent and on the same terms and conditions (including with respect to
advancement of expenses) provided for in the Company's Restated Certificate of
Incorporation and By-Laws and agreements in effect as of December 31, 1995 (to
the extent consistent with applicable Law), which provisions will survive the
Merger and continue in full force and effect after the Effective Time. Without
limiting the foregoing, (i) Parent shall, and shall cause the Surviving
Corporation to, periodically advance expenses (including attorney's fees) as
incurred by an Indemnified Person with respect to the foregoing to the full
extent permitted under the Company's Restated Certificate of Incorporation and
By-Laws in effect on the date hereof (to the extent consistent with applicable
Law) and (ii) any determination required to be made with respect to whether an
Indemnified Party shall be
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entitled to indemnification shall, if requested by such Indemnified Party, be
made by independent legal counsel selected by the Surviving Corporation and
reasonably satisfactory to such Indemnified Party. Parent hereby guarantees
the obligation of the Surviving Corporation provided for under this Section
6.14(a); provided, that the guarantee obligation of Parent provided for herein
shall, in the aggregate, be limited to an amount equal to the Net Worth of the
Company. "NET WORTH OF THE COMPANY" means an amount equal to (i) the aggregate
value of the consolidated assets of the Retained Business less (ii) the
aggregate value of the consolidated liabilities of the Retained Business, each
as reflected on the books and records of the Company as of the most recent
quarterly period ended prior to the date of the consummation of the Offer.
(b) For a period of six years after the Effective Time, Parent shall use
reasonable efforts to cause to be maintained in effect the current policies of
directors and officers liability insurance maintained by the Company (provided
that Parent may substitute therefor policies with reputable and financially
sound carriers of at least the same coverage and amounts containing terms and
conditions which are no less advantageous) with respect to claims arising from
or related to facts or events which occurred at or before the Effective Time;
provided, that Parent shall not be obligated to make annual premium payments
for such insurance to the extent such premiums exceed 150% of the annual
premiums paid as of the date hereof by the Company for such insurance (the
"MAXIMUM AMOUNT"). If the amount of the annual premiums necessary to maintain
or procure such insurance coverage exceeds the Maximum Amount, Parent and the
Surviving Corporation shall maintain the most advantageous policies of
directors, and officers' insurance obtainable for an annual premium equal to
the Maximum Amount.
(c) The provisions of this Section 6.14 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party, his or her heirs and
his or her representatives.
SECTION 6.15 BOARD OF DIRECTORS OF PARENT. Upon the consummation of the
Offer or as soon as practicable thereafter, Parent shall use its best efforts
and take all reasonable steps to cause (a) Bernard L. Schwartz to be appointed
a member and Vice Chairman and Frank C. Lanza to be appointed a member, of the
Board of Directors of Parent; and (b) the bylaws of Parent to be amended to
modify the eligibility requirements of directors to permit Mr. Schwartz to
continue to be eligible to serve as a director through 2001, without prejudice
or commitment with respect to any further continuation of eligibility
thereafter.
SECTION 6.16 STANDSTILL PROVISIONS. The restrictions on Parent and its
affiliates contained in the Standstill Provisions (as defined in Section
6.2(a) hereof) (the "RESTRICTIONS") are hereby waived and Parent and Purchaser
are hereby released therefrom (a) as of and after the date hereof to the
extent necessary to permit Parent and Purchaser to comply with their
respective obligations and to enable Parent and Purchaser to exercise any of
their respective rights, under or as contemplated by this Agreement; and (b)
as of and after the termination of this Agreement (other than by the Company
pursuant to Section 8.1(f) hereof) if at such time or thereafter there is
proposed a Third Party Acquisition (as defined in Section 8.3(b) hereof);
provided, that the Restrictions shall not be waived under this Section 6.16(b)
with respect to any proposal by Parent, Purchaser and their affiliates to
acquire, directly or indirectly, both the Retained Business and all or
substantially all of the Spinco Business, whether by merger, consolidation or
otherwise, unless the proposed Third Party Acquisition also contemplates a
transaction or series of transactions in which both the Retained Business and
all or substantially all of the Spinco Business would be acquired, directly or
indirectly, by the Third Party or its affiliates.
SECTION 6.17 EFFECTIVENESS OF RIGHTS AGREEMENT. On or before January 10,
1996 the Company shall execute and deliver, and cause a person qualified to be
the Rights Agent under the Rights Agreement to execute and deliver, each of
the Rights Agreement and the Rights Amendment so that each shall be valid and
binding agreements of the Company.
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ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger is subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) This Agreement shall have been adopted by the affirmative vote of the
stockholders of the Company by the requisite vote in accordance with
applicable Law, if required by applicable Law;
(b) No statute, rule, regulation, order, decree, or injunction shall have
been enacted, entered, promulgated or enforced by any court or governmental
authority which prohibits or restricts the consummation of the Merger;
(c) Any waiting period applicable to the Merger under the Antitrust Laws
shall have terminated or expired and all approvals required under the
Antitrust Laws shall have been received;
(d) The Spin-Off shall have been consummated in all material respects; and
(e) The Offer shall not have been terminated in accordance with its terms
prior to the purchase of any Shares.
SECTION 7.2. CONDITIONS TO THE OBLIGATION OF THE COMPANY TO EFFECT THE
MERGER. The obligation of the Company to effect the Merger is further subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) The representations and warranties of Parent and Purchaser contained in
this Agreement shall be true and correct in all material respects at and as of
the Effective Time as if made at and as of such time; and
(b) Each of Parent and Purchaser shall have performed in all material
respects its obligations under this Agreement required to be performed by it
at or prior to the Effective Time pursuant to the terms hereof.
Parent and Purchaser will furnish the Company with such certificates and
other documents to evidence the fulfillment of the conditions set forth in
this Section 7.2 as the Company may reasonably request.
SECTION 7.3. CONDITIONS TO OBLIGATIONS OF PARENT AND PURCHASER TO EFFECT THE
MERGER. The obligations of Parent and Purchaser to effect the Merger are
further subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) The representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects at and as of the
Effective Time as if made at and as such time;
(b) The Company shall have delivered to Purchaser and (i) Bank of America,
Illinois (formerly known as Continental Bank, National Association), one or
more opinions of counsel acceptable to Bank of America, Illinois, stating that
the Merger complies with (A) Article IV of the Indenture dated as of January
15, 1992 between the Company and Continental Bank, National Association, as
trustee; and (B) Article Nine of the Indenture dated as of September 1, 1993
between the Company and Continental Bank, National Association, as trustee, as
supplemented by a First Supplemental Indenture dated as of June 1, 1994
between the Company and Continental Bank, National Association, as trustee;
and (ii) NationsBank of Georgia, National Association, an opinion of counsel
acceptable to NationsBank of Georgia, National Association, stating that the
Merger complies with Article Nine of the Indenture dated as of November 1,
1992 between the Company and NationsBank of Georgia, National Association, as
trustee (collectively, the "PUBLIC INDENTURE MERGER OPINIONS");
(c) The Company shall have performed in all material respects each of its
obligations under this Agreement required to be performed by it at or prior to
the Effective Time pursuant to the terms hereof.
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The Company will furnish Parent and Purchaser with such certificates and
other documents to evidence the fulfillment of the conditions set forth in
this Section 7.3 as Parent or Purchaser may reasonably request.
SECTION 7.4. EXCEPTION. The conditions set forth in Sections 7.2 and 7.3
hereof shall cease to be conditions to the obligations of any of the parties
hereto if Purchaser shall have accepted for payment and paid for Shares
validly tendered pursuant to the Offer or if Purchaser fails to accept for
payment any Shares pursuant to the Offer in violation of the terms thereof.
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
SECTION 8.1. TERMINATION. This Agreement may be terminated and the Offer and
the Merger may be abandoned at any time (notwithstanding approval of the
Merger by the stockholders of the Company) prior to the Effective Time:
(a) by mutual written consent of Parent, Purchaser and the Company;
(b) by Parent, Purchaser or the Company if any court of competent
jurisdiction in the United States or other United States governmental body
shall have issued a final order, decree or ruling or taken any other final
action restraining, enjoining or otherwise prohibiting the consummation of the
Offer, the Spin-Off or the Merger and such order, decree, ruling or other
action is or shall have become nonappealable;
(c) by Parent or Purchaser if due to an occurrence or circumstance which
would result in a failure to satisfy any of the conditions set forth in
Exhibit B hereto, Purchaser shall have (i) failed to commence the Offer within
the time required by Regulation 14D under the Exchange Act, (ii) terminated
the Offer or (iii) failed to pay for Shares pursuant to the Offer prior to
June 30, 1996;
(d) by the Company if (i) there shall not have been a material breach of any
representation, warranty, covenant or agreement on the part of the Company and
Purchaser shall have (A) failed to commence the Offer within the time required
by Regulation 14D under the Exchange Act, (B) terminated the Offer or (C)
failed to pay for Shares pursuant to the Offer prior to June 30, 1996 or (ii)
prior to the purchase of Shares pursuant to the Offer, a Third Party shall
have made a bona fide offer that the Board of Directors of the Company by a
majority vote determines in its good faith judgment and in the exercise of its
fiduciary duties, based as to legal matters on the written opinion of legal
counsel, is a Higher Offer (as defined in Section 8.3(b) hereof); provided,
that such termination under this clause (ii) shall not be effective until
payment of the fee required by Section 8.3(a) hereof;
(e) by Parent or Purchaser prior to the purchase of Shares pursuant to the
Offer, if (i) there shall have been a breach of any representation or warranty
on the part of the Company or Spinco under either this Agreement or the
Distribution Agreement having a Material Adverse Effect or materially
adversely affecting (or materially delaying) the consummation of the Offer,
(ii) there shall have been a breach of any covenant or agreement on the part
of the Company or Spinco under either this Agreement or the Distribution
Agreement resulting in a Material Adverse Effect or materially adversely
affecting (or materially delaying) the consummation of the Offer, which shall
not have been cured prior to the earlier of (A) 10 days following notice of
such breach and (B) two Business Days prior to the date on which the Offer
expires, (iii) the Company shall engage in Active Negotiations (as defined in
Section 8.3(b) hereof) with a Third Party with respect to a Third Party
Acquisition (as defined in Section 8.3(b) hereof), (iv) the Board of Directors
of the Company shall have withdrawn or modified (including by amendment of
Schedule 14D-9) in a manner adverse to Purchaser its approval or
recommendation of the Offer, the Spin-Off, the Merger, this Agreement or the
Distribution Agreement, shall have recommended to the Company's stockholders
another offer, shall have authorized the redemption of any Rights (whether or
not in accordance with Section 6.1(k) hereof) after the Company's receipt of
an Acquisition Proposal or shall have adopted any resolution to effect any of
the foregoing or (v) there shall not have been validly tendered and not
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withdrawn prior to the expiration of the Offer 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) shall have made and not
withdrawn a proposal with respect to a Third Party Acquisition; or
(f) by the Company if (i) there shall have been a breach of any
representation or warranty in this Agreement or the Distribution Agreement on
the part of Parent or Purchaser which materially adversely affects (or
materially delays) the consummation of the Offer or (ii) there shall have been
a material breach of any covenant or agreement in this Agreement or the
Distribution Agreement on the part of Parent or Purchaser which materially
adversely affects (or materially delays) the consummation of the Offer which
shall not have been cured prior to the earliest of (A) 10 days following notice
of such breach and (B) two Business Days prior to the date on which the Offer
expires.
SECTION 8.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 8.1, this Agreement shall
forthwith become void and have no effect, without any Liability on the part of
any party hereto or its affiliates, directors, officers or shareholders, other
than the provisions of this Section 8.2 and Sections 6.3(b), 6.14, 8.3, 9.3 and
9.11 hereof. Nothing contained in this Section 8.2 shall relieve any party from
Liability for any breach of this Agreement.
SECTION 8.3 FEES AND EXPENSES.
(a) If:
(i) Parent or Purchaser terminates this Agreement pursuant to Section
8.1(e)(ii), (iii) or (v) hereof and within 12 months thereafter the Company
enters into an agreement with respect to a Third Party Acquisition, or a
Third Party Acquisition occurs, involving any party (or any affiliate
thereof) (A) with whom the Company (or its agents) had negotiations with a
view to a Third Party Acquisition, (B) to whom the Company (or its agents)
furnished information with a view to a Third Party Acquisition or (C) who
had submitted a proposal or expressed an interest in a Third Party
Acquisition, in the case of each of clauses (A), (B) and (C) after the date
hereof and prior to such termination; or
(ii) Parent or Purchaser terminates this Agreement pursuant to Section
8.1(e)(iii) or (v) hereof and, within 12 months thereafter, a Third Party
Acquisition shall occur involving a Higher Offer; or
(iii) Parent or Purchaser terminates this Agreement pursuant to Section
8.1(e)(iv) hereof; or
(iv) the Company terminates this Agreement pursuant to Section 8.1(d)(ii)
hereof;
then, in each case, the Company shall pay to Parent, within one Business Day
following the execution and delivery of such agreement or such occurrence, as
the case may be, or simultaneously with such determination pursuant to Section
8.1(d)(ii), a fee, in cash, of $175 million; provided, that the Company in no
event shall be obligated to pay more than one such $175 million fee with
respect to all such agreements and occurrences and such termination.
(b) "ACTIVE NEGOTIATIONS" means negotiations with a Third Party that has
proposed a Third Party Acquisition or made an Acquisition Proposal, or with
such Third Party's agents or representatives with respect to the substance of
such Third Party Acquisition or Acquisition Proposal, but will not include (x)
communications in connection with, or constituting, the furnishing of
information pursuant to a confidentiality agreement as contemplated by Section
6.2(a) hereof or (y) communications that include no more than an explicit bona
fide rejection of such proposal and a very brief statement of the reasons
therefor. "THIRD PARTY ACQUISITION" means the occurrence of any of the
following events: (i) the acquisition of the Company by merger or otherwise by
any person (which includes for these purposes a "person" as defined in Section
13(d)(3) of the Exchange Act) or entity other than Parent, Purchaser or any
affiliate thereof (a "THIRD PARTY"); (ii) the acquisition by a Third Party of
more than 30% of the total Assets of the Company and its Subsidiaries, taken as
a whole; (iii) the acquisition by a Third Party of 30% or more of the
outstanding Shares; (iv) the adoption by the Company of a plan of liquidation
or the declaration or payment of an extraordinary dividend; or (v) the purchase
by the Company or any of its Subsidiaries of more than 20% of the outstanding
Shares. "HIGHER OFFER" means any Third Party Acquisition which reflects a
higher value for the Shares than the aggregate value being provided
28
<PAGE>
pursuant to the transactions contemplated by this Agreement and the Ancillary
Agreements including, without limitation, the shares of Spinco Common Stock
distributed in the Spin-Off. Prior to the termination of this Agreement by the
Company pursuant to Section 8.1(d)(ii) hereof, the Board of Directors shall
provide a reasonable opportunity to a nationally recognized investment banking
firm selected by Parent, Purchaser or their designee (the "IB") to evaluate
the proposed Third Party Acquisition, to determine whether it is a Higher
Offer and to advise the Board of Directors of the Company of the basis for and
results of its determination. The Company agrees to cooperate and cause the
Company's financial advisors to cooperate with the IB (including, without
limitation, providing the IB with full access to all such information which
the IB deems relevant and which the IB agrees to keep confidential) to the
extent reasonably requested by the IB. The fees and expenses incurred by the
IB shall be paid by Parent. Nothing contained in this Section 8.3(b) shall
prevent Parent and Purchaser from challenging, by injunction or otherwise, the
termination or attempted termination of this Agreement pursuant to Section
8.3(d)(ii) hereof.
(c) If this Agreement is terminated pursuant to Sections 8.1(e)(i) or
8.1(e)(ii) (the "DESIGNATED TERMINATION PROVISIONS") or Parent is entitled to
receive the $175 million fee under Section 8.3(a) hereof, then the Company
shall reimburse Parent, Purchaser and their affiliates (not later than one
Business Day after submission of statements therefore) for actual documented
out-of-pocket fees and expenses, not to exceed $45 million, actually incurred
by any of them or on their behalf in connection with the Offer, the proposed
Merger and the proposed Spin-Off and the transactions contemplated by this
Agreement and the Distribution Agreement (including, without limitation, fees
payable to financing sources, investment bankers (including to the IB),
counsel to any of the foregoing and Accountants), whether incurred prior to or
after the date hereof. The Company shall in any event pay the amount requested
(not to exceed $45 million) within one Business Day of such request, subject
to the Company's right to demand a return of any portion as to which invoices
are not received in due course.
(d) Except as specifically provided in this Section 8.3 and except as
otherwise specifically provided in the Distribution Agreement, each party
shall bear its own respective expenses incurred in connection with this
Agreement, the Offer and the Merger, including, without limitation, the
preparation, execution and performance of this Agreement and the Ancillary
Agreements and the transactions contemplated hereby and thereby, and all fees
and expenses of investment bankers, finders, brokers, agents, representatives,
counsel and accountants.
(e) Notwithstanding anything to the contrary contained in this Agreement,
upon payment by the Company of the amounts referred to in this Section 8.3(a),
the Company shall be released from all Liability hereunder, including any
Liability for any claims by Parent, Purchaser or any of their affiliates based
upon or arising out of any breach of this Agreement or any Ancillary
Agreement. The parties agree that reimbursement of Parent's expenses pursuant
to Section 8.3(c) hereof in connection with a termination of this Agreement
pursuant to any of the Designated Termination Provisions does not constitute
the payment of liquidated damages and, except to the extent of the payment
thereunder, shall not limit the Liability of the Company for any claims by
Parent, Purchaser or any of their affiliates based upon or arising out of any
breach of this Agreement or any Ancillary Agreement.
SECTION 8.4. AMENDMENT. This Agreement may be amended by action taken by the
Company, Parent and Purchaser at any time before or after adoption of the
Merger by the stockholders of the Company, if any; provided that (a) in the
event that any persons designated by Parent pursuant to Section 1.4 hereof
(such directors are hereinafter referred to as the "DESIGNATED DIRECTORS")
constitute in their entirety a majority of the Company's Board of Directors,
no amendment shall be made which decreases the cash price per Share or which
adversely affects the rights of the Company's stockholders hereunder without
the approval of a majority of the Continuing Directors (as hereafter defined)
if at the time there shall be any Continuing Directors and (b) after the date
of adoption of the Merger by the stockholders of the Company, no amendment
shall be made which decreases the cash price per Share or which adversely
affects the rights of the Company's stockholders hereunder without the
approval of such stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of the parties. For purposes hereof,
the term "CONTINUING DIRECTOR" shall mean (a) any member of the Board of
Directors of the Company as of the date hereof, (b) any member of the Board of
29
<PAGE>
Directors of the Company who is unaffiliated with, and not a Designated
Director or other nominee of, Parent or Purchaser or their respective
Subsidiaries, and (c) any successor of a Continuing Director who is (i)
unaffiliated with, and not a Designated Director or other nominee of, Parent
or Purchaser or their respective Subsidiaries and (ii) recommended to succeed
a Continuing Director by a majority of the Continuing Directors then on the
Board of Directors.
SECTION 8.5. EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations
or other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties of the other parties contained herein or in any
document, certificate or writing delivered pursuant hereto or (c) waive
compliance with any of the agreements or conditions of the other parties
hereto contained herein; provided that (x) in the event that any Designated
Directors constitute in their entirety a majority of the Company's Board of
Directors, no extensions or waivers shall be made which adversely affect the
rights of the Company's stockholders hereunder without the approval of a
majority of the Continuing Directors if at the time there shall be any
Continuing Directors and (y) after the date of adoption of the Merger by the
stockholders of the Company, no extensions or waivers shall be made which
adversely affect the rights of the Company's stockholders hereunder without
the approval of such stockholders. Any agreement on the part of any party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. SURVIVAL. Except as otherwise expressly set forth in the
Distribution Agreement, the representations, warranties, covenants and
agreements made herein shall not survive beyond the Effective Time; provided,
that the covenants and agreements contained in Sections 2.7, 2.10, 3.1, 3.2,
6.3(b), 6.4, 6.5, 6.6, 6.8, 6.9, 6.10, 6.14, 8.2, 8.3, 8.4, 8.5, 9.3, 9.5 and
9.11 hereof shall survive beyond the Effective Time without limitation.
SECTION 9.2. ENTIRE AGREEMENT. Except for the provisions of the
Confidentiality Agreement which shall continue in full force and effect, this
Agreement (including the schedules and exhibits and the agreements and other
documents referred to herein, including, without limitation, the Ancillary
Agreements) constitutes the entire agreement among the parties with respect to
the subject matter hereof and supersedes all other prior negotiations,
commitments, agreements and understandings, both written and oral, between the
parties or any of them with respect to the subject matter hereof.
SECTION 9.3. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the Laws of the State of New York (regardless of
the Laws that might otherwise govern under applicable principles of conflicts
Law) as to all matters, including, without limitation, matters of validity,
construction, effect, performance and remedies.
SECTION 9.4. NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given upon (a) transmitter's confirmation of
a receipt of a facsimile transmission, (b) confirmed delivery by a standard
overnight carrier or when delivered by hand or (c) the expiration of five
Business Days after the day when mailed by certified or registered mail,
postage prepaid, addressed at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) If to the Parent or Purchaser, to:
Lockheed Martin Corporation
6801 Rockledge Drive
Bethesda, Maryland 20817
Telephone: (301) 897-6125
Telecopy: (301) 897-6333
Attention: General Counsel
30
<PAGE>
with a copy to:
O'Melveny & Myers
153 E. 53rd Street
New York, New York 10022
Telephone: (212) 326-2000
Telecopy: (212) 326-2061
Attention: C. Douglas Kranwinkle, Esq.
Jeffrey J. Rosen, Esq.
and to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Telephone: (212) 735-3000
Telecopy: (212) 735-2001
Attention: Peter Allan Atkins, Esq.
Lou R. Kling, Esq.
(b) If to the Company, to:
Loral Corporation
600 Third Avenue
New York, New York 10016
Telephone: (212) 697-1105
Telecopy: (212) 661-8988
Attention: General Counsel
with a copy to:
Willkie Farr & Gallagher
153 E. 53rd Street
New York, New York 10022
Telephone: (212) 821-8000
Telecopy: (212) 821-8111
Attention: Robert B. Hodes, Esq.
Bruce R. Kraus, Esq.
SECTION 9.5. SUCCESSORS AND ASSIGNS; NO THIRD PARTY BENEFICIARIES. This
Agreement and all of the provisions hereof shall be binding upon and inure to
the benefit of the parties and their respective successors and permitted
assigns, but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by either party (whether by operation
of law or otherwise) without the prior written consent of the other party;
provided, that Parent may assign its rights and obligations hereunder or those
of Purchaser to Parent or any subsidiary of Parent, and Spinco may assign its
rights and obligations hereunder to any successor to Spinco, but in each case
no such assignment shall relieve Parent, Purchaser or Spinco, as the case may
be, of its obligations hereunder. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and except for Sections 2.7,
2.10, 6.8 and 6.10 hereof nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement.
SECTION 9.6. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same instrument.
SECTION 9.7. INTERPRETATION. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement. Except as
31
<PAGE>
otherwise expressly provided in this Agreement, as used in this Agreement, the
term "person" shall have the meaning assigned to that term in the Distribution
Agreement.
SECTION 9.8. SCHEDULES. The Disclosure Schedule shall be construed with and
as an integral part of this Agreement to the same extent as if the same had
been set forth verbatim herein.
SECTION 9.9. LEGAL ENFORCEABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without affecting the validity or enforceability of the
remaining provisions hereof. Any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction. If any provision of this Agreement is so broad as to
be unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
SECTION 9.10. SPECIFIC PERFORMANCE. Each of the parties hereto acknowledges
and agrees that in the event of any breach of this Agreement, each non-
breaching party would be irreparably and immediately harmed and could not be
made whole by monetary damages. It is accordingly agreed that the parties
hereto (a) will waive, in any action for specific performance, the defense of
adequacy of a remedy at law and (b) shall be entitled, in addition to any
other remedy to which they may be entitled at law or in equity, to compel
specific performance of this Agreement in any action instituted in any state
or federal court sitting in New York. The parties hereto consent to personal
jurisdiction in any such action brought in any state or federal court sitting
in New York and to service of process upon it in the manner set forth in
Section 9.4 hereof.
SECTION 9.11. BROKERAGE FEES AND COMMISSIONS. Except as set forth in
Sections 4.18 and 5.6, the Company hereby represents and warrants to Parent
with respect to the Company, and Parent hereby represents and warrants to the
Company with respect to Parent and Purchaser, that no person or entity is
entitled to receive from the Company or Parent and Purchaser, respectively,
any investment banking, brokerage or finder's fee or fees for financial
consulting or advisory services in connection with this Agreement and Plan of
Merger or any of the transactions contemplated hereby.
[The remainder of this page has been left blank intentionally.]
32
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement and Plan of
Merger to be executed on its behalf by its officers thereunto duly authorized,
all as of the day and year first above written.
Loral Corporation
By: /s/ Michael B. Targoff
----------------------------------
Name: Michael B. Targoff
Title: Senior Vice President
Lockheed Martin Corporation
By: /s/ Marcus C. Bennett
----------------------------------
Name: Marcus C. Bennett
Title: Senior Vice President
LAC Acquisition Corporation
By: /s/ Frank H. Menaker, Jr.
----------------------------------
Name: Frank H. Menaker, Jr.
Title: Vice President
33
<PAGE>
EXHIBITS
<TABLE>
<S> <C>
Exhibit A............................... Tax Sharing Agreement
Exhibit B............................... Conditions to Offer
Exhibit C............................... Form of Employment Protection Agreement
Exhibit D............................... Employment Protection Plan
Exhibit E............................... Supplemental Severance Program
</TABLE>
<PAGE>
EXHIBIT A
Form of Tax Sharing Agreement, dated as of , 1996 by and among Loral
Corporation, Loral Telecommunications Acquisition, Inc., Lockheed Martin
Corporation and LAC Acquisition Corporation--Filed as Exhibit (C)(5) to the
Tender Offer Statement on Schedule 14D-1 dated January 12, 1996.
<PAGE>
EXHIBIT B
CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment or pay for, and may delay the acceptance for
payment of (whether or not the Shares have theretofore been accepted for
payment), or the payment for, any Shares tendered, and may terminate or extend
the Offer and not accept for payment any Shares, if:
(i) immediately prior to the expiration of the Offer (as extended in
accordance with the terms of the Offer), (A) any applicable waiting period
under the Antitrust Laws shall not have expired or been terminated or any
approvals required under the EC Merger Regulations shall not have been
received, (B) the Record Date for the distribution of shares of Spinco
common stock to stockholders of the Company pursuant to the Distribution
Agreement shall not have been set by the Company's Board of Directors, (C)
the Public Indenture Merger Opinions shall not have been delivered to
Purchaser and the applicable Public Indenture trustees, or (D) the number
of Shares validly tendered and not withdrawn when added to the Shares then
beneficially owned by Parent does not constitute two-thirds of the Shares
then outstanding and represent two-thirds of the voting power of the Shares
then outstanding on a fully diluted basis on the date of purchase; OR
(ii) on or after the date of this Agreement and prior to the acceptance
for payment of Shares, any of the following conditions exist:
(a) any of the representations or warranties of the Company contained
in the Merger Agreement shall not have been true and correct at the
date when made or (except for those representations and warranties made
as of a particular date which need only be true and correct as of such
date) shall cease to be true and correct at any time prior to
consummation of the Offer, except where the failure to be so true and
correct would not, individually or in the aggregate, have a Material
Adverse Effect; provided, that if any such failure to be so true and
correct is curable by the Company through the exercise of its
reasonable efforts, then Purchaser may not terminate the Offer under
this subsection (a) until 10 Business Days after written notice thereof
has been given to the Company by Parent or Purchaser and unless at such
time the matter has not been cured; or
(b) any of the representations or warranties of Spinco contained in
the Distribution Agreement shall not have been true and correct at the
date when made or (except for those representations and warranties made
as of a particular date which need only be true and correct as of such
date) shall cease to be true and correct at any time prior to
consummation of the Offer, except where the failure to be so true and
correct would not individually or in the aggregate, have a Material
Adverse Effect; provided that, if any such failure to be so true and
correct is curable by Spinco through the exercise of its reasonable
efforts, then Purchaser may not terminate the Offer under this
subsection (b) until 10 Business Days after written notice thereof has
been given to the Company by Parent or Purchaser and unless at such
time the matter has not been cured; or
(c) the Company shall have breached any of its covenants or
agreements contained in the Merger Agreement, except for any such
breaches that, individually or in the aggregate, would not have a
Material Adverse Effect; provided that, if any such breach is curable
by the Company through the exercise of its reasonable efforts, then
Purchaser may not terminate the Offer under this subsection (c) until
10 Business Days after written notice thereof has been given to the
Company by Parent or Purchaser and unless at such time the breach has
not been cured; or
(d) Spinco or the Company shall have breached any of its covenants or
agreements contained in the Distribution Agreement, except for any such
breaches that, individually or in the aggregate, would not have a
Material Adverse Effect; provided, that if any such breach is curable
by Spinco or the Company through the exercise of its reasonable
efforts, then Purchaser may not terminate the Offer under this
subsection (d) until 10 Business Days after written notice thereof has
been given to the Company or Spinco, as the case may be, by Parent or
Purchaser and unless at such time the breach has not been cured; or
B-1
<PAGE>
(e) there shall have been any statute, rule, regulation, judgment,
order or injunction promulgated, enacted, entered, enforced or deemed
applicable to the Offer, or any other legal action shall have been
taken, by any state, federal or foreign government or governmental
authority or by any U.S. court, other than the routine application to
the Offer, the Merger or the Spin-Off of waiting periods under the HSR
Act, that presents a substantial likelihood of (1) making the
acceptance for payment of, or the payment for, some or all of the
Shares illegal or otherwise prohibiting, restricting or significantly
delaying consummation of the Offer, (2) imposing material limitations
on the ability of Purchaser or Parent to acquire or hold or to exercise
any rights of ownership of the Shares, or effectively to manage or
control the Retained Business, the Company, the Retained Subsidiaries,
Purchaser or any of their respective affiliates, which individually or
in the aggregate could constitute a Significant Adverse Effect; or
(f) any fact or circumstance exists or shall have occurred that has a
Material Adverse Effect; or
(g) there shall have occurred (1) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock
Exchange, Inc., (2) the declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States
(whether or not mandatory), (3) the commencement of a war, armed
hostilities or other international or national calamity directly or
indirectly involving the United States and having a Material Adverse
Effect or materially adversely affecting (or materially delaying) the
consummation of the Offer, (4) any limitation or proposed limitation
(whether or not mandatory) by any U.S. governmental authority or
agency, or any other event, that materially adversely affects generally
the extension of credit by banks or other financial institutions, (5)
from the date of the Merger Agreement through the date of termination
or expiration of the Offer, a decline of at least 25% in the Standard &
Poor's 500 Index or (6) in the case of any of the situations described
in clauses (1) through (5) inclusive, existing at the date of the
commencement of the Offer, a material acceleration, escalation or
worsening thereof; or
(h) any person (which includes a "person" as such term is defined in
Section 13(d)(3) of the Exchange Act) other than Purchaser, any of its
affiliates, or any group of which any of them is a member shall have
acquired beneficial ownership of more than 20% of the outstanding
Shares or shall have entered into a definitive agreement or an
agreement in principle with the Company with respect to a tender offer
or exchange offer for any Shares or merger, consolidation or other
business combination with or involving the Company or any of its
Subsidiaries; or
(i) prior to the purchase of Shares pursuant to the Offer, the Board
of Directors of the Company shall have withdrawn or modified (including
by amendment of the Schedule 14D-9) in a manner adverse to Purchaser
its approval or recommendation of the Offer, this Agreement, the Merger
or the Spin-Off, shall have recommended to the Company's stockholders
another offer, shall have authorized the redemption of the Rights
(whether or not in accordance with Section 6.1(k) hereof) after the
Company has received an Acquisition Proposal or shall have adopted any
resolution to effect any of the foregoing which, in the sole judgment
of Purchaser in any such case, and regardless of the circumstances
(including any action or omission by Purchaser) giving rise to any such
condition, makes it inadvisable to proceed with such acceptance for
payment; or
(j) the Merger Agreement shall have been terminated in accordance
with its terms; or
(k) the Record Date shall not have occurred; or
(l) the conditions to the Spin-Off shall not have been satisfied or
waived; OR
(iii) Parent and Purchaser shall not have secured financing on terms
reasonably acceptable to Parent to finance the purchase of all of the
Shares at the Merger Price and to consummate the transactions contemplated
by this Agreement and the Ancillary Agreements; provided, that the
condition set forth in this clause (iii) shall be a condition to
Purchaser's obligations with respect to the Offer only if (A) the Offer has
not been consummated on or before April 30, 1996, (B) Parent has not taken
any significant action outside of the ordinary course of business, which
prevents Parent from obtaining sufficient financing to purchase all of the
Shares at the Merger Price and to consummate the transactions contemplated
by this Agreement and the Ancillary Agreements and (C) Parent and Purchaser
are in substantial compliance with their respective material obligations
under Sections 6.4, 6.5 and 6.6 of the Merger Agreement.
B-2
<PAGE>
The foregoing conditions are for the sole benefit of Purchaser and may be
asserted by Purchaser regardless of the circumstances giving rise to such
conditions, or may be waived by Purchaser in whole or in part at any time and
from time to time in its sole discretion; provided, that the condition set
forth in clause (ii)(j) above may be waived or modified only by the mutual
consent of Purchaser and the Company.
B-3
<PAGE>
EXHIBIT C
Form of Employment Protection Agreement of the Company--Filed as Exhibit (C)
(6) to the Tender Offer Statement on Schedule 14D-1 dated January 12, 1996.
<PAGE>
EXHIBIT D
Employment Protection Plan of the Company--Filed as Exhibit (C)(7) to the
Tender Offer Statement on Schedule 14D-1 dated January 12, 1996.
<PAGE>
EXHIBIT E
Supplemental Severance Program of the Company--Filed as Exhibit (C)(8) to the
Tender Offer Statement on Schedule 14D-1 dated on January 12, 1996.
<PAGE>
Exhibit 99.8
Conformed Copy
RESTRUCTURING, FINANCING
AND DISTRIBUTION AGREEMENT
dated as of January 7, 1996
by and among
LORAL CORPORATION,
LORAL AEROSPACE HOLDINGS, INC.,
LORAL AEROSPACE CORP.,
LORAL GENERAL PARTNER, INC.,
LORAL GLOBALSTAR, L.P.,
LORAL GLOBALSTAR LIMITED,
LORAL TELECOMMUNICATIONS ACQUISITION, INC.
(TO BE RENAMED "LORAL SPACE & COMMUNICATIONS CORPORATION")
and
LOCKHEED MARTIN CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
RECITALS................................................................... 1
ARTICLE I DEFINITIONS...................................................... 2
Section 1.1. General..................................................... 2
Section 1.2. References to Time.......................................... 19
ARTICLE II THE RESTRUCTURING AND RELATED TRANSACTIONS....................... 19
Section 2.1. Transfers of Assets......................................... 19
Section 2.2. Methods of Transfer and Assumption.......................... 23
Section 2.3. Company Approval of Certain Spinco
Actions; Formation of Spinco............................... 24
Section 2.4. Issuance of Spinco Stock to the Company..................... 25
Section 2.5. Treatment of Globalstar Bank Guarantee...................... 25
Section 2.6. Transfers of Spinco Capital Stock
Subject to Rights of First Offer, Etc...................... 29
Section 2.7. Exchange of Lehman Preferred Stock.......................... 32
ARTICLE III THE DISTRIBUTION................................................. 32
Section 3.1. Cooperation Prior to the Distribution....................... 32
Section 3.2. The Distribution............................................ 35
Section 3.3. Termination of Certain Claims............................... 38
ARTICLE IV INTERCOMPANY BUSINESS RELATIONSHIPS.............................. 39
Section 4.1. Settlement of Intercompany Accounts......................... 39
Section 4.2. Settlements for Cash Collections and
Disbursements After the Distribution Date.................. 40
Section 4.3. Transition Services......................................... 41
Section 4.4. Termination of Intercompany Arrangements.................... 42
ARTICLE V SURVIVAL AND INDEMNIFICATION..................................... 43
Section 5.1. Survival of Agreements...................................... 43
Section 5.2. Spinco's Agreement to Indemnify............................. 43
Section 5.3. The Company's Agreement to Indemnify........................ 45
Section 5.4. Procedure for Indemnification............................... 47
Section 5.5. Miscellaneous Indemnification Provisions.................... 50
Section 5.6. Pending Litigation.......................................... 53
Section 5.7. Construction of Agreements.................................. 54
ARTICLE VI CERTAIN ADDITIONAL MATTERS....................................... 54
Section 6.1. Representations or Warranties; Disclaimers.................. 54
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
Section 6.2. Further Assurances; Subsequent Transfers.................... 56
Section 6.3. The Spinco Board............................................ 59
Section 6.4. Use of Names................................................ 59
Section 6.5. Litigation Relating to Transaction.......................... 60
Section 6.6. Spinco Equity Arrangements.................................. 61
Section 6.7. Post-Closing Business Relationships......................... 61
Section 6.8. No Restrictions on Post-Closing
Competitive Activities..................................... 64
Section 6.9. CCD Lawsuit................................................. 65
ARTICLE VII ACCESS TO INFORMATION AND SERVICES............................... 66
Section 7.1. Provision of Corporate Records.............................. 66
Section 7.2. Access to Information....................................... 66
Section 7.3. Production of Witnesses..................................... 67
Section 7.4. Retention of Records........................................ 67
Section 7.5. Confidentiality............................................. 68
ARTICLE VIII EMPLOYEE MATTERS................................................. 69
Section 8.1. Officers and Employees...................................... 69
Section 8.2. Employee Benefits........................................... 69
Section 8.3. Other Liabilities and Obligations........................... 75
Section 8.4. Preservation of Rights to Amend or Terminate Plans.......... 76
Section 8.5. Reimbursement; Indemnification.............................. 76
Section 8.6. Actions By Spinco........................................... 76
ARTICLE IX INSURANCE........................................................ 77
Section 9.1. General..................................................... 77
Section 9.2. Certain Insured Claims...................................... 77
ARTICLE X CONDITIONS; TERMINATION; AMENDMENTS; WAIVERS..................... 78
Section 10.1. Condition to Restructuring and Distribution................. 78
Section 10.2. Termination................................................. 80
Section 10.3. Amendments; Waivers......................................... 80
ARTICLE XI MISCELLANEOUS.................................................... 80
Section 11.1. Survival of Indemnities; Release............................ 80
Section 11.2. Entire Agreement............................................ 81
Section 11.3. Fees and Expenses........................................... 82
Section 11.4. Governing Law............................................... 82
Section 11.5. Notices..................................................... 82
Section 11.6. Successors and Assigns; No Third Party Beneficiaries........ 84
Section 11.7. Counterparts................................................ 85
Section 11.8. Interpretation.............................................. 85
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 11.9. Schedules................................................... 85
Section 11.10. Legal Enforceability........................................ 85
Section 11.11. Consent to Jurisdiction..................................... 85
Section 11.12. Specific Performance........................................ 86
</TABLE>
Exhibits
- --------
Exhibit A Form of Spinco Stockholders Agreement
Exhibit A-1 Globalstar Warrant Term Sheet
Exhibit B Form of Spinco Preferred Stock Certificate of Designation
Exhibit C Form of Spinco By-Laws
Exhibit D Spinco Shareholder Rights Plan
Exhibit E Spinco Employment Arrangements
<PAGE>
RESTRUCTURING, FINANCING
AND DISTRIBUTION AGREEMENT
--------------------------
RESTRUCTURING, FINANCING AND DISTRIBUTION AGREEMENT, dated as of
January 7, 1996, by and among Loral Corporation, a New York corporation
(the "Company"), Loral Aerospace Holdings, Inc., a Delaware corporation and
a wholly-owned subsidiary of the Company ("Holdings"), Loral Aerospace
Corp., a Delaware corporation and a wholly-owned subsidiary of Holdings
("Aerospace"), Loral General Partner, Inc., a Delaware corporation and a
wholly-owned subsidiary of Aerospace ("LGP"), Loral Globalstar, L.P., a
Delaware limited partnership and a wholly-owned, indirect subsidiary of LGP
("LG"), Loral Globalstar Limited, a Cayman Islands corporation and a
wholly-owned subsidiary of LGP ("Cayman"), Loral Telecommunications
Acquisition, Inc. (to be renamed "Loral Space & Communications
Corporation"), a Delaware corporation and a wholly-owned subsidiary of the
Company ("Spinco"), and Lockheed Martin Corporation, a Maryland corporation
("Parent").
RECITALS:
--------
WHEREAS, each of the Boards of Directors of the Company,
Holdings, Aerospace, LGP and Cayman, and the general partner of LG have
determined to cause certain of the transfers and other transactions
contemplated in connection with the Restructuring (as hereafter defined);
WHEREAS, the Board of Directors of the Company has also
determined to cause the distribution of shares of Spinco Common Stock (as
hereafter defined) to the holders as of the Record Date (as hereafter
defined) of the Company Common Stock (as hereafter defined) and to the
holders of certain Cancelled Company Options (as hereafter defined);
WHEREAS, the Company and Spinco and the other parties hereto have
determined that it is desirable to set forth the principal corporate
transactions required to effect such transfers, share issuances and
distribution and to set forth certain other agreements that will govern
certain other matters prior to or following such distribution;
<PAGE>
WHEREAS, the Company has entered into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), with Parent
and LAC Acquisition Corporation, a New York corporation and a wholly-owned
subsidiary of Parent (the "Purchaser"), providing for the Offer and the
Merger (each as hereafter defined), as a result of which the Company, as
the corporation surviving the Merger, will become a wholly-owned subsidiary
of Parent; and
WHEREAS, in order to induce the parties to enter into this
Agreement and in consideration of the Company's willingness to enter into
the Merger Agreement, the parties hereto and certain other parties are
entering or will enter into the Tax Sharing Agreement and the Stockholders
Agreement (such capitalized terms, as hereafter defined) providing for
certain ongoing relationships among the parties;
NOW, THEREFORE, in consideration of the foregoing and the
agreements, provisions and covenants contained herein, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
-----------
Section 1.1. General. For convenience and brevity, certain
terms used in various parts of this Agreement (including the Schedules) are
listed in alphabetical order and defined or referred to below (such terms
to be equally applicable to both singular and plural forms of the terms
defined or referred to):
"Action" means any action, claim, suit, arbitration, inquiry,
proceeding or investigation by or before any court, any governmental or
other regulatory or administrative agency or commission or any arbitration
tribunal.
"Adjusted GAAP" means, except as otherwise set forth in Section
1.1(a) of the Disclosure Schedule, U.S. generally accepted accounting
principles as in effect on the date hereof, applied on a basis consistent
with the Company Financial Statements.
2
<PAGE>
"Aerospace" shall have the meaning set forth in the recitals to
this Agreement.
"Affiliate" of any specified person or entity means (x) any
director or officer of, or any person or entity that beneficially owns at
least 50% of the capital stock or other equity interests of, such specified
person or entity, or (y) any other person or entity directly or indirectly
controlling, controlled by, or under common control with, such specified
person or entity, at any time during the period for which the determination
of affiliation is being made; provided that the Company and the Retained
Subsidiaries, on the one hand, and Spinco and the Spinco Companies, on the
other hand, shall not, after giving effect to the Restructuring, be deemed
to be Affiliates of each other for purposes of this Agreement.
"Agent" means the distribution agent appointed by the Company
(subject to the prior written consent of Parent, which may not be
unreasonably withheld) to distribute shares of Spinco Common Stock pursuant
to the Distribution.
"Agreement" means this Restructuring, Financing and Distribution
Agreement, together with all exhibits and schedules hereto, as the same may
be amended from time to time in accordance with the terms hereof.
"Asset" means, with respect to any party, except as otherwise
provided herein, any and all of such party's right, title and interest in
and to all of the rights, properties, assets, claims, contracts and
businesses of every kind, character and description, whether real, personal
or mixed, whether accrued, contingent or otherwise, and wherever located,
owned or used primarily by such party and its subsidiaries, including,
without limitation, the following: (i) all cash, cash equivalents, notes
and accounts receivable (whether current or non-current); (ii) all
certificates of deposit, banker's acceptances and other investment
securities; (iii) all registered and unregistered trademarks, service
marks, service names, trade styles and trade names (including, without
limitation, trade dress and other names, marks and slogans) and all
associated goodwill; all statutory, common law and registered copyrights;
all patents; all applications for any of the foregoing together with all
rights to use all of the foregoing and all other rights
3
<PAGE>
in, to, and under the foregoing; all know-how, inventions, discoveries,
improvements, processes, formulae (secret or otherwise), specifications,
trade secrets, whether patentable or not, licenses and other similar
agreements, confidential information, and all drawings, records, books or
other indicia, however evidenced, of the foregoing; (iv) all rights
existing under all Contracts and other business arrangements; (v) all real
estate and all plants, buildings and other improvements thereon; (vi) all
leasehold improvements and all machinery, equipment (including all
transportation and office equipment), fixtures, trade fixtures and
furniture; (vii) all office supplies, production supplies, spare parts,
other miscellaneous supplies and other tangible property of any kind;
(viii) all raw materials, work-in-process, finished goods, consigned goods
and other inventories; (ix) all computer hardware, software, computer
programs and systems and documentation relating thereto; all databases and
reference and resource materials; (x) all prepayments or prepaid expenses;
(xi) all claims, causes of action, choices in action, rights of recovery
and rights of set-off of any kind; (xii) the right to receive mail,
accounts receivable payments and other communications; (xiii) all customer
lists and records pertaining to customers and accounts, personnel records,
all lists and records pertaining to suppliers and agents, and all books,
ledgers, files and business records of every kind; (xiv) all advertising
materials and all other printed or written materials; (xv) all permits,
licenses, approvals and authorizations of governmental authorities or third
parties relating to the ownership, possession or operation of the Assets;
(xvi) all capital stock, partnership interests and other equity or
ownership interests or rights, directly or indirectly, in any subsidiary or
other entity; (xvii) all goodwill as a going concern and all other
intangible properties; and (xviii) all employee contracts, including,
without limitation, the right thereunder to restrict the employee from
competing in certain respects.
"Business Day" means any calendar day which is not a Saturday,
Sunday or public holiday under the Laws of New York.
"Cancelled Company Option" means any option or other right to
acquire shares of Company Common Stock which (i) has been granted by the
Company to any employee
4
<PAGE>
or director of the Company or any of its Subsidiaries, (ii) is outstanding
immediately prior to, and remains unexercised as of, the Record Date, and
(iii) will be cancelled pursuant to Section 2.10 of the Merger Agreement.
"Capital Contribution" shall mean any capital or other investment
in the Spinco Business, Spinco or any Spinco Company (including, without
limitation, (x) the acquisition of any equity or other interests in Spinco
or any Spinco Company during such time period (except as otherwise
expressly contemplated pursuant to the provisions of Article II hereof),
(y) any contribution of cash, cash equivalents, marketable securities,
receivables, inventory, prepaid expenses, real or personal property or any
other assets to the Spinco Business, Spinco or any Spinco Company (except
as otherwise expressly contemplated pursuant to the provisions of Article
II hereof) and (z) the assumption of or payment by the Company or any
Company Subsidiary of any Spinco Liabilities, and any prepayment,
redemption, purchase or defeasance of Spinco Indebtedness (if any) or any
other Spinco Liabilities) by the Company or any Company Subsidiary;
provided that the term "Capital Contribution" shall not include (1) any
amounts which are transferred following the date hereof and prior to the
Offer Purchase Date and which are either (i) in connection with
administrative and other similar services which are provided to any of the
Spinco Companies in the ordinary course of the Company's business and which
are consistent with the past practices of the Company (provided that the
cost of any such services may only be allocated in a manner consistent with
the past practices of the Company), or (ii) (A) pursuant to the express
terms and conditions of any Existing Intercompany Agreement and (B) in the
ordinary course of business and in a manner consistent with past practice,
(2) the Spinco Guarantee Warrants, or (3) the DBS Investment (as defined in
the definition of Spinco Liabilities).
"Casualty Program" means collectively, the series of programs
pursuant to which various insurance carriers provide insurance coverage to
the Company and its subsidiaries in respect of claims or occurrences
relating to workers' compensation liability, general liability, products
liability, automobile liability and
5
<PAGE>
employer's liability for all periods up to the Distribution Date.
"Cayman" shall have the meaning set forth in the recitals to this
Agreement.
"CCD Lawsuit" means the litigation entitled Loral Fairchild Corp.
vs. Sony Corporation, et al.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning set forth in the recitals to
this Agreement.
"Company Common Stock" means the common stock of the Company, par
value $0.25 per share.
"Company Financial Statements" means the audited consolidated
financial statements of the Company and its subsidiaries for the fiscal
year ending March 31, 1995 (a copy of which is set forth in the Company's
Annual Report on Form 10K for the year ended March 31, 1995).
"Confidentiality Agreement" means the confidentiality agreement
dated as of December 4, 1995 between Parent and the Company.
"Continental" means Continental Satellite Corporation, a
California corporation.
"Contract" means any contract, agreement, lease, license, sales
order, purchase order, instrument or other commitment that is binding on
any person or entity or any part of its property under applicable Law.
"Court Order" means any judgment, decree, injunction, order or
ruling of any Governmental Entity that is binding on any person or its
property under applicable Law.
"Disclosure Schedule" means the disclosure schedule dated as of
the date hereof and attached hereto. References to a particular section of
the Disclosure Schedule shall only refer or modify the specific Section of
this Agreement to which such Schedule relates (i.e.,
6
<PAGE>
Section 6.2(c) of the Disclosure Schedule shall refer to or modify only
Section 6.2(c) of this Agreement), unless otherwise expressly set forth
herein.
"Distribution" means the distribution of the shares of Spinco
Common Stock owned by the Company to holders of Company Common Stock and to
holders of Cancelled Company Options pursuant to the provisions of this
Agreement (including, without limitation, the provisions of Section 3.2(b)
hereof).
"Distribution Conditions" means each of the conditions set forth
in clauses (i) through (ix) of Section 10.1(a) hereof.
"Distribution Date" means the date as of which the Distribution
shall be effected as determined by the Board of Directors of the Company,
subject to the terms and conditions of this Agreement (including, without
limitation, the provisions of Section 3.2(a) hereof).
"Distribution Declaration Date" means the date on which the Board
of Directors of the Company takes action to declare the Distribution and
establish the Record Date.
"Existing Intercompany Agreement" means any written Intercompany
Agreement or regular, established accounting practice, consistently
applied, which is in existence prior to December 31, 1995.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"FCC" means the U.S. Federal Communications Commission.
"Final Order" means any consent, approval or other action of the
FCC (a) relating to any of the transactions contemplated pursuant to either
this Agreement or the Merger Agreement and (b) (i) which has not been
vacated, reversed, stayed, set aside, annulled or suspended, (ii) with
respect to which no timely appeal, request for stay or petition for
rehearing, reconsideration or review by any party or by the FCC on its own
motion, is pending, (iii) as to which the time for filing any such appeal,
request, petition or other similar
7
<PAGE>
document has expired, and (iv) as to which the time for reconsideration or
review by the FCC on its own motion under the Communications Act (as
defined in the Merger Agreement) and the rules and regulations of the FCC
has expired.
"Form 10" means the registration statement on Form 10 to be filed
by Spinco with the SEC to effect the registration of the Spinco Common
Stock pursuant to the Exchange Act.
"Globalstar" means Globalstar, L.P., a Delaware limited
partnership.
"Globalstar Bank Guarantee" means the Guarantee, dated as of
December 15, 1995, made by Loral in favor of Chemical Bank, as agent for
the lenders from time to time parties to the Globalstar Credit Agreement.
"Globalstar Credit Agreement" means the Credit Agreement, dated
as of December 15, 1995 (as amended, supplemented or otherwise modified
from time to time in accordance with the provisions of Section 2.5 hereof),
among Globalstar, Chemical Bank, as agent for the lenders from time to time
parties thereto and the other parties thereto.
"Globalstar Partners" means those Persons (or any Affiliates
thereof) holding direct or indirect partnership interests in either
Globalstar, LQSS or LQP.
"Guarantee Warrants" means those warrants to purchase shares of
common stock of GTL (or warrants to purchase partnership interests in
Globalstar, as the case may be), which warrants are to be issued in
connection with the Globalstar Bank Guarantee to the Company and, under
certain circumstances, to certain parties which hold partnership interests
in Globalstar, as more fully described in the Globalstar Warrant Memorandum
and the term sheet set forth on Exhibit A-1 attached hereto.
"Globalstar Warrant Memorandum" means the December 21, 1995
memorandum from Michael B. Targoff to Enrique Fernandez relating to, among
other things, the Globalstar Bank Guarantee and the Globalstar Credit
Agreement.
8
<PAGE>
"Governmental Entity" means any United States or any foreign,
federal, state or local government, court, administrative agency or
commission or other governmental or regulatory body or authority.
"GTL" means Globalstar Telecommunications Limited, a company
organized under the laws of Bermuda.
"Holdings" shall have the meaning set forth in the recitals to
this Agreement.
"Indemnifiable Losses" means, with respect to any claim by an
Indemnified Party for indemnification pursuant to Articles II, V, VI or
VIII hereof, any and all damages, losses, deficiencies, Liabilities,
obligations, penalties, judgments, settlements, claims, payments, fines,
interest, costs and expenses (including, without limitation, the costs and
expenses of any and all Actions, demands, assessments, judgments,
settlements and compromises relating thereto and the costs and expenses of
attorneys', accountants', consultants' and other professionals' fees and
expenses incurred in the investigation or defense thereof or the
enforcement of rights hereunder), including direct and consequential
damages, but excluding punitive damages (other than punitive damages
awarded to any third party against an Indemnified Party) suffered by such
Indemnified Party with respect to such claim.
"Indemnified Party" means any party which is seeking
indemnification from an Indemnifying Person pursuant to the provisions of
Articles II, V, VI or VIII hereof.
"Indemnifying Party" means any party hereto from which any
Indemnified Party is seeking indemnification pursuant to the provisions of
Articles II, V, VI or VIII hereof.
"Information" shall have the same meaning as defined in Section
7.2 hereof.
"Information Statement" means the information statement to be
sent to the holders of the Company's equity securities in connection with
the Distribution.
9
<PAGE>
"Intellectual Property Rights" means all right, title, interest
and all license and other rights, to the extent held by the Company and its
Subsidiaries immediately prior to the Restructuring, with respect to each
of the following items: all patents, patent applications, copyrights,
copyright applications, trademarks, trademark applications and trade names,
in each case as used in the business of the Company and its Subsidiaries as
conducted immediately prior to the Restructuring.
"Intercompany Agreements" means any Contracts between any
entities included within the Retained Business (including, without
limitation, the Company and the Retained Subsidiaries), on the one hand,
and any entities included within the Spinco Business (including, without
limitation, Spinco and the Spinco Companies), on the other hand.
"K&F" means K&F Industries, Inc., a Delaware corporation.
"LG" shall have the meaning set forth in the recitals to this
Agreement.
"LGP" shall have the meaning set forth in the recitals to this
Agreement.
"LQP" means Loral/QUALCOMM Partnership, L.P., a Delaware limited
partnership.
"LQSS" means Loral/QUALCOMM Satellite Services, L.P., a Delaware
limited partnership.
"Law" means any statute, law, rule, regulation, ordinance, order,
decree or judgment of any Governmental Entity, including, without
limitation, those covering environmental, energy, safety, health,
transportation, telecommunications, recordkeeping, zoning,
antidiscrimination, antitrust, wage and hour, and price and wage control
matters.
"Lehman Partnerships" means each of Shearson Lehman Brothers
Capital Partners II, L.P., Lehman Brothers Merchant Banking Portfolio
Partnership L.P., Lehman Brothers Offshore Investment Partnership L.P. and
Lehman Brothers Offshore Investment Partnership-Japan L.P.
10
<PAGE>
"Lehman Preferred Stock" means the shares of Series S Redeemable
Preferred Stock, par value $.10 per share, of Holdings which are held by
any of the Lehman Partnerships, any of their respective transferees or any
other persons.
"Liability" means, with respect to any party, except as otherwise
expressly provided herein, any direct or indirect liability (whether
absolute, accrued, contingent, reflected on a balance sheet (or in the
notes thereto) or otherwise, and whether known or unknown), indebtedness,
obligation, expense, claim, deficiency, guarantee or endorsement of or by
any person (including, without limitation, those arising under any Law or
Action or under any award of any court, tribunal or arbitrator of any kind,
and those arising under any contract, commitment or undertaking).
"Lien" means any mortgage, pledge, lien, encumbrance, charge,
adverse claim (whether pending or, to the knowledge of the person against
whom the adverse claim is being asserted, threatened), defect of title or
restriction of any nature whatsoever on any property or property interest
(regardless of whether such property or property interest is real or
personal, tangible or intangible, or otherwise), or a security interest of
any kind, including, without limitation, any conditional sale or other
title retention agreement, any third party option or other agreement to
sell and any filing of or agreement to give, any financing statement under
the Uniform Commercial Code (or equivalent statute) of any jurisdiction
(other than a financing statement which is filed or given solely to protect
the interest of a lessor).
"Merger" shall have the meaning set forth in the Merger
Agreement.
"Merger Agreement" shall have the meaning set forth in the
recitals to this Agreement.
"NYSE" means the New York Stock Exchange, Inc.
"Offer" shall have the meaning set forth in the Merger Agreement.
11
<PAGE>
"Offer Purchase Date" means the date on which the Purchaser accepts for
payment and pays for Shares tendered pursuant to the Offer.
"Parent" shall have the meaning set forth in the recitals to this
Agreement.
"Parent Indemnified Parties" shall have the same meaning as defined in
Section 5.2(a) hereof.
"Person" or "person" means and includes any individual, partnership, joint
venture, corporation, association, joint stock company, trust, unincorporated
organization or similar entity and any Governmental Entity.
"Purchaser" shall have the meaning set forth in the recitals to this
Agreement.
"Record Date" means the date determined by the Board of Directors of the
Company as the record date for the Distribution, subject to the terms and
conditions of this Agreement (including, without limitation, the provisions of
Section 3.2(a) hereof).
"Restructuring" means collectively, the transactions contemplated pursuant
to the provisions of Article II hereof.
"Retained Action" shall have the same meaning as defined in Section 5.6
hereof.
"Retained Assets" means all Assets of the Company and each Retained
Subsidiary (including, without limitation, (A) all shares of capital stock,
partnership interests and other equity or ownership interests or ownership
rights in all subsidiaries and other entities owned directly or indirectly by
the Company or any of the Retained Subsidiaries, (B) all rights to Assets held
by such subsidiaries and entities, (C) except as provided in Sections 4.1 and
4.2 hereof, all cash and cash equivalents held by the Company or any of the
Retained Subsidiaries, (D) the Company Names and Company Proprietary Names (such
terms, as defined in Section 6.4 hereof), (E) the Retained Actions and all other
Actions commenced by the Company or any Retained Subsidiary (to the extent such
Actions constitute Assets), and (F) the licenses of
12
<PAGE>
Intellectual Property Rights referred to in Section 6.7 hereof to be granted to
Parent, the Company and each of their respective Affiliates), other than the
Spinco Assets.
"Retained Business" means all businesses of the Company and the Retained
Subsidiaries and all businesses included within the Retained Assets (including,
without limitation, the Company's electronic combat business, the Company's
training and simulation business, the Company's tactical weapons business, the
Company's command, control, communications and intelligence (C3I)/reconnaissance
business and the Company's systems integration business (each as described in
the Company's Annual Report on Form 10K for the year ended March 31, 1995)), as
conducted by the Company and its subsidiaries as of the Distribution Date and
all former businesses of the Company and the Retained Subsidiaries; provided
that the term "Retained Business" shall not include the Spinco Business.
"Retained Employees" shall mean all current and former officers and
employees of the Company and its subsidiaries, other than the Spinco Employees.
"Retained Liabilities" means all of the Liabilities of the Company and
each of the Retained Subsidiaries, other than the Spinco Liabilities.
"Retained Subsidiaries" means all of the Subsidiaries of the Company,
other than the Spinco Companies.
"SEC" means the U.S. Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Severance Agreement" means any Contract which provides for the payment of
any cash or other consideration to an officer, director or employee of the
Company or any of its Subsidiaries upon the consummation of either the Offer,
the Merger, the Restructuring or the Distribution.
13
<PAGE>
"Spinco" shall have the meaning set forth in the recitals to this
Agreement.
"Spinco Assets" means all right, title and interest, to the extent held by
the Company and its Subsidiaries or any of the other Spinco Companies
immediately prior to the Restructuring, with respect to each of the following
items: (a) all shares of capital stock of and all partnership interests in (as
the case may be) the Spinco Companies, (b) the Spinco Cash Amount, (c) the
Spinco Names and Spinco Proprietary Name Rights (such terms, as defined in
Section 6.4 hereof), (d) any Actions commenced by a Spinco Company the subject
matter of which is otherwise a Spinco Asset or any Action which relates
primarily to a Spinco Asset (to the extent such Actions constitute Assets), (e)
shares of capital stock of Loral Travel Services Inc. and Loral Properties Inc.,
(f) that portion of the leasehold interest relating to the office space on not
more than two floors reasonably designated by Spinco within 30 days after the
date hereof with respect to the building located at 600 Third Avenue, New York,
New York and such existing furniture, fixtures, and office equipment located on
such floors which is reasonably designated by Spinco within thirty (30) days
after the date hereof, (g) the licenses of Intellectual Property Rights referred
to in Section 6.7 hereof to be granted to Spinco or the Spinco Companies, (h)
the CCD Lawsuit, and (i) the FCC license applications and other Assets listed on
Section 1.1(b) of the Disclosure Schedule. The term "Spinco Assets" shall also
include (A) the Cash Guarantee Fees accruing to the benefit of the Company and
(B) the number of Guarantee Warrants equal to the product of (x) the aggregate
number of Guarantee Warrants which might be issued and (y) a ratio of the Spinco
Assumed Guarantee Amount (as defined in Section 2.5(d) hereof) to the total
amount of Obligations (as defined in Section 2.5 hereof) under the Globalstar
Bank Guarantee in connection with the Globalstar Bank Guarantee, but shall not
include any other Guarantee Warrants which may be issued from time to time to
the Company.
"Spinco Balance Sheet" means the unaudited, pro forma, consolidated balance
sheet (including the related notes) of the Spinco Business as of September 30,
1995 set forth in Section 1.1(d) of the Disclosure Schedule.
14
<PAGE>
"Spinco Business" means each business and each former business which is or
was conducted by Spinco or a Spinco Company as of the Distribution Date or which
is or was included within the Spinco Assets.
"Spinco Cash Amount" means the cash amount referred to in Section
2.1(a)(xiv) hereof.
"Spinco Common Stock" means the common stock, par value $0.01 per share, of
Spinco, together with the associated preferred stock purchase rights to be
issued pursuant to a rights agreement to be entered into between Spinco and a
rights agent to be selected by Spinco.
"Spinco Companies" means (a) each of SSL, GTL, K&F, Globalstar, LGP, LG,
Cayman, LQSS, LQP, Continental and the companies referred to in paragraph (e) of
the definition of "Spinco Assets", and (b) all Subsidiaries of any of the
entities listed in paragraph (a) above after giving effect to the Restructuring.
"Spinco Employees" means (x) those persons who are employed as officers or
employees of Spinco and the Spinco Companies or otherwise employed in the
Spinco Business immediately prior to or effective as of the Distribution Date,
and (y) all former officers and employees of Spinco, any Spinco Company or the
Spinco Business who, immediately prior to the termination of their employment,
were employed by Spinco, any Spinco Company or the Spinco Business. In the event
any person shall have been employed by Spinco or any of the Spinco Companies, as
well as by the Company or any of the Retained Subsidiaries, such person shall be
considered a Spinco Employee if at the Distribution Date such person's primary
employment shall be with Spinco, any of the Spinco Companies or the Spinco
Business.
"Spinco Indebtedness" means (a) any and all of the following items which
are incurred or entered into by Spinco or any Spinco Company or otherwise
incurred or entered into in connection with the Spinco Business: (i)
indebtedness for money borrowed, (ii) indebtedness which is evidenced by notes,
debentures, bonds or other similar instruments; (iii) any lease of any property
(whether real, personal or mixed) that, in accordance with generally accepted
accounting principles, either would be required to be classified and accounted
for as a capital
15
<PAGE>
lease on a balance sheet or otherwise be disclosed as such in a note to any such
balance sheet; (iv) all obligations issued or assumed as the deferred purchase
price of property, all conditional sale obligations and all obligations under
any title retention agreement; and (v) all obligations for the reimbursement of
any obligor on any letter of credit, banker's acceptance or similar credit
transaction; (b) all obligations of the type referred to in clauses (i), (ii),
(iii), (iv) and (v) of paragraph (a) above of which Spinco, any Spinco Company
or the Spinco Business is responsible or liable, directly or indirectly, as
obligor, guarantor or otherwise, including any guarantees of such obligations;
and (c) all obligations of the type referred to in clauses (i), (ii), (iii),
(iv) and (v) of paragraph (a) above or referred to in paragraph (b) above, which
are secured by any Lien on any property or asset of Spinco, any Spinco Company,
any Affiliate of Spinco or the Spinco Business.
"Spinco Indemnified Parties" shall have the same meaning as defined in
Section 5.3(a) hereof.
"Spinco Liabilities" means (a) all of the Liabilities of Spinco and the
Spinco Companies to third parties and all Liabilities relating to or arising out
of the Spinco Assets or the conduct of the Spinco Business (in all cases,
whether arising before or after the date hereof); (b) all Liabilities reflected
or reserved against in the Spinco Balance Sheet and all similar Liabilities
arising after the date thereof; (c) any Actions commenced by a Spinco Company
the subject matter of which is otherwise a Spinco Asset or any Action which
relates primarily to a Spinco Asset (to the extent such Actions constitute
Liabilities); (d) except as otherwise provided in Article VIII hereof, the
Liabilities of the Company and its subsidiaries, including, without limitation,
Spinco and the Spinco Companies, in respect of Spinco Employees (in all cases,
whether arising before or after the date hereof) (excluding, however, all wages,
salary, bonus and other similar amounts accrued prior to the Distribution Date
in respect of Spinco New York Employees); (e) all Liabilities relating to or
arising out of the Spinco Assets or the conduct of the Spinco Business (in all
cases, whether arising before or after the date hereof) with respect to which
the Company or any Retained Subsidiary has agreed, prior to the Distribution
Date, to indemnify any third party in any manner with re-
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spect thereto or has agreed to otherwise be, or is otherwise, liable with
respect thereto; (f) all Company Transfer Expenses (as defined in Section 2.6
hereof) and all other Indemnifiable Losses referred to in Section 2.6 hereof;
(g) all Spinco Excess Costs (as defined in Section 11.3 hereof); and (h) the
amount of any and all consideration paid, and any and all Liabilities incurred,
by the Company, Spinco, any Spinco Company or any Retained Subsidiary or any of
their respective Affiliates, following the date hereof but prior to the
consummation of the Restructuring, in connection with the acquisition of any
securities issued by Continental (whether held by any third party or otherwise)
or any Assets of Continental, but only to the extent that the aggregate fair
market value of such consideration and Liabilities exceeds in the aggregate
$7,500,000.00 (for purposes of this clause (h), the term "Continental" shall
include any other Person, program or business which conducts direct broadcast
satellite operations similar in nature to those operations conducted or proposed
to be conducted by Continental) (the parties hereto acknowledge and agree that,
if the Company acquires any such securities or Assets, that all amounts paid or
Liabilities incurred in connection therewith not in excess of such $7,500,000.00
threshold (the "DBS Investment"), shall not otherwise be included within the
term "Spinco Liabilities"). Notwithstanding the foregoing, the term "Spinco
Liabilities" shall not include any Liabilities of the Company arising pursuant
to the express provisions of the Globalstar Bank Guarantee (as amended pursuant
to the provisions of Section 2.5 hereof), except as otherwise expressly
provided in Section 2.5 hereof.
"Spinco New York Employees" means those Spinco Employees who are located
prior to the date hereof at the office building located at 600 Third Avenue, New
York, New York; provided that the term "Spinco New York Employees" shall not
include any employees whose primary employment is with the Spinco Business and
shall not include senior executive officers of the Company.
"Spinco Preferred Stock" means the Series A Non-Voting Convertible
Preferred Stock, par value $0.01 per share, of Spinco, having the rights,
powers, privileges and other terms set forth in the Certificate of Incorporation
of Spinco (which, pursuant to Section 2.3(a) hereof, shall be in substantially
the same form as
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the provisions set forth on Exhibit B attached hereto (with such changes thereto
as Parent and the Company may approve prior to the Offer Purchase Date)).
"SSL" means Space Systems/Loral, Inc., a Delaware corporation.
"SSL Lawsuit" means the litigation entitled "Space Systems/Loral, Inc. v.
Martin Marietta Corporation."
"SSL Stockholders Agreements" means each of (a) the Stockholders Agreement
by and among the Company, Holdings, SSL, Aerospatiale Societe Nationale
Industrielle, Alcatel Espace and Alenia Aeritalia & Selenia S.p.A., dated as of
April 22, 1991 (as amended by Amendment No. 1, dated as of November 10 1992),
and (b) the Stockholders Agreement by and among Holdings, Aerospace, the Company
and the Lehman Partnerships, dated as of November 13, 1992.
"Stockholders Agreement" means the Stockholders Agreement to be entered
into between the Company and Spinco following the date hereof, the material
terms of which are set forth on Exhibit A to this Agreement.
"Subsidiary" or "subsidiary" of any party means (a) a corporation, a
majority of the voting or capital stock of which is as of the time in question
directly or indirectly owned by such party and (b) any other partnership, joint
venture, association, joint stock company, trust, unincorporated organization or
similar entity, in which such party, directly or indirectly, owns a majority of
the equity interest thereof or has the power to elect or direct the election of
a majority of the members of the governing body of such entity or otherwise has
control over such entity (e.g., as the managing partner of a partnership).
"Tax Sharing Agreement" means the Tax Sharing Agreement, in the form of
Exhibit A to the Merger Agreement, pursuant to which the Company and Spinco have
provided for certain tax matters, including, without limitation,
indemnification, allocation of tax benefits and filing of tax returns.
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Section 1.2. References to Time. All references in this Agreement to times
of the day shall be to New York City time.
ARTICLE II
THE RESTRUCTURING AND RELATED TRANSACTIONS
------------------------------------------
Section 2.1. Transfers of Assets.
(a) Subject to the terms and conditions of this Agreement:
(i) prior to the Distribution Date, LG shall transfer to Cayman all of
its right, title and interest in and to all shares of capital stock owned
by LG in GTL, by means of a distribution to Cayman of such equity
securities;
(ii) immediately following the actions referred to in the immediately
preceding clause, Cayman shall transfer to LGP all of its right, title and
interest in and to all shares of capital stock of GTL owned by Cayman and
may transfer all, or a portion of, the partnership interests in LG owned by
Cayman, by means of a dividend to LGP of such equity securities;
(iii) immediately following the actions referred to in the immediately
preceding clause, LGP shall transfer to Aerospace all of its right, title
and interest in and to all shares of capital stock of Cayman and GTL owned
by LGP and may transfer all, or a portion of, the partnership interests in
LG owned by LGP, by means of a dividend to Aerospace of such equity
securities;
(iv) immediately following the actions referred to in the immediately
preceding clause, Aerospace shall transfer to Holdings all of its right,
title and interest in and to all shares of capital stock owned by Aerospace
in Cayman, GTL, LGP and SSL and all partnership interests in LG owned by
it, by means of a dividend to Holdings of such equity securities;
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(v) immediately following the actions referred to in the immediately
preceding clause, Holdings shall transfer to the Company all of its right,
title and interest in and to (x) all shares of capital stock owned by
Holdings in Cayman, GTL, LGP and Continental, (y) 64.125 percent (64.125%)
of the shares of capital stock owned by Holdings in SSL, and (z) all
partnership interests in LG owned by Holdings, by means of a dividend of
such equity securities;
(vi) immediately following the actions referred to in the immediately
preceding clause, LGP may transfer to Spinco or to any Spinco Subsidiary
designated by Spinco, all (or any other portion thereof reasonably
designated by Spinco) of LGP's right, title and interest in the partnership
interests in LG and LQP;
(vii) immediately following the actions referred to in the preceding
clauses, the Company shall transfer to Spinco all of its right, title and
interest in and to all shares of capital stock owned by the Company in
Cayman, GTL, K&F, LGP, SSL and Continental and all partnership interests in
LG owned by the Company, in exchange for, among other things, the issuance
by Spinco to the Company of the shares of Spinco Common Stock;
(viii) immediately following the actions referred to in the
immediately preceding clause, the Company shall transfer to Spinco (and the
Company shall cause each of its subsidiaries to transfer to Spinco) all of
their right, title and interest in and to all Spinco Assets not otherwise
transferred to Spinco pursuant to the provisions of this Section 2.1(a), in
the case of assets not held directly by the Company, by a distribution to
the Company and, in each case by means of a contribution by the Company to
the capital of Spinco of such Spinco Assets (provided that the foregoing
provisions shall not be construed to constitute a transfer by the Company
to Spinco of any capital stock of Spinco owned at that time by the
Company);
(ix) immediately following the actions referred to in the immediately
preceding
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clause, Spinco shall transfer to the Company (and Spinco shall cause each
of its Subsidiaries to transfer to the Company) all of its right, title and
interest in and to all Retained Assets not otherwise transferred to the
Company pursuant to the provisions of this Section 2.1(a) (if any), in each
case by means of a dividend of such Retained Assets (provided that the
foregoing provisions shall not be construed to constitute a transfer by the
Spinco to Company of the rights of Spinco under this Agreement);
(x) immediately following the actions referred to in the immediately
preceding clause, the Company shall assume and shall in due course pay,
perform and discharge (or shall cause to be assumed and cause in due course
to be paid, performed and discharged), all of the Retained Liabilities to
which the Spinco Business or the Spinco Assets are then subject or
otherwise liable;
(xi) immediately following the actions referred to in the immediately
preceding clause, Spinco shall assume and shall in due course pay, perform
and discharge (or shall cause to be assumed and cause in due course to be
paid, performed and discharged), all of the Spinco Liabilities to which the
Retained Business or the Retained Assets are then subject or otherwise
liable;
(xii) following, or prior to, the actions referred to in the preceding
clauses, Holdings shall transfer all its right, title and interest in its
shares of capital stock of SSL owned by it that are not transferred
pursuant to clause (v), above, either to Spinco or, pursuant to Section
2.7, to the Lehman Partnerships;
(xiii) in connection with the actions referred to in the preceding
clauses, Spinco shall issue to the Company the shares of Spinco Common
Stock referred to in Section 2.4 hereof; and
(xiv) following the actions referred to in the preceding clauses and
following Parent's acceptance for payment of Shares of Company Common Stock
in connection with the Offer, on or prior to
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the Distribution Date and prior to the Distribution, Parent shall transfer
to the Company, as a contribution to capital, $712,400,000 in immediately
available funds, less any amount which the parties hereto have at such
time agreed is owed to Parent pursuant to the provisions of Sections
4.1(a) and 4.1(c) hereof (the aggregate of such cash amount being
hereinafter referred to as the "Spinco Cash Amount"), and the Company
shall then immediately contribute the Spinco Cash Amount to Spinco, as a
contribution to capital, of which $344,000,000.00 shall be in exchange for
the Spinco Preferred Stock and the balance shall be treated as additional
consideration for the Spinco Common Stock.
(b) Notwithstanding anything else in this Agreement to the contrary but
subject to the provisions of Section 2.6 hereof, this Agreement shall not
constitute an agreement to assign, convey or transfer any Action, Liability,
Asset or Contract or any claim or right or any benefit arising thereunder or
resulting therefrom as to which (x) a prior right of assignment, conveyance or
transfer exists (including, without limitation, a Third Party Call Right (as
defined in Section 2.6 hereof)) which has not been waived as of the Distribution
Date or (y) consent to assignment, conveyance or transfer thereof is required
but has not been obtained as of the Distribution Date (including, without
limitation, any Asset which has been pledged to any third party creditor and
with respect to which such pledge has not been released prior to the
Distribution Date). Subject to the preceding sentence and the provisions of
Section 6.2 hereof, to the extent that any such contributions and transfers
shall not have been so consummated prior to the Distribution Date, the parties
shall cooperate to effect such consummation as promptly thereafter as shall be
practicable, and as between the Company and Spinco, as of the Distribution Date,
(i) the Company shall be deemed to have contributed to Spinco, and Spinco shall
have and be deemed to have obtained, complete and sole beneficial ownership over
all of the Spinco Assets, together with all of the rights, powers and privileges
incident thereto which are held by the Company and the Retained Subsidiaries,
and Spinco shall be deemed to have assumed in accordance with the terms of this
Agreement all of the Spinco Liabilities and all of the duties, obligations and
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responsibilities of the Company and the Retained Subsidiaries incident thereto,
whether or not all instruments of transfer and assumption shall have been
executed and delivered, and (ii) Spinco shall be deemed to have transferred to
the Company and the Retained Subsidiaries, and the Company and the Retained
Subsidiaries shall have and be deemed to have obtained, complete and sole
beneficial ownership over all of the Retained Assets which are being transferred
from Spinco and the Spinco Companies pursuant to the provisions of this Section
2.1(a), together with all of the rights, powers and privileges incident thereto
which are held by Spinco and the Spinco Companies, and the Company and the
Retained Subsidiaries shall be deemed to have assumed in accordance with the
terms of this Agreement all of the Retained Liabilities and all of the duties,
obligations and responsibilities of Spinco and the Spinco Companies incident
thereto, whether or not all instruments of transfer and assumption shall have
been executed and delivered.
Section 2.2. Methods of Transfer and Assumption. The parties hereto agree
that (a) the transfers of Assets contemplated pursuant to Section 2.1 hereof
shall be effected by delivery by Spinco to the Company, and by the Company to
Spinco, as the case may be, of (i) with respect to those Assets which are
evidenced by capital stock certificates or similar instruments, certificates
duly endorsed in blank or accompanied by stock powers or other instruments of
assignment executed in blank, (ii) with respect to any real property interest
and/or any improvements thereon, a quitclaim deed or the equivalent thereof in
accordance with local practice, and (iii) with respect to all other Assets, such
good and sufficient instruments of contribution, transfer and delivery, in form
and substance reasonably satisfactory to the Company, Parent and Spinco, as
shall be necessary to vest in the Company or Spinco, as the case may be, all of
the right, title and interest of Spinco or the Company, as the case may be, in
and to any such Assets, (b) the assumption of the Retained Liabilities
contemplated pursuant to Section 2.1(a)(x) hereof shall be effected by delivery
by the Company to Spinco of such good and sufficient instruments of assumption,
in form and substance reasonably satisfactory to the Company, Parent and Spinco,
as shall be necessary for the assumption by the Company of the Retained
Liabilities, and (c) the assumption of the Spinco Liabilities contemplated
pursuant to Section 2.1(a)(xi)
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hereof shall be effected by delivery by Spinco to the Company of such good and
sufficient instruments of assumption, in form and substance reasonably
satisfactory to the Company, Parent and Spinco, as shall be necessary for the
assumption by Spinco of the Spinco Liabilities. Each of the parties hereto also
agrees to deliver to any other party hereto such other documents, instruments
and writings as may be reasonably requested by such other parties hereto in
connection with the transactions contemplated hereby. Notwithstanding any other
provisions of this Agreement to the contrary, (x) the instruments of transfer or
assumption referred to in this Section 2.2 shall not, without the prior written
consent of Parent, include any separate representations and warranties, and (y)
in the event and to the extent that there is any conflict between the provisions
of this Agreement and the provisions of any of the instruments of transfer or
assumption referred to in this Section 2.2, the provisions of this Agreement
shall prevail and govern.
Section 2.3. Company Approval of Certain Spinco Actions; Formation of
Spinco. Unless otherwise provided in this Agreement, the Company shall cooperate
with Spinco and the Spinco Companies in effecting, and if so requested by Spinco
the Company shall, as the sole stockholder of Spinco, ratify any actions that
are reasonably necessary or desirable to be taken by Spinco to effectuate the
transactions contemplated by this Agreement in a manner consistent with the
terms of this Agreement, including, without limitation, the following: (a)
amending the Certificate of Incorporation of Spinco so that the provisions
thereof shall at the Distribution Date have the provisions set forth on Exhibit
B attached hereto and such other terms and conditions as Parent and Spinco shall
reasonably approve (with such changes thereto as Parent and the Company may
approve prior to the Offer Purchase Date); (b) amending the By-Laws of Spinco so
that the provisions thereof shall at the Distribution Date have the provisions
set forth on Exhibit C attached hereto and such other terms and conditions as
Parent and Spinco shall reasonably approve (with such changes thereto as Parent
and the Company may approve prior to the Offer Purchase Date); (c) adopting a
shareholder rights plan of Spinco having substantially the same provisions, as
of the Distribution Date, as those set forth on Exhibit D attached hereto (with
such changes thereto as the Board of Directors of the Company may approve in its
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reasonable discretion prior to the Offer Purchase Date); (d) adopting, preparing
and implementing appropriate plans, agreements and arrangements for Spinco
Employees and Spinco non-employee directors (including, without limitation,
employee benefit plans, agreements and arrangements substantially similar to
those set forth on Exhibit E attached hereto (with such changes thereto as the
Board of Directors of the Company may approve in its reasonable discretion prior
to the Offer Purchase Date)); and (e) electing to the Board of Directors of
Spinco those persons referred to in Section 6.3 hereof so that such persons
shall be able to serve as the sole members of Spinco's Board of Directors as of
the Distribution Date.
Section 2.4. Issuance of Spinco Stock to the Company. Spinco agrees to
issue to the Company, (a) contemporaneously with the transfers of Assets and
assumption of Liabilities contemplated in connection with the Restructuring, one
share of Spinco Common Stock for each share of Company Common Stock held of
record as of the Record Date and such number of shares of Spinco Preferred Stock
as may be necessary to satisfy the representations and warranties set forth in
Section 4.1(c) of the Stockholders Agreement (which shares of Spinco Preferred
Stock shall, in the aggregate, be convertible into such number of shares of
Spinco Common Stock as shall equal 20% of the total number of shares of Spinco
Common Stock to be outstanding on a fully-diluted basis, immediately after
giving effect to the Distribution and after giving effect to the conversion of
such Spinco Preferred Stock). In addition, Spinco agrees to issue to the Company
on or prior to the Record Date such additional shares of Spinco Common Stock as
may be required in order for the Company to fulfill its obligations pursuant to
Section 3.2 hereof.
Section 2.5. Treatment of Globalstar Bank Guarantee.
(a) Spinco shall, and prior to the Offer Purchase Date the Company shall,
use their respective reasonable efforts to amend the Globalstar Bank Guarantee
so that, following the Restructuring, (x) the provisions of Section 10 of the
Globalstar Bank Guarantee shall be deleted and shall have no force and effect
against the Company or any of its Affiliates (provided that, in the
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event that the Globalstar Bank Guarantee is amended in the manner provided in
this Section 2.5, Parent agrees to assume the obligations of the Company as
guarantor under the Globalstar Bank Guarantee), and (y) the aggregate amount of
indebtedness being guaranteed by the Company (or Parent, as the case may be)
under the Globalstar Bank Guarantee shall not exceed $250,000,000; provided that
the amendments contemplated in this sentence shall be in such form and substance
as shall be reasonably acceptable to Parent. Notwithstanding anything to the
contrary contained in this Agreement, except as otherwise expressly provided in
this Section 2.5, neither the Company nor Spinco shall, nor shall they permit
any of their respective Affiliates to, (i) amend or in any way modify either the
Globalstar Bank Guarantee, the Globalstar Credit Agreement, the Guarantee
Warrants or any other Contract, in a manner which adversely affects any of the
benefits, rights or obligations of the Company with respect to either the
Globalstar Bank Guarantee, the Globalstar Credit Agreement or the Guarantee
Warrants, without obtaining the prior written consent of Parent (which consent
may not be unreasonably withheld), or (ii) waive or diminish any rights of
subrogation of the Company with respect to the Globalstar Bank Guarantee or take
any other action which adversely affects any of the benefits, rights or
obligations of the Company with respect to either the Globalstar Bank Guarantee,
the Globalstar Credit Agreement or the Guarantee Warrants, without obtaining the
prior written consent of Parent (provided that the consent of Parent need not be
obtained with respect to the diminution of any rights of subrogation held by the
Company and its Affiliates where (A) Globalstar determines within 90 days to
either issue to the Company subordinated indebtedness of Globalstar having an
aggregate principal amount (the repayment of which, together with interest
thereon, may be deferred for up to 3 years) equal to, or equity interests in
Globalstar having a fair market value equal to, the aggregate of the amounts
paid or incurred or Liabilities assumed by the Company or its Affiliates in
connection with the Globalstar Bank Guarantee, and (B) the Company and its
Affiliates are treated no less favorably with respect to the matters set forth
in this clause (ii) than the manner in which Spinco and those of the Globalstar
Partners who have assumed liability in connection with the Globalstar Bank
Guarantee are treated with respect to such matters.
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(b) Spinco shall, and prior to the Offer Purchase Date the Company
shall, use its respective reasonable efforts to cause the Globalstar Partners to
assume the obligations of the Company (or Parent, as the case may be) as
guarantor under the Globalstar Bank Guarantee in an aggregate amount of up to
the Maximum Partner Assumed Guarantee Amount (as defined below), and to cause
the Company (or Parent, as the case may be) to be released in respect thereof.
The parties hereto acknowledge that the Guarantee Warrants will be initially
issued to the Company, Spinco and the Globalstar Partners in direct proportion
to the amount of liability in respect of the Globalstar Bank Guarantee for which
each such person has agreed to be liable, that is, 60% to the Company and 40% to
Spinco, and that 100% of the deferred cash fees payable in respect of the
Globalstar Bank Guarantee (the "Cash Guarantee Fee") will be initially payable
solely to Spinco, subject to reallocation to Globalstar Partners assuming such
obligations as provided in Section 2.6(d).
(c) Spinco agrees to indemnify, defend and hold harmless the Company
and each Parent Indemnified Party in accordance with the indemnification
provisions of Article V hereof, from and against any and all Indemnifiable
Losses of the Company and any such Parent Indemnified Party which both (i) arise
out of, relate to or result from the Globalstar Bank Guarantee or any failure by
Globalstar to pay when due any principal, interest or other amounts owing under
the Globalstar Credit Agreement or any failure by Globalstar to perform and
abide by all other obligations, covenants, conditions and agreements applicable
to it under such Globalstar Credit Agreement, and (ii) exceed in the aggregate
$150,000,000.00; provided that in no event shall Spinco's liability in
connection with the Globalstar Bank Guarantee exceed the Spinco Assumed
Guarantee Amount (as defined below). Spinco hereby pledges to the Company, and
grants the Company a security interest in, all Guarantee Warrants held at any
time by Spinco or its Subsidiaries (and all rights, benefits and proceeds in
respect thereof), as collateral in respect of Spinco's indemnity obligations set
forth in the immediately preceding sentence, and the Company shall be entitled
to exercise all of the rights, powers and remedies (whether arising pursuant to
this Agreement, statute, common law, equity or otherwise) for the protection and
enforcement of the Company's
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rights under this Section 2.5. Spinco hereby agrees to deliver to the Company
all certificates representing Guarantee Warrants promptly following receipt
thereof. Upon receipt from Spinco of any certificates representing Guarantee
Warrants, the Company shall hold such certificates as pledgee thereof. The
Company shall have all rights with respect to the Guarantee Warrants owned by
Spinco and pledged to the Company hereunder as afforded a secured party under
the Uniform Commercial Code. The Company agrees to transfer to Spinco or as
Spinco shall direct and release its security interest in any Guarantee Warrants
of Spinco held by the Company which are required to be transferred pursuant to
Section 2.5(d) hereof. The Company shall also release the Guarantee Warrants
from the lien of the security interest granted hereunder at the later of (i) the
release of the Company from the Globalstar Bank Guarantee and (ii) the
satisfaction in full of Spinco's in full of Spinco's indemnification obligations
hereunder with respect to Globalstar Bank Guarantee. Upon delivery to the
Company by Spinco of the pledged Guarantee Warrants, the Company shall confirm
to Spinco in writing that the Company will be holding such Guarantee Warrants as
pledge thereof.
(d) For purposes of this Section 2.5, (i) the term "Maximum Partner
Assumed Guarantee Amount" shall mean the sum of (A) $150,000,000.00 in principal
amount of indebtedness, plus (B) sixty percent (60%) of the aggregate of all
interest amounts thereon in accordance with the Globalstar Credit Agreement
(other than unpaid principal) which are owed under the Globalstar Credit
Agreement, (ii) the term "Actual Partner Assumed Guarantee Amount" shall mean
the aggregate amount of guarantee obligations with respect to which all
Globalstar Partners have actually guaranteed pursuant to the provisions of this
Section 2.5, and (iii) the term "Spinco Assumed Guarantee Amount" shall mean the
sum of (A) $100,000,000.00 in principal amount of indebtedness, plus (B) forty
percent (40%) of the aggregate of all interest amounts and other Obligations
(such term, as defined in the Globalstar Bank Guarantee)(other than unpaid
principal) which are owed under the Globalstar Credit Agreement; provided that
the Spinco Assumed Guarantee Amount shall be reduced on a dollar-for-dollar
basis by the amount of the Actual Partner Assumed Guarantee Amount (if any)
(provided that the Spinco Assumed Guarantee Amount shall in no event be less
than zero), provided further
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that (x) Spinco will convey to each Globalstar Partner which assumes a portion
of the Globalstar Bank Guarantee Obligation a pro rata share of the Cash
Guarantee Fees and, with respect to the first $100,000,000 of obligations so
assumed, a pro rata share of the Guarantee Warrants and (y) the Company will
convey to each such Globalstar Partner, with respect to the next $50,000,000 of
obligations so assumed, a pro rata share of the Guarantee Warrants.
Section 2.6. Transfers of Spinco Capital Stock Subject to Rights of
First Offer, Etc.
(a) Third Party Call Rights. In the event that any Spinco Assets
consist of shares of capital stock of a Spinco Company, which shares are subject
to any right of first offer, right of first refusal, call right, third party
option or other similar contractual right (including, without limitation, any
rights of first offer (if any) arising out of the SSL Stockholders Agreements)
on the part of any party (other than the Company, any Retained Subsidiary,
Spinco and any Spinco Company) (such third party, a "Third Party Transferee") to
require that such shares be sold or otherwise transferred to such Third Party
Transferee (any such right, a "Third Party Call Right", and any such shares
subject to such right, the "Restricted Spinco Shares"), then Spinco shall (x)
deliver or cause to be delivered all notice(s) which are required to be
delivered by the Company, Spinco, any Retained Subsidiary or any Spinco Company
in connection with any such Third Party Call Rights (unless delivery of such
notice(s) has been waived by the recipient(s) thereof), and (y) use its
reasonable efforts to cause each such Third Party Transferee to waive all Third
Party Call Rights held by such Third Party Transferee. In the event that Spinco
is unable to obtain any such waiver with respect to any Restricted Spinco Shares
prior to the Distribution Date, then such Restricted Spinco Shares shall not be
assigned, conveyed or transferred to Spinco pursuant to this Agreement unless
and until such Restricted Spinco Shares are no longer subject to acquisition by
any Third Party Transferee pursuant to any Third Party Call Rights (provided
that, prior to such assignment, conveyance or transfer to either the Third Party
Transferee pursuant to this Section 2.6 or to Spinco pursuant to this Agreement,
such Restricted Spinco Shares shall, to the extent applicable, be subject to the
provi-
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sions of Section 2.1(b) hereof). In the event that a Third Party Transferee
exercises any Third Party Call Right with respect to any Restricted Spinco
Shares, then (i) such Restricted Spinco Shares shall be transferred to such
Third Party Transferee in accordance with the terms and conditions of the Third
Party Call Right relating thereto, and (ii) the Company shall turn over promptly
to Spinco all cash and other amounts if and when received by the Company or any
Retained Subsidiary from such Third Party Transferee in connection therewith.
The parties hereto acknowledge and agree that the amounts referred to in clause
(ii) of the preceding sentence shall be received and held in trust and may not
be set off or reduced by any amounts which may otherwise be owed to any of the
Parent Indemnified Parties pursuant to this Agreement.
(b) Third Party Put Rights. In the event that any party (other than
the Company, any Retained Subsidiary, Spinco and any Spinco Company) (such third
party, a "Third Party Transferor") has any put right or other similar
contractual right (including, without limitation, any put rights (if any)
arising out of the SSL Stockholders Agreements) to require that the Company or
any Retained Subsidiary acquire any shares of capital stock of a Spinco Company
which are then beneficially owned or held by such Third Party Transferor (any
such right, a "Third Party Put Right", and any such shares subject to such
right, the "Spinco Put Shares"), then Spinco shall (x) deliver or cause to be
delivered all notice(s) which are required to be delivered by the Company,
Spinco, any Retained Subsidiary or any Spinco Company in connection with any
such Third Party Put Rights (unless delivery of such notice(s) has been waived
by the recipient(s) thereof), and (y) use its reasonable efforts to cause such
Third Party Transferor to waive all Third Party Put Rights held by such Third
Party Transferor. In the event that Spinco is unable to obtain any such waiver
with respect to any Restricted Spinco Shares and any such Third Party Transferor
exercises any Third Party Put Right with respect to any Spinco Put Shares, then
(i) Spinco shall pay to the Company in immediately available funds (and without
any deductions or setoffs) prior to the date of such acquisition (but in no
event later than the third Business Day prior to the anticipated date of such
acquisition) the sum of (x) the entire amount which is required to be paid to
such Third Party
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Transferor in connection with such Third Party Put Right, and (y) all Company
Transfer Expenses (as defined below) for which documentation evidencing such
Company Transfer Expenses has been provided to Spinco prior to such date
(except, in the case of either clause (x) or (y) above, for those amounts which
have already been paid in full by Spinco), (ii) the Company or the Retained
Subsidiary which is responsible for acquiring such Spinco Put Shares upon the
exercise of such Third Party Put Right shall acquire such Spinco Put Shares in
accordance with the terms and conditions of the Third Party Put Right relating
thereto, and (iii) following receipt of the amounts payable by Spinco to the
Company pursuant to clause (i) above and following receipt of the certificates
representing any Spinco Put Shares acquired pursuant to clause (ii) above, the
Company (or any Retained Subsidiary which received such certificates) shall
thereafter deliver promptly to Spinco (or any Spinco Company designated by
Spinco) such certificates, accompanied by such endorsements or instruments of
transfer as may be reasonably requested by Spinco.
(c) Payment of Expenses; Indemnification. Spinco agrees that it shall
reimburse the Company and all Parent Indemnified Parties promptly with respect
to all costs and expenses incurred by the Company and all other Parent
Indemnified Parties (including, without limitation, all costs and expenses of
attorneys', accountants', consultants' and other similar persons) in connection
with any Actions relating to (x) the exercise or purported exercise of any Third
Party Call Right or any Third Party Put Right or (y) the consummation of any
transactions contemplated pursuant to the provisions of this Section 2.6 (all
such costs and expenses, the "Company Transfer Expenses"). Spinco agrees that
all Indemnifiable Losses (including, without limitation, all Company Transfer
Expenses) of the Company and all Parent Indemnified Parties arising out of,
relating to or resulting from, directly or indirectly, the performance or
failure to perform by any party hereto of the provisions of this Section 2.6 or
any of the transfers in any way relating thereto (other than as a result of any
willful breach, on or after the Offer Purchase Date, on the part of the Company
or any Retained Subsidiary) shall in each case be deemed to be Spinco
Liabilities, and, in each case, shall be subject to the indemnification
provisions set forth in Article V hereof.
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Section 2.7. Exchange of Lehman Preferred Stock. Spinco shall, and
prior to the Offer Purchase Date the Company shall, use their respective best
efforts to cause the Lehman Partnerships and all other holders of the Lehman
Preferred Stock (if any) to exchange all issued and outstanding shares of
Lehman Preferred Stock for shares of capital stock or other equity securities of
either Spinco, any Spinco Company or any Subsidiary of Spinco. Spinco agrees to
indemnify, defend and hold harmless the Company and each Parent Indemnified
Party in accordance with the indemnification provisions of Article V hereof,
from and against any and all Indemnifiable Losses of the Company and any such
Parent Indemnified Party arising out of, relating to or resulting from the
ownership of any shares of Lehman Preferred Stock by the Lehman Partnerships and
all other holders of the Lehman Preferred Stock (if any).
ARTICLE III
THE DISTRIBUTION
----------------
Section 3.1. Cooperation Prior to the Distribution. As promptly as
practicable after the date hereof and prior to the Distribution Date:
(a) Subject to the provisions of paragraph (b) below, the Company and
Spinco shall prepare an Information Statement (which shall set forth appropriate
disclosure concerning Spinco and the Spinco Companies, the Spinco Business, the
Distribution and certain other matters) and Spinco shall file with the SEC the
Form 10 (which shall include or incorporate by reference the Information
Statement). The Company and Spinco shall use their respective reasonable efforts
to cause the Form 10 to be declared effective under the Exchange Act or, if
either the Company or Parent reasonably determines that the Distribution may not
be effected without registering the Spinco Common Stock pursuant to the
Securities Act, the Company shall use its best efforts to cause the Spinco
Common Stock to be registered pursuant to the Securities Act and thereafter
effect the Distribution in accordance with the terms of this Agreement,
including, without limitation, by preparing and filing on an appropriate form of
registration statement under the Securities Act covering the Spinco Common Stock
and using its
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best efforts to cause such registration statement to be declared effective.
Following the effectiveness of such Form 10 (or registration statement, as the
case may be), the Company shall mail the Information Statement to the holders of
the Company Common Stock.
(b) Before filing with the SEC the Form 10, or the registration
statement referred to in Section 3.1(a), as the case may be, or any amendments
or supplements thereto, the Company shall furnish to Parent (or Parent's
counsel) copies of all such documents proposed to be filed, in order to give
Parent (or Parent's counsel) sufficient time to review such documents, and such
documents may thereafter be filed subject to any timely and reasonable comments
of Parent (or Parent's counsel). On or prior to the Offer Purchase Date, the
Company shall (i) deliver to Parent (or Parent's counsel) promptly, following
the receipt thereof, copies of all written communications between the Company
and the SEC relating to either the Information Statement or the Form 10 (or the
registration statement referred to in Section 3.1(a), as the case may be), and
(ii) advise Parent (or Parent's counsel) promptly of, and provide Parent (or
Parent's counsel) with the opportunity to participate in (to the extent
reasonably practicable), all telephonic and other non-written communications
between the Company and the SEC relating to either the Information Statement or
the Form 10 (or the registration statement referred to in Section 3.1(a), as the
case may be). The Company shall respond promptly to any comments from the SEC
with respect thereto, after consultation with Parent (or Parent's counsel), and
shall take such other actions as shall be reasonably required in order to have
the Form 10 declared effective under the Exchange Act, or the registration
statement referred to in Section 3.1(a) hereof declared effective under the
Securities Act, as the case may be, as soon as reasonably practicable following
the date hereof. Before filing with the SEC the Solicitation/Recommendation
Statement on Schedule 14D-9 of the Company to be filed by the Company in
connection with the Offer, and all amendments or supplements thereto, the
Company shall furnish to Parent (or Parent's counsel) copies of all such
documents proposed to be filed, in order to give Parent (or Parent's counsel)
sufficient time to review such documents, and such documents may thereafter be
filed subject to any timely and reasonable comments of Parent (or Parent's
counsel). Following the
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date hereof, the Company shall, and shall cause its Affiliates to, provide
promptly to Parent, Purchaser and their respective counsel all such information
as such persons may reasonably request in connection with the Tender Offer
Statement on Schedule 14D-1 of the Purchaser or Parent to be filed in connection
with the Offer.
(c) The Company and Spinco shall cooperate in preparing, filing with
the SEC and causing to become effective any registration statements or
amendments thereto which are appropriate to reflect the establishment of, or
amendments to, any employee benefit and other plans contemplated by this
Agreement.
(d) The Company and Spinco shall take all such action as may be
necessary or appropriate under state securities or "Blue Sky" Laws in connection
with the transactions contemplated by this Agreement.
(e) The Company and Spinco shall prepare, and Spinco shall file and
seek to make effective, an application to permit listing of the Spinco Common
Stock either on the NYSE or any other national securities exchange or national
market system as may be selected by Spinco in its sole discretion (to the extent
permitted pursuant to the listing requirements of such exchange or national
market system).
(f) The Company and Spinco shall prepare and file an application with
the FCC (the "FCC Application") requesting the FCC's consent to the transfer of
control of any licenses, permits, approvals or other authorizations issued by
the FCC to the Company and its Subsidiaries in connection with their
telecommunications and space systems business, including those licenses,
permits, approvals and authorizations set forth in Section 3.1(f) of the
Disclosure Schedule.
(g) In addition to the actions specifically provided for elsewhere in
this Agreement and except as otherwise expressly set forth in this Agreement,
each of the parties hereto shall use its respective best efforts to take, or
cause to be taken, all actions, and, to execute and deliver, or cause to be
executed and delivered, such additional documents and instruments, and to do,
or cause to be done, all things, reasonably necessary, proper or advisable under
applicable Laws and
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agreements to consummate and make effective the transactions contemplated by
this Agreement, including, without limitation, using its best efforts to obtain
the consents and approvals, to enter into any amendatory agreements and to make
the filings and applications necessary or desirable to have been obtained,
entered into or made in order to consummate the transactions contemplated by
this Agreement. Without limiting the generality of the foregoing sentence, each
of the parties hereto shall use its respective best efforts to ensure that the
conditions set forth in Article X hereof are satisfied (insofar as such matters
are within the control of such party). Notwithstanding any other provisions set
forth in this Agreement (including, without limitation, the provisions of this
Section 3.1(g)), neither the Company, nor Spinco nor any of their respective
Affiliates shall, without first obtaining the prior written consent of the
Parent, take or commit to take any action, in connection with obtaining any
consent, waiver or approval or effecting any of the transactions contemplated in
connection with the Closing or otherwise, (i) except as otherwise expressly
provided in this Agreement, that would result in the payment of any funds (other
than normal and usual filing fees) or the incurrence of any liability by the
Company or any Retained Subsidiary, (ii) that would result in the divestiture or
holding separate of any assets, businesses or operations of the Company or any
of the Retained Subsidiaries, (iii) that might materially limit or impair
Parent's or the Company's or any Retained Subsidiary's freedom of action with
respect to, or its ability to retain or exercise control over, any assets,
businesses or operations of the Company or any Retained Subsidiaries (other than
any limitations or restrictions expressly set forth in the Merger Agreement, the
Tax Sharing Agreement, the Stockholders Agreement or any other agreement to be
entered into pursuant to this Agreement or the Merger Agreement prior to the
Offer Purchase Date), or (iv) that might otherwise adversely affect Parent, or,
following the Offer Purchase Date, either the Company or any Retained
Subsidiary.
Section 3.2. The Distribution.
(a) Subject to the terms and conditions of this Agreement, the
Company's Board of Directors (or any duly appointed committee thereof) shall in
its reasonable discretion establish the Record Date and the
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Distribution Date and any appropriate procedures in connection with the
Distribution (subject in each case to the provisions of applicable Law) as soon
as reasonably practicable following the date hereof or on such other dates as
Parent may reasonably request; provided that (x) the Record Date may not be
earlier than the twentieth day following the date on which the Offer is
commenced and also may not be earlier than the tenth day following the
Distribution Declaration Date and (y) the parties hereto shall use their
reasonable efforts to cause the Record Date to be established so as to occur
immediately prior to the acceptance for payment by the Purchaser of the shares
of Common Stock pursuant to the Offer (provided that in no event shall the
Record Date be established so as to occur as of or at any time after the
acceptance for payment by the Purchaser of the shares of Common Stock pursuant
to the Offer); provided further that if all conditions to the Offer have been
satisfied or waived prior to the date on which all of the Distribution
Conditions have been satisfied (or waived, to the extent expressly permitted by
the provisions of Section 10.1 hereof), then the Purchaser shall be permitted,
but not required, to accept for payment at such time the shares of Common Stock
pursuant to the Offer notwithstanding the fact that the Distribution Conditions
have not been satisfied or waived (provided that prior to such acceptance for
payment Purchaser first obtains the consent of the Company, which consent may
not be unreasonably withheld) (as further described in clause (a)(iii) below).
The parties hereto acknowledge and agree that payment of the Distribution shall
be conditioned on (x) the satisfaction (or waiver, to the extent expressly
permitted by the provisions of Section 10.1 hereof) of each of the Distribution
Conditions on a date which is prior to the fiftieth (50th) day following the
Record Date and (y) Parent and Purchaser not having taken any action, on or
after the Distribution Declaration Date, to extend or delay the expiration of
the Offer to a date which is later than the Record Date. The parties hereto
further acknowledge and agree that:
(i) if the Distribution Conditions are satisfied (or waived,
to the extent expressly permitted by the provisions of Section 10.1
hereof) prior to the fiftieth (50th) day following the Record Date,
the conditions to the Distribution shall be deemed to have been
satisfied and, if such
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date is on or prior to the Offer Purchase Date, the Record Date shall
be deemed to have occurred immediately prior to the time at which the
Purchaser has accepted for payment the shares of Company Common Stock
pursuant to the Offer and the Distribution shall occur one Business
Day thereafter;
(ii) if the Offer Purchase Date has not yet occurred and the
Distribution Conditions are not satisfied or waived prior to the
fiftieth (50th) day following the Record Date, (A) the Distribution
shall not be paid, the declaration of the Distribution shall be null
and void, and no holder of Company Common Stock shall have any rights
whatsoever to receive any part of the Distribution, and (B) the
Company's Board of Directors shall establish a new Record Date in a
manner consistent with the provisions of the first sentence of this
Section 3.2(a); and
(iii) if the Offer Purchase Date has already occurred and
the Distribution Conditions are not expected to be satisfied or waived
prior to the fiftieth (50th) day following the Record Date, the
parties hereto agree to use their respective best efforts to
restructure the Distribution in a manner which shall permit the
holders of Company Common Stock of record immediately prior to the
consummation of the Offer to participate in a distribution of shares
of Spinco capital stock in order to preserve for such holders the
material economic benefits of the Distribution; provided that, in
connection with any such restructuring of the Distribution, the
parties hereto must first obtain the prior consent (which consent may
not be unreasonably withheld of a majority of the remaining
Continuing Directors (such term, as defined in Section 8.4 of the
Merger Agreement), if any (it being understood and agreed that the
consent of the remaining Continuing Directors may be reasonably
withheld by such remaining Continuing Directors in the event that
counsel to such remaining Continuing Directors advises such persons
that, in such counsel's reasonable opinion, any such restructuring of
the Distribution would adversely affect in any material respect the
holders of Company Common Stock of record immediately prior to the
consummation of the Offer
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with respect to the income tax or securities law consequences of the
Distribution).
(b) Subject to Section 10.1 hereof, following the declaration by
the Company's Board of Directors of the Record Date but prior to the
Distribution Date, the Company shall deliver to the Agent one or more share
certificates representing all of the outstanding shares of Spinco Common Stock
(or other Spinco capital stock if necessary in the circumstances set forth in
paragraph (a)(iii) above) to be distributed in the Distribution and shall
instruct the Agent to distribute on the Distribution Date, (i) one share of
Spinco Common Stock (or other Spinco capital stock if necessary in the
circumstances set forth in paragraph (a)(iii) above) for each share of Company
Common Stock owned to holders of record of Company Common Stock on the Record
Date (subject to the provisions of any restricted stock or other benefit plan of
the Company) and (ii) one share of Spinco Common Stock (or other Spinco capital
stock if necessary in the circumstances set forth in paragraph (a)(iii) above)
for each share of Company Common Stock subject to a Cancelled Company Option to
the respective holders of such Cancelled Company Options (provided that the
Agent shall not distribute the shares referred to in the preceding clause (ii)
until promptly after the effective time of the Merger). Spinco agrees to provide
all share certificates that the Agent shall require in order to effect the
Distribution. All shares of Spinco Common Stock issued in the Distribution shall
be duly authorized, validly issued, fully paid, non-assessable and free of
preemptive rights.
(c) Each of the parties hereto agrees that, immediately upon
consummation of the Distribution, the Company shall not hold or beneficially own
directly or indirectly any shares of Spinco Common Stock.
Section 3.3. Termination of Certain Claims. Following the Distribution
Date, Spinco shall have no claims against the Company, any Retained Subsidiary
or any Affiliate of either based on any breach by the Company, and Retained
Subsidiary or any of their respective Affiliates of any obligations under this
Agreement that occurred on or prior to the Offer Purchase Date, all of such
claims being hereby irrevocably waived and terminated as of the Offer Purchase
Date; provided that the fore-
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going shall not limit the Company's liability for any breach by the Company or
any Retained Subsidiary of any of their respective obligations under this
Agreement that occurs following the Offer Purchase Date.
ARTICLE IV
INTERCOMPANY BUSINESS RELATIONSHIPS
-----------------------------------
Section 4.1. Settlement of Intercompany Accounts.
(a) Except as expressly provided for in this Article IV, all
intercompany and interdivisional receivables, payables, loans, cash overdrafts
and other accounts in existence as of the Distribution Date between Spinco and
the Spinco Companies, on the one hand, and the Company and the Retained
Subsidiaries, on the other hand, under the Company's cash management program or
otherwise (other than accounts, if any, which (x) are owed to or by any Spinco
Company which is not an Affiliate of Spinco or the Company, (y) arose pursuant
to the express terms and conditions of any Existing Intercompany Agreement and
(z) are not yet payable pursuant to the provisions of such Intercompany
Agreement), shall be settled by payment in full of such amounts effective
immediately prior to the Restructuring. Following the date hereof, (i) no such
intercompany transactions shall be entered into except (x) pursuant to the
express terms and conditions of any Existing Intercompany Agreement and (y) in
the ordinary course of business and in a manner consistent with past practice,
and (ii) except with the prior written consent of the Parent, neither the
Company, any Retained Subsidiary, Spinco or any Spinco Company shall enter into
any Intercompany Agreement following the date hereof and prior to the Offer
Purchase Date, except for any Intercompany Agreement which (x) is on terms and
conditions entered into in the ordinary course of business and in a manner
consistent with past practices and (y) is not otherwise significantly adverse to
(i) the business, properties, operations, prospects, results of operations or
condition (financial or otherwise) of the Company, any Retained Subsidiary or
the Retained Business or (ii) the ability of the Company or any of the Retained
Subsidiaries to perform their respective obligations under this
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Agreement, the Tax Sharing Agreement or the Stockholders Agreement.
(b) Following the Distribution Date, each of the Company and
Spinco shall give the other party and any independent auditors of such other
party full access at all reasonable times to the books and records of the
Company and Spinco (and each of their respective Subsidiaries) relating to
periods prior to the Distribution Date for purposes of verifying the amounts to
be paid immediately prior to the Restructuring pursuant to Section 4.1(a) above
and for resolving any disputes related thereto. The amounts settled shall, to
the extent applicable, be calculated in accordance with Adjusted GAAP.
(c) Except as otherwise expressly provided in Section 2.1(a)
hereof, the Company and Spinco covenant and agree that no Capital Contributions
may be made following the date hereof and prior to the Offer Purchase Date;
provided that the Company may make a Capital Contribution at any time after (i)
the Company notifies Parent in writing of the details of such Capital
Contribution, and (ii) the parties hereto agree to reduce the Spinco Cash Amount
otherwise payable by Parent as a result of such Capital Contribution (which
shall include interest thereon (calculated at a compounded rate of interest
equal to the commercial paper rate available to the Company as of the date
hereof) following the date of such Capital Contribution) and (iii) the parties
agree at such time as to the appropriate amount of such reduction in the event
of a Capital Contribution which is in a form other than cash.
Section 4.2. Settlements for Cash Collections and Disbursements After
the Distribution Date.
(a) For each calendar month commencing with the month in which
the Distribution Date occurs and, unless sooner terminated by agreement of the
parties, continuing for a period of two (2) years thereafter, (i) within 10
Business Days of the end of the month in question, the Company shall prepare,
and Spinco shall fully cooperate in preparing, a statement of transactions which
shall reflect a complete analysis of any cash collections and cash disbursements
by the Company and the Retained Subsidiaries on behalf of Spinco and the Spinco
Companies (including those relating to the Spinco Business) during
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the relevant month and (ii) within 10 Business Days of the end of the month in
question, Spinco shall prepare, and the Company shall fully cooperate in
preparing, a statement of transactions which shall reflect a complete analysis
of any cash collections and cash disbursements by Spinco and the Spinco
Companies on behalf of the Company and the Retained Subsidiaries during the
relevant month (including those relating to the Retained Business); provided in
each case that, with respect to the first such monthly period such statement
shall not reflect any cash collections or disbursements occurring prior to the
Distribution Date.
(b) Not later than five Business Days following delivery of each
such monthly statement, Spinco shall pay to the Company or the Company shall pay
to Spinco, as the case may be, in cash an amount necessary to eliminate the
account balance as reflected in each such statement. Payments made pursuant to
this Section 4.2 shall not, for any purposes of this Agreement, constitute
Indemnifiable Losses or be set off against any other payments to be made,
Liabilities asserted or claims made pursuant to this Agreement, including but
not limited to Article V hereof, unless the Company and Spinco otherwise agree
in writing.
(c) Following the end of the two-year period referred to in
Section 4.2(a) above (or such earlier period as the parties hereto may agree),
(i) the Company shall promptly turn over to Spinco all cash and other similar
amounts received by the Company and the Retained Subsidiaries which properly
constitute Assets attributable to the Spinco Business and (ii) Spinco shall
promptly turn over to the Company all cash and other similar amounts received by
Spinco and the Spinco Companies which properly constitute Assets attributable to
the Retained Business.
Section 4.3. Transition Services. Following the Distribution Date and
ending on the later of (i) the sixth month anniversary of the Distribution Date
and (ii) December 31, 1996 (such period, the "Transition Services Period"), the
Company shall provide to Spinco, at such times and in such amounts as may be
reasonably requested by Spinco, those data processing, procurement support,
travel support, communications, tax, accounting, legal, insurance, employee
benefits and similar services which
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have been customarily provided by the Company and the Retained Subsidiaries to
the Spinco Business during the twelve months prior to the date hereof
(collectively, the "Transition Services"). The Transition Services shall be
provided at a cost calculated in accordance with the cost the Company currently
assesses to the Spinco Companies and the Spinco Business for the same or similar
services. Following the end of the calendar month in which any such Transition
Services are performed, the Company shall provide to Spinco an invoice (the
"Transition Services Invoice") setting forth in summary detail the Transition
Services which were provided during such calendar month and the appropriate cost
thereof. Spinco shall pay to the Company in cash in immediately available funds,
in a reasonably prompt manner following the delivery by the Company of a
Transition Services Invoice, the amounts due with respect to the Transition
Services reflected on such Transition Services Invoice. The Transition Services
Period may be extended for up to two six-month periods in the event that Spinco
notifies the Company at least 30 days prior to the expiration of the then-
current Transition Services Period of its intention to so extend the Transition
Services Period.
Section 4.4. Termination of Intercompany Arrangements. Each of the
parties hereto agrees that, except as otherwise expressly provided in this
Article IV, all Existing Intercompany Agreements in effect immediately prior to
the Distribution Date shall not be deemed altered, amended or terminated as a
result of this Agreement or the consummation of the transactions contemplated
hereby and shall otherwise remain in effect immediately after giving effect to
the Restructuring (provided that nothing contained in this Agreement shall be
deemed to limit any party's ability to terminate any such Intercompany Agreement
following the Distribution Date in accordance with the provisions of such
Intercompany Agreement).
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ARTICLE V
SURVIVAL AND INDEMNIFICATION
----------------------------
Section 5.1. Survival of Agreements. The obligations under this
Article V of each of Spinco and the Spinco Companies, on the one hand, and the
Company and the Retained Subsidiaries, on the other hand, shall survive the sale
or other transfer by it of any Assets or businesses or the assignment by it of
any Liabilities. To the extent that Spinco or any of the Spinco Companies
transfers directly or indirectly to any other person all or substantially all of
the Spinco Assets or the Spinco Business, Spinco will cause the transferee of
such SpincoAssets or Spinco Business to assume specifically its obligations
under this Agreement with respect thereto and will cause such transferee to
fulfill its obligations related to such Spinco Liabilities. Such assumption will
not relieve Spinco of its obligations in respect thereof. To the extent that the
Company or any of the Retained Subsidiaries transfers directly or indirectly to
any other person all or substantially all of the Retained Assets or the Retained
Business the Company will cause the transferee of such Retained Assets or
Retained Business to assume specifically its obligations under this Agreement
with respect thereto and will cause such transferee to fulfill its obligations
related to such Retained Liabilities. Such assumption will not relieve the
Company of its obligations in respect thereof. Spinco, on the one hand, and the
Company, on the other hand, agree that such transferee may exercise all of
Spinco's or the Company's rights hereunder, as the case may be, with respect to
such Assets or businesses.
Section 5.2. Spinco's Agreement to Indemnify.
(a) In addition to any indemnification required by Articles II,
VI and VIII hereof, subject to the terms and conditions set forth in this
Agreement, from and after the Distribution Date, Spinco shall indemnify, defend
and hold harmless the Company, each Retained Subsidiary, the Purchaser and
Parent and each of their respective directors, officers, employees,
representatives, advisors, agents and Affiliates (collectively, the "Parent
Indemnified Parties") from, against and in respect of any and all Indemnifiable
Losses of the Parent Indemnified Parties arising out of, relating to or re-
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sulting from, directly or indirectly, (i) any misrepresentation or breach of
warranty made by or on behalf of Spinco or, on or prior to the Offer Purchase
Date, made by or on behalf of the Company, which misrepresentation or breach of
warranty is contained in this Agreement or the Stockholders Agreement, (ii) any
breach of any agreement or covenant under this Agreement or the Stockholders
Agreement on the part of Spinco or, on or prior to the Offer Purchase Date, on
the part of the Company, (iii) any and all Spinco Liabilities, (iv) the conduct
of the Spinco Business or any part thereof on, prior to or following the
Distribution Date, (v) any transfer of Spinco Assets to, or assumption of Spinco
Liabilities by, Spinco or any Spinco Company in accordance with this Agreement
or otherwise in connection with the Restructuring (other than any costs and
expenses which have been expressly assumed by the Company pursuant to the
provisions of this Agreement), (vi) any Indemnifiable Loss resulting from any
claims that any statements or omissions relating to or describing, directly or
indirectly, Spinco, any Spinco Company, the Spinco Business, any Spinco Asset or
any Spinco Liability, and which occur on or prior to the Offer Purchase Date (A)
in the Information Statement, the Form 10 or in any registration statement filed
pursuant to Section 3.1 hereof (in each case other than with respect to any
statements or omissions made in reliance upon and in conformity with information
furnished in writing by Parent, the Purchaser or their Affiliates,
representatives or advisors and other than any statements or omissions which
relate solely to the Merger Agreement and this Agreement and the transactions
contemplated thereby and hereby), or (B) in any document(s) filed with the SEC
by Spinco or any Spinco Company after the date hereof pursuant to either the
Securities Act or the Exchange Act (in each case other than with respect to any
statements or omissions which relate solely to the Merger Agreement and this
Agreement and the transactions contemplated thereby and hereby), which, in the
case of either clause (A) or (B) above, are false or misleading with respect to
any material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, (vii) the failure of
the Company or Spinco to obtain any Final Order or other consent or approval of
the FCC with respect to any of the transactions contemplated pursuant to either
this Agreement or the Merger Agreement and (viii)
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any Excluded Indemnifiable Losses (as defined below). Notwithstanding the
foregoing, Spinco's indemnification obligations pursuant to this Section 5.2
shall not in any event include any Indemnifiable Losses arising out of or
relating to Transaction Suits (as defined in Section 6.5), except to the extent
of any Indemnifiable Losses (such Indemnifiable Losses, the "Excluded
Indemnifiable Losses") which the Company is able to demonstrate resulted
directly from (a) any statement or omission on the part of Spinco or any of its
Affiliates in the documents referred to in Section 5.2(a)(vi) above or (b) any
business activities, Assets or Liabilities of Spinco, any of the Spinco
Companies or the Spinco Business.
(b) Notwithstanding Spinco's obligations to indemnify Parent
Indemnified Parties pursuant to Section 5.2(a) hereof, Spinco shall be obligated
to indemnify the Parent Indemnified Parties only for those Indemnifiable Losses
under clauses (i), (ii) or (vi) of Section 5.2(a) hereof as to which the Parent
Indemnified Parties have given Spinco written notice thereof on or prior to the
third anniversary of the Distribution Date (it being understood that there shall
be no corresponding time limitation with respect to any Indemnifiable Losses
arising under clauses (iii), (iv), (v), (vii) and (viii) of Section 5.2(a)
hereof); provided further that claims with respect to breaches of covenants and
agreements set forth in this Agreement or the Stockholders Agreement shall
survive for the applicable statute of limitations period. Notwithstanding the
foregoing, if on or before the expiration of such indemnification period any
Parent Indemnified Party has given notice to Spinco pursuant to Section 5.4
hereof of any matter which would be the basis for a claim of indemnification by
such Parent Indemnified Party pursuant to Section 5.2(a), such Parent
Indemnified Party shall have the right after the expiration of such
indemnification period to assert or to continue to assert such claim and to be
indemnified with respect thereto.
Section 5.3. The Company's Agreement to Indemnify.
(a) In addition to any indemnification required by Articles II,
VI and VIII hereof, subject to the terms and conditions set forth in this
Agreement, from and after the Distribution Date, the Company shall indemnify,
defend and hold harmless Spinco, each Spinco
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Company and each of their respective directors, officers, employees,
representatives, advisors, agents and Affiliates (collectively, the "Spinco
Indemnified Parties") from, against and in respect of any and all Indemnifiable
Losses of the Spinco Indemnified Parties arising out of, relating to or
resulting from, directly or indirectly, (i) any breach of any agreement or
covenant set forth in this Agreement or in the Stockholders Agreement on the
part of Parent or the Purchaser or, following the Offer Purchase Date, on the
part of the Company, (ii) any and all Retained Liabilities, (iii) the conduct of
the Retained Business or any part thereof on, prior to or following the
Distribution Date, (iv) any Indemnifiable Loss resulting from any claims that
any statements or omissions (A) relating to or describing, directly or
indirectly, Parent or the Purchaser, and which occur on or prior to the Offer
Purchase Date in any Solicitation/Recommendation Statement on Schedule 14D-9 of
the Company filed in connection with the Offer, the Information Statement, the
Form 10 or in any registration statement filed pursuant to Section 3.1 or
Section 3.3 hereof (in each case only to the extent of any statements or
omissions made in reliance upon and in conformity with information furnished in
writing by Parent, the Purchaser or their Affiliates, representatives or
advisors), (B) in any Tender Offer Statement on Schedule 14D-1 of the Purchaser
or Parent filed in connection with the Offer (other than any statements or
omissions made in reliance upon and in conformity with information furnished in
writing by the Company, any Retained Subsidiary, Spinco, any Spinco Company or
any of their respective Affiliates, representatives or advisors), or (C) in any
other document(s) filed after the date hereof by Parent or the Purchaser with
the SEC pursuant to either the Securities Act or the Exchange Act (e.g.,
statements or omissions made in a Current Report on Form 8-K filed by either
Parent or the Purchaser after the date hereof pursuant to the Exchange Act),
which, in the case of either clauses (A), (B) or (C) above, are false or
misleading with respect to any material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (v) any Indemnifiable Loss arising out of or resulting from
Transaction Suits (other than Excluded Indemnifiable Losses). Notwithstanding
the foregoing and anything to the contrary in this Agreement or any other
agreement to
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be entered into pursuant to this Agreement, the Company shall not be required to
indemnify, defend and hold harmless any Spinco Indemnified Party from and
against any Indemnifiable Loss resulting from any claims that the statements
included in the Information Statement, the Form 10 or in any registration
statement filed pursuant to Section 3.1 or Section 3.3 hereof (in each case
other than statements or omissions made in reliance upon and in conformity with
information furnished in writing by Parent, the Purchaser or their Affiliates,
representatives or advisors expressly for use therein) are false or misleading
with respect to any material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(b) Notwithstanding the Company's obligations to indemnify the
Spinco Indemnified Parties pursuant to Section 5.3(a) hereof, the Company shall
be obligated to indemnify the Spinco Indemnified Parties only for those
Indemnifiable Losses under Sections 5.3(a)(i) and 5.3(a)(iv) hereof as to which
the Spinco Indemnified Parties have given the Company written notice thereof on
or prior to the expiration of any applicable statute of limitations period (it
being understood that there shall be no corresponding time limitation with
respect to any Indemnifiable Losses arising under clauses (ii) and (iii) of
Section 5.3(a) hereof). Notwithstanding the foregoing, if on or before the
expiration of such indemnification period any Spinco Indemnified Party has given
notice to the Company pursuant to Section 5.4 hereof of any matter which would
be the basis for a claim of indemnification by such Spinco Indemnified Party
pursuant to Section 5.3(a), such Spinco Indemnified Party shall have the right
after the expiration of such indemnification period to assert or to continue to
assert such claim and to be indemnified with respect thereto.
Section 5.4. Procedure for Indemnification. All claims for
indemnification under this Article V shall be asserted and resolved as follows:
(a) In the event that any claim or demand, or other circumstance
or state of facts which could give rise to any claim or demand, for which an
Indemnifying Party may be liable to an Indemnified Party hereunder
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is asserted against or sought to be collected by a third party (an "Asserted
Liability"), the Indemnified Party shall promptly notify the Indemnifying Party
in writing of such Asserted Liability, specifying the nature of such Asserted
Liability and the amount or the estimated amount thereof to the extent then
feasible (which estimate shall not be conclusive of the final amount of such
claim or demand) (the "Claim Notice"); provided that no delay on the part of the
Indemnified Party in giving any such Claim Notice shall relieve the Indemnifying
Party of any indemnification obligation hereunder unless (and then solely to the
extent that) the Indemnifying Party is materially prejudiced by such delay. The
Indemnifying Party shall have 20 days (or less if the nature of the Asserted
Liability requires) from its receipt of the Claim Notice (the "Notice Period")
to notify the Indemnified Party whether or not the Indemnifying Party desires,
at the Indemnifying Party's sole cost and expense and by counsel of its own
choosing, which shall be reasonably satisfactory to the Indemnified Party, to
defend against such Asserted Liability; provided that if, under applicable
standards of professional conduct a conflict on any significant issue between
the Indemnifying Party and any Indemnified Party exists in respect of such
Asserted Liability, then the Indemnifying Party shall reimburse the Indemnified
Party for the reasonable fees and expenses of one additional counsel to be
retained in order to resolve such conflict, promptly upon presentation by the
Indemnified Party of invoices or other documentation evidencing such amounts to
be reimbursed. If the Indemnifying Party undertakes to defend against such
Asserted Liability, the Indemnifying Party shall control the investigation,
defense and settlement thereof; provided that (i) the Indemnifying Party shall
use its reasonable efforts to defend and protect the interests of the
Indemnified Party with respect to such Asserted Liability, (ii) the Indemnified
Party, prior to or during the period in which the Indemnifying Party assumes
control of such matter, may take such reasonable actions as the Indemnified
Party deems necessary to preserve any and all rights with respect to such
matter, without such actions being construed as a waiver of the Indemnified
Party's rights to defense and indemnification pursuant to this Agreement, and
(iii) the Indemnifying Party shall not, without the prior written consent of the
Indemnified Party, consent to any settlement which (A) imposes any Liabilities
on the Indemnified Party (other than those Liabili-
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ties which the Indemnifying Party agrees to promptly pay or discharge), and (B)
with respect to any non-monetary provision of such settlement, would be likely,
in the Indemnified Party's reasonable judgment, to have an adverse effect on
the business operations, assets, properties or prospects of Parent, the Company
or the Retained Business (in the case of a Parent Indemnified Party), Spinco or
the Spinco Business (in the case of a Spinco Indemnified Party), or such
Indemnified Party. Notwithstanding the foregoing, the Indemnified Party shall
have the right to control, pay or settle any Asserted Liability which the
Indemnifying Party shall have undertaken to defend so long as the Indemnified
Party shall also waive any right to indemnification therefor by the Indemnifying
Party. If the Indemnifying Party undertakes to defend against such Asserted
Liability, the Indemnified Party shall cooperate fully with the Indemnifying
Party and its counsel in the investigation, defense and settlement thereof. If
the Indemnified Party desires to participate in any such defense it may do so at
its sole cost and expense. If the Indemnifying Party does not undertake within
the Notice Period to defend against such Asserted Liability, then the
Indemnifying Party shall have the right to participate in any such defense at
its sole cost and expense, but the Indemnified Party shall control the
investigation, defense and settlement thereof (provided that the Indemnified
Party may not settle any such Asserted Liability without obtaining the prior
written consent of the Indemnifying Party (which consent shall not be
unreasonably withheld by the Indemnifying Party; provided that in the event that
the Indemnifying Party is in material breach at such time of the provisions of
this Section 5.4, then the Indemnified Party shall not be obligated to obtain
such prior written consent of the Indemnifying Party) at the reasonable cost and
expense of the Indemnifying Party (which shall be paid by the Indemnifying Party
promptly upon presentation by the Indemnified Party of invoices or other
documentation evidencing the amounts to be indemnified). The Indemnified Party
and the Indemnifying Party agree to make available to each other, their counsel
and other representatives, all information and documents available to them which
relate to such claim or demand (subject to the confidentiality provisions of
Section 7.5 hereof); provided that no party hereto shall be obligated to
disclose any information which would result in the waiver of any attorney-
client, attorney work product or other
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similar privileges, if the disclosure of such information would be materially
prejudicial to such disclosing party. The Indemnified Party and the Indemnifying
Party and the Company and its employees also agree to render to each other such
assistance and cooperation as may reasonably be required to ensure the proper
and adequate defense of such claim or demand.
(b) In the event that an Indemnified Party should have a claim
against the Indemnifying Party hereunder which does not involve a claim or
demand being asserted against or sought to be collected from it by a third
party, the Indemnified Party shall send a Claim Notice with respect to such
claim to the Indemnifying Party. The Indemnifying Party shall have 20 days from
the date such Claim Notice is delivered during which to notify the Indemnified
Party in writing of any good faith objections it has to the Indemnified Party's
Claim Notice or claims for indemnification, setting forth in reasonable detail
each of the Indemnifying Party's objections thereto. If the Indemnifying Party
does not deliver such written notice of objection within such 20-day period, the
Indemnifying Party shall be deemed to have accepted responsibility for the
prompt payment of the Indemnified Party's claims for indemnification, and shall
have no further right to contest the validity of such indemnification claims. If
the Indemnifying Party does deliver such written notice of objection within such
20-day period, the Indemnifying Party and the Indemnified Party shall attempt
in good faith to resolve any such dispute within 30 days of the delivery by the
Indemnifying Party of such written notice of objection. If the Indemnifying
Party and the Indemnified Party are unable to resolve any such dispute within
such 30-day period, then either the Indemnifying Party or the Indemnified Party
shall be free to pursue any remedies which may be available to such party under
applicable Law.
Section 5.5. Miscellaneous Indemnification Provisions.
(a) The Indemnifying Party agrees to indemnify any successors of
the Indemnified Party to the same extent and in the same manner and on the same
terms and conditions as the Indemnified Party is indemnified by the Indemnifying
Party under this Article V. In the event that any claim for indemnification
under either
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Articles II, V, VI or VIII hereof meets the criteria of more than one of the
types of claims for which indemnification is provided for under such provisions,
the Indemnified Party, in its sole discretion, shall classify such claim and
only be required to include such claim, and the recoveries for indemnification
therefrom, in one of such categories. No investigation made by any party hereto
shall affect any representation or warranty of the other party's hereto
contained in this Agreement or in the Schedules attached hereto or any
certificate, document or other instrument delivered in connection herewith. The
consummation by Parent of the Offer pursuant to the terms and conditions of the
Merger Agreement, either with or without knowledge of a breach of warranty or
covenant or misrepresentation by any party hereto, shall not constitute a waiver
of any claim by any Parent Indemnified Party for Indemnifiable Losses with
respect to such breach or misrepresentation. In determining the amount of
Indemnifiable Losses to which a Parent Indemnified Party or Spinco Indemnified
Party (as the case may be) is entitled to indemnification hereunder, an
arbitration panel, court or tribunal may take into consideration, where
appropriate and without duplication, any diminution in the aggregate value of
the Retained Business or the Spinco Business (as the case may be).
Notwithstanding anything to the contrary contained in this Agreement, the
assignment of any party's rights hereunder to any other person or entity shall
not limit, affect or prejudice the ability of the assigning party to continue to
enforce any rights of indemnification hereunder or other rights hereunder in
accordance with the terms and conditions of this Agreement.
(b) In determining the amount of any indemnity payable under this
Article V, such amount shall be reduced by (x) any related tax benefits if and
when actually realized or received (but only after taking into account any tax
benefits (including, without limitation, any net operating losses or other
deductions) to which the Indemnified Party would be entitled without regard to
such item), except to the extent such recovery has already been taken into
account in determining the amount of any indemnity payable under Articles II, V,
VI or VIII hereof, and (y) any insurance recovery if and when actually realized
or received, in each case in respect of such Asserted Liability. Any such
recovery shall be promptly repaid by the Indemnified Party to the Indemni-
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fying Party following the time at which such recovery is realized or received
pursuant to the previous sentence, minus all reasonably allocable costs, charges
and expenses incurred by the Indemnified Party in obtaining such recovery.
Notwithstanding the foregoing, if (x) the amount of Indemnifiable Losses for
which the Indemnifying Party is obligated to indemnify the Indemnified Party is
reduced by any tax benefit or insurance recovery in accordance with the
provisions of the previous sentence, and (y) the Indemnified Party subsequently
is required to repay the amount of any such tax benefit or insurance recovery or
such tax benefit or insurance recovery is disallowed, then the obligation of the
Indemnifying Party to indemnify with respect to such amounts shall be reinstated
immediately and such amounts shall be paid promptly to the Indemnified Party in
accordance with the provisions of this Agreement.
(c) In the event that a dispute between any Indemnifying Party
and any Indemnified Party concerning the existence of a right or obligation to
indemnity under this Agreement is determined by any arbitration panel or any
court or tribunal, the reasonable fees and expenses of the attorneys for the
party which is principally prevailing in such action shall be paid by the party
which is not principally prevailing in such action.
(d) All amounts owing under this Article V shall bear interest at
a fluctuating rate of interest equal to the rate of interest from time to time
announced by Citibank, N.A. in New York, New York as its prime lending rate,
computed from the time such Damage, cost or expense was incurred or suffered to
the date of payment therefor.
(e) The remedies provided by this Article V shall be the parties'
sole and exclusive remedies for the recovery of any Indemnifiable Losses
resulting, from or arising out of or related to misrepresentations, breaches of
warranties, and non-fulfillment of obligations under this Agreement, except
those arising from or arising out of or related to fraud; provided that the
provisions of this Section 5.5(e) shall not limit the ability of any party to
seek injunctive or similar relief pursuant to Section 11.11 hereof.
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(f) The parties hereto agree that, notwithstanding any other
provision in this Agreement to the contrary, in the event of any breach of
the representation and warranty set forth in Section 6.1(c)(i) hereof, in
addition to the indemnities provided for in this Article V, Spinco shall
either (a) secure the prompt release of the Company, the Retained
Companies, the Retained Business and any affected Parent Indemnified Party
from all obligations and Liabilities relating to those Spinco Liabilities
or Spinco Indebtedness for which the Company, the Retained Companies, the
Retained Business or any affected Parent Indemnified Party is or has become
liable, directly or indirectly, as borrower, surety, guarantor or otherwise
(or with respect to which any of the Retained Assets is or has become bound
by or subject to) or (b) promptly prepay, redeem, purchase or defease
(pursuant to a trust arrangement reasonably acceptable to Parent) in full
all such Spinco Liabilities or Spinco Indebtedness. Spinco shall take or
cause to be taken all actions, execute such agreements, documents or
instruments, and do or cause to be done all things, necessary, proper or
advisable under the terms of the agreements governing the Spinco Liability
or Spinco Indebtedness in question and under the provisions of applicable
Law, or as Parent may otherwise reasonably request, in connection with the
fulfillment of Spinco's obligations under this Section 5.5(f).
Section 5.6. Pending Litigation. Following the Distribution
Date, (a) Spinco shall have exclusive authority and control over the
investigation, prosecution, defense and appeal of all pending Actions
relating primarily to the Spinco Business, the Spinco Assets or the Spinco
Liabilities (each, a "Spinco Action"), and may settle or compromise, or
consent to the entry of any judgment with respect to, any such Action
without the consent of the Company, and (b) the Company shall have
exclusive authority and control over the investigation, prosecution,
defense and appeal of all pending Actions relating primarily to the
Retained Business, the Retained Assets or the Retained Liabilities (each, a
"Retained Action"), and may settle or compromise, or consent to the entry
of any judgment with respect to, any such Action without the consent of
Spinco; provided that if both the Company and Spinco are named as parties
to any Spinco Action or Retained Action, neither the Company nor Spinco
(nor any of their respective Subsidiaries) may settle or
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compromise, or consent to the entry of any judgment with respect to, any
such Action without the prior written consent of the other party (which
consent may not be unreasonably withheld) if such settlement, compromise or
consent to such judgment includes any form of injunctive relief binding
upon such other party. Spinco shall indemnify, defend and hold harmless
each of the Parent Indemnified Parties, and the Company shall indemnify and
hold harmless each of the Spinco Indemnified Parties, in the manner
provided in this Article V, from and against all Indemnifiable Losses
arising out of or resulting from each such Action over which such
indemnifying party has authority and control pursuant to this Section 5.6.
Section 5.7. Construction of Agreements. Notwithstanding any
other provision in this Agreement to the contrary, in the event and to the
extent that there shall be a conflict between the provisions of this
Article V and the provisions of any other part of this Agreement or any
exhibit or schedule hereto, the provisions of this Article V shall control,
and in the event and to the extent that there shall be a conflict between
the provisions of this Agreement (including, without limitation, the
provisions of this Article V) and the provisions of the Tax Sharing
Agreement, the provisions of the Tax Sharing Agreement shall control.
ARTICLE VI
CERTAIN ADDITIONAL MATTERS
--------------------------
Section 6.1. Representations or Warranties; Disclaimers.
(a) It is the explicit intent of each party hereto that no party
to this Agreement or to the Merger Agreement is making any representation
or warranty whatsoever, express or implied, in this Agreement, the Merger
Agreement, the Tax Sharing Agreement or the Stockholders Agreement or in
any other agreement contemplated hereby or thereby, except those
representations and warranties expressly set forth in this Agreement.
Each of the parties hereto agrees, to the fullest extent permitted by Law,
that none of them nor any of their Affiliates, agents or representatives
shall have any liability or responsibility whatsoever to any such other
party
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hereto or such other party's Affiliates, agents or representatives on any
basis (including, without limitation, in contract or tort, under federal or
state securities laws or otherwise) based upon any information provided or
made available, or statements made, to any such other party or such other
party's Affiliates, agents or representatives (or any omissions therefrom),
including, without limitation, in respect of the specific representations
and warranties set forth in this Agreement and the Merger Agreement and the
covenants and agreements set forth in the Merger Agreement, except (i) as
and only to the extent expressly set forth in the indemnification
provisions of Article V hereof and as otherwise expressly set forth herein
(subject to the limitations and restrictions contained herein), and (ii)
with respect to breaches of the covenants and agreements set forth in this
Agreement.
(b) Without limiting the generality of the foregoing, it is
understood and agreed (a) that neither Parent, the Company nor any of the
Retained Subsidiaries is, in this Agreement or in any other agreement or
document contemplated by this Agreement, representing or warranting in any
way as to the value or freedom from encumbrance of, or any other matter
concerning, any Spinco Assets, (b) that the Spinco Assets are being
transferred "as is, where is" and (c) that, subject to the obligations of
the Company set forth in Sections 2.1(b) and 6.2 hereof, Spinco shall bear
the risk that any conveyances of the Spinco Assets might be insufficient or
that Spinco's or any of the Spinco Company's title to any Retained Assets
shall be other than good and marketable and free from encumbrances.
Similarly, it is understood and agreed that neither Parent, the Company nor
any of the Retained Subsidiaries is, in this Agreement or in any other
agreement or document contemplated by this Agreement, representing or
warranting to Spinco or any Spinco Indemnified Party in any way that the
obtaining of the consents and approvals, the execution and delivery of any
amendatory agreements and the making of the filings and applications
contemplated by this Agreement shall satisfy the provisions of any or all
applicable agreements or the requirements of all applicable Laws or
judgments.
(c) Spinco represents and warrants to the Company that (i) except
as expressly provided in the
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Globalstar Bank Guarantee (as amended pursuant to the provisions of Section
2.5 hereof), neither the Company nor any of the Retained Subsidiaries will,
after giving effect to the Restructuring, be liable directly or indirectly,
as borrower, surety, guarantor, indemnitor or otherwise, with respect to
(and that none of the Retained Assets shall be bound by or subject to) any
of the Spinco Liabilities or any Spinco Indebtedness, (ii) there are no
Intercompany Agreements in effect as of the date hereof, which, either
individually or in the aggregate, are materially adverse to (i) the
business, properties, operations, prospects, results of operations or
condition (financial or otherwise) of the Retained Business or (ii) the
ability of the Company or any of the Retained Subsidiaries to perform their
respective obligations under this Agreement, the Tax Sharing Agreement or
the Stockholders Agreement, (iii) there are no Spinco Assets which have
been used within the Retained Business within one year prior to the date
hereof, other than those Spinco Assets which are listed on Section 6.2(c)
of the Disclosure Schedule, (iv) except as set forth in Section 6.1(c)(iv)
of the Disclosure Schedule, neither Spinco nor any Spinco Company shall,
immediately after giving effect to the Restructuring and the Distribution,
own, hold or lease, in whole or in part, any of the assets, properties,
licenses and rights which are reasonably necessary to carry on the Retained
Business as presently conducted, and (v) prior to, on or shortly after the
Distribution Date, GTL or Globalstar (as the case may be) will issue to the
Company the Guarantee Warrants described in the Globalstar Warrant
Memorandum and the term sheet set forth on Exhibit A-1 attached hereto,
which warrants will be on the terms and conditions described in the
Globalstar Warrant Memorandum and shall otherwise be on such terms and
conditions as are customary to transactions of a similar nature.
Section 6.2. Further Assurances; Subsequent Transfers.
(a) To the extent that any of the transfers, distributions and
deliveries required to be made pursuant to Article II shall not have been
so consummated prior to the Distribution Date, the parties shall cooperate
and use their best efforts to effect such consummation as promptly
thereafter as reasonably practicable. Each of the parties hereto will
execute and deliver such
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further instruments of transfer and distribution and will take such other
actions as any party hereto may reasonably request in order to effectuate
the purposes of this Agreement and to carry out the terms hereof. Without
limiting the generality of the foregoing, at any time and from time to time
after the Distribution Date, at the request of Spinco or any of its
Subsidiaries, each party hereto will, and will cause each of its
Subsidiaries to, execute and deliver such other instruments of transfer and
distribution, and take such action as any party hereto may reasonably
request in order to more effectively transfer, convey and assign to such
requesting party or to the Subsidiaries of such requesting party and to
confirm the right, title or interest held by such requesting party or any
of the Subsidiaries of such requesting party, in the Assets to be
transferred to such requesting party (or its Subsidiaries) pursuant to this
Agreement, to put such requesting party and its Subsidiaries in actual
possession and operating control thereof and to permit such requesting
party and its Subsidiaries to exercise all rights with respect thereto
(including, without limitation, rights under contracts and other
arrangements as to which the consent of any third party to the transfer
thereof shall not have previously been obtained) and to properly assume and
discharge the related Liabilities.
(b) Each of the parties hereto agrees to use its respective best
efforts, at the Company's reasonable expense, to obtain any consents
required to transfer and assign to (i) Spinco all agreements, leases,
licenses and other rights of any nature whatsoever relating to the Spinco
Assets, and (ii) the Company all agreements, leases, licenses and other
rights of any nature whatsoever relating to the Retained Assets. In the
event and to the extent that any party hereto or any of its Subsidiaries is
unable to obtain any such required consents, (i) such party (or any
Subsidiary that is a party to such agreements, leases, licenses and other
rights, as the case may be) shall continue to be bound thereby (such
person, the "Record Holder") and (ii) the party to which such Asset would
otherwise be transferred pursuant to this Agreement (the "Beneficial
Holder") shall pay, perform and discharge fully all the obligations of the
Record Holder thereunder from and after the Distribution Date and indemnify
such Record Holder for all Indemnifiable Losses arising out of such
performance by
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such Record Holder. The Record Holder shall, without further consideration
therefor, pay, assign and remit to the Beneficial Holder promptly all
monies, rights and other consideration received in respect of such
performance. The Record Holder shall exercise or exploit its rights and
options under all such agreements, leases, licenses and other rights and
commitments referred to in this Section 6.2(b) only as reasonably directed
by the Beneficial Holder and at the Beneficial Holder's expense. If and
when any such consent shall be obtained or such agreement, lease, license
or other right shall otherwise become assignable, the Record Holder shall
promptly assign all its rights and obligations thereunder to the
Beneficial Holder without payment of further consideration and the
Beneficial Holder shall, without the payment of any further consideration
therefor, assume such rights and obligations.
(c) In the event that, subsequent to the Distribution Date, the
Company or any of the Retained Subsidiaries shall either (i) receive
written notice from Spinco or any of the Spinco Companies that certain
specified Assets of the Company or any of the Retained Subsidiaries which
properly constitute Spinco Assets were not transferred to it on or prior to
the Distribution Date or (ii) determine that certain Assets of the Company
or any of the Retained Subsidiaries which constitute Spinco Assets were not
transferred to Spinco or any of the Spinco Companies on or prior to the
Distribution Date, then as promptly as practicable thereafter, the Company
shall, and shall cause its Subsidiaries to, take all steps reasonably
necessary to transfer and deliver any and all of such Assets to Spinco or
its Subsidiaries at the recipient's reasonable expense. In the event that,
subsequent to the Distribution Date, Spinco or any of the Spinco Companies
shall either (i) receive written notice from the Company or any of the
Retained Subsidiaries that certain specified Assets were transferred to
Spinco or its Subsidiaries which properly constitute Retained Assets, or
(ii) determine that certain Assets of Spinco or the Spinco Companies which
constitute Retained Assets were transferred to Spinco or the Spinco
Companies, then as promptly as practicable thereafter, Spinco shall, and
shall cause the Spinco Companies to, take all steps reasonably necessary
to transfer and deliver any and all of such Assets to the Company or the
Company's Subsid-
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iaries at the recipient's reasonable expense without the payment by the
Company of any consideration therefor.
Section 6.3. The Spinco Board. Spinco and the Company shall
take all actions which may be required to elect or otherwise appoint, on or
prior to the Distribution Date, those individuals that the Board of
Directors of the Company (as in effect prior to the consummation of the
Offer) may designate as directors of Spinco.
Section 6.4. Use of Names. Following the Distribution Date,
Spinco and each of the Spinco Companies shall have the sole and exclusive
ownership of and right to use, as between the Company and each of the
Retained Subsidiaries, on the one hand, and Spinco and each of the Spinco
Companies, on the other hand, the "Loral" name and each of the names used
(or formerly used) in the Spinco Business (the "Spinco Names"), and each of
the trade marks, trade names, service marks and other proprietary rights
related to such Spinco Names as set forth on Section 6.4 of the Disclosure
Schedule (the "Spinco Proprietary Name Rights"); provided that the Company,
the Retained Business and each of the Retained Subsidiaries is hereby
granted a perpetual, fully paid-up, worldwide, non-exclusive license with
respect to such Spinco Names and Spinco Proprietary Name Rights to the
extent necessary to enable the Company, the Retained Business and each of
the Retained Subsidiaries to continue to use such rights in their
respective businesses with respect to (x) those governmental Contracts of
the Retained Business (and any programs thereunder) in existence as of the
Offer Purchase Date or those governmental programs for which a bid has been
submitted prior to the Offer Purchase Date, and (y) those products and
services of the type manufactured or sold by them on the date hereof or at
any time during the last five years or under current development by them as
of the date hereof. Following the Distribution Date, the Company and each
of the Retained Subsidiaries shall have the sole and exclusive ownership of
and right to use, as between Spinco and each of the Spinco Companies, on
the one hand, and the Company and each of the Retained Subsidiaries, on the
other hand, all names used (or formerly used) by the Company or any of the
Retained Subsidiaries as of such date other than the Spinco Names (the
"Company Names"), and all other trade marks, trade names, service marks and
other proprietary rights owned or used by the Company or any of the Retai-
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ned Subsidiaries as of such date other than the Spinco Proprietary Name
Rights (the "Company Proprietary Name Rights"). Notwithstanding the
foregoing, following the Distribution Date, (x) the Company shall, and
shall cause its Subsidiaries and other Affiliates to, take all action
reasonably necessary to cease using, and change as soon as commercially
practicable (including by amending any charter documents), any corporate or
other names which are the same as or confusingly similar to any of the
Spinco Names or any of the Spinco Proprietary Name Rights, and (y) Spinco
shall, and shall cause its Subsidiaries and other Affiliates to, take all
action reasonably necessary to cease using, and change as soon as
commercially practicable (including by amending any charter documents), any
corporate or other names which are the same as or confusingly similar to
any of the Company Names or any of the Company Proprietary Name Rights.
Section 6.5. Litigation Relating to Transaction.
(a) Following the date hereof, in the event that any Action is
commenced against the Company or any of its Subsidiaries challenging either
the Merger Agreement, this Agreement, the Tax Sharing Agreement or the
Stockholders Agreement or any of the transactions contemplated therein or
herein (any such Action, a "Transaction Suit"), then the Company shall
provide promptly to Parent copies of all material pleadings sent or
received after the date hereof by the Company or its counsel with respect
to any such Transaction Suit(s).
(b) Parent shall be entitled to participate in the defense of
each Transaction Suit and to employ counsel at its own expense to assist
in the handling of each such Transaction Suit. The Company shall not
settle or compromise any Transaction Suit or consent to the entry of any
judgment with respect to any such Transaction Suit, without the prior
written consent of Parent (which consent shall not be unreasonably
withheld).
(c) Following the Distribution Date, Spinco shall be entitled to
participate in the defense of each Transaction Suit to which it or any of
its Affiliates is a party, and to employ counsel at its own expense to
assist in the handling of each such Transaction Suit.
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Following the Distribution Date, the Company shall not settle or compromise
any Transaction Suit to which Spinco or any of its Affiliates is a party or
consent to the entry of any judgment with respect to any such Transaction
Suit, without the prior written consent of Spinco (which consent shall not
be unreasonably withheld).
Section 6.6. Spinco Equity Arrangements. On or prior to the
Offer Purchase Date, Spinco, the Company and each Retained Subsidiary which
will be a holder of Spinco Preferred Stock immediately after giving effect
to the Restructuring, shall each execute and deliver to the other
counterparts of a stockholders agreement with respect to such Spinco
Preferred Stock in substantially the form set forth in Exhibit A hereto.
Section 6.7. Post-Closing Business Relationships.
(a) License of Existing Intellectual Property Rights. The
Company and the Retained Subsidiaries hereby grant to each of Spinco and
the Spinco Companies, effective as of the Distribution Date, a perpetual,
fully paid-up, worldwide, non-exclusive license with respect to the
Intellectual Property Rights to the extent necessary to enable Spinco and
the Spinco Companies to continue to use the Intellectual Property Rights in
their respective businesses with respect to those products and services
thereof of the type manufactured or sold by them on the date hereof or at
any time during the last five years or under current development by them as
of the date hereof; provided that neither Spinco nor any of the Spinco
Companies shall be permitted to sublicense or otherwise transfer any of the
Intellectual Property Rights referred to in this Section 6.7(a) to any
Person other than an Affiliate of Spinco. Each of Spinco and the Spinco
Companies acknowledges and agrees that neither the Company nor the Retained
Subsidiaries nor any of their respective Affiliates is making any
representations or warranties with respect to the ownership, validity,
efficacy or other matters relating to any of the Intellectual Property
Rights referred to in this Section 6.7(a).
(b) License of Certain Other Intellectual Property Rights.
During the period commencing after the Distribution Date and ending on the
third anniversary
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thereof, the Company and the Retained Subsidiaries shall, at the request of
Spinco or any Spinco Company, grant to Spinco or such Spinco Company a non-
exclusive license for those applications reasonably related to the Spinco
Business with respect to any Intellectual Property Rights not already
covered by paragraph (a) above, which grant shall be made on terms and
conditions no less favorable than those terms and conditions which may from
time to time be extended generally by Parent to third parties with respect
to similar products, services or applications; provided that neither the
Company nor any of the Retained Subsidiaries shall be obligated to license
to Spinco or any Spinco Company any of the Intellectual Rights referred to
in this Section 6.7(b) if such Intellectual Property Rights relate to any
product or service which competes with or will compete with those products
or services of the type manufactured or sold by Parent, any Subsidiary of
Parent, the Company or any of the Retained Subsidiaries on the date thereof
or at any time during the previous five years or under current development
by them as of the date thereof.
(c) Certain General Licensing Provisions. The license of
Intellectual Property Rights granted pursuant to this Section 6.7 shall
not affect the rights of the Company or any of the Retained Subsidiaries to
use, disclose or otherwise freely deal with any Intellectual Property
Rights licensed hereunder and shall be subject to and limited by (x) all
Contracts and obligations, entered into prior to the date on which the
license in question was granted, in any way affecting the Company's ability
to license the Intellectual Property Rights and (y) the provisions of
applicable Law. Spinco agrees to indemnify, defend and hold harmless the
Company and each Parent Indemnified Party in accordance with the
indemnification provisions of Article V hereof, from and against any and
all Indemnifiable Losses of the Company and any such Parent Indemnified
Party arising out of, relating to or resulting from the license of any
Intellectual Property Rights to Spinco or any Spinco Company pursuant to
the provisions of Section 6.7(a) above or any failure by Spinco or any
Spinco Company to perform and abide by all obligations, restrictions,
conditions and agreements applicable to the Intellectual Property Rights
licensed to Spinco or any Spinco Company pursuant to the provisions of
Section 6.7(a) above.
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(d) Technical Services. During the period commencing after the
Distribution Date and ending on the third anniversary thereof (and for
successive periods of three years provided that Spinco notifies the Company in
writing, no less than six months nor more than nine months prior to the end of
the three-year period in question, of Spinco's intention to continue seeking the
services set forth in this Section 6.7(d) during the following three-year
period), and subject to existing commitments, obligations and availability, and
upon reasonable notice, Parent and its Subsidiaries shall use their reasonable
efforts to make available to Spinco and the Spinco Companies those personnel and
facilities reasonably designated by Parent or the Company to provide such
research and development, technological and technical consulting and support
services and other similar consulting and support services (such services, the
"Technical Services"), to the extent reasonably requested by Spinco or the
Spinco Companies from time to time. The Technical Services shall be provided at
a cost calculated in accordance with the "fully-allocated" cost (which shall
include all direct and indirect expenses of Parent or the Company or any of
their respective Subsidiaries or any other entity which is providing the
Technical Services in question, and which shall be allocated in a manner
consistent with the Parent's or the Company's past practices (as the case may
be) with respect to the allocation of costs to its Subsidiaries. Following the
end of the calendar month in which any such Technical Services are performed,
the Company shall provide to Spinco or the Spinco Subsidiary in question an
invoice (the "Technical Services Invoice") setting forth in summary detail the
Technical Services which were provided during such calendar month and the
appropriate cost thereof. Spinco or the Spinco Subsidiary in question shall pay
to the Company in cash in a reasonably prompt manner following the delivery by
the Company of a Technical Services Invoice, the amounts due with respect to the
Technical Services reflected on such Technical Services Invoice. The parties
hereto acknowledge and agree that (x) the specific terms and conditions of the
Technical Services to be provided hereunder (to the extent not otherwise
specified and to the extent not inconsistent with the provisions of this Section
6.7(d)) shall be on terms and conditions similar to those terms and conditions
which may from time to time be extended generally by or to Parent to or from
third parties with respect to similar services (except as
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the parties may otherwise mutually agree) and (y) any Intellectual Property
Rights created primarily in connection with the delivery of Technical Services
to Spinco or the Spinco Subsidiary (as the case may be) shall be the property of
Spinco or the Spinco Subsidiary (as the case may be); provided that Parent, the
Company and each of their respective Affiliates are hereby granted a perpetual,
fully paid-up, worldwide, non-exclusive license with respect to all such
Intellectual Property Rights (provided further that neither Parent nor any of
its Affiliates shall be permitted to sublicense or otherwise transfer any of the
Intellectual Property Rights referred to in this Section 6.7(d) to any Person
other than an Affiliate of such party). Notwithstanding anything to the contrary
contained in this Section 6.7(d), SSL shall not be entitled to request or to
receive, either directly or indirectly, any Technical Services or any
Intellectual Property Rights relating thereto (nor may Spinco, nor any Affiliate
of either Spinco or SSL, request or receive any such Technical Services or
Intellectual Property Rights on behalf of SSL) unless and until SSL shall have
entered into an unconditional release (which shall be in form and substance
reasonably acceptable to Parent) in favor of Parent and its Affiliates with
respect to any and all Liabilities relating to the SSL Lawsuit (provided that
in the event that SSL delivers to Parent a release which satisfies the
provisions of this sentence, Parent agrees to promptly deliver to SSL a similar
release with respect to such SSL Lawsuit).
Section 6.8. No Restrictions on Post-Closing Competitive
Activities. It is the explicit intent of each of the parties hereto that the
provisions of this Agreement shall not include any non-competition or other
similar restrictive arrangements with respect to the range of business
activities which may be conducted by the parties hereto. Accordingly, each of
the parties hereto acknowledges and agrees that nothing set forth in this
Agreement shall be construed to create any explicit or implied restriction or
other limitation on (a) the ability of any party hereto to engage in any
business or other activity which competes with the business of any other party
hereto, or (b) the ability of any party to engage in any specific line of
business or engage in any business activity in any specific geographic area.
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Section 6.9. CCD Lawsuit.
(a) The parties hereto acknowledge and agree that prior to the
Distribution Date, the Company shall have complete and exclusive control and
management over the CCD Lawsuit. On the Distribution Date, immediately prior to
the Distribution, Spinco shall acquire an interest in the CCD lawsuit pursuant
to the transfers set forth in Section 2.1(a)(viii), which transfers shall be
effected by the Company and its Subsidiaries, with the consent of Parent (which
shall not be unreasonably withheld), entering into any agreements or
stipulations, including, but not limited to, an assignment of the action to
Spinco, as may reasonably be required to (i) grant to Spinco complete and
exclusive control and management of the CCD Lawsuit (including, but not limited
to, the prosecution, defense or settlement of such action) and (ii) grant to
Spinco the exclusive right to any and all proceeds or awards resulting or
derived from the CCD Lawsuit; provided that Spinco shall pay all fees and
expenses relating to the CCD Lawsuit and Spinco hereby agrees to indemnify,
defend and hold harmless the Company and each Parent Indemnified Party in
accordance with the indemnification provisions of Article V hereof, from and
against any and all Indemnifiable Losses of the Company and any such Parent
Indemnified Party with respect to the CCD Lawsuit (including, without
limitation, with respect to any countersuit relating thereto). The Company
agrees that it shall provide reasonable cooperation to Spinco in connection with
the CCD Lawsuit, including, but not limited to, reasonable access to such
books, records and employees of the Company as may be reasonably necessary in
order for Spinco to prosecute or defend the CCD Lawsuit or any other Action
related thereto.
(b) Notwithstanding anything to the contrary contained in this
Section 6.9, Spinco shall not, without the prior written consent of Parent,
consent to any settlement which (A) imposes any Liabilities on Parent (other
than those Liabilities which Spinco agrees to promptly pay or discharge), and
(B) with respect to any non-monetary provision of such settlement, would be
likely, in Parent's reasonable judgment, to have an adverse effect on the
business operations, assets, properties or prospects of Parent, the Company or
the Retained Business. Nothing in this Section 6.9 shall be construed in any
manner to vitiate any of the collective
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rights of the Company, the Retained Subsidiaries and Spinco under the CCD
Lawsuit and the rights being asserted thereunder in relation to any third
party, and the parties hereto shall take all reasonable actions necessary
to ensure the foregoing.
ARTICLE VII
ACCESS TO INFORMATION AND SERVICES
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Section 7.1. Provision of Corporate Records. Except as provided
in the following sentence, on the Distribution Date, the Company shall
deliver to Spinco all corporate books and records (including all active
agreements, active litigation files and government filings) which are
corporate records of Spinco or any of the Spinco Companies and which relate
primarily to the Spinco Assets, the Spinco Business or the Spinco
Liabilities, including, without limitation, original corporate minute
books, stock ledgers and certificates and corporate seals of each
corporation the capital stock of which is included in the Spinco Assets.
Notwithstanding the foregoing, the Company shall have the right to retain
the original copies of any such documents which also relate to the Retained
Assets, the Retained Business or the Retained Liabilities, provided that
it provides Spinco with copies of, and reasonable access to, such materials
after the Distribution Date. Also on the Distribution Date, the Company
shall provide to Spinco lists of trademarks, patents, copyrights and other
intellectual property set forth in clause (iii) of the definition of
"Assets" herein included in the Spinco Assets.
Section 7.2. Access to Information. Subject to the
confidentiality provisions of Section 7.5 hereof, from and after the
Distribution Date (i) Spinco shall afford to the Company and its authorized
accountants, counsel and other designated representatives reasonable access
(including, without limitation, using reasonable efforts to give access to
persons or firms possessing Information (as defined below)) and duplicating
rights during normal business hours to all records, books, contracts,
instruments, computer data and other data and information (collectively,
"Information") within Spinco's possession relating to the Spinco Assets,
the Spinco Business and the Spinco Liabilities, insofar as such
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access is reasonably required by the Company, and (ii) the Company shall
afford to Spinco and its authorized accountants, counsel and other
designated representatives reasonable access (including, without
limitation, using reasonable efforts to give access to persons or firms
possessing Information) and duplicating rights during normal business hours
to all Information within the Company's possession relating to the
Retained Assets, the Retained Business and the Retained Liabilities,
insofar as such access is reasonably required by Spinco. Information may
be requested under this Article VII for, without limitation, audit,
accounting, claims, litigation and tax purposes, as well as for purposes of
fulfilling disclosure and reporting obligations.
Section 7.3. Production of Witnesses. From and after the
Distribution Date, each party shall use reasonable efforts to make
available to the other party, upon written request, its officers,
directors, employees and agents as witnesses to the extent that any such
person may reasonably be required in connection with any legal,
administrative or other proceedings in which the requesting party may from
time to time be involved.
Section 7.4. Retention of Records. Except as otherwise required
by Law or agreed to in writing, Spinco and the Company shall each retain,
for a period of at least seven years following the Distribution Date, all
significant Information relating to (i) in the case of the Company, the
Spinco Business and (ii) in the case of Spinco, the Retained Business.
Notwithstanding the foregoing, either Spinco or the Company may destroy or
otherwise dispose of any of such Information at any time, provided that,
prior to such destruction or disposal, (a) Spinco or the Company, as the
case may be, shall provide no less than 90 or more than 120 days' prior
written notice to the other party, specifying the Information proposed to
be destroyed or disposed of and (b) if the other party shall request in
writing prior to the scheduled date for such destruction or disposal that
any of the Information proposed to be destroyed or disposed of be delivered
to the other party, Spinco or the Company, as the case may be, shall
promptly arrange for the delivery of such of the Information as was
requested, at the expense of the other party.
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Section 7.5. Confidentiality.
(a) Each party shall hold, and shall cause its officers,
employees, agents, consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or, in
the reasonable opinion of its counsel, by other requirements of Law, all
confidential, proprietary or other non-public information or trade secrets
concerning the other party (or such other party's business operations or
the business operations of such other party's Affiliates) which is
furnished it by such other party or its representatives pursuant to either
the Merger Agreement, this Agreement or the Confidentiality Agreement
(collectively, the "Confidential Information"). None of the parties hereto
nor any of their respective Affiliates shall use for their own benefit or
purposes, or release or disclose to any other person or entity, any such
Confidential Information (except, to the extent reasonably required, for
disclosure to those of such party's auditors, attorneys and other
representatives who agree to be bound by the provisions of this Section
7.5). Notwithstanding the foregoing, in the event any party hereto is
requested to disclose any Confidential Information to any third party
pursuant to any judicial or administrative process or, in the reasonable
opinion of its counsel, any other requirements of Law, the party from whom
such disclosure is sought shall (x) notify the other parties hereto as soon
as reasonably practicable of such request for disclosure, (y) disclose only
that portion of the Confidential Information which it reasonably believes,
following the advice of counsel, is necessary in order to comply with such
judicial or administrative process or other requirements of Law, and (z)
cooperate with the other parties hereto in seeking to narrow the scope of
any such third party request for disclosure).
(b) Notwithstanding the foregoing, the term "Confidential
Information" shall not include information (a) which is or becomes
generally available to the public other than as a result of disclosure of
such information by the disclosing party or any of its Affiliates or
representatives, (b) becomes available to the recipient of such information
on a non-confidential basis from a source which is not, to the recipient's
knowledge, bound by a confidentiality or other similar agreement, or by any
other legal, contractual or fiduciary obligation
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which prohibits disclosure of such information to the other party hereto,
or (c) which can be demonstrated to have been developed independently by
the representatives of such recipient which representatives have not had
any access to any information which would otherwise be deemed to be
"Confidential Information" pursuant to the provisions of this Section 7.5.
ARTICLE VIII
EMPLOYEE MATTERS
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Section 8.1. Officers and Employees. Except as otherwise
specified by Spinco prior to the Offer Purchase Date, the executive
officers of the Company shall be the executive officers of Spinco on and
after the Distribution Date. Effective as of the Distribution Date, (a)
those Retained Employees who are employed by the Company or any of its
subsidiaries immediately prior to the Distribution Date shall become
employees of the Company in the same capacities as then held by such
employees (or in such other capacities as the Company shall determine in
its sole discretion) and (b) those Spinco Employees, together with those
persons whose primary employment is with the Spinco Business, who are
employed by the Company or any of its subsidiaries immediately prior to the
Distribution Date shall become employees of Spinco in the same capacities
as then held by such employees (or in such other capacities as Spinco
shall determine in its sole discretion).
Section 8.2. Employee Benefits.
(a) As soon as practicable after, and in any event within 90
days after, and effective as of, the Distribution Date, Spinco shall
establish a defined benefit pension plan and trust intended to qualify
under Section 401(a) and Section 501(a) of the Code (the "Spinco Pension
Plan"). The Company shall, within 180 days following the Distribution
Date, but in no event prior to the receipt by the Company of written
evidence of the adoption of the Spinco Pension Plan and the trust
thereunder by Spinco and either (A) the receipt by the Company of a copy of
a favorable determination letter issued by the IRS with respect to the
Spinco Pension Plan or (B) an opinion, satisfactory to the Company's
counsel,
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of Spinco's counsel to the effect that the terms of the Spinco Pension Plan
and its related trust qualify under Section 401(a) and Section 501(a) of
the Code, direct the Trustees of the Loral Corporation Pension Plan and the
Retirement Plan of Loral Aerospace Corp. (the "Company Pension Plans") to
transfer in cash or in kind, as agreed to by the Company and Spinco, from
the trusts under the Company Pension Plans to the trust under the Spinco
Pension Plan, an amount determined by the certified actuary of the Company
Pension Plans (the "Company Actuary") which shall be equal to, with respect
to each such Company Pension Plan, (A) the product of (i) the fair market
value of the assets held under such Company Pension Plan as of the last day
of the month prior to the month in which the transfer occurs (the
"Valuation Date") and (ii) a fraction, the numerator of which is equal to
the present value of all accrued benefits under such Company Pension Plan
as of the Distribution Date in respect of Spinco Employees and the
denominator of which is equal to the present value of all accrued benefits
under such Company Pension Plan less (B) the payments made by such Company
Pension Plan between the Distribution Date and the date of transfer in
respect of Spinco Employees. From the Valuation Date to the date of
transfer, the assets to be transferred will be credited with interest at
the interest rate available on a 30-day treasury note at the auction date
on or immediately preceding the Valuation Date.
The calculation of the present value of such benefits shall be in
accordance with Section 414(1) of the Code and the regulations promulgated
thereunder and in all cases utilizing the assumptions used by the Company
for reporting accrued benefit obligations under FAS No. 87 in its 1995
Annual Report. For purposes of this calculation, the present value of
accrued benefits shall be determined on a termination basis in accordance
with the standards of Section 414(l) of the Code. The determination by the
Company Actuary shall be final and binding, provided, however, that the
Company Actuary shall provide the actuary selected by Spinco with all the
documentation reasonably necessary for Spinco to verify such determination;
provided, further, that if the Spinco actuary certifies, in writing within
60 days of receiving such supporting documentation, that he disagrees with
the Company Actuary then, first the chief financial officers of the Company
and Spinco shall negotiate, in good faith,
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to resolve such dispute, and if unable to come to an agreement, then the
Company and Spinco shall agree upon and engage an impartial actuary, who
shall be entitled to the privileges and immunities of an arbitrator, to
resolve any disagreement and whose determination as to any such
disagreement (if not contrary to ERISA) shall be conclusive, final and
binding. The parties shall share equally all costs and fees of such
impartial actuary. At the time of transfer of the amount set forth in this
Section 8.2, Spinco and the Spinco Pension Plan shall assume all
liabilities for all accrued benefits under the Company Pension Plans in
respect of Spinco Employees and each of the Company and the Company Pension
Plans shall be relieved of all liabilities for such benefits. As soon as
practicable after, and in any event within 90 days after, and effective as
of, the Distribution Date, Spinco shall cause SSL to establish a trust
intended to qualify under Section 501(a) of the Code ("Spinco SSL Trust")
and intended to hold the assets of the Retirement Plan of SSL (the "SSL
Plan"). The Company shall, within 180 days following the Distribution Date,
but in no event prior to the receipt by the Company of written evidence of
the adoption of the Spinco SSL Trust, direct the Trustees of the Loral
Master Pension Trust (the "Master Trust") to transfer in cash or in kind as
agreed to by SSL and the Company from the Master Trust to the Spinco SSL
Trust, the assets held by the Master Trust under the SSL Plan. Upon the
transfer of assets in accordance with this Section 8.2(a), Spinco agrees to
indemnify and hold harmless the Company, its officers, directors,
employees, agents and affiliates from and against any and all Indemnifiable
Losses arising out of or related to the Spinco Pension Plan and the SSL
Plan, including all benefits accrued by Spinco Employees prior to the
Distribution Date under the Company Pension Plans and the SSL Plan. Spinco
and the Company shall provide each other with such records and information
as may be necessary or appropriate to carry out their obligations under
this Section or for the purposes of administration of the Spinco Pension
Plan and the SSL Plan, and they shall cooperate in the filing of documents
required by the transfer of assets and liabilities described herein.
Notwithstanding anything contained herein to the contrary, no such transfer
shall take place until the 31st day following the filing of all required
Forms 5310-A in connection therewith.
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(b) Individual Account Plan. As soon as practicable after the
Distribution Date, but in no event later than 90 days after the
Distribution Date, Spinco shall establish a defined contribution plan and
trust intended to qualify under Section 401(a) and Section 501(a) of the
Code (the "Spinco Savings Plan"). The Company shall, within 180 days
following the Distribution Date, but in no event prior to the receipt by
the Company of written evidence of the adoption of the Spinco Savings Plan
and the trust thereunder by Spinco and either (A) the receipt by the
Company of a copy of a favorable determination letter issued by the IRS
with respect to the Spinco Savings Plan or (B) an opinion, satisfactory to
the Company's counsel, of Spinco's counsel to the effect that the terms of
the Spinco Savings Plan and its related trust qualify under Section 401(a)
and Section 501(a) of the Code, direct the trustee of the Loral Master
Savings Plan and the Loral Aerospace Savings Plan (the "Company Savings
Plans") to transfer to the trustee of the Spinco Savings Plan the account
balances under the Company Savings Plans as of the date of transfer in
respect of Spinco Employees in cash or in kind, as agreed to by the Company
and Spinco; provided, however, all outstanding loans shall be transferred
in kind. Upon such transfer, the Spinco Savings Plan shall assume all
liabilities for all accrued benefits under the Company Savings Plans in
respect of Spinco Employees that are transferred to the Spinco Savings Plan
and the Company Savings Plans shall be relieved of all liabilities for such
accrued benefits. The Company and Spinco shall cooperate in the filing of
documents required by the transfer of assets and liabilities described
herein. Notwithstanding anything contained herein to the contrary, no such
transfer shall take place until the 31st day following the filing of all
required Forms 5310-A in connection therewith. Upon the transfer of assets
in accordance with this section 8.2(b), Spinco agrees to indemnify and hold
harmless the Company, its officers, directors, employees, agents and
affiliates from and against any and all Indemnifiable Losses arising out of
or relating to the Spinco Savings Plan, including all benefits accrued by
Spinco Employees prior to the Distribution Date.
(c) Welfare Benefit Plans. As of the Distribution Date, Spinco
Employees shall cease to participate in the employee welfare benefit plans
(as such term
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in defined in ERISA) maintained or sponsored by the Company (the "Prior
Welfare Plans") and shall commence to participate in welfare benefit plans
of Spinco (the "Replacement Welfare Plans") which Replacement Welfare Plans
shall, in the case of any such plan that is subject to the requirements of
Section 4980B of the Code, provide for substantially identical benefits on
substantially identical terms and conditions that were provided by Prior
Welfare Plans immediately prior to the Distribution Date. Spinco will, (i)
waive all limitations as to pre-existing condition exclusions and waiting
periods with respect to participation and coverage requirements applicable
to Spinco Employees under the Replacement Welfare Plans, other than
limitations or waiting periods that were in effect with respect to such
employees under the Prior Welfare Plans and that have not been satisfied as
of the Distribution Date, and (ii) provide each Spinco Employee with credit
for any co-payments and deductibles paid prior to the Distribution Date in
satisfying any deductible or out-of-pocket requirements under the
Replacement Welfare Plans. After the Distribution Date, Spinco shall be
responsible for any claims by Spinco Employees for benefits relating to
claims incurred but not reported prior to the Distribution Date. The
Company shall use its best efforts to ensure that, except as provided
otherwise in the Merger Agreement or Distribution Agreement, the
consummation of the transactions contemplated by this Distribution
Agreement shall not entitle any employee to severance benefits under any
severance plan or arrangement of the Company or any of its Subsidiaries.
(d) Collective Bargaining Agreements. As of the Distribution
Date, with respect to those collective bargaining agreements to which the
Company or any of its Affiliates is a party and which cover Spinco
Employees, Spinco shall assume all liabilities and obligations of the
Company and each of its Affiliates thereunder, but only to the extent that
such liabilities and obligations relate to any Spinco Employees.
(e) Certain Liabilities. Spinco hereby agrees to indemnify the
Company and its Affiliates against, and agrees to hold them harmless from
any and all Indemnifiable Losses incurred or suffered as a result of any
claim by any Spinco Employee which arises under federal, state or local
statute (including, without
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limitation, Title VII of the Civil Rights Act of 1964, the Civil Rights Act
of 1991, the Age Discrimination in Employment Act of 1990, the Equal Pay
Act, the Americans with Disabilities Act of 1990, the Employee Retirement
Income Security Act of 1974 and all other statutes regulating the terms and
conditions of employment), regulation or ordinance, under the common law or
in equity (including any claims for wrongful discharge or otherwise), or
under any policy, agreement, understanding or promise, written or oral,
formal or informal, between the Company and the Spinco Employee, whether
arising out of actions, events or omissions that occurred (or, in the case
of omissions, failed to occur) prior to, or after, the Distribution Date.
The Company hereby agrees to indemnify Spinco and its Affiliates against,
and agrees to hold it harmless from any and all Indemnifiable Losses
incurred or suffered as a result of any claim by any Retained Employee
which arises under federal, state or local statute (including, without
limitation, Title VII of the Civil Rights Act of 1964, the Civil Rights Act
of 1991, the Age Discrimination in Employment Act of 1990, the Equal Pay
Act, the Americans with Disabilities Act of 1990, the Employee Retirement
Income Security Act of 1974 and all other statutes regulating the terms and
conditions of employment), regulation or ordinance, under the common law or
in equity (including any claims for wrongful discharge or otherwise), or
under any policy, agreement, understanding or promise, written or oral,
formal or informal, between the Company and the Retained Employee, whether
arising out of actions, events or omissions that occurred (or, in the case
of omissions, failed to occur) prior to, or after, the Distribution Date.
The indemnification provided for in this Section 8.2 shall be subject to
the terms and conditions of the indemnification provisions of Article V
hereof.
(f) As of the Distribution Date, with respect to any employee
liabilities or obligations arising under the Company's (i) split dollar
life insurance arrangements with certain executives, (ii) the Loral
Supplemental Executive Retirement Plan (the "SERP"), and (iii) retiree
welfare plans (including retiree medical plans), (all such liabilities in
(i), (ii) and (iii), "Enumerated Liabilities"):
(A) On or prior to the Distribution Date, the Company
shall establish one or
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more grantor rabbi trusts (the "SERP Trust") of which the
participants in the SERP shall be the beneficiaries and
shall contribute to such trust an amount equal to the
present value of all accrued benefits under the SERP as of
the Distribution Date (the parties hereto acknowledge that
such amount shall not exceed $11 million).
(B) The Company shall retain and be solely responsible
for all liabilities and obligations whatsoever of both the
Retained Business and the Spinco Business for all
Enumerated Liabilities with respect to Retained Employees
and shall retain any assets relating to such liabilities.
(C) Spinco shall assume and be solely responsible for
all liabilities and obligations whatsoever of both the
Retained Business and the Spinco Business for all Enumerated
Liabilities with respect to Spinco Employees and the Company
shall transfer, or allocate, as applicable, to Spinco as
soon as practicable following the Distribution Date any
assets relating to such liabilities. The assets held in the
SERP Trust shall be allocated, to the extent practicable, in
accordance with the principles set forth in Section 8.2(a).
Section 8.3. Other Liabilities and Obligations. As of the
Distribution Date, with respect to claims relating to any employee
liability or obligation not otherwise provided for in this Agreement or
the Merger Agreement, including, without limitation, accrued holiday,
vacation and sick day benefits, (a) the Company shall assume and be solely
responsible for all liabilities and obligations whatsoever of both the
Retained Business and the Spinco Business for all such claims made by
Retained Employees and (b) Spinco shall assume and be solely responsible
for all liabilities and obligations whatsoever of both the Retained
Business and the Spinco Business for all such claims made by all Spinco
Employees. Notwithstanding the foregoing, wages and salary accrued prior
to the Distribution Date in respect of
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Spinco New York Employees and deferred directors' fees shall be the sole
responsibility of the Retained Business.
Section 8.4. Preservation of Rights to Amend or Terminate Plans.
No provision of this Agreement, shall be construed as a limitation on the
right of the Company or Spinco to amend any plan or terminate its
participation therein which the Company or Spinco would otherwise have
under the terms of such plan or otherwise, and no provision of this
Agreement shall be construed to create a right in any employee or
beneficiary of such employee under a plan that such employee or beneficiary
would not otherwise have under the terms of such plan itself.
Section 8.5. Reimbursement; Indemnification. Spinco and the
Company acknowledge that the Company, on the one hand, and Spinco, on the
other hand, may incur costs and expenses (including, without limitation,
contributions to plans and the payment of insurance premiums) pursuant to
any of the employee benefit or compensation plans, programs or arrangements
which are, as set forth in this Agreement, the responsibility of the other
party. Accordingly, the Company and Spinco agree to reimburse each other,
as soon as practicable but in any event within 30 days of receipt from the
other party of appropriate verification, for all such costs and expenses
reduced by the amount of any tax reduction or recovery of tax benefit
realized by the Company or Spinco, as the case may be, in respect of the
corresponding payment made by it. All Liabilities retained, assumed or
indemnified by Spinco pursuant to this Article VIII shall in each case be
deemed to be Spinco Liabilities, and all Liabilities retained, assumed or
indemnified by the Company pursuant to this Article VIII shall in each case
be deemed to be Retained Liabilities, and, in each case, shall be subject
to the indemnification provisions set forth in Article V hereof.
Section 8.6 Actions By Spinco. Any action required to be
taken under this Article VIII may be taken by a Subsidiary of Spinco, the
Spinco Companies, or a Subsidiary of the Spinco Companies.
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ARTICLE IX
INSURANCE
---------
Section 9.1. General. Except as otherwise agreed in writing between
the parties, the Company shall maintain until the Distribution Date all policies
of liability, fire, extended coverage, fidelity, fiduciary, workers'
compensation and other forms of insurance in effect as of the date hereof
insuring the products, properties, Assets and operations contemplated to be
transferred to Spinco and each of the Spinco Companies.
Section 9.2. Certain Insured Claims. The Company shall (a) use
reasonable efforts, upon Spinco's written request and at Spinco's sole expense,
to continue to maintain and renew for the benefit of Spinco and each of the
Spinco Companies the insurance policies under the Casualty Program with respect
to claims having an occurrence date (as the term "occurrence date" is
customarily defined) prior to the Distribution Date, relating to, or arising out
of the conduct of, the Spinco Business, the Spinco Assets or the Spinco
Liabilities, and (b) use reasonable efforts and cooperate with Spinco, upon
Spinco's written request and at Spinco's sole expense, to obtain coverage,
recoveries and other benefits under such policies for the benefit of Spinco and
each of the Spinco Companies, including, without limitation, by filing and
pursuing claims with respect to obtaining such coverage, recoveries and other
benefits; provided that in no event shall the Company be obligated to litigate
or pursue any other extra-contractual remedies against any insurer; provided
further that all claims pursuant to this Section 9.2 shall be submitted,
investigated, processed and paid in accordance with the claims handling
procedures used by the Company and its Affiliates from time to time with respect
to other like claims. The Company will reimburse Spinco and each of the Spinco
Companies for any recovery obtained by it pursuant to such claims. The Company
shall make available to Spinco such of its employees as Spinco may reasonably
request as witnesses or deponents in connection with Spinco's pursuit of claims.
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ARTICLE X
CONDITIONS; TERMINATION;
AMENDMENTS; WAIVERS
------------------------
Section 10.1. Condition to Restructuring and Distribution.
(a) The obligations of each of the Company, Holdings, Aerospace
LGP, LG, Cayman and Spinco to effect the Restructuring and the Distribution
(other than those obligations which are normally expected to precede the
Restructuring or the Distribution) shall be subject to the satisfaction of the
following conditions: (i) the Purchaser shall have notified the Company that it
is prepared to immediately accept for payment shares of Company Common Stock
pursuant to the terms and conditions of the Offer as set forth in the Merger
Agreement, (ii) the Record Date shall have been set by the Company's Board of
Directors, (iii) the Form 10 (or the registration statement referred to in
Section 3.1(a) hereof) shall have been declared effective by the SEC, (iv) the
Spinco Common Stock shall have been accepted for listing or quotation in
accordance with Section 3.1(e) hereof, (v) no Court Order or Law shall have been
enacted, promulgated, issued or entered against any of the parties hereto which
(x) prohibits or materially restricts consummation of any of the transactions
contemplated by this Agreement and (y) remains in effect as of the date on which
the satisfaction of this condition is determined, (vi) the Company and the
Retained Subsidiaries (other than Spinco and the Spinco Companies) shall have
obtained all consents required to be obtained by the Company as a result of or
in connection with the transactions contemplated by this Agreement in order to
avoid a material Default under any material Contract to or by which the Company,
Spinco or any of their respective Subsidiaries is a party or may be bound, or
otherwise necessary to permit the Company and each of the Retained Subsidiaries
to conduct their business in a manner consistent with its past practices, (vii)
all consents and approvals of, and notices to and filings with, any Governmental
Entity or any other person or entity arising out of or relating to the
consummation of the transactions contemplated by this Agreement, shall have been
obtained or made (as the case may be), (viii) the Globalstar Bank Guarantee
shall have been amended pursuant to Section 2.5 hereof so that the provisions
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thereof shall, following the Restructuring, be amended in the manner
contemplated by Section 2.5 hereof (with such changes thereto as Parent and the
Company may approve prior to the Offer Purchase Date), and (ix) the Lehman
Partnerships and all other holders of the Lehman Preferred Stock (if any) shall
have exchanged all issued and outstanding shares of Lehman Preferred Stock for
shares of capital stock or other equity securities of either Spinco, any Spinco
Company or any Subsidiary of Spinco pursuant to Section 2.7 hereof.
(b) The parties hereto acknowledge and agree that (x) Parent may
waive, on behalf of all parties hereto, the conditions set forth in clauses
(viii) and (ix) of Section 10.1(a) above, (y) Parent may waive, on behalf of all
parties hereto, the condition set forth in clauses (v), (vi) and (vii) of
Section 10.1(a) above so long as (1) Parent reasonably believes that
consummation of the Distribution at such time will have no material adverse
effect on Spinco or the Spinco Business and (2) Parent agrees to indemnify
Spinco pursuant to the provisions of Article V hereof with respect to any
Indemnifiable Losses which result from any material adverse effect on Spinco or
the Spinco Business which results directly from such waiver, and (z) the Company
may not waive any of the conditions set forth in Sections 10.1(a)(i) through
10.1(a)(ix) above without first obtaining the prior written consent of Parent
(which may not be unreasonably withheld). In the event that all of the
Distribution Conditions have been satisfied (or waived, to the extent expressly
permitted by the provisions of the preceding sentence), the Company, Holdings,
Aerospace and Spinco shall consummate the Restructuring and the Distribution,
and all other transactions related thereto, on the date on the date on which
such Distribution Conditions have been so satisfied or waived (or as soon as
practicable following such date in the event that such parties are unable to
consummate the Restructuring and the Distribution, and all other transactions
related thereto, on such date). The respective obligations of each party hereto
to perform those of its obligations which are to be performed following
consummation of the Restructuring and the Distribution, shall be conditioned on
the consummation of the Restructuring and the Distribution in accordance with
the provisions of this Agreement.
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Section 10.2. Termination. This Agreement (i) may be terminated and
the Distribution abandoned at any time prior to the Offer Purchase Date by the
mutual written agreement of each of the parties hereto or (ii) shall be
terminated automatically and the Distribution abandoned upon any termination of
the Merger Agreement in accordance with the terms and conditions thereof. In the
event that this Agreement shall be terminated pursuant to this Section 10.2, all
obligations of the parties hereto under this Agreement shall terminate without
further liability or obligation of any party hereto to the other parties hereto
under this Agreement or otherwise, except (i) for any breach by such party of
the terms and provisions of this Agreement prior to the date of such termination
and (ii) as stated in Section 11.3 hereof.
Section 10.3. Amendments; Waivers. This Agreement may be amended,
modified or supplemented only by written agreement of each of the parties
hereto. Any term or provision of this Agreement may be waived at any time by the
party entitled to the benefit thereof by a written instrument executed by such
party. Except as provided in the preceding sentence, no action taken pursuant to
this Agreement, including, without limitation, any investigation by or on behalf
of any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants, agreements
or conditions contained herein. The waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any preceding or succeeding breach and no failure by any party to exercise any
right or privilege hereunder shall be deemed a waiver of such party's rights or
privileges hereunder or shall be deemed a waiver of such party's rights to
exercise the same at any subsequent time or times hereunder.
ARTICLE XI
MISCELLANEOUS
-------------
Section 11.1. Survival of Indemnities; Release. The representations
and warranties made in Section 6.1 of this Agreement shall survive for a period
of three years from the Distribution Date, but shall not survive any termination
of this Agreement; provided that
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claims with respect to breaches of covenants and agreements set forth in this
Agreement shall survive for the applicable statute of limitations period. Except
as otherwise expressly provided in this Agreement (including, without
limitation, the indemnification provisions of Article V hereof), each of the
parties (a) agrees that no claims or causes of action may be brought against the
Company, Holdings, Aerospace, Spinco, Parent or the Purchaser or any of their
Affiliates, agents or representatives based upon, directly or indirectly, any of
the representations and warranties contained in this Agreement after three years
following the Distribution Date (other than causes of actions commenced after
such three-year period to seek recourse for claims asserted during such three-
year period that are not resolved by the parties), and (b) hereby waives and
releases all other claims and causes of action, that may be asserted or brought
against the Company, Holdings, Aerospace, Spinco, Parent or the Purchaser or any
of their Affiliates, agents or representatives directly or indirectly based upon
or arising under this Agreement or the Merger Agreement, or the transactions
contemplated hereby or thereby. Notwithstanding the foregoing, this Section 11.1
shall not limit any covenant or agreement of the parties in this Agreement, the
Merger Agreement, the Tax Sharing Agreement or the Stockholders Agreement which
contemplates performance after the Distribution Date (including, without
limitation, the covenants and agreements set forth in Sections 2.1(b) and 6.2
hereof), except for the covenants and agreements in the Merger Agreement to the
extent of their performance prior to the Distribution Date.
Section 11.2. Entire Agreement. This Agreement (including the
schedules and exhibits and the agreements and other documents referred to
herein, including, without limitation, the Merger Agreement, the Tax Sharing
Agreement and the Stockholders Agreement) constitutes the entire agreement among
the parties with respect to the subject matter hereof and supersedes all other
prior negotiations, commitments, agreements and understandings, both written and
oral, between the parties or any of them with respect to the subject matter
hereof (including, without limitation, the provisions of the Confidentiality
Agreement).
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Section 11.3. Fees and Expenses. Except as otherwise provided in this
Agreement, the Merger Agreement, the Tax Sharing Agreement or the Stockholders
Agreement, and subject to the proviso below, all costs and expenses incurred by
the Company and each of the Retained Subsidiaries and by Spinco in connection
with (x) the preparation, execution and delivery of this Agreement, the Merger
Agreement, the Tax Sharing Agreement and the Stockholders Agreement and (y)
consummating such party's obligations hereunder and thereunder (including,
without limitation, investment banking, legal, accounting, audit and printing
costs and expenses), shall be paid by the Company, upon the submission to the
Company of appropriate documentation detailing such costs and expenses);
provided that the investment banking costs and expenses incurred by the Company
(including any legal or other costs and expenses but excluding any
indemnification-related costs and expenses) incurred by the Company relating to
the provision of such investment banking services) in connection with the
transactions contemplated by this Agreement and the Merger Agreement which
exceed $12,000,000 (such excess amount of such investment banking costs and
expenses, the "Spinco Excess Costs"), shall not be considered to be expenses of
the Company, but shall be deemed to be Spinco Liabilities and shall be paid by
Spinco on or promptly after the Distribution Date.
Section 11.4. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF
NEW YORK, WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES THEREOF.
Section 11.5. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given upon (a) transmitter's
confirmation of a receipt of a facsimile transmission, (b) confirmed delivery by
a standard overnight carrier or when delivered by hand or (c) the expiration of
five Business Days after the day when mailed by certified or registered mail,
postage prepaid, addressed at the following addresses (or at such other address
for a party as shall be specified by like notice):
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(a) If to the Company, or Aerospace, to:
Loral Corporation
600 Third Avenue
New York, NY 10016
Telephone: (212) 697-1105
Telecopy No.: (212) 602-9805
Attention: General Counsel
with a copy to:
Lockheed Martin Corporation
6801 Rockledge Drive
Bethedsa, MD 20817
Telephone: (301) 897-6125
Telecopy No.: (301) 897-6333
Attention: General Counsel
and to:
Skadden, Arps, Slate, Meagher
& Flom
919 Third Avenue
New York, New York 10022
Telephone: (212) 735-3000
Telecopy No.: (212) 735-2000
Attention: Peter Allan Atkins, Esq.
Lou R. Kling, Esq.
and to:
O'Melveny & Myers
153 E. 53rd Street
New York, New York 10022
Telephone: (212) 326-2000
Telecopy No.: (212) 326-2160
Attention: C. Douglas Kranwinkle, Esq.
Jeffrey J. Rosen, Esq.
(b) If to Spinco, to:
Loral Space & Communications Corporation
600 Third Avenue
New York, New York 10016
Telephone: (212) 697-1105
Telecopy No.: (212) 602-9805
Attention: General Counsel
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with a copy to:
Willkie Farr & Gallagher
153 E. 53rd Street
New York, New York 10022
Telephone: (212) 821-8000
Telecopy No.: (212) 821-8111
Attention: Robert B. Hodes, Esq.
Bruce R. Kraus, Esq.
Section 11.6. Successors and Assigns; No Third Party
Beneficiaries. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any party
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties hereto (which consent may not be unreasonably
withheld), except that any party shall have the right, without the consent
of any other party hereto, to assign all or a portion of its rights,
interests and obligations hereunder to one or more direct or indirect
subsidiaries, but no such assignment of obligation shall relieve the
assigning party from its responsibility therefor. Notwithstanding the
foregoing, Spinco shall be permitted to assign its rights and obligations
under this Agreement to one of its Affiliates (the "Spinco Transferee")
prior to the Record Date so long as (x) such assignment shall not relieve
Spinco from its joint responsibility therefor and (y) such assignment does
not adversely affect any of the rights, benefits or obligations of Parent
or any of the Parent Indemnified Parties under this Agreement or the Merger
Agreement; provided that in the event of any such assignment to the Spinco
Transferee, all references to Spinco shall be automatically deemed to be
references to Spinco. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and, except for the provisions
of Sections 8.1 hereof, nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement;
provided, however, that the Indemnified Parties are intended to be third
party beneficiaries of the provisions of Article V hereof, and shall have
the right to enforce such provisions as if they were parties hereto.
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Section 11.7. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
Section 11.8. Interpretation. The descriptive headings herein
are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement.
Section 11.9. Schedules. The Disclosure Schedule shall be
construed with and as an integral part of this Agreement to the same extent
as if the same had been set forth verbatim herein.
Section 11.10. Legal Enforceability. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without affecting the validity or enforceability of the
remaining provisions hereof. Any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, the provision shall be interpreted to be
only so broad as is enforceable.
Section 11.11. Consent to Jurisdiction. Each of the parties
hereto irrevocably and unconditionally (a) agrees that all suits, actions
or other legal proceedings arising out of this Agreement or any of the
transactions contemplated hereby (a "Suit") shall be brought and
adjudicated solely in the United States District Court for the Southern
District of New York, or, if such court will not accept jurisdiction, in
any court of competent civil jurisdiction sitting in New York City, New
York, (b) submits to the non-exclusive jurisdiction of any such court for
the purpose of any such Suit and (c) waives and agrees not to assert by way
of motion, as a defense or otherwise in any such Suit, any claims that it
is not subject to the jurisdiction of the above courts, that such Suit is
brought in an inconvenient forum or that the venue of such Suit is
improper. Each of the parties hereto also irrevocably and unconditionally
consents to the service of any process, summons, pleadings, notices or
other papers in a manner permitted by the notice
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provisions of Section 11.5 hereof and agrees that any such form of service
shall be effective in connection with any such Suit; provided that nothing
contained in this Section 11.11 shall affect the right of any party to
serve process, pleadings, notices or other papers in any other manner
permitted by applicable Law.
Section 11.12. Specific Performance. Each of the parties hereto
acknowledges and agrees that in the event of any breach of this Agreement,
each non-breaching party would be irreparably and immediately harmed and
could not be made whole by monetary damages. It is accordingly agreed that
the parties hereto (a) will waive, in any action for specific performance,
the defense of adequacy of a remedy at law and (b) shall be entitled, in
addition to any other remedy to which they may be entitled at law or in
equity, to compel specific performance of this Agreement in any action
instituted in any court referred to in Section 11.11 hereof.
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IN WITNESS WHEREOF, each of the parties has caused this
Restructuring, Financing and Distribution Agreement to be executed on its
behalf by its officers thereunto duly authorized, all as of the day and
year first above written.
LORAL CORPORATION
/s/ MICHAEL B. TARGOFF
By:_____________________________
Name: Michael B. Targoff
Title: Senior Vice President
and Secretary
LORAL AEROSPACE HOLDINGS,
INC.
/s/ MICHAEL B. TARGOFF
By:______________________________
Name: Michael B. Targoff
Title: Senior Vice President
LORAL AEROSPACE CORP.
/s/ MICHAEL B. TARGOFF
By:______________________________
Name: Michael B. Targoff
Title: Senior Vice President
LORAL TELECOMMUNICATIONS
ACQUISITION, INC.
/s/ MICHAEL B. TARGOFF
By:______________________________
Name: Michael B. Targoff
Title: Senior Vice President
and Secretary
LOCKHEED MARTIN CORPORATION
/s/ MARCUS C. BENNETT
By:______________________________
Name: Marcus C. Bennett
Title: Senior Vice President
<PAGE>
LORAL GLOBALSTAR LIMITED
/s/ MICHAEL B. TARGOFF
By:______________________________
Name: Michael B. Targoff
Title: Senior Vice President
LORAL GENERAL PARTNER, INC.
/s/ MICHAEL B. TARGOFF
By:______________________________
Name: Michael B. Targoff
Title: Vice President
LORAL GLOBALSTAR, L.P.
/s/ MICHAEL B. TARGOFF
By:______________________________
Name: Michael B. Targoff
Title: Senior Vice President
and Secretary
<PAGE>
EXHIBIT A-1
-----------
GLOBALSTAR WARRANT - SUMMARY TERM SHEET - PRINCIPAL TERMS
---------------------------------------------------------
Reference is hereby made to (x) the Restructuring, Financing and
Distribution Agreement dated as of January 8, 1996 (the "Restructuring
Agreement") among Lockheed Martin Corporation, Loral Corporation, Spinco and the
other parties thereto, and (y) the Globalstar Warrant Memorandum (as defined in
the Restructuring Agreement). All capitalized terms which are not otherwise
defined herein shall have the meanings ascribed to such terms in the
Restructuring Agreement.
Issuer: Globalstar Telecommunications Limited or, if not available, Globalstar
L.P. (the "Company").
Issued To: Guarantors
No. of Shares: As set forth in the Globalstar Warrant Memorandum, subject to
adjustment based on the antidilution provisions described below. (If issuer is
Globalstar L.P., the term "shares" will refer to L.P. interests.)
Warrant Exercise Price: As set forth in the Globalstar Warrant Memorandum,
subject to adjustment based on the antidilution provisions described below.
Acceleration of Vesting: In the event the Company merges with or into another
company (unless the warrants continue to represent the rights to purchase equity
in the surviving company on the same terms, except for equitable adjustment of
price and number of shares purchasable), sells all or substantially all of its
assets, liquidates, etc., the Company must give notice to the holder prior to
the consummation of the transaction and must give the holder the option of
exercising the warrant prior to consummation of such transaction.
Antidilution Events:
. Stock Splits, Recaps, etc. - will result in increased number of
Warrant Shares (unless reverse split, etc.)
. Rights, Options, Warrants, Convertible Securities - will result in
increased number of Warrant Shares pursuant to a prescribed
formula, but only to the extent that such shares, rights, options,
warrants or convertible securities are issued or distributed
generally to all holders of the Common Stock.
. Issuance of Common Stock at Lower Values - if shares are issued
below the then current fair market value of such shares,
adjustment will be made on a proportionate basis pursuant to a
prescribed formula, but only to the extent that such shares,
rights, options, warrants or
<PAGE>
convertible securities are issued or distributed generally to all
holders of the Common Stock.
. Extraordinary Distributions/Stock Dividends -extraordinary cash
dividends (over 10% of current market value on record date),
distributions of properties, assets, etc. in partial liquidation
and stock dividends will result in adjustment.
. Distributions of Debt - Warrant Shares subject to adjustment in
accordance with a prescribed formula.
. Distributions includes repurchases and redemptions.
Registration Rights on Warrant Shares: Customary
-2-
<PAGE>
EXHIBIT B
---------
WF&G Draft
1/8/96
CERTIFICATE OF DESIGNATION
OF
SERIES A NON-VOTING CONVERTIBLE PREFERRED STOCK
OF
LORAL TELECOMMUNICATIONS ACQUISITION, INC.
Pursuant to Section 151(g) of the
General Corporation Law of the State of Delaware
The undersigned, Senior Vice President of Loral Telecommunications
Acquisition, Inc., a Delaware corporation (the "Corporation"), in accordance
with the provisions of Section 151 of the General Corporation Law of the State
of Delaware, hereby certifies that pursuant to authority vested in the Board of
Directors of the Corporation by the provisions of its Certificate of
Incorporation, the Board of Directors has duly adopted the following resolution
creating a series of Preferred Stock of the Corporation designated as the Series
A Non-Voting Convertible Preferred Stock:
WHEREAS, the Certificate of Incorporation of the Corporation authorizes
__________ shares of capital stock, of which 1,000 shares are authorized as
Common Stock, $.01 par value per share ("Common Stock"), and __________ shares
are authorized as Preferred Stock, $.01 par value per share ("Preferred Stock");
and
WHEREAS, the Certificate of Incorporation of the Corporation authorizes the
Board of Directors to provide for the issuance of shares of Preferred Stock in
series and to establish from time to time the number of shares to be included in
each such series and to fix the designation, powers, preferences and rights of
the shares of each such series and the qualifications, limitations and
restrictions thereof;
NOW, THEREFORE, BE IT RESOLVED, that, pursuant to the Certificate of
Incorporation, the Board of Directors hereby fixes the designation and
preferences and relative rights, qualifications, limitations and restrictions of
a series of Preferred Stock.
RESOLVED, that each share of Preferred Stock described herein shall rank
equally in all respects and shall be subject to the following provisions:
(1) Number and Designation. ______ shares of Preferred Stock of the
Corporation shall be designated as Series
<PAGE>
A Non-Voting Convertible Preferred Stock (the "Series A Preferred Stock").
(2) Dividends and Distributions. (a) Subject to paragraphs (2)(b)
and (4) below, the Corporation shall pay, and the holders of shares of Series A
Preferred Stock shall be entitled to receive, and to share equally and ratably,
share for share with the Common Stock, in such dividends and distributions on
the Common Stock or the Series A Preferred Stock as may be declared from time to
time by the Board of Directors, whether payable in cash, property or securities
of the Corporation. The record date for determining the holders of Series A
Preferred Stock entitled to receive dividends and distributions shall be the
same as the record date for determining the holders of Common Stock entitled to
receive dividends and distributions. Dividends and distributions shall be paid
to the holders of Series A Preferred Stock entitled to receive such dividends
and distributions at the close of business on the date on which such dividends
and distributions are paid or made by the Corporation in respect of the Common
Stock.
(b) In the event that the Corporation declares and pays a dividend or
makes any distribution on its Common Stock in the form of (x) shares of
additional Common Stock, (y) options, warrants or rights to acquire Common Stock
or (z) other securities of the Corporation convertible into or exchangeable for
Common Stock, the holders of the Series A Preferred Stock shall receive in lieu
of such securities: (1) an equal number of shares of additional Series A
Preferred Stock, in the case of clause (x) above; (2) options, warrants or
rights to acquire an equal number of additional shares of Series A Preferred
Stock on terms otherwise identical to such options, warrants or rights
distributed to the holders of Common Stock, in the case of clause (y) above; and
(3) securities convertible into or exchangeable for an equal number of shares of
Series A Preferred Stock on terms otherwise identical to the convertible or
exchangeable securities distributed to the holders of Common Stock, in the case
of clause (z) above.
(c) All dividends or distributions paid with respect to shares of the
Series A Preferred Stock shall be paid pro rata to the holders entitled thereto.
(d) Each fractional share of Series A Preferred Stock outstanding
shall be entitled to a ratable proportionate amount of all dividends and other
distributions accruing, paid or made with respect to each outstanding share of
Series A Preferred Stock and all such dividends and other distributions with
respect to such outstanding fractional shares shall be payable in the same
manner and at such times as provided for in paragraphs (2)(a), (2)(b) and (4)
hereof with respect to dividends and other distributions on each outstanding
share of Series A Preferred Stock.
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<PAGE>
(3) Voting Rights. (a) Except as otherwise set forth herein and as
otherwise provided by law, the holders of the Series A Preferred Stock shall not
be entitled to vote on any matter relating to the business or affairs of the
Corporation and shall not be included in determining the number of Shares voting
or entitled to vote on any such matters.
(b) Notwithstanding the foregoing, each issued and outstanding share
of Series A Preferred Stock shall be entitled to one vote for each share of
Common Stock into which such share of Series A Preferred Stock is convertible,
and shall be included as aforesaid in the number of shares voting and entitled
to vote with respect to the following matters presented to the stockholders of
the Corporation for their action or consideration:
i) any amendment to or modification or repeal of any provision of the
Corporation's Certificate of Incorporation or By-laws (or similar organizational
documents);
ii) any merger, consolidation, corporate reorganization or similar
transaction involving the Corporation;
iii) any sale, lease, exchange, transfer or other disposition,
directly or indirectly, in a single transaction or series of related
transactions, of all or substantially all of the assets of the Corporation or
any of its Affiliates;
iv) any plan or proposal for the liquidation or dissolution of the
Corporation or any assignment by the Corporation for the benefit of creditors,
or any filing by the Corporation of a petition in bankruptcy; or
v) any restructuring, extension, modification, substitution,
refinancing or amendment of any indebtedness of the Corporation.
Except as otherwise provided herein or by law, the holders of the Series A
Preferred Stock shall vote together with the holders of the Common Stock as a
single class.
(c) In addition to the voting rights set forth above, the consent of
the holders of at least a majority of the shares of the Series A Preferred Stock
at the time outstanding, voting together as a single class, shall be necessary
for any amendment to the Certificate of Incorporation or By-laws of the
Corporation, if such amendment would adversely affect the rights, powers,
privileges or preferences of the Series A Preferred Stock.
(4) Rights on Liquidation. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of the shares of the Series A Preferred Stock then outstanding shall
be entitled
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<PAGE>
to receive, prior and in preference to any distribution of any of the assets of
the Corporation to the holders of the Common Stock by reason of their ownership
thereof, an amount equal to $.01 per share for each outstanding share of Series
A Preferred Stock. If upon the occurrence of such event the assets thus
distributed among the holders of the Series A Preferred Stock shall be
insufficient to permit the payment to such holders of the full preferential
amount, the entire assets of the Corporation legally available for distribution
shall be distributed ratably among the holders of the Series A Preferred Stock.
After the payment or distribution to the holders of the Series A Preferred Stock
of such preferential amount, the holders of the Series A Preferred Stock and the
Common Stock then outstanding shall be entitled to receive ratably (based, in
the case of the Series A Preferred Stock, on the number of shares of Common
Stock into which such Series A Preferred Stock was last convertible) all
remaining assets of the Corporation to be distributed.
(5) Conversion. (a) Each share of Series A Preferred Stock may be
converted, at the option of the holder thereof, at any time (i) after the HSR
Clearance Date or (ii) upon the transfer (in accordance with the provisions of
the Stockholders Agreement) of such share of Series A Preferred Stock to a
Person other than a Stockholder or any Affiliate thereof, in the manner
hereinafter provided, into one (subject to any adjustment required below) fully
paid and nonassessable share of Common Stock; provided, however, that on any
liquidation of the Corporation, the right of conversion shall terminate at the
close of business on the business day immediately preceding the date fixed for
the payment of any amounts distributable on liquidation to the holders of the
Series A Preferred Stock.
(b) Each conversion of shares of Series A Preferred Stock into shares of
Common Stock shall be effected by the prior written notice thereof by the holder
of the Series A Preferred Stock and the surrender of the certificates
representing the shares to be converted at the principal office of the
Corporation (or such other office or agency of the Corporation as the
Corporation may designate by notice in writing to the holders of the Series A
Preferred Stock as shown on the books of the Corporation) at any time during
normal business hours. Such notice shall state the name or names (with
addresses) and denominations in which the certificate or certificates for such
shares of Common Stock are to be issued and shall include instructions for
reasonable delivery thereof. Each conversion shall be deemed to have been
effected as of the close of business on the date on which such certificates have
been surrendered and such notice has been received. At such time, the rights of
the holder of the surrendered Series A Preferred Stock as such holder shall
cease, and the Person in whose name the certificates for shares of Common Stock
will be issued upon such conversion shall be deemed to have become the holder of
record of the Common Stock represented thereby.
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<PAGE>
(c) Promptly after the surrender of the certificates and the receipt of
written notice, the Corporation shall issue and deliver in accordance with the
surrendering holder's instructions (i) the certificates for the shares of Common
Stock issuable upon such conversion and (ii) certificates representing any
surrendered shares of Series A Preferred Stock which were delivered to the
Corporation in connection with such conversion but which were not requested to
be converted and, therefore, were not converted.
(d) The issuance of certificates for Common Stock upon conversion of
Series A Preferred Stock shall be made without charge to the holders of such
shares for any issuance tax in respect thereof or other cost incurred by the
Corporation in connection with such conversion and the related issuance of
shares of Common Stock; provided that the Corporation shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the holder
of the Series A Preferred Stock being converted.
(e) The Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose of
issuance upon the conversion of the Series A Preferred Stock, such number of
shares of Common Stock issuable upon conversion of all outstanding Series A
Preferred Stock. All shares of Common Stock which are so issuable shall, when
issued, be duly and validly issued fully paid and nonassessable and free from
all taxes, liens and charges. The Corporation shall take all such actions as
may be necessary to assure that all such shares of Common Stock may be so issued
without violation of any applicable law or governmental regulation or any
requirement of any domestic securities exchange upon which shares of Common
Stock may be listed (except for official notice of issuance which shall be
immediately transmitted by the Corporation upon issuance).
(f) The Corporation shall not close its books against the transfer of
shares of Series A Preferred Stock in any manner which would interfere with the
timely conversion of any shares of Series A Preferred Stock. The Corporation
shall assist and cooperate with any holder of Series A Preferred Stock required
to make any governmental filings or obtain any governmental approval prior to or
in connection with any conversion of Series A Preferred Stock hereunder
(including, without limitation, making any filings required to be made by the
Corporation).
(6) Stock Splits; Adjustments. (a) If the Corporation shall in any manner
subdivide (by stock split, stock dividend or otherwise) or combine (by reverse
stock split or otherwise) the outstanding shares of Common Stock, the
outstanding shares of the Series A Preferred Stock shall be proportionately
subdivided or combined, as the case may be, and effective provision shall be
made for the protection of all
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<PAGE>
conversion and voting rights of the Series A Preferred Stock hereunder.
(b) If the Corporation shall issue any shares of its capital stock in
a reclassification of the Common Stock (including any such reclassification in
connection with a merger, consolidation or other business combination involving
the Corporation), or in any other similar transaction affecting the Corporation
or the number or value of Common Stock outstanding, effective provision shall be
made for the protection of all conversion and voting rights of the Series A
Preferred Stock hereunder.
(7) General Provisions. (a) The term "Affiliate" as used herein shall
have the meaning set forth in the Stockholders Agreement.
(b) The term "Antitrust Authority" as used herein shall have the
meaning set forth in the Stockholders Agreement.
(c) The terms "HSR Clearance Date" and "HSR Act" as used herein shall
have the meanings set forth in the Stockholders Agreement.
(d) The term "Person" as used herein means an individual or a
corporation, partnership, association, trust or any other entity or
organization.
(e) The term "outstanding," when used herein with reference to shares
of stock, shall mean issued shares, excluding shares held by the Corporation.
(f) The term "Stockholders Agreement" as used herein means that
certain Stockholders Agreement, dated as of _________, 1996, by and among Loral
Corporation, Loral Aerospace Holdings, Inc., Loral Aerospace Corp. and Loral
Telecommunications Acquisition, Inc.
(g) The term "Stockholders" as used herein shall have the meaning set
forth in the Stockholders Agreement.
(h) The headings of the paragraphs, subparagraphs, clauses and
subclauses of this Certificate of Designation are for convenience of reference
only and shall not define, limit or affect any of the provisions hereof.
(i) Subject to Section 3 hereof, any right, preference, privilege or
power of, or restriction provided for the benefit of, the Series A Preferred
Stock set forth herein may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively) with the written consent of the Corporation and the consent of
the holders of not less than a majority of the shares of Series A Preferred
Stock then outstanding, and any
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<PAGE>
amendment or waiver so effected shall be binding upon the Corporation and all
holders of Series A Preferred Stock.
IN WITNESS WHEREOF, the undersigned, Senior Vice President of Loral
Telecommunications Acquisition, Inc., has signed this Certificate of Designation
this ___ day of ____________, 1996 and affirms under penalties of perjury that
it is the act and deed of the Corporation and that the facts stated herein are
true.
LORAL TELECOMMUNICATIONS
ACQUISITION, INC.
By:____________________________
Michael B. Targoff
Senior Vice President
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<PAGE>
EXHIBITS B & C
--------------
1. Broad indemnification provisions
2. Limitations on and methods for changing size of the board
3. Limitations on shareholder rights to:
A. act by written consent
B. call special meetings
C. fill board vacancies
D. nominate directors
E. propose actions that would facilitate change of
control
F. remove directors
4. Lock-ins (supermajority provisions for amending charter and by-
laws)
5. Shareholder rights plan (Poison pill)
6. Staggered board
<PAGE>
EXHIBIT D
---------
A shareholder rights plan substantially identical to that of the
shareholder rights plan adopted by Loral (as submitted to and approved by the
Board of Directors of Loral prior to the date hereof) except that Loral and its
affiliates and its associates shall not be deemed to be an "Acquiring Person"
unless Loral and its affiliates become the beneficial owner of 25% or more of
the outstanding shares of common stock (including securities convertible or
exercisable into common stock) of the Company, together with such other changes
to the shareholder rights plan as the parties may reasonably agree.
<PAGE>
EXHIBIT E TO DISTRIBUTION AGREEMENT
-----------------------------------
1. The Company Pension Plans
2. The Company Savings Plans
3. The Prior Welfare Plans
4. The SERP
<PAGE>
Exhibit 99.9
TAX SHARING AGREEMENT
TAX SHARING AGREEMENT ("the Agreement") dated as of _____________,
1996 by and among Loral Corporation, a New York corporation (the "Company"),
Loral Telecommunications Acquisition, Inc., a Delaware corporation and a wholly-
owned subsidiary of the Company ("Spinco"), Lockheed Martin Corporation, a
Maryland corporation ("Parent") and LAC Acquisition Corporation, a New York
corporation and a wholly-owned subsidiary of Parent (the "Purchaser").
WHEREAS, in connection with the restructuring of the Company pursuant
to the Restructuring, Financing and Distribution Agreement, dated as of January
7, 1996 (the "Distribution Agreement"), the Company, Spinco and certain of the
Retained Subsidiaries have agreed to certain intercompany distributions,
assignments, transfers and contributions of the Spinco Assets and the assumption
of certain liabilities by Spinco, as more fully described in Section 2.1 of the
Distribution Agreement (the "Transfer");
WHEREAS, the Company will retain its stock in all of its subsidiaries
other than the Spinco Subsidiaries (the "Retained Subsidiaries");
WHEREAS, in accordance with the terms of the Agreement and Plan of
Merger dated as of January 7, 1996 (the "Merger Agreement"), the Purchaser will
commence and consummate the Offer and the Company will complete the Transfer;
WHEREAS, immediately after the consummation of the Offer and the Form
10 or registration statement, as the case may be, having been declared effective
by the SEC, the Company will distribute the Spinco Common Stock to the Company
shareholders and the Company will retain its Spinco Preferred Stock;
WHEREAS, pursuant to the Merger Agreement, and in accordance with New
York law, the Purchaser will merge with and into the Company after certain
conditions are satisfied at the Effective Time (the "Merger"), whereby each
share of common stock of the Company issued and outstanding immediately prior to
the Effective Time will be converted into the right to receive cash and, as a
<PAGE>
result of such Merger, the Company, as the surviving corporation, will become
wholly-owned by Parent;
WHEREAS, at the end of the day on which the Distribution occurs (the
"Distribution Date"), Spinco's taxable year shall close for U.S. federal income
tax purposes;
WHEREAS, the parties hereto wish to provide for the payment of tax
liabilities and entitlement to refunds, allocate responsibility and provide for
cooperation in the filing of tax returns, provide for the realization and
payment of tax benefits arising out of adjustments to the tax returns of the
parties and provide for certain other matters;
NOW, THEREFORE, in consideration of the premises and the
representations, covenants and agreements herein contained, and intending to be
legally bound hereby, the Company, Spinco, Parent, and the Purchaser hereby
agree as follows:
1. Certain Definitions. The following terms used herein shall have
the meanings set forth below (such terms to be equally applicable to the
singular and plural forms of the terms defined or referred to below):
"Aerospace" shall have the meaning set forth in the Distribution Agreement.
"Agreement" shall have the meaning set forth in the recitals to this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning set forth in the recitals to this
Agreement.
"Company Group" means the Retained Subsidiaries, together with the Company.
"Consolidated Group" or "consolidated group" means an affiliated group of
corporations filing a consolidated federal income tax return, as defined in
Treasury Regulation Section 1.1502-1(h).
2
<PAGE>
"Continental" shall have the meaning set forth in the Distribution
Agreement.
"Distribution" shall have the meaning set forth in the Distribution
Agreement.
"Distribution Agreement" shall have the meaning set forth in the recitals
to this Agreement.
"Distribution Date" shall have the meaning set forth in the recitals to
this Agreement.
"Effective Time" shall have the meaning set forth in the Merger Agreement.
"Form 10" shall have the meaning set forth in the Distribution Agreement.
"Holdings" shall have the meaning set forth in the Distribution Agreement.
"Income Taxes" means any and all taxes based upon or measured by net income
(including, without limitation, any alternative minimum tax under Section 55 of
the Code) imposed by or payable to the U.S., or any state, county, local or
foreign government or any subdivision or agency thereof, and such term shall
include any interest (whether paid or received), penalties or additions to tax
attributable thereto.
"Income Tax Liabilities" means all liabilities for Income Taxes.
"Indemnified Party" means the party that is entitled to indemnification by
another party pursuant to this Agreement.
"Indemnifying Party" means the party that is required to indemnify another
party pursuant to this Agreement.
"Independent Accounting Firm" means a "big six" independent accounting
firm, jointly selected by the parties; or, if the parties cannot agree on such
accounting firm, Spinco and Parent shall each submit the name of a "big six"
independent accounting firm that does not at the time and has not in the prior
two years provided
3
<PAGE>
services to any member of the Spinco Group or the Parent Group, and the
"Independent Accounting Firm" shall mean the firm selected by lot from these two
firms.
"Independent Law Firm" means a nationally-recognized independent law firm,
jointly selected by the parties; or, if the parties cannot agree on such law
firm, Spinco and Parent shall each submit the name of a nationally-recognized
independent law firm that does not at the time and has not in the prior two
years provided services to any member of the Spinco Group or the Parent Group,
and the "Independent Law Firm" shall mean the firm selected by lot from these
two firms.
"Information Return" means any report, return, declaration or other
information or filing (other than a Tax Return) required to be supplied to any
taxing authority or jurisdiction.
"K&F" shall have the meaning set forth in the Distribution Agreement.
"LGP" shall have the meaning set forth in the Distribution Agreement.
"Merger" shall have the meaning set forth in the recitals to this
Agreement.
"Merger Agreement" shall have the meaning set forth in the recitals to this
Agreement.
"Offer" shall have the meaning set forth in the Merger Agreement.
"Old Company Group" means the consolidated group of corporations of which
the Company is the "common parent" within the meaning of Section 1504 of the
Code and the Treasury Regulations promulgated under Section 1502 of the Code and
any Subsidiary of a member of such consolidated group.
"Other Taxes" means any and all taxes, levies or other like assessments,
charges or fees, other than Income Taxes, including, without limitation, any
excise, real or personal property, gains, sales, use, license, real estate or
personal property transfer, net worth, stock transfer, payroll, ad valorem and
other governmen-
4
<PAGE>
tal taxes and any withholding obligation imposed by or payable to the U.S., or
any state, county, local or foreign government or subdivision or agency thereof,
and any interest (whether paid or received), penalties or additions to tax
attributable thereto.
"Overpayment Rate" means the rate specified under Section 6621(a)(1) of the
Code for overpayments of tax.
"Parent" shall have the meaning set forth in the recitals to this
Agreement.
"Parent Group" means the consolidated group of which Parent or any
successor is the "common parent" within the meaning of Section 1504 of the Code
and the Treasury Regulations promulgated under Section 1502 of the Code and any
Subsidiary of a member of such consolidated group.
"Proceeding" means any audit or other examination, judicial or
administrative proceeding relating to liability for or refunds or adjustments
with respect to Other Taxes or Income Taxes.
"Purchaser" shall have the meaning set forth in the recitals to this
Agreement.
"Refund" means any refund of Income Taxes or Other Taxes, including any
reduction in liabilities for such taxes.
"Retained Subsidiaries" shall have the meaning set forth in the recitals to
this Agreement.
"SEC" means the Securities and Exchange Commission.
"Spinco" shall have the meaning set forth in the recitals to this
Agreement.
"Spinco Assets" shall have the meaning set forth in the Distribution
Agreement.
"Spinco Common Stock" shall have the meaning set forth in the Distribution
Agreement.
"Spinco Companies" shall have the meaning set forth in the Distribution
Agreement.
5
<PAGE>
"Spinco Group" means the Spinco Companies, Spinco and any Subsidiary
thereof (including any successors thereto).
"Spinco Preferred Stock" shall have the meaning set forth in the
Distribution Agreement.
"SSL" shall have the meaning set forth in the Distribution Agreement.
"Subsidiary" or "subsidiary" shall have the meaning set forth in the
Distribution Agreement.
"Tax Benefit" means, in the case of separate state, local or other Income
Tax Returns, the sum of the amount by which the tax liability (after giving
effect to any alternative minimum or similar tax and adjusted for the loss of
any federal tax benefit) of a person to the appropriate taxing authority is
reduced (including, without limitation, by deduction, entitlement to refund,
credit or otherwise, whether available in the current taxable year, as an
adjustment to taxable income in any other taxable year or as a carryforward or
carryback, as applicable) plus any interest from such government or jurisdiction
relating to such tax liability, and in the case of a consolidated federal Income
Tax Return or similar state, local or other Income Tax Return, the sum of the
amount by which the tax liability of the consolidated group or other relevant
group of corporations to the appropriate government or jurisdiction is reduced
(including, without limitation, by deduction, entitlement to refund, credit or
otherwise, whether available in the current taxable year, as an adjustment to
taxable income in any other taxable year or as a carryforward or carryback, as
applicable) plus any interest from such government or jurisdiction relating to
such tax liability, less the amount by which the tax liability to another taxing
authority is increased as a result of the reduction in tax liabilities to
another taxing authority (unless such increase has already been taken into
account under the provisions of Section 5 hereof) and less any increase in tax
liability as a result of the receipt of interest as described above.
"Tax Return" means any report, return, declaration or other information or
filing required to be supplied to any taxing authority or jurisdiction with
respect to
6
<PAGE>
Income Taxes or Other Taxes, including, without limitation, any documents with
respect to or accompanying payments of estimated Income Taxes or Other Taxes, or
with respect to or accompanying requests for the extension of time in which to
file any such report, return, declaration or other document.
"Transfer" shall have the meaning set forth in the recitals to this
Agreement.
"Treasury Regulation" means any final, temporary or proposed regulation
promulgated under the Code.
"U.S." means the United States of America.
2. Cooperation; Maintenance and Retention of Records. Parent and
Spinco shall, and shall cause the members of the Parent Group and the Spinco
Group, respectively, to, provide the requesting party with such assistance and
documents, without charge, as may be reasonably requested by such party in
connection with (i) the preparation of any Tax Return or any Information Return,
(ii) the conduct of any Proceeding (iii) any matter relating to Income Taxes,
Other Taxes or Information Returns of any member of the Old Company Group, the
Company Group, the Spinco Group or the Parent Group and (iv) any other matter
that is a subject of this Agreement. Such cooperation and assistance shall be
provided to the requesting party promptly upon its request. Parent and the
Company, on the one hand, and Spinco, on the other hand, shall retain or cause
to be retained all Tax Returns, Information Returns, schedules and workpapers,
and all material records or other documents relating thereto, until the
expiration of the statute of limitations (including any waivers or extensions
thereof) of the taxable years to which such Tax Returns, Information Returns,
and other documents relate or until the expiration of any additional period that
any party reasonably requests, in writing, with respect to specific material
records or documents. A party intending to destroy any material records or
documents shall provide the other party with advance notice and the opportunity
to copy or take possession of such records and documents. The parties hereto
will notify each other in writing of any waivers or extensions of the applicable
statute of limitations that may affect the period for which the foregoing
records or other documents must be retained.
7
<PAGE>
3. Timing of Distribution Date; Reporting of Certain Transactions.
(a) The parties hereby agree that, for federal income tax
purposes (and, to the extent permissible under applicable law, for state, local
and other tax purposes), Spinco's taxable year shall end at the close of the
Distribution Date, in accordance with the rule of Treasury Regulation Section
1.1502-76(b)(1).
(b) The Parent Group hereby agrees to report each of the
transactions set forth in Section 2.1 of the Distribution Agreement for all
foreign, federal, state and local Income Tax purposes in a manner consistent
with the form and chronology described therein, including (i) in the case of any
distribution of a Spinco Asset by any member of the Old Company Group that is a
corporation, as a distribution of property under Section 311(b) of the Code and
any comparable provision of state or local law; (ii) in the case of any such
distribution between members of the Old Company Group filing a consolidated Tax
Return, as an "intercompany transaction" within the meaning of Treasury
Regulations Section 1.1502-13(b) and any comparable provision of state or local
law; and (iii) in the case of any transfer subject to Treasury Regulations
Section 1.1502-13(d) and any comparable provision of state or local law, by
applying the rules described therein. The parties hereby agree to negotiate in
good faith to determine the fair market values of Spinco and the material items
of the Spinco Assets for purposes of reporting the transactions described in
this subsection (b) for all foreign, federal, state and local Income Tax
purposes, and the parties shall report all Income Taxes in a manner consistent
with such fair market values.
4. Filing of Tax Returns and Information Returns; Payment of Taxes.
(a) Old Company Group. To the extent not filed before the
Distribution Date, Parent shall prepare and file or cause to be prepared and
filed all Tax Returns of the Old Company Group and any member thereof, other
than Tax Returns involving only the Spinco Group (or any members thereof) for
which Spinco is responsible pursuant to subsection (c) hereof, and Parent shall
pay or cause to be paid all Income Taxes shown to be due and
8
<PAGE>
payable by any member of the Old Company Group on such Tax Returns.
(b) Company Group; Parent Group. Parent shall prepare and file or
shall cause to be prepared and filed all Tax Returns of the Company Group and
the Parent Group and any member of either the Company Group or the Parent Group
(other than Tax Returns of Spinco or any of its Subsidiaries for taxable periods
beginning after the Distribution Date) and shall pay or cause to be paid all
Income Taxes shown to be due and payable by any member of the Company Group or
the Parent Group on such Tax Returns.
(c) Spinco Group. Spinco shall prepare and file or cause to be
prepared and filed (i) all Tax Returns of the Spinco Group for all taxable
periods beginning after the Distribution Date and (ii) all Tax Returns
involving only one or more members of the Spinco Group for all taxable periods,
and Spinco shall pay or cause to be paid all Income Taxes shown to be due and
payable by any member of the Spinco Group on such Tax Returns.
(d) Information Returns. Spinco shall file all Information
Returns required to be filed by any member of the Spinco Group after the
Distribution Date and all Information Returns involving only the Spinco Group
(or any members thereof) for all taxable periods. Except as provided in the
preceding sentence, to the extent not filed before the Distribution Date, Parent
shall file all Information Returns required to be filed by any member of the Old
Company Group, the Parent Group or the Company Group. Any party required to file
any Information Return pursuant to this Section 4 shall pay any fees or charges
required in connection with such filing and shall indemnify and hold the other
party harmless against any penalties, fees or other charges resulting from the
failure to pay such fees or charges or the failure to file such Information
Returns in a correct or timely fashion, unless such failure results from the
failure of the other party to provide correct information.
5. Indemnification for Taxes.
(a) Spinco Group Income Taxes. The Spinco Group shall pay, and
shall indemnify and hold the
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<PAGE>
Parent Group harmless against, (i) all Income Tax Liabilities of any member of
the Spinco Group for all taxable periods (including taxable periods or portions
thereof during which any member of the Spinco Group was a member of the Old
Company Group or the Parent Group but excluding all Income Tax Liabilities
arising from the Transfer and Distribution (other than amounts described in
clause (iii) hereof); (ii) all Income Tax Liabilities incurred pursuant to
Treasury Regulation Section 1.1502-6 or any comparable state, local or other
provision providing for joint and several liability as a result of any member of
the Spinco Group having been a member of any consolidated, combined, unitary or
other group (other than the Old Company Group and the Parent Group); and (iii)
the excess, if any, of (A) all Income Tax Liabilities arising, directly or
indirectly, from the transactions set forth in Section 2.1(a) of the
Distribution Agreement and the Distribution minus (B) the hypothetical amount of
all Income Tax Liabilities that would have arisen, directly or indirectly, from
a distribution by Aerospace to Holdings of all of the shares of capital stock
owned by Aerospace in LGP and SSL, followed by a distribution by Holdings to the
Company of all of the shares of capital stock owned by Holdings in LGP, SSL and
Continental, followed by a transfer by the Company to Spinco of all of the
shares of capital stock owned by the Company in LGP, SSL, K&F and Continental
and the transfer to Spinco of the other Spinco Assets described in Section
2.1(a)(viii) of the Distribution Agreement, followed by the Distribution. For
purposes of clause (i) of this subsection (a), the Income Tax Liabilities of any
member or members of the Spinco Group for any taxable period during which such
member or members joined with members of the Old Company Group, the Parent
Group, or any other group in the filing of a consolidated, unitary, combined or
other group Tax Return shall be determined as if each of such Spinco Group
member or members filed its Tax Returns for such period on a stand-alone basis.
(b) Old Company Group and Parent Group Income Taxes. The Parent
Group shall pay, and shall indemnify and hold the Spinco Group harmless against,
(i) all Income Tax Liabilities of any member of the Old Company Group or the
Parent Group (other than Income Tax Liabilities of any member of the Spinco
Group for any taxable period); (ii) all Income Tax Liabilities incurred pursuant
to Treasury Regulation Section 1.1502-6 or any
10
<PAGE>
comparable state, local or other provision providing for joint and several
liability as a result of any member of the Old Company Group or the Parent Group
(other than any member of the Spinco Group) having been a member of any
consolidated, combined, unitary or other group; and (iii) any Income Tax
Liabilities arising from the Transfer and the Distribution (other than amounts
described in subsection (a)(iii) hereof), regardless of when recognized.
(c) Other Taxes. The Parent Group shall pay, and shall indemnify
and hold the Spinco Group harmless against, all liabilities for all Other Taxes
attributable to the income, property or activities of any member of the Old
Company Group or the Parent Group (other than, in both cases, a member of the
Spinco Group), including all Other Taxes, if any, arising from the Transfer and
the Distribution. Except as provided in the preceding sentence, the Spinco Group
shall pay, and shall indemnify and hold the Parent Group harmless against, all
liabilities for all Other Taxes attributable to the income, property or
activities of any member of the Spinco Group. Without limiting the generality of
the foregoing, and notwithstanding any other provision of this Agreement, the
Company shall prepare and file, or cause to be prepared and filed, any Tax
Return required under the New York Real Property Transfer Gains Tax, the New
York Real Property Transfer Tax and the New York City Real Property Transfer Tax
in connection with the Offer, the Merger, or the Transfer (other than amounts
described in clause (iii) of subsection (a) hereof) and the Parent Group shall
timely pay and indemnify the Spinco group against any taxes due and payable on
such returns; and Spinco shall prepare and file, or cause to be prepared and
filed, any Tax Return required under the New York Real Property Transfer Gains
Tax, the New York Real Property Transfer Tax and the New York City Real Property
Transfer Tax in connection with the Distribution and the Spinco Group shall
timely pay and indemnify the Parent group against any taxes due and payable on
such returns.
(d) To the extent that the Indemnifying Party is required to
indemnify another party pursuant to this Section 5, the Indemnifying Party shall
pay to the Indemnified Party, no later than 10 days prior to the due date of the
relevant Tax Return or estimated Tax Return or 10 days after the Indemnifying
Party receives the Indemnified Party's calculations, whichever occurs later,
11
<PAGE>
the amount that the Indemnifying Party is required to pay the Indemnified Party
under this Section 5. The Indemnified Party shall submit its calculations of
the amount required to be paid pursuant to this Section 5, showing such
calculations in sufficient detail so as to permit the Indemnifying Party to
understand the calculations. If the Indemnifying Party disagrees with such
calculations, it must notify the Indemnified Party of its disagreement in
writing within 15 days of receiving such calculations. Any dispute regarding
such calculations shall be resolved in accordance with Section 8 of this
Agreement.
6. Carryovers. In the event that any member of the Spinco Group
realizes any loss or credit for tax purposes for any taxable period beginning on
or after the Distribution Date, such member may elect to carry back such loss or
credit only with the written consent of Parent (which consent shall not be
unreasonably withheld).
7. Refunds of Income Taxes or Other Taxes. The Spinco Group shall be
entitled to all Refunds attributable to the Spinco Group, and the Parent Group
shall be entitled to all Refunds attributable to the Company Group or the Old
Company Group (other than those attributable to the Spinco Group).
Notwithstanding the foregoing, the Parent Group shall be entitled to Refunds
attributable to the Spinco Group that result from the carryback of a tax
attribute by the Company Group, and the Spinco Group shall be entitled to
Refunds attributable to the Company Group that result from the carryback of a
tax attribute by the Spinco Group. A party receiving a Refund to which another
party is entitled pursuant to this Agreement shall pay the amount to which such
other party is entitled within ten days after the receipt of the refund. The
amount of any Refund attributable to the Spinco Group shall be determined
according to the principles set forth in the last sentence of Section 5(a)
hereof.
8. Disputes. If the parties disagree as to the amount of any payment
to be made under, or any other matter arising out of, this Agreement, the
parties shall attempt in good faith to resolve such dispute, and any agreed-upon
amount shall be paid to the appropriate party. If such dispute is not resolved
within 15 days, the parties shall jointly retain the Independent Accoun-
12
<PAGE>
ting Firm to resolve the dispute. If and to the extent that the dispute
presents legal issues, the Independent Accounting Firm shall have the authority
to consult the Independent Law Firm. The fees of the Independent Accounting
Firm and the Independent Law Firm shall be borne equally by the Spinco Group and
the Parent Group, and the decision of such Independent Accounting Firm and
Independent Law Firm shall be final and binding on all parties. Following the
decision of the Independent Accounting Firm and/or the Independent Law Firm, the
parties shall each take or cause to be taken any action that is necessary or
appropriate to implement such decision of the Independent Accounting Firm and
the Independent Law Firm, including, without limitation, the prompt payment of
underpayments or overpayments, with interest calculated on such overpayments and
underpayments at the Overpayment Rate from the date such payment was due through
the date such underpayment or overpayment is paid or refunded.
9. Control of Proceedings. In the case of any Proceeding with
respect to Income Taxes or Other Taxes for which a party is or may be liable
pursuant to this Agreement, Parent or Spinco, as the case may be, shall promptly
give notice to the other party, informing such other party of the Proceeding in
reasonable detail, and Parent or Spinco, as the case may be, shall execute or
cause to be executed any powers of attorney or other documents necessary to
enable the party that may be so liable to take all actions desired by such party
with respect to such Proceeding. Such party shall have the right to control any
such Proceeding and, to initiate any claim for refund, file any amended return
or take any other action that it deems appropriate with respect to such Income
Taxes or Other Taxes, provided, however, that if such Proceeding relates to a
Tax Return for which the other party is Responsible, the Responsible party shall
have the right, within a reasonable time after such notice is given, to deny the
non-Responsible party control of such Proceeding. In the event that a
Responsible party denies control of a Proceeding to a non-Responsible party, the
parties shall agree upon the amount of such Income Taxes of Other Taxes for
which the non-Responsible party is liable pursuant to this Agreement or, if the
parties cannot so agree, shall submit the amount of such liability to
arbitration for resolution (in a manner consistent with the procedures set forth
in Section 8 hereof), which resolution shall determine the amount of
13
<PAGE>
the payment to be made pursuant to this Agreement, taking into account the risks
of litigation and the other practical considerations associated with the
settlement of such a Proceeding, and the Responsible party shall have the sole
discretion to defend, settle or take any action that it deems appropriate with
respect to such Proceeding. For purposes of this Section 9, a party is
Responsible for any Tax Return that it is required to file pursuant to Section 4
hereof, and Parent is Responsible for any Tax Returns of any member of the Old
Company Group (excluding Tax Returns involving solely members of the Spinco
Group).
10. Timing Adjustment.
(a) If an audit or other examination of any Income Tax Return of
the Parent Group or a Proceeding for any period for which Parent is responsible
shall result (by settlement or otherwise) in any adjustment that (A) decreases
deductions, losses or tax credits or increases income, gains or recapture of tax
credits for such period and (B) will permit the Spinco Group to increase
deductions, losses or tax credits or decrease income, gains or recapture of tax
credits that would otherwise (but for such adjustment) have been taken or
reported with respect to the Spinco Group for one or more taxable periods,
Parent shall notify Spinco (Parent and Spinco, for purposes of this subsection
(a), shall be deemed to include, where appropriate, the affiliated, unitary,
combined or other group of which such party is a member) and provide it with
adequate information so that it can reflect on the Income Tax Returns of the
Spinco Group such increases in deductions, losses or tax credits or decreases in
income, gains, or recapture of tax credits. With respect to such increases or
decreases on Income Tax Returns, Spinco shall, and shall cause the Spinco Group
to, pay to Parent the amounts of any Tax Benefits that result therefrom, within
ten days of the date on which such Tax Benefits are realized.
(b) If an audit or other examination of any Income Tax Return of
the Spinco Group or a Proceeding for any period for which Spinco is responsible
shall result (by settlement or otherwise) in any adjustment that (A) decreases
deductions, losses or tax credits or increases income, gains or recapture of tax
credits for such period, and (B) will permit the Parent Group to in-
14
<PAGE>
crease deductions, losses or tax credits or decrease income, gains or recapture
of tax credits that would otherwise (but for such adjustment) have been taken or
reported with respect to the Parent Group for one or more taxable periods,
Spinco will notify Parent (Spinco and Parent, for purposes of this subsection
(b), shall be deemed to include, where appropriate, the affiliated, unitary,
combined or other group of which such party is a member) and provide it with
adequate information so that it can reflect on the Income Tax Returns of the
Parent Group such increases in deductions, losses or tax credits or decreases in
income, gains, or recapture of tax credits. With respect to such increases or
decreases on Income Tax Returns, Parent shall, and shall cause the Parent Group
to, pay to Spinco the amounts of any Tax Benefits that result therefrom, within
ten days of the date such Tax Benefits are realized.
(c) No later than 30 days after the date on which Spinco or
Parent, as the case may be, receives notice pursuant to subsections (a) or (b)
that a Tax Benefit may be available to the Spinco Group or Parent Group,
respectively, Spinco or Parent, as the case may be, shall, and shall cause such
members of the Parent Group or the Spinco Group or, in the case of Spinco, such
members of the Old Company Group, as the case may be, to, as promptly as
practicable, take such steps (including, without limitation, the filing of
amended returns or claims for refunds where the amount of the Tax Benefit for
any company in the aggregate exceeds $100,000) necessary or appropriate to
obtain such Tax Benefit. Thereafter, Spinco or Parent, as the case may be,
shall, and shall cause the Parent Group or the Spinco Group or, in the case of
Spinco, the Old Company group, as the case may be, to, file all Income Tax
Returns to obtain at the earliest possible time such Tax Benefit to the maximum
extent available. Notwithstanding anything to the contrary in this Section 10,
either party may, at its election, pay the amount of any Tax Benefit to the
other party rather than filing amended returns or otherwise reflecting
adjustments or taking positions on its Tax Returns. If such an election is made
by a party, the party will be treated as having realized a Tax Benefit at the
time such Tax Benefit would have been realized if such party had chosen to file
amended returns or otherwise to reflect adjustments or to take positions on its
Tax Returns; provided, however, that such party shall pay
15
<PAGE>
to the other party, no later than 20 days after such party receives notice from
the other party that a Tax Benefit may be available, the amount of Tax Benefit
that such party would have obtained if such party had filed an amended Tax
Return. Notwithstanding the foregoing, a party shall not be required to take
steps to obtain a Tax Benefit or to pay the other party, if, in the opinion of
such party's counsel, which counsel shall be reasonably acceptable to the other
party, there is not substantial authority to seek such Tax Benefit.
(d) For purposes of this Agreement, a Tax Benefit shall be deemed
to have been realized at the time any refund of Taxes is received or applied
against other Taxes due, or at the time of filing of an Income Tax Return
(including any relating to estimated Taxes) on which a loss, deduction or credit
is applied in reduction of Taxes which would otherwise be payable; provided,
however, that, where a party has other losses, deductions, credits or similar
items available to it, deductions, credits or items for which the other party
would be entitled to a payment under this Agreement shall be treated as the last
items utilized to produce a Tax Benefit. In accordance with the provisions of
this subsection (d), Spinco and Parent agree that where a Tax Benefit may be
realized that may result in a payment to, or reduce a payment by, the other
party hereto, each party will as promptly as practicable take or cause its
affiliate to take such reasonable or appropriate steps (including, without
limitation, the filing of an amended return or claim for refund) to obtain at
the earliest possible time any such reasonably available Tax Benefit. In the
event that after payment of a Tax Benefit under this subsection (d), such Tax
Benefit is reduced or eliminated because of a final decree or agreement of a
taxing authority or the carryback of losses or credits, then the party to whom
the Tax Benefit was paid shall pay to the other party the amount by which the
Tax Benefit was reduced or eliminated plus interest on the amount returned at
the Overpayment Rate from the date of payment to the date of repayment.
11. Payments.
(a) Any payment required by this Agreement that is not made on or
before the date provided hereunder shall bear interest after such date at the
16
<PAGE>
Overpayment Rate. In the case of any payment required hereunder to be made
"promptly," such payment shall be considered late for purposes of this Agreement
if not made 20 days after notice that such payment is due is provided. All
payments made pursuant to this Agreement shall be made in immediately available
funds.
(b) All payments made pursuant to this Agreement shall be treated
as an adjustment (increase or decrease) in the amount contributed by Parent to
the Company and by the Company to Spinco, and the parties shall not file any Tax
Returns or Information Returns inconsistent with this position.
12. Termination of Prior Tax Sharing Agreements. This Agreement
shall take effect on the Distribution Date and shall replace all other
agreements, whether or not written, in respect of any Income Taxes or Other
Taxes between or among any members of the Old Company Group, or their respective
predecessors or successors, other than any such agreements made exclusively
between or among any members of the Spinco Group. All such replaced agreements
shall be cancelled as of the Distribution Date, and any rights or obligations
existing thereunder thereby shall be fully and finally settled without any
payment by any party thereto.
13. Notices. All notices, requests, demands and other communications
required or permitted under this Agreement will be made in the manner provided
in Section 11.5 of the Distribution Agreement.
14. Construction. The provisions of this Agreement shall be
construed such that no increase or decrease in Income Taxes or Other Taxes or
Tax Benefit is taken into account more than once.
15. Entire Agreement; Amendments. This Agreement constitutes the
entire agreement of the parties concerning the subject matter hereof and
supersedes all prior agreements, whether or not written, concerning such subject
matter. This Agreement may not be amended except by an agreement in writing,
signed by the parties.
16. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York regardless of the laws that
might
17
<PAGE>
otherwise govern under applicable New York principles of conflicts of law.
17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which shall
constitute together the same document.
18. Effective Date. This Agreement shall become effective only
upon the occurrence of the Distribution Date and shall terminate and be null and
void and of no force and effect upon any termination of the Merger Agreement.
19. Successors and Assigns. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties and their
respective successors and permitted assigns.
18
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
LORAL CORPORATION
By:_______________________________
Name:
Title:
LORAL TELECOMMUNICATIONS
ACQUISITION, INC.
By:_______________________________
Name:
Title:
LOCKHEED MARTIN CORPORATION
By:_______________________________
Name:
Title:
LAC ACQUISITION CORPORATION
By:________________________________
Name:
Title:
19
<PAGE>
EXHIBIT 99.10
CONFORMED COPY
________________________________________________
Rights Agreement
Loral Corporation
and
The Bank of New York,
Rights Agent
Dated as of January 10, 1996
________________________________________________
<PAGE>
Table of Contents
-----------------
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
Section 1. Certain Definitions..................................................................... 1
Section 2. Appointment of Rights Agent............................................................. 6
Section 3. Issue of Rights Certificates............................................................ 7
Section 4. Form of Rights Certificates............................................................. 9
Section 5. Countersignature and Registration....................................................... 10
Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates................................ 11
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights........................... 12
Section 8. Cancellation and Destruction of Rights Certificates..................................... 14
Section 9. Reservation and Availability of Capital Stock........................................... 15
Section 10. Preferred Stock Record Date............................................................ 16
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights............ 17
Section 12. Certificate of Adjusted Purchase Price or Number of Shares............................. 27
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power................... 27
Section 14. Fractional Rights and Fractional Shares................................................ 30
Section 15. Rights of Action....................................................................... 32
Section 16. Agreement of Rights Holders............................................................ 32
Section 17. Rights Certificate Holder Not Deemed a Stockholder..................................... 33
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 18. Concerning the Rights Agent........................................................ 34
Section 19. Merger or Consolidation or Change of Name of Rights Agent.......................... 34
Section 20. Duties of Rights Agent............................................................. 35
Section 21. Change of Rights Agent............................................................. 37
Section 22. Issuance of New Rights Certificates................................................ 38
Section 23. Redemption and Termination......................................................... 39
Section 24. Notice of Certain Events........................................................... 39
Section 25. Notices............................................................................ 40
Section 26. Supplements and Amendments......................................................... 41
Section 27. Successors......................................................................... 42
Section 28. Determinations and Actions by the Board of Directors, etc.......................... 42
Section 29. Benefits of this Agreement......................................................... 43
Section 30. Severability....................................................................... 43
Section 31. Governing Law...................................................................... 43
Section 32. Counterparts....................................................................... 43
Section 33. Descriptive Headings............................................................... 43
</TABLE>
Attachments:
- -----------
Exhibit A -- Form of Certificate of Amendment
Exhibit B -- Form of Rights Certificate
Exhibit C -- Summary of Rights
(ii)
<PAGE>
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of January 10, 1996, between LORAL CORPORATION,
a New York corporation (the "Company"), and THE BANK OF NEW YORK, a New York
banking corporation (the "Rights Agent").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, on January 7, 1996 (the "Rights Dividend Declaration Date"), the
Board of Directors of the Company authorized and declared a dividend
distribution of one Right for each share of Common Stock of the Company
outstanding at the close of business on January 22, 1996 (the "Record Date"),
and has authorized the issuance of one Right (as such number may hereinafter be
adjusted pursuant to the provisions of Section 11(p) hereof) for each share of
Common Stock of the Company issued between the Record Date (whether originally
issued or delivered from the Company's treasury) and the Distribution Date, each
Right initially representing the right to purchase one unit (a "Unit") with each
such unit consisting initially of one one-thousandth of a share of Series A
Preferred Stock of the Company having the rights, powers and preferences set
forth in the form of Certificate of Amendment attached hereto as Exhibit A, upon
the terms and subject to the conditions hereinafter set forth ("Rights");
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together with
all Affiliates and Associates of such Person, shall be the Beneficial Owner of
20% or more of the shares of Common Stock then outstanding, but shall not
include (i) the Company, (ii) any Subsidiary of the Company, (iii) any employee
benefit plan of the Company or of 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 (each of (i) through (iv), an "Exempted
Person"). Notwithstanding the foregoing, (i) no Person shall become an
"Acquiring Person" as a result of an acquisition of Common Stock by the Company
which, by
<PAGE>
reducing the number of such shares then outstanding, increases the proportionate
number of shares beneficially owned by such Person to 20% or more of the
outstanding Common Stock, except that if such Person, after such share purchases
by the Company, becomes the Beneficial Owner of any additional shares of Common
Stock, such Person shall be deemed to be an "Acquiring Person;" and (ii) if the
Board of Directors of the Company determines in good faith that a Person who
would otherwise be an "Acquiring Person" has become such inadvertently, and such
Person divests as promptly as practicable a sufficient number of shares of
Common Stock so that such Person would no longer be an Acquiring Person then
such Person shall not be deemed to be an "Acquiring Person." The term
"outstanding," when used with reference to a Person's Beneficial Ownership of
securities of the Company, shall mean the number of such securities then issued
and outstanding together with the number of such securities not then issued and
outstanding which such Person would be deemed to beneficially own hereunder.
(b) "Act" shall mean the Securities Act of 1933, as amended.
(c) "Adjustment Shares" shall have the meaning set forth in Section
11(a)(ii) of this Agreement.
(d) "Affiliate" shall have the meaning set forth in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act.
(e) "Associate" shall have the meaning set forth in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act.
(f) A Person shall be deemed the "Beneficial Owner" of, and shall be deemed
to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such
right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (whether or not in
writing) or upon the exercise of conversion rights, exchange rights,
rights, warrants or options, or otherwise; provided, however, that a Person
shall not be deemed the "Beneficial Owner" of, or to "beneficially own,"
(A) securities tendered pursuant to a tender or exchange offer made by such
Person or any of such Person's Affiliates or Associates until such tendered
securities are accepted
-2-
<PAGE>
for purchase or exchange, or (B) securities issuable upon exercise of
Rights at any time prior to the occurrence of a Triggering Event, or (C)
securities issuable upon exercise of Rights from and after the occurrence
of a Triggering Event which Rights were acquired by such Person or any of
such Person's Affiliates or Associates prior to the Distribution Date or
pursuant to Section 3(a) or Section 22 hereof ("Original Rights") or
pursuant to Section 11(i) hereof in connection with an adjustment made with
respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or
has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the
General Rules and Regulations under the Exchange Act), including pursuant
to any agreement, arrangement or understanding, whether or not in writing;
provided, however, that a Person shall not be deemed the "Beneficial Owner"
of, or to "beneficially own," any security under this subparagraph (ii) as
a result of an agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding: (A) arises
solely from a revocable proxy given in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the
applicable provisions of the General Rules and Regulations under the
Exchange Act, and (B) is not also then reportable by such Person on
Schedule 13D under the Exchange Act (or any comparable or successor
report); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such Person
(or any of such Person's Affiliates or Associates) has any agreement,
arrangement or understanding (whether or not in writing), for the purpose
of acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to subparagraph (ii) of this paragraph (f)) or
disposing of any voting securities of the Company;
provided, however, that nothing in this paragraph (f) shall cause a person
engaged in business as an underwriter of securities to be the "Beneficial Owner"
of, or to "beneficially own," any securities acquired through such person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition. Notwithstanding
anything in this definition of Beneficial Owner to the contrary, a Person who is
an officer of the Company or who is an Affiliate
-3-
<PAGE>
or Associate of an officer of the Company (each, an "Excluded Person") shall not
be deemed to "beneficially own" shares of Common Stock held by another Excluded
Person solely by reason of any agreement, arrangement or understanding, written
or otherwise, entered into in opposition to a transaction that, at the time such
agreement, arrangement or understanding was entered into, has not been approved
or recommended by the Board of Directors to the stockholders of the Company.
(g) "Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in the State of New York or the state in which
the principal office of the Rights Agent is located are authorized or obligated
by law or executive order to close.
(h) "Close of business" on any given date shall mean 5:00 P.M., New York
City time, on such date; provided, however, that if such date is not a Business
Day it shall mean 5:00 P.M., New York City time, on the next succeeding Business
Day.
(i) "Common Stock" shall mean the common stock, par value $.25 per share,
of the Company; provided, that "Common Stock" when used with reference to any
Person other than the Company shall mean the capital stock of such Person with
the greatest voting power, or the equity securities or other equity interest
having power to control or direct the management, of such Person.
(j) "Common Stock Equivalents" shall have the meaning set forth in Section
11(a)(iii) of this Agreement.
(k) "Company" shall have the meaning set forth in the introductory
paragraph of this Agreement.
(l) "Current Market Price" shall have the meaning set forth in Section
11(d)(i).
(m) "Current Value" shall have the meaning set forth in Section 11(a)(iii)
of this Agreement.
(n) "Distribution Date" shall have the meaning set forth in Section 3(a) of
this Agreement.
(o) "Equivalent preferred stock" shall have the meaning set forth in
Section 11(b) of this Agreement.
(p) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
-4-
<PAGE>
(q) "Excluded Person" shall have the meaning set forth in Section 1(f) of
this Agreement.
(r) "Exempted Person" shall have meaning set forth in Section 1(a) of this
Agreement.
(s) "Expiration Date" shall have the meaning set forth in Section 7(a) of
this Agreement.
(t) "Final Expiration Date" shall have the meaning set forth in Section
7(a) of this Agreement.
(u) "Original Rights" shall have the meaning set forth in Section 1(f)(i)
of this Agreement.
(v) "Person" shall mean any individual, firm, corporation, partnership or
other entity.
(w) "Preferred Stock" shall mean shares of Series A Preferred Stock, par
value $1.00 per share, of the Company, and, to the extent that there are not a
sufficient number of shares of Series A Preferred Stock authorized to permit the
full exercise of the Rights, any other series of Preferred Stock, par value
$1.00 per share, of the Company designated for such purpose containing terms
substantially similar to the terms of the Series A Preferred Stock.
(x) "Principal Party" shall have the meaning set forth in Section 13(b) of
this Agreement.
(y) "Purchase Price" shall have the meaning set forth in Section 4(a) of
this Agreement.
(z) "Record Date" shall have the meaning set forth in the "Whereas" clause
of this Agreement.
(bb) "Redemption Price" shall have the meaning set forth in Section 23 of
this Agreement.
(cc) "Rights" shall have the meaning set forth in the "Whereas" clause of
this Agreement.
(dd) "Rights Agent" shall have the meaning set forth in the introductory
paragraph of this Agreement.
(ee) "Rights Certificates" shall have the meaning set forth in Section 3(a)
of this Agreement.
-5-
<PAGE>
(ff) "Rights Dividend Declaration Date" shall have the meaning set forth in
the "Whereas" clause of this Agreement.
(gg) "Section 11(a)(ii) Event" shall mean any event described in Section
11(a)(ii) of this Agreement.
(hh) "Section 11(a)(ii) Trigger Date" shall have the meaning set forth in
Section 11(a)(iii) of this Agreement.
(ii) "Section 13 Event" shall mean any event described in clause (x), (y)
or (z) of Section 13(a) of this Agreement.
(jj) "Spread" shall have the meaning set forth in Section 11(a)(iii) of
this Agreement.
(kk) "Stock Acquisition Date" shall mean the earlier of the date of (i) the
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) under the Exchange
Act) by the Company or an Acquiring Person that an Acquiring Person has become
such or (ii) the public disclosure of facts by the Company or an Acquiring
Person indicating that an Acquiring Person has become an Acquiring Person.
(ll) "Subsidiary" shall mean, with reference to any Person, any corporation
(or other entity) of which an amount of voting securities (or other interests)
sufficient to elect at least a majority of the directors (or equivalent) of such
corporation (or other entity) is beneficially owned, directly or indirectly, by
such Person, or otherwise controlled by such Person.
(mm) "Substitution Period" shall have the meaning set forth in Section
11(a)(iii) of this Agreement.
(nn) "Summary of Rights" shall have the meaning set forth in Section 3(b)
of this Agreement.
(oo) "Trading Day" shall have the meaning set forth in Section 11(d)(i) of
this Agreement.
(pp) "Transaction" shall mean any merger, consolidation or sale of assets
or earning power described in Section 13(a) hereof or any acquisition of Common
Stock of the Company which, without regard to any required approval of the
Company, would result in a Person becoming an Acquiring Person.
(qq) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
Section 13 Event.
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(rr) "Unit" shall have the meaning set forth in the "Whereas" clause of
this Agreement.
SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable upon ten (10) days' prior written notice to the Rights
Agent. The Rights Agent shall have no duty to supervise, and shall in no event
be liable for, the acts or omissions of any such co-Rights Agent.
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SECTION 3. ISSUE OF RIGHTS CERTIFICATES.
(a) Until the earlier of (i) the close of business on the tenth day after
the Stock Acquisition Date (or such later date as the Board shall determine),
(ii) the close of business on the tenth Business Day (or such later date as the
Board shall determine) after the date that a tender or exchange offer by any
Person is first published or sent or given within the meaning of Rule 14d-2(a)
of the General Rules and Regulations under the Exchange Act, if upon
consummation thereof, such Person would become an Acquiring Person or (iii) the
Expiration Date (the earlier of (i) and (ii) being herein referred to as the
"Distribution Date"), (x) the Rights will be evidenced by the certificates for
the Common Stock registered in the names of the holders of the Common Stock
(which certificates for Common Stock shall be deemed also to be certificates for
Rights) and not by separate certificates, and (y) the Rights will be
transferable only in connection with the transfer of the underlying shares of
Common Stock (including a transfer to the Company). The Board of Directors of
the Company may defer the date set forth in clause (i) or (ii) of the preceding
sentence to a specified later date or to an unspecified later date, each to be
determined by action of the Board of Directors of the Company. As soon as
practicable after the Distribution Date, the Rights Agent will, at the Company's
expense, send by first-class, insured, postage prepaid mail, to each record
holder of the Common Stock as of the close of business on the Distribution Date,
at the address of such holder shown on the records of the Company, one or more
rights certificates, in substantially the form of Exhibit B hereto (the "Rights
Certificates"), evidencing one Right for each share of Common Stock so held,
subject to adjustment as provided herein. In the event that an adjustment in
the number of Rights per share of Common Stock has been made pursuant to Section
11(p) hereof, at the time of distribution of the Rights Certificates, the
Company shall make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that Rights Certificates representing
only whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Distribution Date, the Rights will be
evidenced solely by such Rights Certificates.
(b) As promptly as practicable, the Company will send a copy of a Summary
of Rights to Purchase Preferred Stock, in substantially the form attached hereto
as Exhibit C (the "Summary of Rights"), by first-class, postage prepaid mail, to
each record holder of the Common Stock as of the close of business on the
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Record Date, at the address of such holder shown on the records of the Company.
(c) Rights shall be issued in respect of all shares of Common Stock which
are issued (whether originally issued or from the Company's treasury) after the
Record Date but prior to the earlier of the Distribution Date or the Expiration
Date. Certificates representing such shares of Common Stock shall also be
deemed to be certificates for Rights and shall bear the following legend:
This certificate also evidences and entitles the holder hereof to certain
Rights as set forth in the Rights Agreement between Loral Corporation (the
"Company") and The Bank of New York (the "Rights Agent") dated as of
January 10, 1996 (the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the
principal offices of the Company. Under certain circumstances, as set
forth in the Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate. The
Company will mail to the holder of this certificate a copy of the Rights
Agreement, as in effect on the date of mailing, without charge, promptly
after receipt of a written request therefor. Under certain circumstances
set forth in the Rights Agreement, Rights issued to, or held by, any Person
who is, was or becomes an Acquiring Person or any Affiliate or Associate
thereof (as such terms are defined in the Rights Agreement), whether
currently held by or on behalf of such Person or by any subsequent holder,
may become null and void.
With respect to such certificates containing the foregoing legend, until the
earlier of the Distribution Date or the Expiration Date, registered holders of
Common Stock shall also be the registered holders of the associated Rights, and
the transfer of any of such certificates shall also constitute the transfer of
the Rights associated with the Common Stock represented by such certificates.
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SECTION 4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the forms of election to purchase and of
assignment to be printed on the reverse thereof) shall each be substantially in
the form set forth in Exhibit B hereto and may have such marks of identification
or designation and such legends, summaries or endorsements printed thereon as
the Company may deem appropriate and as are not inconsistent with the provisions
of this Agreement, or as may be required to comply with any applicable law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange on which the Rights may from time to time be listed, or to
conform to usage. The Rights Certificate shall be in a machine printable
format. Subject to the provisions of Section 11 and Section 22 hereof, the
Rights Certificates, whenever distributed, shall be dated as of the Record Date,
shall show the date of countersignature and on their face shall entitle the
holders thereof to purchase such number of one one-thousandths of a share of
Preferred Stock as shall be set forth therein at the price set forth therein
(such exercise price per one one-thousandth of a share, the "Purchase Price"),
but the amount and the type of securities purchasable upon the exercise of each
Right and the Purchase Price thereof shall be subject to adjustment as provided
herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section 22
hereof that represents Rights beneficially owned by: (i) an Acquiring Person or
any Affiliate or Associate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any such Affiliate or Associate) who becomes a
transferee after the Acquiring Person becomes such, or (iii) a transferee of an
Acquiring Person (or of any such Affiliate or Associate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which a majority of the Board of Directors of the
Company has determined is part of a plan, arrangement or understanding which has
as a primary purpose or effect avoidance of Section 7(e) hereof, and any Rights
Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer,
exchange, replacement or adjustment of any other Rights Certificate referred to
in this sentence, shall contain (to the extent feasible) the following legend:
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The Rights represented by this Rights Certificate are or were beneficially
owned by a Person who was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such terms are defined in the Rights
Agreement). Accordingly, this Rights Certificate and the Rights
represented hereby may become null and void in the circumstances specified
in Section 7(e) of such Agreement.
The Company shall instruct the Rights Agent in writing of the Rights which
should be so legended and shall supply the Rights Agent with such legended
Rights Certificates.
SECTION 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on behalf of the Company by
its Chairman of the Board, Chief Executive Officer, President, or any Senior
Vice President, either manually or by facsimile signature, and shall have
affixed thereto the Company's seal or a facsimile thereof which shall be
attested by the Secretary or an Assistant Secretary of the Company, either
manually or by facsimile signature. The Rights Certificates shall be manually
countersigned by an authorized signatory of the Rights Agent and shall not be
valid for any purpose unless so countersigned. In case any officer of the
Company who shall have signed any of the Rights Certificates shall cease to be
such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Rights Certificates, nevertheless,
may be countersigned by an authorized signatory of the Rights Agent and issued
and delivered by the Company with the same force and effect as though the person
who signed such Rights Certificates had not ceased to be such officer of the
Company; and any Rights Certificates may be signed on behalf of the Company by
any person who, at the actual date of the execution of such Rights Certificate,
shall be a proper officer of the Company to sign such Rights Certificate,
although at the date of the execution of this Rights Agreement any such person
was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or cause
to be kept, at its office or offices designated as the appropriate place for
surrender of Rights Certificates upon exercise or transfer, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the Rights
Certificates and the date of each of the Rights Certificates.
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SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
(a) Subject to the provisions of Section 4(b), Section 7(e) and Section 14
hereof, at any time after the close of business on the Distribution Date, and at
or prior to the close of business on the Expiration Date, any Rights Certificate
or Certificates may be transferred, split up, combined or exchanged for another
Rights Certificate or Certificates, entitling the registered holder to purchase
a like number of one one-thousandths of a share of Preferred Stock (or,
following a Triggering Event, Common Stock, other securities, cash or other
assets, as the case may be) as the Rights Certificate or Certificates
surrendered then entitled such holder (or former holder in the case of a
transfer) to purchase. Any registered holder desiring to transfer, split up,
combine or exchange any Rights Certificate or Certificates shall make such
request in writing delivered to the Rights Agent, and shall surrender the Rights
Certificate or Certificates to be transferred, split up, combined or exchanged
at the office or offices of the Rights Agent designated for such purpose.
Neither the Rights Agent nor the Company shall be obligated to take any action
whatsoever with respect to the transfer of any such surrendered Rights
Certificate until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the
Rights Agent shall, subject to Section 4(b), Section 7(e) and Section 14 hereof,
countersign and deliver to the Person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. The Company may
require payment by the holder of a Rights Certificate of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate, if
mutilated, the Company will execute
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and deliver a new Rights Certificate of like tenor to the Rights Agent for
countersignature and delivery to the registered owner in lieu of the Rights
Certificate so lost, stolen, destroyed or mutilated.
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS.
(a) Subject to Section 7(e) hereof, the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the office or offices of the Rights Agent designated for such purpose, along
with a signature guarantee and such other and further documentation as the
Rights Agent may reasonably request, together with payment of the aggregate
Purchase Price with respect to the total number of one one-thousandths of a
share (or other securities, cash or other assets, as the case may be) as to
which such surrendered Rights are then exercisable, at or prior to the earlier
of (i) the close of business on January 22, 2006 (the "Final Expiration Date"),
or (ii) the time at which the Rights are redeemed as provided in Section 23
hereof (the earlier of (i) and (ii) being herein referred to as the "Expiration
Date").
(b) The Purchase Price for each one one-thousandth of a share of Preferred
Stock pursuant to the exercise of a Right shall initially be $180 and shall be
subject to adjustment from time to time as provided in Sections 11 and 13(a)
hereof and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable Rights,
with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per one one-thousandth of a share of Preferred Stock (or other securities,
cash or other assets, as the case may be) to be purchased as set forth below and
an amount equal to any applicable transfer tax, the Rights Agent shall, subject
to Section 20(k) hereof, thereupon promptly (i) (A) requisition from any
transfer agent of the shares of Preferred Stock (or make available, if the
Rights Agent is the transfer agent for such shares) certificates for the total
number of one one-thousandths of a share of Preferred Stock to be purchased and
the Company hereby irrevocably authorizes its
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transfer agent to comply with all such requests, or (B) if the Company shall
have elected to deposit the total number of shares of Preferred Stock issuable
upon exercise of the Rights hereunder with a depositary agent, requisition from
the depositary agent depositary receipts representing such number of one one-
thousandths of a share of Preferred Stock as are to be purchased (in which case
certificates for the shares of Preferred Stock represented by such receipts
shall be deposited by the transfer agent with the depositary agent) and the
Company will direct the depositary agent to comply with such request, (ii)
requisition from the Company the amount of cash, if any, to be paid in lieu of
fractional shares in accordance with Section 14 hereof, (iii) after receipt of
such certificates or depositary receipts, cause the same to be delivered to or
upon the order of the registered holder of such Rights Certificate, registered
in such name or names as may be designated by such holder, and (iv) after
receipt thereof, deliver such cash, if any, to or upon the order of the
registered holder of such Rights Certificate. The payment of the Purchase Price
(as such amount may be reduced pursuant to Section 11(a)(ii) or Section 13(a)
hereof) shall be made in cash or by certified check or bank draft payable to the
order of the Company. In the event that the Company is obligated to issue other
securities (including Common Stock) of the Company, pay cash and/or distribute
other property pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such other securities, cash and/or other property
are available for distribution by the Rights Agent, if and when appropriate. The
Company reserves the right to require prior to the occurrence of a Triggering
Event that, upon any exercise of Rights, a number of Rights be exercised so that
only whole shares of Preferred Stock would be issued.
(d) In case the registered holder of any Rights Certificate shall exercise
less than all the Rights evidenced thereby, a new Rights Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent and delivered to, or upon the order of, the registered holder of
such Rights Certificate, registered in such name or names as may be designated
by such holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially
owned by (i) an Acquiring Person or an Affiliate or Associate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any such Affiliate or
Associate) who becomes a transferee after the Acquiring Person becomes such, or
(iii) a transferee of an
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Acquiring Person (or of any such Affiliate or Associate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which a majority of the Board of Directors of the
Company has determined is part of a plan, arrangement or understanding which has
as a primary purpose or effect the avoidance of this Section 7(e), shall become
null and void without any further action, and no holder of such Rights shall
have any rights whatsoever with respect to such Rights, whether under any
provision of this Agreement or otherwise. The Company shall use all reasonable
efforts to ensure that the provisions of this Section 7(e) and Section 4(b)
hereof are complied with, but shall have no liability to any holder of Rights
Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or its Affiliates, Associates
or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section 7 unless such registered holder shall have (i)
completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Rights Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all canceled Rights Certificates to the Company.
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SECTION 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK.
(a) The Company covenants and agrees that it will cause to be reserved and
kept available out of its authorized and unissued shares of Preferred Stock
(and, following the occurrence of a Triggering Event, out of its authorized and
unissued shares of Common Stock and/or other securities or out of its authorized
and issued shares held in its treasury), the number of shares of Preferred Stock
(and, following the occurrence of a Triggering Event, Common Stock and/or other
securities) that, as provided in this Agreement, including Section 11(a)(iii)
hereof, will be sufficient to permit the exercise in full of all outstanding
Rights.
(b) So long as the shares of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or other securities) issuable
and deliverable upon the exercise of the Rights may be listed on any national
securities exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all shares reserved for such
issuance to be listed on such exchange upon official notice of issuance upon
such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a Section
11(a)(ii) Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section 11(a)(iii)
hereof, a registration statement under the Act with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, (ii) cause such
registration statement to become effective as soon as practicable after such
filing, and (iii) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Act) until the earlier
of (A) the date as of which the Rights are no longer exercisable for such
securities, or (B) the date of the expiration of the Rights. The Company will
also take such action as may be appropriate under, or to ensure compliance with,
the securities or "blue sky" laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily suspend, for a period
of time not to exceed 90 days after the date set forth in clause (i) of the
first sentence of this Section 9(c), the exercisability of the Rights in order
to prepare and file such registration statement and permit it to become
effective. Upon any such suspension, the Company shall issue a public
announcement, and shall give simultaneous written notice to the Rights Agent
stating that the exercisability of the
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Rights has been temporarily suspended, as well as a public announcement at such
time as the suspension is no longer in effect. In addition, if the Company shall
determine that a registration statement is required following the Distribution
Date, the Company may temporarily suspend the exercisability of the Rights until
such time as a registration statement has been declared effective.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction if the requisite qualification in
such jurisdiction shall not have been obtained, the exercise thereof shall not
be permitted under applicable law or a registration statement shall not have
been declared effective.
(d) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all one one-thousandths of a share of Preferred
Stock (and, following the occurrence of a Triggering Event, Common Stock and/or
other securities) delivered upon exercise of Rights shall, at the time of
delivery of the certificates for such shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued, and fully paid and non-
assessable.
(e) The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Rights Certificates and of
any certificates for a number of one one-thousandths of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) upon the
exercise of the Rights. The Company shall not, however, be required to pay any
transfer tax which may be payable in respect of any transfer or delivery of
Rights Certificates to a Person other than, or the issuance or delivery of a
number of one one-thousandths of a share of Preferred Stock (or Common Stock
and/or other securities, as the case may be) in respect of a name other than
that of, the registered holder of the Rights Certificates evidencing Rights
surrendered for exercise or to issue or deliver any certificates for a number of
one one-thousandths of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
SECTION 10. PREFERRED STOCK RECORD DATE. Each person in whose name any
certificate for a number of one one-thousandths of a share of Preferred Stock
(or Common Stock and/or other
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securities, as the case may be) is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of such fractional
shares of Preferred Stock (or Common Stock and/or other securities, as the case
may be) represented thereby on, and such certificate shall be dated, the date
upon which the Rights Certificate evidencing such Rights was duly surrendered
and payment of the Purchase Price (and all applicable transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a date upon
which the Preferred Stock (or Common Stock and/or other securities, as the case
may be) transfer books of the Company are closed, such Person shall be deemed to
have become the record holder of such shares (fractional or otherwise) on, and
such certificate shall be dated, the next succeeding Business Day on which the
Preferred Stock (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Rights Certificate shall not be entitled to
any rights of a stockholder of the Company with respect to shares for which the
Rights shall be exercisable, including, without limitation, the right to vote,
to receive dividends or other distributions or to exercise any preemptive
rights, and shall not be entitled to receive any notice of any proceedings of
the Company, except as provided herein.
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES OR
NUMBER OF RIGHTS. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock,
(C) combine the outstanding Preferred Stock into a smaller number of
shares, or (D) issue any shares of its capital stock in a reclassification
of the Preferred Stock (including any such reclassification in connection
with a consolidation or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided in this Section 11(a)
and Section 7(e) hereof, the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of shares of
Preferred Stock or capital stock, as the case may be, issuable on such
date, shall be proportionately adjusted so that the holder of any Right
exercised after such time shall
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be entitled to receive, upon payment of the Purchase Price then in effect,
the aggregate number and kind of shares of Preferred Stock or capital
stock, as the case may be, which, if such Right had been exercised
immediately prior to such date and at a time when the Preferred Stock
transfer books of the Company were open, he would have owned upon such
exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. If an event occurs which
would require an adjustment under both this Section 11(a)(i) and Section
11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i)
shall be in addition to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii) hereof.
(ii) In the event any Person, alone or together with its Affiliates
and Associates, shall, at any time after the Rights Dividend Declaration
Date, become an Acquiring Person, then proper provision shall be made so
that each holder of a Right (except as provided below and in Section 7(e)
hereof) shall thereafter have the right to receive, upon exercise thereof
at the then current Purchase Price in accordance with the terms of this
Agreement, in lieu of a number of one one-thousandths of a share of
Preferred Stock, such number of shares of Common Stock of the Company as
shall equal the result obtained by (x) multiplying the then current
Purchase Price by the then number of one one-thousandths of a share of
Preferred Stock for which a Right was exercisable immediately prior to the
first occurrence of a Section 11(a)(ii) Event, and (y) dividing that
product (which, following such first occurrence, shall thereafter be
referred to as the "Purchase Price" for each Right and for all purposes of
this Agreement) by 50% of the Current Market Price (determined pursuant to
Section 11(d)(i) hereof) per share of Common Stock on the date of such
first occurrence (such number of shares being referred to as the
"Adjustment Shares").
(iii) In the event that the number of shares of Common Stock which
are authorized by the Company's Certificate of Incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise
of the Rights are not sufficient to permit the exercise in full of the
Rights in accordance with the foregoing subparagraph (ii) of this Section
11(a), the Company, acting by resolution of its Board of Directors shall
(A) determine the value of the Adjustment Shares issuable upon the exercise
of a Right (the "Current Value"), and (B) with respect to each Right
(subject to Section 7(e) hereof), make adequate provision to
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substitute for the Adjustment Shares, upon the exercise of a Right and
payment of the applicable Purchase Price, (1) cash, (2) a reduction in the
Purchase Price, (3) Common Stock or other equity securities of the Company
(including, without limitation, shares, or units of shares, of preferred
stock, such as the Preferred Stock, which the Board has deemed to have
essentially the same value or economic rights as shares of Common Stock
(such shares of preferred stock being referred to as "Common Stock
Equivalents")), (4) debt securities of the Company, (5) other assets, or
(6) any combination of the foregoing, having an aggregate value equal to
the Current Value (less the amount of any reduction in the Purchase Price),
where such aggregate value has been determined by the Board based upon the
advice of a nationally recognized investment banking firm selected by the
Board; provided, however, that if the Company shall not have made adequate
provision to deliver value pursuant to clause (B) above within 30 days
following the later of (x) the first occurrence of a Section 11(a)(ii)
Event and (y) the date on which the Company's right of redemption pursuant
to Section 23(a) expires (the later of (x) and (y) being referred to herein
as the "Section 11(a)(ii) Trigger Date"), then the Company shall be
obligated to deliver, upon the surrender for exercise of a Right and
without requiring payment of the Purchase Price, shares of Common Stock (to
the extent available) and then, if necessary, cash, which shares and/or
cash have an aggregate value equal to the Spread. For purposes of the
preceding sentence, the term "Spread" shall mean the excess of (i) the
Current Value over (ii) the Purchase Price. If the Board determines in good
faith that it is likely that sufficient additional shares of Common Stock
could be authorized for issuance upon exercise in full of the Rights, the
30-day period set forth above may be extended to the extent necessary, but
not more than 90 days after the Section 11(a)(ii) Trigger Date, in order
that the Company may seek shareholder approval for the authorization of
such additional shares (such 30-day period, as it may be extended, is
herein called the "Substitution Period"). To the extent that action is to
be taken pursuant to the first and/or third sentences of this Section
11(a)(iii), the Company (1) shall provide, subject to Section 7(e) hereof,
that such action shall apply uniformly to all outstanding Rights, and (2)
may suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek such shareholder approval for such
authorization of additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to determine
the value
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thereof. In the event of any such suspension, the Company shall issue a
public announcement, with simultaneous written notice to the Rights Agent
stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension
is no longer in effect. For purposes of this Section 11(a)(iii), the value
of each Adjustment Share shall be the Current Market Price (as determined
pursuant to Section 11(d)(i) hereof) per share of the Common Stock on the
Section 11(a)(ii) Trigger Date and the per share or per unit value of any
Common Stock Equivalent shall be deemed to equal the Current Market Price
per share of the Common Stock on such date.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Stock entitling them to
subscribe for or purchase (for a period expiring within 45 calendar days after
such record date) Preferred Stock (or shares having the same rights, privileges
and preferences as the shares of Preferred Stock ("equivalent preferred stock"))
or securities convertible into Preferred Stock or equivalent preferred stock at
a price per share of Preferred Stock or per share of equivalent preferred stock
(or having a conversion price per share, if a security convertible into
Preferred Stock or equivalent preferred stock) less than the Current Market
Price per share of Preferred Stock on such record date, the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Preferred Stock outstanding
on such record date, plus the number of shares of Preferred Stock which the
aggregate offering price of the total number of shares of Preferred Stock and/or
equivalent preferred stock so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such Current Market Price, and the denominator of which shall be the number
of shares of Preferred Stock outstanding on such record date, plus the number of
additional shares of Preferred Stock and/or equivalent preferred stock to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). In case such subscription price
may be paid by delivery of consideration part or all of which may be in a form
other than cash, the value of such consideration shall be as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on the
Rights Agent and the holders of the Rights. Shares of Preferred Stock
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owned by or held for the account of the Company shall not be deemed outstanding
for the purpose of any such computation. Such adjustment shall be made
successively whenever such a record date is fixed, and in the event that such
rights or warrants are not so issued, the Purchase Price shall be adjusted to be
the Purchase Price which would then be in effect if such record date had not
been fixed.
(c) In case the Company shall fix a record date for a distribution to all
holders of Preferred Stock (including any such distribution made in connection
with a consolidation or merger in which the Company is the continuing
corporation), of evidences of indebtedness, cash (other than a regular quarterly
cash dividend out of the earnings or retained earnings of the Company), assets
(other than a dividend payable in Preferred Stock, but including any dividend
payable in stock other than Preferred Stock) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the current market price (as determined pursuant to
Section 11(d)(i) hereof) per share of Preferred Stock on such record date, less
the fair market value (as determined in good faith by the Board of Directors of
the Company, whose determination shall be described in a statement filed with
the Rights Agent) of the portion of the cash, assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to a share of Preferred Stock and the denominator of which shall be
such Current Market Price per share of Preferred Stock. Such adjustments shall
be made successively whenever such a record date is fixed, and in the event that
such distribution is not so made, the Purchase Price shall be adjusted to be the
Purchase Price which would have been in effect if such record date had not been
fixed.
(d)(i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the "Current
Market Price" per share of Common Stock on any date shall be deemed to be
the average of the daily closing prices per share of such Common Stock for
the 30 consecutive Trading Days (as hereinafter defined) immediately prior
to such date, and for purposes of computations made pursuant to Section
11(a)(iii) hereof, the Current Market Price per share of Common Stock on
any date shall be deemed to be the average of the daily closing prices per
share of such Common Stock for the ten consecutive Trading Days immediately
following such date;
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provided, however, that in the event that the Current Market Price per
share of the Common Stock is determined during a period following the
announcement by the issuer of such Common Stock of (A) a dividend or
distribution on such Common Stock payable in shares of such Common Stock or
securities convertible into shares of such Common Stock (other than the
Rights), or (B) any subdivision, combination or reclassification of such
Common Stock, and the ex-dividend date for such dividend or distribution,
or the record date for such subdivision, combination or reclassification
shall not have occurred prior to the commencement of the requisite 30
Trading Day or ten Trading Day period, as set forth above, then, and in
each such case, the Current Market Price shall be properly adjusted to take
into account ex-dividend trading. The closing price for each day shall be
the last sale price, regular way, or, in case no such sale takes place on
such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New
York Stock Exchange or, if the shares of Common Stock are not listed or
admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which
the shares of Common Stock are listed or admitted to trading or, if the
shares of Common Stock are not listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter
market, as reported by the National Association of Securities Dealers, Inc.
Automated Quotation System or such other system then in use, or, if on any
such date the shares of Common Stock are not quoted by any such
organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Common Stock selected
by the Board. If on any such date no market maker is making a market in the
Common Stock, the fair value of such shares on such date as determined in
good faith by the Board shall be used. The term "Trading Day" shall mean a
day on which the principal national securities exchange on which the shares
of Common Stock are listed or admitted to trading is open for the
transaction of business or, if the shares of Common Stock are not listed or
admitted to trading on any national securities exchange, a Business Day. If
the Common Stock is not publicly held or not so listed or traded, Current
Market Price per share shall mean the fair value per share as
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determined in good faith by the Board, whose determination shall be
described in a statement filed with the Rights Agent and shall be
conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the Current Market
Price per share of Preferred Stock shall be determined in the same manner
as set forth above for the Common Stock in clause (i) of this Section 11(d)
(other than the last sentence thereof). If the Current Market Price per
share of Preferred Stock cannot be determined in the manner provided above
or if the Preferred Stock is not publicly held or listed or traded in a
manner described in clause (i) of this Section 11(d), the Current Market
Price per share of Preferred Stock shall be conclusively deemed to be an
amount equal to 1,000 (as such number may be appropriately adjusted for
such events as stock splits, stock dividends and recapitalizations with
respect to the Common Stock occurring after the date of this Agreement)
multiplied by the Current Market Price per share of the Common Stock. If
neither the Common Stock nor the Preferred Stock is publicly held or so
listed or traded, Current Market Price per share of the Preferred Stock
shall mean the fair value per share as determined in good faith by the
Board, whose determination shall be described in a statement filed with the
Rights Agent and shall be conclusive for all purposes. For all purposes of
this Agreement, the Current Market Price of a Unit shall be equal to the
Current Market Price of one share of Preferred Stock divided by 1,000.
(e) Anything herein to the contrary notwithstanding, no adjustment in the
Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase Price; provided, however,
that any adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest hundred-thousandth of a share of Common Stock or other
share or one-ten-millionth of a share of Preferred Stock, as the case may be.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
years from the date of the transaction which mandates such adjustment, or (ii)
the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)(ii) or
Section 13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock other than Preferred Stock,
thereafter
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the number of such other shares so receivable upon exercise of any Right and the
Purchase Price thereof shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Preferred Stock contained in Sections 11(a), (b), (c), (e), (g),
(h), (i), (j), (k) and (m), and the provisions of Sections 7, 9, 10, 13 and 14
hereof with respect to the Preferred Stock shall apply on like terms to any such
other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-thousandths of
a share of Preferred Stock (calculated to the nearest one-ten-millionth)
obtained by (i) multiplying (x) the number of one one-thousandths of a share
covered by a Right immediately prior to this adjustment, by (y) the Purchase
Price in effect immediately prior to such adjustment of the Purchase Price, and
(ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in lieu of any adjustment in the
number of one one-thousandths of a share of Preferred Stock purchasable upon the
exercise of a Right. Each of the Rights outstanding after the adjustment in the
number of Rights shall be exercisable for the number of one one-thousandths of a
share of Preferred Stock for which a Right was exercisable immediately prior to
such adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the nearest
one-ten-thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price. The Company shall
make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date may be the
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date on which the Purchase Price is adjusted or any day thereafter, but, if the
Rights Certificates have been issued, shall be at least ten days later than the
date of the public announcement. If Rights Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders of
record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of one one-thousandths of a share of Preferred Stock issuable upon the
exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per one one-thousandth of a
share and the number of one one-thousandths of a share which were expressed in
the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then stated value, if any, of the number of one one-
thousandths of a share of Preferred Stock issuable upon exercise of the Rights,
the Company shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue
fully paid and non-assessable such number of one one-thousandths of a share of
Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event the
issuance to the holder of any Right exercised after such record date the number
of one one-thousandths of a share of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise
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over and above the number of one one-thousandths of a share of Preferred Stock
and other capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
additional shares (fractional or otherwise) or securities upon the occurrence of
the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board of Directors of the
Company shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares
of Preferred Stock at less than the Current Market Price thereof, (iii) issuance
wholly for cash of shares of Preferred Stock or securities which by their terms
are convertible into or exchangeable for shares of Preferred Stock, (iv) stock
dividends, or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred Stock
shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any time after
the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof), or (iii)
sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), if (x) at the time of or immediately after
such consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately after
such consolidation, merger or sale, the shareholders of the Person who
constitutes, or would constitute, the Principal Party for purposes of Section
13(a) hereof shall have received a distribution of Rights
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previously owned by such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution Date, it
will not, except as permitted by Section 23 or Section 26 hereof, take (or
permit any Subsidiary to take) any action if at the time such action is taken it
is reasonably foreseeable that such action will diminish substantially or
otherwise eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time after the Rights Dividend Declaration
Date and prior to the Distribution Date (i) declare a dividend on the
outstanding shares of Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding shares of Common Stock, or (iii) combine the
outstanding shares of Common Stock into a smaller number of shares, the number
of Rights associated with each share of Common Stock then outstanding, or issued
or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction the numerator of
which shall be the total number of shares of Common Stock outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
following the occurrence of such event.
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Section 11 and Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment, the adjusted Purchase Price and a brief statement of the facts
accounting for such adjustment, (b) promptly file with the Rights Agent, and
with each transfer agent for the Preferred Stock and the Common Stock, a copy of
such certificate, and (c) mail a brief summary thereof to each holder of a
Rights Certificate (or, if prior to the Distribution Date, to each holder of a
certificate representing shares of Common Stock) in accordance with Section 25
hereof. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained.
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING
POWER.
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(a) In the event that, following the Stock Acquisition Date, directly or
indirectly, (x) the Company shall consolidate with, or merge with and into, any
other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), and the Company shall not be the continuing
or surviving corporation of such consolidation or merger, (y) any Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof) shall consolidate with, or merge with or into, the Company, and
the Company shall be the continuing or surviving corporation of such
consolidation or merger and, in connection with such consolidation or merger,
all or part of the outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other Person or cash or any other
property, or (z) the Company shall sell, mortgage or otherwise transfer (or one
or more of its Subsidiaries shall sell, mortgage or otherwise transfer), in one
transaction or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons (other than the Company
or any Subsidiary of the Company in one or more transactions each of which
complies with Section 11(o) hereof), then, and in each such case (except as may
be contemplated by Section 13(d) hereof), proper provision shall be made so
that: (i) each holder of a Right, except as provided in Section 7(e) hereof,
shall thereafter have the right to receive, upon the exercise thereof at the
then current Purchase Price in accordance with the terms of this Agreement, such
number of validly authorized and issued, fully paid, non-assessable and freely
tradeable shares of Common Stock of the Principal Party, not subject to any
liens, encumbrances, rights of first refusal or other adverse claims, as shall
be equal to the result obtained by(1) multiplying the then current Purchase
Price by the number of one one-thousandths of a share of Preferred Stock for
which a Right is exercisable immediately prior to the first occurrence of a
Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to the
first occurrence of a Section 13 Event, multiplying the number of such one one-
thousandths of a share for which a Right was exercisable immediately prior to
the first occurrence of a Section 11(a)(ii) Event by the Purchase Price in
effect immediately prior to such first occurrence), and dividing that product
(which, following the first occurrence of a Section 13 Event, shall be referred
to as the "Purchase Price" for each Right and for all purposes of this
Agreement) by (2) 50% of the Current Market Price (determined pursuant to
Section 11(d)(i) hereof) per share of the Common Stock of such Principal Party
on the date of consummation of such Section 13 Event; (ii) such
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Principal Party shall thereafter be liable for, and shall assume, by virtue of
such Section 13 Event, all the obligations and duties of the Company pursuant to
this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to
such Principal Party, it being specifically intended that the provisions of
Section 11 hereof shall apply only to such Principal Party following the first
occurrence of a Section 13 Event; (iv) such Principal Party shall take such
steps (including, but not limited to, the reservation of a sufficient number of
shares of its Common Stock) in connection with the consummation of any such
transaction as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to its
shares of Common Stock thereafter deliverable upon the exercise of the Rights;
and (v) the provisions of Section 11(a)(ii) hereof shall be of no effect
following the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x) or (y) of
the first sentence of Section 13(a), the Person that is the issuer of any
securities into which shares of Common Stock of the Company are converted
in such merger or consolidation, and if no securities are so issued, the
Person that is the other party to such merger or consolidation; and
(ii) in the case of any transaction described in clause (z) of the
first sentence of Section 13(a), the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to
such transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding 12-month
period registered under Section 12 of the Exchange Act, and such Person is a
direct or indirect Subsidiary of another Person the Common Stock of which is and
has been so registered, "Principal Party" shall refer to such other Person; and
(2) in case such Person is a Subsidiary, directly or indirectly, of more than
one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation, merger, sale
or transfer unless the Principal Party shall have a sufficient number of
authorized shares of its
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Common Stock which have not been issued or reserved for issuance to permit the
exercise in full of the Rights in accordance with this Section 13 and unless
prior thereto the Company and such Principal Party shall have executed and
delivered to the Rights Agent a supplemental agreement providing for the terms
set forth in paragraphs (a) and (b) of this Section 13 and further providing
that, as soon as practicable after the date of any consolidation, merger or sale
of assets mentioned in paragraph (a) of this Section 13, the Principal Party
will
(i) prepare and file a registration statement under the Act, with
respect to the Rights and the securities purchasable upon exercise of the
Rights on an appropriate form, and will use its best efforts to cause such
registration statement to (A) become effective as soon as practicable after
such filing and (B) remain effective (with a prospectus at all times
meeting the requirements of the Act) until the Expiration Date; and
(ii) deliver to holders of the Rights historical financial statements
for the Principal Party and each of its Affiliates which comply in all
respects with the requirements for registration on Form 10 under the
Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13
Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event,
the Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to the contrary, Section 13
shall not be applicable to a transaction described in subparagraphs (x) and (y)
of Section 13(a) if (i) such transaction is consummated with a Person or Persons
who (or whose Affiliates) acquired shares of Common Stock pursuant to a tender
offer or exchange offer for all outstanding shares of Common Stock which offer
did not result in an adjustment under Section 11(a)(ii) with respect to the
securities issuable upon the exercise of Rights (ii) the price per share of
Common Stock offered in such transaction is not less than the price per share of
Common Stock paid to all holders of shares of Common Stock whose shares were
purchased pursuant to such tender offer or exchange offer, and (iii) the form of
consideration being offered to the remaining holders of shares of Common Stock
pursuant to such transaction is the same as the form of consideration paid
pursuant to such tender offer or exchange offer. Upon
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consummation of any such transaction contemplated by this Section 13(d), all
Rights hereunder shall expire.
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of Rights, except
prior to the Distribution Date as provided in Section 11(p) hereof, or to
distribute Rights Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For purposes of this Section 14(a), the current market
value of a whole Right shall be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional Rights would have
been otherwise issuable. The closing price of the Rights for any day shall be
the last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Rights are not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the Rights are listed or admitted to trading, or if the Rights
are not listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is making a
market in the Rights the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one one-
thousandth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth of a
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share of Preferred Stock). In lieu of fractional shares of Preferred Stock that
are not integral multiples of one one-thousandth of a share of Preferred Stock,
the Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one one-thousandth of a share of
Preferred Stock. For purposes of this Section 14(b), the current market value
of one one-thousandth of a share of Preferred Stock shall be one one-thousandth
of the closing price of a share of Preferred Stock (as determined pursuant to
Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of
such exercise.
(c) Following the occurrence of a Triggering Event, the Company shall not
be required to issue fractions of shares of Common Stock upon exercise of the
Rights or to distribute certificates which evidence fractional shares of Common
Stock. In lieu of fractional shares of Common Stock, the Company may pay to the
registered holders of Rights Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the Current
Market Value of one share of Common Stock. For purposes of this Section 14(c),
the Current Market Value of one share of Common Stock shall be the closing price
of one share of Common Stock (as determined pursuant to Section 11(d)(i) hereof)
for the Trading Day immediately prior to the date of such exercise.
(d) The holder of a Right by the acceptance of the Rights expressly waives
his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
SECTION 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent, are vested
in the respective registered holders of the Rights Certificates (and, prior to
the Distribution Date, the registered holders of the Common Stock); and any
registered holder of any Rights Certificate (or, prior to the Distribution Date,
of the Common Stock), without the consent of the Rights Agent or of the holder
of any other Rights Certificate (or, prior to the Distribution Date, of the
Common Stock), may, in his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his right to exercise the Rights
evidenced by such Rights Certificate in the manner provided in such Rights
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically
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acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
SECTION 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only
in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the office or
offices of the Rights Agent designated for such purposes, duly endorsed or
accompanied by a proper instrument of transfer and with the appropriate forms
and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company and the
Rights Agent may deem and treat the person in whose name a Rights Certificate
(or, prior to the Distribution Date, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights
Certificates or the associated Common Stock certificate made by anyone other
than the Company or the Rights Agent) for all purposes whatsoever, and neither
the Company nor the Rights Agent, subject to the last sentence of Section 7(e)
hereof, shall be required to be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights Agent shall have any liability to any holder of a
Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligations; provided, however, the Company must use its
best efforts to have any such order, decree or ruling lifted or otherwise
overturned as soon as possible.
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SECTION 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of one one-
thousandths of a share of Preferred Stock or any other securities of the Company
which may at any time be issuable on the exercise of the Rights represented
thereby, nor shall anything contained herein or in any Rights Certificate be
construed to confer upon the holder of any Rights Certificate, as such, any of
the rights of a stockholder of the Company or any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action, or to receive
notice of meetings or other actions affecting stockholders (except as provided
in Section 24 hereof), or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by such Rights Certificate shall
have been exercised in accordance with the provisions hereof.
SECTION 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent such compensation as
shall be agreed to in writing between the Company and the Rights Agent for all
services rendered by it hereunder and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees and disbursements and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, or expense, incurred without gross negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the acceptance and administration of this
Agreement, including, without limitation, the costs and expenses of defending
against any claim of liability in the premises. The provisions of this Section
18(a) shall survive the expiration of the Rights and the termination of this
Agreement.
(b) The Rights Agent shall be protected and shall incur no liability for
or in respect of any action taken, suffered or omitted by it in connection with
its administration of this Agreement in reliance upon any Rights Certificate or
certificate for Common Stock or for other securities of the Company, instrument
of assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement, or other paper or document
believed by it to be genuine and to be signed and executed, by the proper Person
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or Persons, and where necessary, verified or acknowledged, or otherwise upon the
advice of counsel as set forth in Section 20 hereof.
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
corporate trust or shareholder services business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto; provided, however, that such corporation
would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof. In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of a predecessor Rights Agent and
deliver such Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Rights Certificates either in the name of the
predecessor or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and
at such time any of the Rights Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Rights Certificates so countersigned; and in case at that time
any of the Rights Certificates shall not have been countersigned, the Rights
Agent may countersign such Rights Certificates either in its prior name or in
its changed name; and in all such cases such Rights Certificates shall have the
full force provided in the Rights Certificates and in this Agreement.
SECTION 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations expressly imposed by this Agreement, and no implied
duties or obligations shall be read into this Agreement against the Rights
Agent, upon the following terms and conditions, by all of which the Company and
the holders
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of Rights Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel of its selection (who
may be legal counsel for the Company), and the opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "Current Market Price") be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by the
Chairman of the Board, Chief Executive Officer, the President, any Senior Vice
President, the Secretary or any Assistant Secretary of the Company and delivered
to the Rights Agent; and such certificate shall be full authorization to the
Rights Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own gross
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 7(e) hereof); nor shall it be
responsible for any adjustment required under the provisions of Section 11 or
Section 13 hereof or responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of
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facts that would require any such adjustment (except with respect to the
exercise of Rights evidenced by Rights Certificates after actual notice of any
such adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any shares
of Common Stock or Preferred Stock to be issued pursuant to this Agreement or
any Rights Certificate or as to whether any shares of Common Stock or Preferred
Stock will, when so issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, Chief Executive Officer, the President, any Senior Vice
President, the Secretary of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it shall not be liable
for any action taken or suffered to be taken by it in good faith in accordance
with instructions of any such officer or for any delay in acting while waiting
for those instructions.
(h) The Rights Agent and any stockholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct; provided, however, reasonable care was exercised in the
selection thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any
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financial liability in the performance of any of its duties hereunder or in the
exercise of its rights if there shall be reasonable grounds for believing that
repayment of such funds or adequate indemnification against such risk or
liability is not reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
(l) The Company agrees to give the Rights Agent prompt written notice of
any event or ownership which would prohibit the exercise or transfer of the
Rights Certificate.
SECTION 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company. The Company may remove
the Rights Agent or any successor Rights Agent upon 30 days' notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be, and to
each transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of 30 days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent or
by the holder of a Rights Certificate (who shall, with such notice, submit his
Rights Certificate for inspection by the Company), then the Company shall become
the Rights Agent until a successor Rights Agent has been appointed, and the
Rights Agent or any registered holder of any Rights Certificate may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be a corporation organized and doing business under the laws of the United
States or of any state of the United States, in good standing, which is
authorized under such laws to exercise corporate trust or shareholder services
powers and is subject to supervision or examination by federal or state
authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at
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least $100,000,000. After appointment, the successor Rights Agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock and the Preferred Stock, and mail a notice thereof in writing
to the registered holders of the Rights Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
SECTION 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, subject to Section 4 hereof, issue new Rights Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the Purchase Price and the number or kind or
class of shares or other securities or property purchasable under the Rights
Certificates made in accordance with the provisions of this Agreement.
SECTION 23. REDEMPTION AND TERMINATION.
(a) The Company may, by a resolution of its Board of Directors, at its
option, at any time prior to the earlier of (i) the close of business on the
tenth day following the Stock Acquisition Date or (ii) the Final Expiration
Date, redeem all but not less than all the then outstanding Rights at a
redemption price of $.0001 per Right, as such amount may be appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter
referred to as the "Redemption Price"). Notwithstanding anything contained in
this Agreement to the contrary, the Rights shall not be exercisable after the
first occurrence of a Section 11(a)(ii) Event until such time as the Company's
right of redemption hereunder has expired. The Company may, at its option, pay
the Redemption Price in cash, shares of Common Stock (based on the Current
Market Price of the Common Stock at the time of redemption) or any other form of
consideration deemed appropriate by the Board of Directors.
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(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights, evidence of which shall have been filed
with the Rights Agent and without any further action and without any notice, the
right to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price for each Right so
held. Promptly after the action of the Board of Directors ordering the
redemption of the Rights, the Company shall give notice of such redemption to
the Rights Agent and the holders of the then outstanding Rights by mailing such
notice to all such holders at each holder's last address as it appears upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the Transfer Agent for the Common Stock. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption will state the
method by which the payment of the Redemption Price will be made.
SECTION 24. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose, at any time after the Distribution
Date, (i) to pay any dividend payable in stock of any class to the holders of
Preferred Stock or to make any other distribution to the holders of Preferred
Stock (other than a regular quarterly cash dividend out of earnings or retained
earnings of the Company), or (ii) to offer to the holders of Preferred Stock
rights or warrants to subscribe for or to purchase any additional shares of
Preferred Stock or shares of stock of any class or any other securities, rights
or options, or (iii) to effect any reclassification of its Preferred Stock
(other than a reclassification involving only the subdivision of outstanding
shares of Preferred Stock), or (iv) to effect any consolidation or merger into
or with any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), or to effect any sale or
other transfer (or to permit one or more of its Subsidiaries to effect any sale
or other transfer), in one transaction or a series of related transactions, of
more than 50% of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person or Persons (other than the Company and/or
any of its Subsidiaries in one or more transactions each of which complies with
Section 11(o) hereof), or (v) to effect the liquidation, dissolution or winding
up of the Company, then, in each such case, the Company shall give to each
holder of a Rights Certificate and to the Rights Agent, to the extent feasible
and in accordance with Section 25 hereof, a notice of such proposed action,
which shall specify the record date for the purposes of
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such stock dividend, distribution of rights or warrants, or the date on which
such reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the shares of Preferred Stock, if any such date is to
be fixed, and such notice shall be so given in the case of any action covered by
clause (i) or (ii) above at least 20 days prior to the record date for
determining holders of the shares of Preferred Stock for purposes of such
action, and in the case of any such other action, at least 20 days prior to the
date of the taking of such proposed action or the date of participation therein
by the holders of the shares of Preferred Stock whichever shall be the earlier.
(b) In the event that a Section 11(a)(ii) Event shall occur, then (i) the
Company shall as soon as practicable thereafter give to each holder of a Rights
Certificate and to the Rights Agent, to the extent feasible and in accordance
with Section 25 hereof, a notice of the occurrence of such event, which shall
specify the event and the consequences of the event to holders of Rights under
Section 11(a)(ii) hereof, and (ii) all references in the preceding paragraph to
Preferred Stock shall be deemed thereafter to refer to Common Stock and/or, if
appropriate, other securities.
SECTION 25. NOTICES. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Rights Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Loral Corporation
600 Third Avenue
New York, NY 10016
Attention: Secretary
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
The Bank of New York
101 Barclay Street, Floor 12W
New York, NY 10286
Attention: Stock Transfer Administration
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Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by first-
class mail, postage prepaid, addressed to such holder at the address of such
holder as shown on the registry books of the Company.
SECTION 26. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution Date
and subject to the penultimate sentence of this Section 26, the Company may by
resolution of its Board of Directors, and the Rights Agent shall if the Company
so directs, supplement or amend any provision of this Agreement without the
approval of any holders of certificates representing shares of Common Stock.
From and after the Distribution Date and subject to the penultimate sentence of
this Section 26, the Company may by resolution of its Board of Directors, and
the Rights Agent shall if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights Certificates in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder, or (iv) to change or
supplement the provisions hereunder in any manner which the Company may deem
necessary or desirable and which, in the case of this clause (iv), shall not
adversely affect the interests of the holders of Rights Certificates (other than
an Acquiring Person or an Affiliate or Associate of an Acquiring Person);
provided, however, that this Agreement may not be supplemented or amended to
lengthen, pursuant to clause (iii) of this sentence, (A) a time period relating
to when the Rights may be redeemed at such time as the Rights are not then
redeemable, or (B) any other time period unless such lengthening is for the
purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights. Upon the delivery of a certificate from an
appropriate officer of the Company which states that the proposed supplement or
amendment is in compliance with the terms of this Section 26, the Rights Agent
shall execute such supplement or amendment. Notwithstanding any other provision
hereof, the Rights Agent's consent must be obtained regarding any amendment or
supplement pursuant to this Section 26 which alters the Rights Agent's rights or
duties. Notwithstanding anything contained in this Agreement to the contrary,
no supplement or amendment shall be made which changes the Redemption Price, the
Final Expiration Date, the Purchase Price or the number of one one-thousandths
of a share of Preferred Stock for which a Right is exercisable. Prior to the
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Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Stock.
SECTION 27. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
SECTION 28. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC.
For all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act. The Board of Directors of the Company shall have the
exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board or to the Company, or as may
be necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
of Directors in good faith, shall (x) be final, conclusive and binding on the
Company, the Rights Agent, the holders of the Rights and all other parties, and
(y) not subject the Board of Directors to any liability to the holders of the
Rights.
SECTION 29. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).
SECTION 30. SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or
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unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated; provided, however, that
notwithstanding anything in this Agreement to the contrary, if any such term,
provision, covenant or restriction is held by such court or authority to be
invalid, void or unenforceable and the Board of Directors of the Company
determines in its good faith judgment that severing the invalid language from
this Agreement would adversely affect the purpose or effect of this Agreement,
the right of redemption set forth in Section 23 hereof shall be reinstated and
shall not expire until the close of business on the tenth day following the date
of such determination by the Board of Directors.
SECTION 31. GOVERNING LAW. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of New York and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.
SECTION 32. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
SECTION 33. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
LORAL CORPORATION
By: /s/Eric J. Zahler
----------------------------------
Name: Eric J. Zahler
Title: Vice President & General
Counsel
THE BANK OF NEW YORK,
as Rights Agent
By: /s/Vincent J. Cahill Jr.
----------------------------------
Name: Vincent J. Cahill Jr.
Title: Vice President
<PAGE>
Exhibit A
---------
FORM OF
CERTIFICATE OF AMENDMENT
OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF
LORAL CORPORATION
_________________________________
Under Section 805 of the
New York Business Corporation Law
_________________________________
Pursuant to the provisions of Section 805 of the Business Corporation
Law, the undersigned hereby certify as follows:
FIRST: The name of the corporation is LORAL CORPORATION. This
corporation was originally formed under the name LORAL ELECTRONICS CORPORATION.
SECOND: The Certificate of Incorporation of LORAL ELECTRONICS
CORPORATION was filed by the Department of State on February 24, 1948.
THIRD: The Restated Certificate of Incorporation of the Corporation,
as heretofore amended, is further amended by the addition of the following
provision stating the number, designations, relative rights, preferences and
limitations of a series of Preferred Stock of the Corporation, designated as
Series A Preferred Stock, as fixed by the Board of Directors of the Corporation
pursuant to the authority vested in it by the Restated Certificate of
Incorporation of the Corporation:
Terms of the Series A Preferred Stock:
Section 1. Designation and Amount. The shares of such series shall
be designated as "Series A Preferred Stock" and the number of shares
constituting such series shall be 250,000.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of any series
of Preferred Stock ranking on a parity with the shares of Series A Preferred
Stock with respect to dividends, the holders of shares of Series A Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly dividends
payable in cash on the fifteenth day of January, April,
<PAGE>
July and October in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series A Preferred Stock, in an amount per share (rounded to the nearest cent),
subject to the provision for adjustment hereinafter set forth, equal to 1,000
times the aggregate per share amount of all cash dividends, and 1,000 times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock, par value $.25 per share, of the
Corporation (the "Common Stock") since the immediately preceding Quarterly
Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of Series A
Preferred Stock. In the event the Corporation shall at any time (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the amount to which holders of
shares of Series A Preferred Stock were entitled immediately prior to such event
pursuant to the preceding sentence shall be adjusted by multiplying such amount
by a fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) above immediately after it
declares a dividend or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock).
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Preferred Stock, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series A Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series
A-2
<PAGE>
A Preferred Stock in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no more than 30 days
prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to one
vote on all matters submitted to a vote of the stockholders of the Corporation.
In the event the Corporation shall at any time (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the number of votes per share to which
holders of shares of Series A Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Preferred Stock and the holders of shares of Common Stock
shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A Preferred Stock
shall be in arrears in an amount equal to six quarterly dividends thereon, the
occurrence of such contingency shall mark the beginning of a period (herein
called a "default period") which shall extend until such time when all accrued
and unpaid dividends for all previous quarterly dividend periods and for the
current quarterly dividend period on all shares of Series A Preferred Stock then
outstanding shall have been declared and paid or set apart for payment. During
each default period, all holders of Preferred Stock (including holders of the
Series A Preferred Stock) with dividends in arrears in an amount equal to six
quarterly dividends thereon, voting as a class, irrespective of series, shall
have the right to elect two Directors.
(ii) During any default period, such voting right of the holders of
Series A Preferred Stock may be exercised initially at a special meeting called
pursuant to subparagraph
A-3
<PAGE>
(iii) of this Section 3(C) or at any annual meeting of stockholders, and
thereafter at annual meetings of stockholders, provided that neither such voting
right nor the right of the holders of any other series of Preferred Stock, if
any, to increase, in certain cases, the authorized number of Directors shall be
exercised unless the holders of 10% in number of shares of Preferred Stock
outstanding shall be present in person or by proxy. The absence of a quorum of
the holders of Common Stock shall not affect the exercise by the holders of
Preferred Stock of such voting right. At any meeting at which the holders of
Preferred Stock shall exercise such voting right initially during an existing
default period, they shall have the right, voting as a class, to elect Directors
to fill such vacancies, if any, in the Board of Directors as may then exist up
to two Directors or, if such right is exercised at an annual meeting, to elect
two Directors. If the number which may be so elected at any special meeting does
not amount to the required number, the holders of the Preferred Stock shall have
the right to make such increase in the number of Directors as shall be necessary
to permit the election by them of the required number. After the holders of the
Preferred Stock shall have exercised their right to elect Directors in any
default period and during the continuance of such period, the number of
Directors shall not be increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or on a parity with the Series A Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an existing
default period, have previously exercised their right to elect Directors, the
Board of Directors may order, or any stockholder or stockholders owning in the
aggregate not less than 10% of the total number of shares of Preferred Stock
outstanding, irrespective of series, may request, the calling of a special
meeting of the holders of Preferred Stock, which meeting shall thereupon be
called by the Chairman of the Board of the Corporation. Notice of such meeting
and of any annual meeting at which holders of Preferred Stock are entitled to
vote pursuant to this paragraph (C)(iii) shall be given to each holder of record
of Preferred Stock by mailing a copy of such notice to him at his last address
as the same appears on the books of the Corporation. Such meeting shall be
called for a time not earlier than 20 days and not later than 60 days after such
order or request or in default of the calling of such meeting within 60 days
after such order or request, such meeting may be called on similar notice by any
stockholder or stockholders owning in the aggregate not less than 10% of the
total number of shares of Preferred Stock outstanding. Notwithstanding the
provisions of this paragraph (C)(iii), no such special meeting shall be called
A-4
<PAGE>
during the period within 60 days immediately preceding the date fixed for the
next annual meeting of the stockholders.
(iv) In any default period, the holders of Common Stock, and other
classes of stock of the Corporation if applicable, shall continue to be entitled
to elect the whole number of Directors until the holders of Preferred Stock
shall have exercised their right to elect two Directors voting as a class, after
the exercise of which right (x) the Directors so elected by the holders of
Preferred Stock shall continue in office until their successors shall have been
elected by such holders or until the expiration of the default period, and (y)
any vacancy in the Board of Directors may (except as provided in paragraph
(C)(ii) of this Section 3) be filled by vote of a majority of the remaining
Directors theretofore elected by the holders of the class of stock which elected
the Director whose office shall have become vacant. References in this
paragraph (C) to Directors elected by the holders of a particular class of stock
shall include Directors elected by such Directors to fill vacancies as provided
in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the
right of the holders of Preferred Stock as a class to elect Directors shall
cease, (y) the term of any Directors elected by the holders of Preferred Stock
as a class shall terminate, and (z) the number of Directors shall be such number
as may be provided for in the certificate of incorporation or by-laws
irrespective of any increase made pursuant to the provisions of paragraph
(C)(ii) of this Section 3 (such number being subject, however, to change
thereafter in any manner provided by law or in the certificate of incorporation
or by-laws). Any vacancies in the Board of Directors effected by the provisions
of clauses (y) and (z) in the preceding sentence may be filled by a majority of
the remaining Directors.
(D) Except as set forth herein, holders of Series A Preferred Stock
shall have no special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of Common Stock as
set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
A-5
<PAGE>
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any shares
of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on or make any other distributions
on any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except dividends paid ratably on the Series A Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for shares of any stock
of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred Stock;
(iv) purchase or otherwise acquire for consideration any shares
of Series A Preferred Stock, or any shares of stock ranking on a parity
with the Series A Preferred Stock, except in accordance with a purchase
offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable treatment
among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of
A-6
<PAGE>
a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, subject to the conditions and restrictions on issuance
set forth herein, in the Restated Certificate of Incorporation, or in any other
Certificate of Amendment creating a series of Preferred Stock or any similar
stock or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any
liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock unless, prior thereto, the holders
of shares of Series A Preferred Stock shall have received $1 per share, plus an
amount equal to accrued and unpaid dividends and distributions thereon, whether
or not declared, to the date of such payment. Thereafter, the holders of the
Series A Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
1,000 times the aggregate amount to be distributed per share to holders of
shares of Common Stock. Following the payment of the foregoing, holders of
Series A Preferred Stock and holders of shares of Common Stock shall receive
their ratable and proportionate share of the remaining assets to be distributed.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Preferred Stock liquidation
preference and the liquidation preferences of all other series of Preferred
Stock, if any, which rank on a parity with the Series A Preferred Stock, then
such remaining assets shall be distributed ratably to the holders of such parity
shares in proportion to their respective liquidation preferences.
(C) In the event the Corporation shall at any time (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock (by reclassification or otherwise), or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in each such
case the aggregate amount to which holders of shares of the Series A Preferred
Stock were entitled immediately prior to such event shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common
A-7
<PAGE>
Stock are exchanged for or changed into other stock or securities, cash and/or
any other property, then in any such case each share of Series A Preferred Stock
shall at the same time be similarly exchanged or changed in an amount per share
(subject to the provision for adjustment hereinafter set forth) equal to 1,000
times the aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged. In the event the Corporation shall at any
time (i) declare any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock (by reclassification or otherwise),
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the amount set forth in the preceding sentence with
respect to the exchange or change of shares of Series A Preferred Stock shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Preferred Stock
shall not be redeemable.
Section 9. Ranking. The Series A Preferred Stock shall rank on a
parity with all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
Section 10. Amendment. The Restated Certificate of Incorporation of
the Corporation shall not be amended in any manner which would materially alter
or change the powers, preferences or special rights of the Series A Preferred
Stock so as to affect them adversely without the affirmative vote of the holders
of a majority or more of the outstanding shares of Series A Preferred Stock
voting separately as a class.
Section 11. Fractional Shares. Series A Preferred Stock may be
issued in fractions of a share which shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.
The foregoing amendment to the Restated Certificate of Incorporation
of the Corporation was authorized by the Board of Directors of the Corporation,
pursuant to the authority vested in it by its Restated Certificate of
Incorporation, at a meeting of the Board duly held on the 7th day of January,
1996.
A-8
<PAGE>
IN WITNESS WHEREOF, this Certificate of Amendment has been executed on
behalf of the Corporation by its Chairman of the Board and attested by its
Secretary this ____ day of January, 1996.
_______________________
Bernard L. Schwartz
Chairman of the Board
Attest:
- --------------------------
Michael B. Targoff
Secretary
A-9
<PAGE>
Exhibit B
---------
FORM OF RIGHTS CERTIFICATE
Certificate No. R- _______ Rights
NOT EXERCISABLE AFTER JANUARY 22, 2006 OR EARLIER IF REDEEMED BY THE COMPANY.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.0001
PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS
DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR
WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN
SECTION 7(e) OF SUCH AGREEMENT.]/*/
RIGHTS CERTIFICATE
LORAL CORPORATION
This certifies that _________________________, or registered assigns,
is the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of January 10, 1996 (the "Rights Agreement"),
between Loral Corporation, a New York corporation (the "Company"), and The Bank
of New York (the "Rights Agent"), to purchase from the Company at any time after
the Distribution Date (as such term is defined in the Rights Agreement) and at
any time prior to 5:00 P.M. (New York City time) on January 22, 2006 at the
office or offices of the Rights Agent designated for such purpose, or its
successors as Rights Agent, one one-thousandth of a fully paid, nonassessable
share of Series A Preferred Stock (the "Preferred Stock") of the Company, at a
purchase price of $180 per one one-thousandth of a share (the "Purchase Price"),
upon presentation and surrender of this Rights Certificate with the Form of
Election to Purchase and related Certification duly executed. The number of
Rights evidenced by this Rights Certificate (and the number of one one-
thousandths of a share of Preferred Stock which may be purchased upon exercise
thereof) set
- --------------------------
* The portion of the legend in brackets shall be inserted only if applicable
and shall replace the preceding sentence.
<PAGE>
forth above, and the Purchase Price per share set forth above, are
the number and Purchase Price as of January 8, 1996, based on the Preferred
Stock as constituted at such date. As provided in the Rights Agreement, the
Purchase Price and the number and kind of shares of Preferred Stock or other
securities, which may be purchased upon the exercise of the Rights evidenced by
this Rights Certificate are subject to modification and adjustment upon the
happening of certain events.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Affiliate or
Associate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a person who, after such transfer, became an
Acquiring Person, or an Affiliate or Associate of an Acquiring Person, such
Rights shall become null and void and no holder hereof shall have any right with
respect to such Rights from and after the occurrence of such Section 11(a)(ii)
Event.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent designated
for such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-thousandths of a share of Preferred
Stock as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option at a
redemption price of $.0001 per Right.
B-2
<PAGE>
No fractional shares of Preferred Stock will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-thousandth of a share of Preferred Stock, which may, at the
election of the Company, be evidenced by depositary receipts), but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Preferred
Stock or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of January __, 1996
Attest: LORAL CORPORATION
By:_____________________ By:_____________________
Name: Name:
Title: Title:
Countersigned:
THE BANK OF NEW YORK,
as Rights Agent
By:_________________________
Authorized Representative
Date of Countersignature:_________
B-3
<PAGE>
Form of Reverse Side of Rights Certificate
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED _______________________________
hereby sells, assigns and transfers unto ___________________
____________________________________________________________
(Please print name and address of transferee)
____________________________________________________________
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________ Attorney,
to transfer the within Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated: __________ __, 199_
_________________________
Signature
Signature Guaranteed:
Signature must be guaranteed by a commercial bank or trust company,
broker, dealer, or other eligible institution which is a member in good standing
of a medallion guaranty program approved by the Securities Transfer Association,
Inc.
B-4
<PAGE>
Form of Reverse Side of Rights Certificate (continued)
CERTIFICATION
-------------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned
and transferred by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
the undersigned [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person.
Dated: __________ __, 199_ _________________________
Signature
Signature Guaranteed:
Signature must be guaranteed by a commercial bank or trust company,
broker, dealer, or other eligible institution which is a member in good standing
of a medallion guaranty program approved by the Securities Transfer Association,
Inc.
NOTICE
------
The signature to the foregoing Assignment and Certification must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above is not completed, the
Company and the Rights Agent will deem the beneficial owner of the Rights
evidenced by this Rights Certificate to be an Acquiring Person or an Affiliate
or Associate thereof (as defined in the Rights Certificate) and such Assignment
will not be honored.
B-5
<PAGE>
Form of Reverse Side of Rights Certificate (continued)
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to exercise Rights
represented by the Rights Certificate.)
To Loral Corporation:
The undersigned hereby irrevocably elects to exercise ___________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be issued
in the name of:
Please insert social security
or other identifying number:_________________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number:_________________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated: __________ __, 199_
_________________________
Signature
Signature Guaranteed:
Signature must be guaranteed by a commercial bank or trust company,
broker, dealer, or other eligible institution which is a member in good standing
of a medallion guaranty program approved by the Securities Transfer Association,
Inc.
B-6
<PAGE>
Form of Reverse Side of Rights Certificate (continued)
CERTIFICATION
-------------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
the undersigned [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: __________ __, 199_ __________________________
Signature
Signature Guaranteed:
Signature must be guaranteed by a commercial bank or trust company,
broker, dealer, or other eligible institution which is a member in good standing
of a medallion guaranty program approved by the Securities Transfer Association,
Inc.
NOTICE
------
The signature to the foregoing Election to Purchase and Certification
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above is not completed, the
Company and the Rights Agent will deem the beneficial owner of the Rights
evidenced by this Rights Certificate to be an Acquiring Person or an Affiliate
or Associate thereof (as defined in the Rights Certificate) and such Election to
Purchase will not be honored.
B-7
<PAGE>
Exhibit C
---------
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On January 7, 1996, the Board of Directors of Wings (the "Company")
declared a dividend distribution of one Right for each outstanding share of the
Company's common stock, par value $.25 per share (the "Common Stock"), payable
to stockholders of record at the close of business on January 22, 1996 (the
"Record Date") and with respect to the Common Stock issued thereafter until the
Distribution Date (as defined below) and, in certain circumstances, with respect
to the Common Stock issued after the Distribution Date. Except as set forth
below, each Right, when it becomes exercisable, entitles the registered holder
to purchase from the Company a unit consisting initially of one one-thousandth
of a share (a "Unit") of Series A Preferred Stock, par value $1.00 per share
(the "Preferred Stock"), of the Company, at a Purchase Price of $180 per Unit,
subject to adjustment (the "Purchase Price"). The description and terms of the
Rights are set forth in a Rights Agreement (the "Rights Agreement"), dated as of
January 10, 1996, between the Company and The Bank of New York, as Rights Agent.
Initially, the Rights were and are attached to all certificates
representing shares of Common Stock then outstanding, and no separate
certificates evidencing the Rights (the "Rights Certificates") were or have been
distributed. The Rights will separate from the Common Stock and a "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 shall
determine) following the commencement of a tender offer or exchange offer that
would result in a person or group becoming an "Acquiring Person". Except as set
forth below, an "Acquiring Person" is a person or group of affiliated or
associated persons who has acquired beneficial ownership of 20% or more of the
outstanding shares of Common Stock. The term "Acquiring Person" excludes (i)
the Company, (ii) any subsidiary of the Company, (iii) any employee benefit plan
of the Company or any subsidiary of the Company, or (iv) any person or entity
organized, appointed or established by the Company for or pursuant to the terms
of any such plan.
Until the occurrence of the Distribution Date, (i) the Rights will be
evidenced by the Common Stock certificates and will be transferred with and only
with such Common Stock certificates, (ii) new Common Stock certificates issued
after the Record Date will contain a notation incorporating the Rights Agreement
by reference, and (iii) the surrender for transfer of
<PAGE>
any certificates for Common Stock outstanding will also constitute the transfer
of the Rights associated with the Common Stock represented by such certificate.
Pursuant to the Rights Agreement, the Company reserves the right to require
prior to the occurrence of a Triggering Event (as defined below) that, upon any
exercise of Rights, a number of Rights be exercised so that only whole shares of
Preferred Stock will be issued.
As soon as practicable after the occurrence of the Distribution Date,
Rights Certificates will be mailed to holders of record of the Common Stock as
of the close of business on the Distribution Date and, thereafter, the separate
Rights Certificates alone will represent the Rights. Except in certain
circumstances specified in the Rights Agreement or as otherwise determined by
the Board of Directors, only shares of Common Stock issued prior to the
Distribution Date will be issued with Rights.
The Rights are not exercisable until the occurrence of the 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 Distribution Date, a person
becomes an Acquiring Person, each holder of a Right will thereafter have the
right to receive, upon exercise of the Right, Common Stock (or, in certain
circumstances, cash, property or other securities of the Company) having a value
equal to two times the exercise price of the Right. Notwithstanding the
foregoing, following the occurrence of the event set forth in this paragraph,
all Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person will be null and
void and nontransferable and any holder of any such right (including any
purported transferee or subsequent holder) will be unable to exercise or
transfer any such right. For example, at an exercise price of $200 per Right,
each Right not owned by an Acquiring Person (or by certain related parties)
following an event set forth in this paragraph would entitle its holder to
purchase $400 worth of Common Stock (or other consideration, as noted above) for
$200. Assuming that the Common Stock had a per share value of $40 at such time,
the holder of each valid Right would be entitled to purchase ten shares of
Common Stock for $200.
In the event that, at any time following the date on which there has been
public disclosure that, or of facts indicating that, a person has become an
Acquiring Person (the "Stock Acquisition Date"), (i) the Company is acquired in
a merger or other business combination transaction in which the Company is not
the surviving corporation (other than a merger which follows an offer described
in the preceding paragraph), or (ii) 50% or more of the Company's assets or
earning power is sold, mortgaged or transferred, each holder of a Right (except
Rights which previously have been voided as set forth above) shall thereafter
C-2
<PAGE>
have the right to receive, upon exercise, common stock of the acquiring company
having a value equal to two times the exercise price of the Right. The events
set forth in this paragraph and in the preceding paragraph are referred to as
the "Triggering Events."
The Purchase Price payable, and the number of Units of 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 Preferred
Stock, (ii) if holders of the Preferred Stock are granted certain rights or
warrants to subscribe for Preferred Stock or convertible securities at less than
the current market price of the Preferred Stock, or (iii) upon the distribution
to holders of the 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 Purchase Price will be
required until cumulative adjustments amount to at least 1% of the 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 Preferred Stock on the
last trading date prior to the date of exercise.
Because of the nature of the Preferred Stock's dividend and liquidation
rights, the value of the one one-thousandth interest in a share of Preferred
Stock purchasable upon exercise of each Right should approximate the value of
one share of Common Stock. Shares of Preferred Stock purchasable upon exercise
of the Rights will not be redeemable. Each share of Preferred Stock will be
entitled to a quarterly dividend payment of 1,000 times the dividend declared
per share of Common Stock. In the event of liquidation, each share of Preferred
Stock will be entitled to a $1 preference, and thereafter the holders of the
shares of Preferred Stock will be entitled to an aggregate payment of 1,000
times the aggregate payment made per share of Common Stock. Each share of
Preferred Stock will have one vote, voting together with the shares of Common
Stock. These rights are protected by customary antidilution provisions.
At any time until ten days following the Stock Acquisition Date, the
Company may redeem the Rights in whole, but not in part, at a price (the
"Redemption Price") of $.0001 per Right (payable in cash, Common Stock or other
consideration deemed appropriate by the Board of Directors) by resolution of the
Board of Directors. The redemption of the Rights may be made effective at such
time, on such basis, and with such conditions as the Board of Directors in its
sole discretion may establish. Immediately upon such action of the Board of
Directors ordering redemption of the Rights, the Rights will terminate and the
only
C-3
<PAGE>
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 Common Stock (or other consideration) of the Company or for
common stock of the acquiring company as set forth above.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by
resolution of the Company's Board of Directors. After the Distribution Date,
the provisions of the Rights Agreement may be amended by resolution of the
Company's Board of Directors in order to cure any ambiguity, to make changes
which do not adversely affect the interests of holders of Rights (excluding the
interests of any Acquiring Person or its affiliates or associates), or to
shorten or lengthen any time period under the Rights Agreement; provided,
however, that no amendment to adjust the time period governing redemption shall
be made at such time as the Rights are not redeemable.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
January ___, 1996. A copy of the Rights Agreement is available free of charge
from the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is incorporated herein by reference.
January ___, 1996
C-4
<PAGE>
EXHIBIT 99.11
CONFORMED COPY
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
Amendment, dated as of January 10, 1996 (this "Amendment"), to the
Rights Agreement dated as of January 10, 1996 (the "Rights Agreement") between
Loral Corporation, a New York corporation (the "Company"), and The Bank of New
York, a New York banking corporation, as Rights Agent (the "Rights Agent").
Capitalized terms which are not defined herein shall, unless the context
otherwise requires, have the meanings assigned to such terms in the Rights
Agreement.
W I T N E S S E T H:
WHEREAS, the Company has entered into an Agreement and Plan of Merger
dated as of January 7, 1996 (as may be amended or supplemented from time to
time, the "Merger Agreement") with Lockheed Martin Corporation, a Maryland
corporation ("Parent"), and LAC Acquisition Corporation, a New York corporation
and a wholly-owned subsidiary of Parent ("Purchaser");
WHEREAS, the Board of Directors of the Company has determined that the
Merger Agreement and the transactions contemplated thereby are in the best
interests of the stockholders of the Company;
WHEREAS, the Merger Agreement requires the Company and the Rights
Agent to enter into this Amendment;
WHEREAS, as provided in Section 26 of the Rights Agreement, the
interests of the holders of Rights thereunder are currently deemed to be
coincident with the interests of the Company's stockholders;
WHEREAS, in order to further clarify the provisions of the Rights
Agreement and the relationship between the Parent, Purchaser and the Company and
to further facilitate the transactions contemplated by the Merger Agreement, the
Company (x) has determined that it is necessary and desirable to amend the
Rights Agreement in the manner provided herein, and (y) shall execute and
deliver to the Rights Agent the officer's certificate with respect to this
Amendment provided for in Section 26 of the Rights Agreement; and
WHEREAS, in connection with such proposed amendment to the Rights
Agreement, the Company and the Rights Agent have agreed to amend the Rights
Agreement in accordance with Section 26 thereof in the manner provided herein.
NOW, THEREFORE, in consideration of the premises and the agreements
herein set forth, the parties hereby agree as follows:
<PAGE>
1. Section 1(a) of the Rights Agreement is hereby modified and
amended to insert the following sentence at the end of such Section:
"Notwithstanding anything to the contrary contained in this Agreement,
for so long as the Merger Agreement (as defined below) shall remain in
full force and effect, neither the execution, delivery nor performance
of the Agreement and Plan of Merger dated as of January 7, 1996 (as
may be amended or supplemented from time to time, the "Merger
Agreement"), by and among the Company, Lockheed Martin Corporation, a
Maryland corporation ("Parent"), and LAC Acquisition Corporation, a
New York corporation and a wholly-owned subsidiary of Parent
("Purchaser"), nor the execution, delivery nor performance of the
Distribution Agreement (as defined in the Merger Agreement), nor the
consummation of the transactions contemplated pursuant to (x) the
Merger Agreement (including, without limitation, the publication or
other commencement of the Offer and the consummation of the Offer and
the Merger (such capitalized terms, as defined in the Merger
Agreement)) or (y) the Distribution Agreement (including, without
limitation, the consummation of the Restructuring and the Distribution
(such capitalized terms, as defined in the Distribution Agreement)),
shall cause either the Parent or Purchaser or any of their respective
Affiliates or Associates to become or to be deemed Acquiring Persons."
2. Section 1(r) of the Rights Agreement is hereby modified and
amended to insert the following sentence at the end of such Section:
"Notwithstanding anything to the contrary contained in this Agreement,
for so long as the Merger Agreement shall remain in full force and
effect, the term "Exempted Person" shall include Parent, Purchaser and
each of their respective Affiliates and Associates, and neither the
Parent, Purchaser nor any of their respective Affiliates or Associates
shall be deemed Acquiring Persons."
3. Sections 1(gg), 1(ii) and 1(qq) of the Rights Agreement are each
hereby modified and amended to insert the following sentence at the end of each
such Section:
"Notwithstanding anything to the contrary contained in this Agreement,
for so long as the Merger Agreement shall remain in full force and
effect, neither the execution, delivery nor performance of the Merger
Agreement (as defined in Section 1(a) hereof (as
<PAGE>
amended)), nor the execution, delivery nor performance of the
Distribution Agreement (as defined in the Merger Agreement), nor the
consummation of the transactions contemplated pursuant to (x) the
Merger Agreement (including, without limitation, the publication or
other commencement of the Offer and the consummation of the Offer and
the Merger (such capitalized terms, as defined in the Merger
Agreement)) or (y) the Distribution Agreement (including, without
limitation, the consummation of the Restructuring and the Distribution
(such capitalized terms, as defined in the Distribution Agreement)),
shall result in a Section 11(a)(ii) Event, a Section 13 Event or a
Triggering Event. In addition, notwithstanding anything to the
contrary contained in this Agreement, no acquisition of shares of
Common Stock nor of any other securities of the Company (nor the
acquisition of any rights to any of the foregoing) by the Parent,
Purchaser or any of their respective Affiliates or Associates as
contemplated by the terms of the Merger Agreement or the Distribution
Agreement, shall result in a Section 11(a)(ii) Event, a Section 13
Event or a Triggering Event."
4. Section 3(a) of the Rights Agreement is hereby modified and
amended to insert the following sentence at the end of such Section:
"Notwithstanding anything to the contrary contained in this Agreement,
for so long as the Merger Agreement shall remain in full force and
effect, neither the execution, delivery nor performance of the Merger
Agreement (as defined in Section l(a) hereof (as amended)), nor the
execution, delivery nor performance of the Distribution Agreement (as
defined in the Merger Agreement), nor the consummation of the
transactions contemplated pursuant to (x) the Merger Agreement
(including, without limitation, the publication or other commencement
of the Offer and the consummation of the Offer and the Merger (such
capitalized terms, as defined in the Merger Agreement)) or (y) the
Distribution Agreement (including, without limitation, the
consummation of the Restructuring and the Distribution (such
capitalized terms, as defined in the Distribution Agreement)), shall
cause either the occurrence of a Distribution Date or a Stock
Acquisition Date or cause or require the distribution of any Rights
Certificates to the record holders of shares of Common Stock. In
addition, notwithstanding anything to the contrary contained in this
Agreement, no acquisition of shares of Common Stock nor of any other
securities of the Company (nor the acquisition of any rights to any of
the foregoing) by the Parent, Purchaser or any of
<PAGE>
their respective Affiliates or Associates as contemplated by the terms
of the Merger Agreement or the Distribution Agreement, shall cause
either the occurrence of a Distribution Date or a Stock Acquisition
Date or cause or require the distribution of any Rights Certificates
to the record holders of shares of Common Stock."
5. This Amendment is irrevocable and shall be deemed to be a
contract made under the laws of the State of New York and for all purposes shall
be governed by and construed in accordance with the laws of such State
applicable to contracts to be made and performed entirely within such State.
6. Parent, Purchaser and their respective Affiliates and Associates
shall be third party beneficiaries of this Amendment.
7. This Amendment may be executed in counterparts, each of which
shall be deemed an original, but such counterparts shall together constitute one
and the same instrument.
8. In executing and delivering this Amendment, the Rights Agent
shall be entitled to all the privileges and immunities afforded to the Rights
Agent under the terms and conditions of the Rights Agreement. This Amendment
shall be effective as of the date first above stated, and for so long as the
Merger Agreement shall remain in full force and effect, and except as set forth
herein, the Rights Agreement, as amended hereby and as heretofore amended, shall
remain in full force and effect and shall be otherwise unaffected hereby.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date and year first above written.
By: /s/Eric J. Zahler
-----------------
Name: Eric J. Zahler
Title: Vice President & General
Counsel
THE BANK OF NEW YORK,
as Rights Agent
By: /s/Vincent J. Cahill Jr.
------------------------
Name: Vincent J. Cahill Jr.
Title: Vice President
<PAGE>
OFFICER'S CERTIFICATE
Reference is hereby made to the Rights Agreement dated as of January
10, 1996 (the "Rights Agreement") between Loral Corporation, a New York
corporation (the "Company") and The Bank of New York, a New York banking
corporation, as Rights Agent (the "Rights Agent"). The undersigned, in his
capacity as an authorized officer of the Company, hereby certifies to the Rights
Agent that the form of proposed amendment to the Rights Agreement, a copy of
which is attached hereto, is in compliance with the terms of Section 26 of the
Rights Agreement.
LORAL CORPORATION
By: /s/Eric J. Zahler
----------------------------------
Name: Eric J. Zahler
Title: Vice President & General
Counsel
<PAGE>
Exhibit 99.12
-------------
STOCKHOLDERS AGREEMENT
dated as of _________, 1996
by and among
LORAL CORPORATION,
and
LORAL SPACE & COMMUNICATIONS CORPORATION
<PAGE>
STOCKHOLDERS AGREEMENT
----------------------
STOCKHOLDERS AGREEMENT, dated as of ________, 1996 (the "Agreement"),
by and among Loral Corporation, a New York corporation ("Loral"), and Loral
Space & Communications Corporation, a __________ corporation (the "Company").
Loral and those of its Affiliates who are transferees with respect to any of the
Equity Securities (as defined below), are sometimes collectively referred to
herein as the "Stockholders".
RECITALS:
--------
WHEREAS, the Company, Lockheed Martin Corporation, a Maryland
corporation ("LMC"), Loral and certain subsidiaries of Loral entered into a
Restructuring, Financing and Distribution Agreement, dated as of January 7, 1996
(the "Restructuring Agreement"; all capitalized terms used in this Agreement but
not otherwise defined herein, shall have the respective meanings assigned to
such terms in the Restructuring Agreement), pursuant to which, after giving
effect to the Restructuring and the Distribution, Loral acquired _______ shares
of Series A Non-Voting Convertible Preferred Stock, par value $0.01 per share,
of the Company (the "Preferred Stock"); and
WHEREAS, the Company and Loral desire to establish in this Agreement
certain conditions with respect to the relationship between the Stockholders and
the Company;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and in the Restructuring Agreement, the parties
hereto agree as follows:
<PAGE>
ARTICLE I
STANDSTILL AND VOTING PROVISIONS
Section 1.1. Restrictions on Certain Actions by the Stockholders.
(a) During the Term (as defined in Article V below), each Stockholder will not,
and will cause each of its Affiliates (such term, as used in this Agreement, as
defined in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act) not to, singly or as part of a partnership, limited partnership, syndicate
or other group (as those terms are used in Section 13(d)(3) of the Exchange
Act), directly or indirectly:
(i) acquire, offer to acquire, or agree to acquire, by purchase,
gift or otherwise, any Equity Securities (as defined below in Section
1.1(c)), except pursuant to a stock split, stock dividend, rights offering,
recapitalization, reclassification, merger, consolidation, corporate
reorganization or similar transaction; provided that at any time in which
the Stockholders hold, in the aggregate, less than twenty percent (20%) of
the Total Voting Power, then the Stockholders may acquire Equity Securities
so that the Stockholders hold, in the aggregate, up to twenty percent (20%)
of the Total Voting Power;
(ii) make, or in any way actively participate in, any
"solicitation" of "proxies" to vote (as such terms are defined in Rule 14a-
1 under the Exchange Act), solicit any consent or communicate with or seek
to advise or influence any third party with respect to the voting of any
Equity Securities or become a "participant" in any "election contest" (as
such terms are defined or used in Rule 14a-11 under the Exchange Act), in
each case with respect to the Company;
(iii) form, join or encourage the formation of, any "person"
within the meaning of Section 13(d)(3) of the Exchange Act with respect to
any Equity Securities; provided that this Section 1.1(a)(iii) shall not
prohibit any such arrangement solely among the Stockholders and any of
their respective Affiliates;
2
<PAGE>
(iv) deposit any Equity Securities into a voting trust or
subject any such Equity Securities to any arrangement or agreement with
respect to the voting thereof; provided that this Section 1.1(a)(iv) shall
--------
not prohibit any such arrangement solely among the Stockholders and any of
their respective Affiliates;
(v) initiate, propose or otherwise solicit stockholders for the
approval of one or more stockholder proposals with respect to the Company
as described in Rule 14a-8 under the Exchange Act, or induce or attempt to
induce any other third party to initiate any stockholder proposal;
(vi) except as otherwise contemplated or permitted by this
Agreement (including, without limitation, pursuant to Section 1.2 hereof),
seek to place a representative on the Board of Directors of the Company or
seek the removal of any member of the Board of Directors of the Company,
except with the approval of the Board of Directors or management of the
Company;
(vii) except with the approval of the Board of Directors or
management of the Company, call or seek to have called any meeting of the
stockholders of the Company;
(viii) except through its representatives on the Board of
Directors (or any committee thereof) of the Company (if any) and except as
otherwise contemplated by this Agreement or the Restructuring Agreement
(including the agreements and other documents referred to therein,
including, without limitation, the Tax Sharing Agreement), otherwise act to
seek to control the management or policies of the Company, except with the
approval of the Board of Directors or management of the Company;
(ix) sell or otherwise transfer in any manner any Equity
Securities to any "person" (within the meaning of Section 13(d)(3) of the
Exchange Act) who, immediately following such sale or transfer, would, to
the best of the Stockholder's knowledge, own more than four percent (4%) of
any class of Equity Securities or who, without the approval of
3
<PAGE>
the Board of Directors of the Company, (A) has publicly proposed a business
combination or similar transaction with, or a change of control of, the
Company or who has publicly proposed a tender offer for Equity Securities
or (B) who has discussed with Loral or any of its respective Affiliates the
possibility of proposing a business combination or similar transaction
with, or a change in control of, the Company;
(x) sell or otherwise transfer in any manner to any person (as
defined in clause (ix) above) in any single transaction or series of
related transactions more than 2% of the outstanding Equity Securities;
(xi) solicit, seek to effect, negotiate with or provide any
information to any other party with respect to, or make any statement or
proposal, whether written or oral, to the Board of Directors of the Company
or any director or officer of the Company or otherwise make any public
announcement or proposal whatsoever with respect to, any form of business
combination transaction involving the Company, including, without
limitation, a merger, exchange offer or liquidation of the Company's
assets, or any corporate reorganization or similar transaction with respect
to the Company, except in each case with the approval of the Board of
Directors or management of the Company; or
(xii) instigate or encourage any third party to do any of the
foregoing.
Notwithstanding clauses (ix) and (x) above, the Stockholders may
effect any transaction contemplated by Article III hereof.
(b) Notwithstanding the provisions of this Section 1.1, nothing
herein shall apply with respect to any Equity Securities acquired from any
person other than a Stockholder (x) held by any pension, retirement or other
benefit plan managed by any Stockholder or any of its subsidiaries or other
Affiliates or (y) held in any account managed for the benefit of another person,
by any subsidiary or other Affiliate of any of the Stockholders which is engaged
in the financial services business. In
4
<PAGE>
addition, notwithstanding the provisions of this Section 1.1, nothing herein
shall prohibit or restrict any transfer of Equity Securities to or among any of
the subsidiaries or other Affiliates of any of the Stockholders (provided that
such subsidiary or Affiliate agrees to be bound to the provisions of this
Agreement, upon which such subsidiary or Affiliate shall be entitled to all
rights and benefits, and shall be subject to all obligations, of a Stockholder
under this Agreement).
(c) For the purposes of this Agreement, (i) the term "Equity
Securities" shall mean the Preferred Stock and any securities entitled to vote
generally in the election of directors of the Company, or any direct or indirect
rights or options to acquire any such securities or any securities convertible
or exercisable into or exchangeable for such securities (provided that, in the
event that the Guaranty Warrants (as defined below) become warrants to acquire
Equity Securities, such Guaranty Warrants and any securities issued pursuant to
the exercise of such Guaranty Warrants, shall not (so long, in each case, as
they are held by the Stockholder) constitute Equity Securities for purposes of
determining the appropriate number of shares of Common Equity Securities which
Loral is entitled to acquire hereunder, including in connection with the
determination of the Target Percentage pursuant to Section 1.4(a) hereof), (ii)
the term "Voting Power" shall mean the voting power in the general election of
directors of the Company, (iii) the term "Total Voting Power" shall mean the
total combined Voting Power of all the Equity Securities then outstanding,
including, without limitation, the Preferred Stock, and, insofar as the
Preferred Stock is concerned, it is deemed to have Voting Power equal to that of
the Common Stock into which it is convertible, (iv) the term "Change of Control"
shall mean the occurrence of any of the following events: (A) any "person" or
"group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act)
is or becomes the beneficial owner of Equity Securities which represent at least
forty percent (40%) of the Total Voting Power, or (B) during any one-year
period, individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election by such
Board of Directors or whose nomination for election by the shareholders of the
Company was approved by a vote of a majority of the directors of the Company
then still in office who were
5
<PAGE>
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company then in office, (v) the term
"beneficial owner", and terms having similar import, shall mean any direct or
indirect "beneficial owner", as such term is defined in Rules 13d-3 and 13d-5
under the Exchange Act, and (vi) the term "Guaranty Warrants" shall mean those
warrants which accrue to the benefit of the Company in connection with the
Globalstar Bank Guarantee, as described in the Globalstar Warrant Memorandum.
Section 1.2. HSR Clearance.
(a) At any time after the date hereof (but subject to the provisions
of Section 1.2(b) below), following a written request by Loral to the Company
(such request, the "HSR Notice"), the Company and the Stockholders will (i) take
promptly all actions necessary to make the filings required of the Stockholders,
the Company or any of their respective Affiliates under the HSR Act (as defined
in the Merger Agreement) with respect to the right to convert Preferred Stock
and continue to own the securities so received, the ownership and voting of
Equity Securities by the Stockholders, any of the transactions contemplated by
this Agreement or any other similar matters (all such exercise, ownership,
voting, transaction and other similar matters, the "Filing Matters"), (ii)
comply at the earliest practicable date with any request for additional
information or documentary material received by the Company or the Stockholders
or any of their Affiliates from any of the Federal Trade Commission, the
Antitrust Division of the Department of Justice, state attorneys general, the
Commission, or other governmental or regulatory authorities (all such
authorities, the "Antitrust Authorities"), and (iii) cooperate with each other
in connection with any of the filings referred to in clause (i) above and in
connection with resolving any investigation or other inquiry commenced by any of
the Antitrust Authorities. To the extent reasonably requested by Loral, the
Company shall use all reasonable efforts to resolve such objections, if any, as
may be asserted with respect to the Filing Matters. If any administrative,
judicial or legislative action or proceeding is instituted (or threatened to be
instituted)
6
<PAGE>
challenging any aspect of the Filing Matters as violative of any Antitrust Law,
each of the Stockholders and the Company shall cooperate with each other to
contest and resist any such action or proceeding, and to have vacated, lifted,
reversed or overturned any decree, judgment, injunction or other order (whether
temporary, preliminary or permanent) that is in effect and that restricts,
prevents or prohibits the exercise by the Stockholders of the right to convert
Preferred Stock and continue to own the securities so received, or the exercise
by Loral of its rights with respect to the ownership and voting of Equity
Securities or any of the transactions contemplated by this Agreement (any such
decree, judgment, injunction or other order is hereafter referred to as an
"Order"), including, without limitation, by pursuing all reasonable avenues of
administrative and judicial appeal, provided that nothing contained in this
Section 1.2(a) shall be construed to require any party hereto to hold separate
or divest any of their respective assets or businesses or agree to any
substantive restriction thereon or on the conduct thereof. Each of the Company
and Loral shall promptly inform the other party of any material communication
received by such party from any Antitrust Authority regarding any of the Filing
Matters or any of the other transactions contemplated hereby. For the purposes
of this Agreement, the term "HSR Clearance Date" shall mean the first date on
which (x) any applicable waiting period under the HSR Act with respect to the
Filing Matters shall have expired or been terminated, (y) there shall not be
pending any Action commenced by any Antitrust Authority relating to any of the
Filing Matters or any of the other transactions contemplated hereby, and (z)
there shall not be in effect any Order.
(b) Notwithstanding the provisions of Section 1.2(a) above, in the
event that Loral delivers the HSR Notice to the Company, the Company shall be
entitled to postpone for a reasonable period of time (but in no event later than
45 days), any filing referred to in Section 1.2(a)(i) above if the Company
determines in its reasonable judgment and in good faith that such filing would
delay the obtaining of any approval from an Antitrust Authority with respect to
any announced or imminent material acquisition or disposition which would
require a filing by the Company under the HSR Act. In the event of such
postponement, Loral shall have the right to withdraw
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its HSR Notice and may deliver any such HSR Notice at any time thereafter.
Section 1.3. Voting.
(a) General Voting Provisions. Subject to the provisions of Section
1.3(b) below, prior to the HSR Clearance Date, no Stockholder shall have the
right to convert Preferred Stock into common stock or the right to vote any
Equity Securities with respect to the election of directors of the Company or on
any other matters submitted to a vote of the stockholders of the Company (other
than those matters set forth in Section 1.3(b) below). Following the HSR
Clearance Date, each Stockholder shall have the right to vote its Equity
Securities to the extent permitted by the terms thereof on any matters submitted
to a vote of the stockholders of the Company (including, without limitation,
those matters set forth in Section 1.3(b) below); provided that following the
HSR Clearance Date any Stockholder shall have the right to vote any Equity
Securities to the extent permitted by the terms thereof with respect to the
election of directors of the Company only (i) as recommended by the Board of
Directors or management of the Company or (ii) in the same proportions as the
holders of Equity Securities (other than Stockholders) vote their Securities.
On each matter with respect to which a Stockholder is entitled to vote pursuant
to this Section 1.3, each such Stockholder shall be present, in person or
represented by proxy, at all such stockholder meetings of the Company so that
all Equity Securities beneficially owned by it shall be counted for the purpose
of determining the presence of a quorum at such meetings. For purposes of this
Section 1.3, all references to the term "vote" shall include the execution and
delivery of any written consent with respect to the taking of any stockholder
action in lieu of a meeting of stockholders.
(b) Exceptions to General Voting Provisions. Notwithstanding anything
to the contrary contained in this Agreement, each Stockholder shall have the
right to vote freely, in any manner in which they determine, with respect to any
of the following matters:
(i) any amendment to or modification or repeal of any provision
of the Company's Certificate of Incorporation including any of the
provisions of
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any certificate of designation or By-laws (or similar organizational
documents);
(ii) any merger, consolidation, corporate reorganization or
similar transaction involving the Company;
(iii) any sale, lease, exchange, transfer or other disposition,
directly or indirectly, in a single transaction or series of related
transactions, of all or substantially all of the assets of the Company or
any of its Affiliates;
(iv) any plan or proposal for the liquidation or dissolution of
the Company or any assignment by the Company for the benefit of creditors,
or any filing by the Company of a petition in bankruptcy; or
(v) any restructuring, extension, modification, substitution,
refinancing or amendment of any indebtedness of the Company.
(c) Company Call. If, within one year following the date hereof, the
Stockholders vote against any Call Event Triggering Transaction (as defined
below), the Company shall have the right, for 10 days following the date on
which such vote is held, to purchase, and the Stockholders shall be required to
sell to the Company, all, but not less than all, of the Equity Securities held
by the Stockholders at a per share cash price equal to the Call Event Trigger
Price (as defined below). The Company may exercise such right by delivering to
each Stockholder, within such 10-day period, a written notice stating that the
Company has irrevocably agreed to purchase in cash all (but not less than all)
of the Equity Securities held by the Stockholders at the Call Event Trigger
Price upon the terms and conditions set forth in this Section 1.3(c). The
closing with respect to the purchase of Equity Securities by the Company
pursuant to this Section 1.3(c) shall be on a mutually determined closing date
which shall not be more than 15 days after the date on which the Company's
written notice referred to above is delivered to the Stockholders. The closing
shall be held at 10:00 A.M., local time, at the principal office of the Company,
or at such other time or place as the parties mutually agree. On such closing
date, each
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Stockholder shall deliver (i) certificates representing the shares of Equity
Securities being sold, free and clear of any lien, claim or encumbrance, and
(ii) such instruments of transfer and evidence of ownership and authority as the
Company may reasonably request. The purchase price shall be paid by the Company
to each Stockholder by wire transfer of immediately available funds no later
than 2:00 P.M. on the closing date to the account(s) designated by the
Stockholders prior to such closing date. For purposes of this Section 1.3(c),
(i) the term "Call Event Triggering Transaction" shall mean any transaction
described in Sections 1.3(b)(ii) and 1.3(b)(iii) between the Company, on the one
hand, and any Spinco Company (or any other Subsidiary of either the Company or a
Spinco Company), on the other; provided that the term "Call Event Triggering
Transaction" shall not include any transaction involving any party which is not
a Spinco Company (or any other Subsidiary of either the Company or a Spinco
Company), (ii) the term "Call Event Trigger Price" shall mean the sum of (x)
$344,000,000.00, plus (y) all amounts expended by the Stockholders following the
date hereof in connection with the acquisition of Equity Securities other than
acquisitions from another Stockholder following the date hereof, minus (z) any
net sales proceeds received by the Stockholders following the date hereof in
connection with the sale of Equity Securities (other than sales to another
Stockholder) following the date hereof.
Section 1.4. Loral Option.
(a) General Provisions Relating to Loral Option. If, within one year
following the date hereof, any Option Event Triggering Transaction (as defined
below) occurs, Loral shall have the right, within 90 days after the consummation
of the Option Event Triggering Transaction, to purchase, and the Company (for
purposes of this Section 1.4, all references to the "Company" shall be deemed to
include the Surviving Corporation (as defined below), shall be required to sell
to Loral, a number of shares of Preferred Stock which would cause Loral to own
Equity Securities with Voting Power equal to the Target Percentage (as defined
below) of the Total Voting Power immediately after giving effect to the
consummation of the Option Event Triggering Transaction, at a per share cash
price equal to the Option Event Trigger Price (as defined below). Loral may
exercise such right by deliv-
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ering to the Company, within such 90-day period, a written notice stating that
Loral (or any Subsidiary of Loral designated by Loral; for purposes of this
Section 1.4, all references to "Loral" shall be deemed to include such
designated Subsidiary) has irrevocably agreed to purchase in cash the number of
shares of Preferred Stock specified in the preceding sentence, at the Option
Event Trigger Price, upon the terms and conditions set forth in this Section
1.4. The closing with respect to the purchase of Preferred Stock by the Company
pursuant to this Section 1.4 shall be on a mutually determined closing date
which shall not be more than 15 days after the date on which Loral's written
notice referred to above is delivered to the Company. The closing shall be held
at 10:00 A.M., local time, at the principal office of the Company, or at such
other time or place as the parties mutually agree. On such closing date, the
Company shall issue to Loral certificates representing the shares of Preferred
Stock being sold, which shall be validly issued, fully paid and non-assessable
and free and clear of any lien, claim or encumbrance. The purchase price shall
be paid by Loral to the Company by wire transfer of immediately available funds
no later than 2:00 P.M. on the closing date to the account designated in writing
by the Company prior to such closing date. For purposes of this Section 1.4,
(i) the term "Option Event Triggering Transaction" shall mean any transaction
described in clauses (ii), (iii) or (iv) of Section 1.3(b) hereof, involving as
parties, among others, the Company or any of its Affiliates (other than GTL and
Globalstar), on the one hand, and either GTL or Globalstar or any of their
respective Subsidiaries, on the other, (ii) the term "Option Event Trigger
Price" shall mean a $6.00 per share cash purchase price, subject to adjustment
pursuant to the provisions of Section 1.4(b) hereof, (iii) the term "Surviving
Corporation" shall mean any successor to the rights and obligations of the
Company as a result of or in connection with any Option Event Triggering
Transaction, and (v) the term "Target Percentage" shall mean a percentage amount
equal to the percentage of the Total Voting Power represented by the Equity
Securities held by the Stockholders immediately prior to the closing of the
Option Event Triggering Transaction; provided, however, that if there has
occurred within the five days preceding such closing an event that diluted the
Voting Power of the Equity Securities held by the Stockholders, the Target
Percentage
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shall be determined as of the date five days prior to the closing of such Option
Event Triggering Transaction.
(b) Adjustment of Loral Option Event Trigger Price. The Option Event
Trigger Price shall be equitably adjusted from time to time after the date
hereof to take into account of any of the following events: (i) if the Company
shall pay a dividend or make any other distribution with respect to any Equity
Securities which is payable in the form of Equity Securities or in the form of
any other Asset (other than normal, periodic cash dividends of the Company),
(ii) if the Company shall subdivide its outstanding common stock, (iii) if the
Company shall combine its outstanding common stock into a smaller number of
shares, (iv) if the Company shall issue any shares of its capital stock in a
reclassification of the Common Stock (including any such reclassification in
connection with a merger, consolidation or other business combination involving
the Company), or (v) in any other similar transaction affecting the Company or
the number or value of the outstanding Equity Securities. The parties
acknowledge and agree that each such equitable adjustment shall preserve for
Loral the economic benefits of the Loral option set forth in Section 1.4(a)
above.
Section 1.5. Globalstar Warrant Put Option. In the event of any of
the following transactions (each such transaction, a "Warrant Trigger Event"):
(i) any merger, consolidation, corporate reorganization or similar
transaction involving Globalstar or GTL;
(ii) any sale, lease, exchange, transfer or other disposition,
directly or indirectly, of all or substantially all of the assets of
Globalstar or GTL; or
(iii) any liquidation or dissolution of Globalstar or GTL;
in which it is proposed that the Globalstar Warrants be converted into cash or
the right to receive cash, or any other interest (or the right to receive any
other interest) in Globalstar other than common stock thereof the Stockholders
shall have the right (the "Limited Warrant Put") to require the Company to
purchase the Globalstar
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Warrants for a price equal to their Option Privilege Value (as defined below).
The Stockholders may exercise the Limited Warrant Put by delivering to the
Company, at least 10 days prior to the scheduled closing of the Warrant Trigger
Event, a notice to such effect accompanied by appropriate documentation or
certificates evidencing the Globalstar Warrants. The Option Privilege Price
shall be payable by the Company 10 days after the determination thereof. As
used herein, the term "Option Privilege Price" means the greater of (x) the
consideration payable in respect of the Globalstar Warrants in the Warrant
Trigger Event and (y) the hypothetical fair market value that would be assigned
to the Globalstar Warrants at the date of the Warrant Trigger Event assuming (1)
that no Warrant Trigger Event were to occur then or at any time prior to the
expiration of the Globalstar Warrants, (2) that the Globalstar Warrants would
remain outstanding until such expiration in accordance with their terms,
exercisable for shares of or interests in the issuer thereof, and (3) that such
issuer would remain a public company during such period. The Option Privilege
Price shall be determined by an investment banking firm of national standing
selected by agreement of the Company and the Stockholders or, failing such
agreement, by agreement of Bear Stearns Co. Inc. and Lehman Brothers. Such
investment banking firm shall, in determining the Option Privilege Price, give
full effect to (i) the spread between the exercise price and the fair market
value of the securities into which the Globalstar Warrants are exercisable and
(ii) the value of the "option privilege" in the Globalstar Warrants (that is,
the value of the right, without risking any capital, to speculate on and benefit
from appreciation in the underlying securities).
ARTICLE II
TRANSFER RESTRICTIONS
2.1. Certain Transactions. Notwithstanding anything contained in this
Agreement to the contrary, a Stockholder may without restriction:
(i) assign, pledge, mortgage, hypothecate, or otherwise encumber
or transfer all or any of its
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Equity Securities in connection with any bona fide financing arrangement entered
into by such person or otherwise in connection with any indebtedness owed by
such Stockholder; provided that in the event that the Stockholder in question
defaults, the creditor's rights and obligations with respect to the voting and
transfer of such Equity Securities and the registration thereof shall be the
same as the Stockholder in question had under the provisions of this Agreement
and the creditor in question shall be deemed to be a Stockholder under this
Agreement for such purposes;
(ii) transfer any Equity Securities to another Stockholder or
any subsidiary or other Affiliate thereof (provided that such subsidiary or
Affiliate agrees to be bound to the provisions of this Agreement, upon which
such subsidiary or Affiliate shall be entitled to all rights and benefits, and
shall be subject to all obligations, of a Stockholder under this Agreement);
(iii) transfer any Equity Securities pursuant to any registered
public offering in connection with the provisions of Article III hereof or
pursuant to the provisions of Rule 144 (or any similar provision then in force)
under the Securities Act provided that such transfer under Rule 144 or any
similar provision meets the volume restrictions set forth in Rule 144 as in
effect on the date hereof; or
(iv) transfer any Equity Securities pursuant to any merger,
consolidation, corporate reorganization, restructuring or any other similar
transaction affecting the Company or pursuant to any involuntary transfer.
Section 2.2. Rights Pursuant to a Tender Offer. Each Stockholder
(any such Stockholder shall, for purposes of this Section 2.2, be referred to as
a "Tendering Stockholder") shall have the right to sell or exchange all its
Equity Securities pursuant to a tender or exchange offer for the Equity
Securities (an "Offer"). However, during the Term, prior to such sale or
exchange, the Tendering Stockholder shall give the Company the opportunity to
purchase such Equity Securities in the following manner:
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(i) The Tendering Stockholder shall give notice (the "Tender Notice")
to the Company in writing of its intention to sell or exchange Equity
Securities in response to an Offer no later than three calendar days prior
to the latest time (including any extensions) by which Equity Securities
must be tendered in order to be accepted pursuant to such Offer, specifying
the amount of Equity Securities proposed to be tendered by the Tendering
Stockholder (the "Tendered Shares") and the purchase price per share
specified in the Offer at the time of the Tender Notice.
(ii) If the Tender Notice is given, the Company shall have the right
to purchase all, but not less than all, of the Tendered Shares exercisable
by giving written notice (an "Exercise Notice") to the Tendering
Stockholder at least two calendar days prior to the latest time after
delivery of the Tender Notice by which Equity Securities must be tendered
in order to be accepted pursuant to the Offer (including any extensions
thereof) and depositing in any escrow or similar arrangement reasonably
acceptable to the Tendering Stockholder, a sum in cash sufficient to
purchase all Tendered Shares at the price then being offered in the Offer,
without regard to any provision thereof with respect to proration or
conditions to the offeror's obligation to purchase. The delivery by the
Company of an Exercise Notice and deposit of funds as provided above will,
except as provided below, constitute an irrevocable agreement by the
Company to purchase, and the Tendering Stockholder to sell, the Tendered
Shares in accordance with the terms of this Section 2.2, whether or not the
Offer or any other tender or exchange offer (a "Competing Tender Offer")
for Equity Securities that was outstanding during the Offer is consummated.
(iii) The purchase price to be paid by the Company for any Equity
Securities purchased by it pursuant to this Section 2.2 shall be the
highest price offered or paid in the Offer or in any Competing Tender
Offer. For purposes hereof, the price offered or paid in a tender or
exchange offer for Voting Shares shall be deemed to be the price offered or
paid pursuant thereto, without regard to
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<PAGE>
any provisions thereof with respect to proration or conditions to the
offeror's obligation to purchase. If the purchase price per share
specified in the Offer includes any property other than cash (the "Offer
Noncash Property"), the purchase price per share at which the Company shall
be entitled to purchase all, but not less than all, of the Equity
Securities specified in the Tender Notice shall be (y) the amount of cash
per share, if any, specified in such Offer (the "Cash Portion"), plus (z)
an amount of cash per share equal to the value of the Offer Noncash
Property per share (the "Cash Value of Offer Noncash Property"), as
determined in good faith by the mutual agreement of the parties hereto, or
if the parties cannot agree, by an independent, nationally recognized
investment banking firm selected by the Tendering Stockholders and
reasonably acceptable to the Company. If the Company exercises its right
of first refusal by giving an Exercise Notice, the closing of the purchase
of the Equity Securities with respect to such right (the "Closing") shall
take place at 3:00 p.m., local time (or, if earlier, two hours before the
latest time by which Equity Securities must be tendered in order to be
accepted pursuant to the Offer), on the last day on which Equity Securities
must be tendered in order to be accepted pursuant to the Offer (including
any extensions thereof) (the "Last Tender Date"), and the Company shall pay
the purchase price for the Equity Securities specified above. The
Tendering Stockholder shall be entitled to rescind its Tender Notice at any
time prior to the Last Tender Date by notice in writing to the Company;
provided that if on or before the Last Tender Date, the Company publicly
announces that the Company has approved, proposed or entered into an
agreement with respect to (either individually or together with any other
persons) a recapitalization, reorganization or business combination with
respect to the Company or all or substantially all of its assets, or a
self-tender offer, the Tendering Stockholder shall be entitled to rescind
its Tender Notice by notice in writing to the Company at any time prior to
the Closing on the Last Tender Date. If the Tendering Stockholder rescinds
its Tender Notice pursuant to the immediately preceding sentence, the
Company's Exercise Notice with respect to such Offer shall be
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deemed to be immediately rescinded and the Tendering Stockholder's
disposition of its Equity Securities in response to the Offer with respect
to which the Tender Notice is rescinded or any other Offer shall again be
subject to all of the provisions of this Section 2.2.
(iv) If the Company does not exercise its right of first refusal set
forth in this Section 2.2 within the time specified for such exercise by
giving an Exercise Notice, then the Tendering Stockholder shall be free to
accept, for all its Equity Securities, the Offer with respect to which the
Tender Notice was given or any Competing Tender Offer (including any
increases and extensions thereof).
ARTICLE III
REGISTRATION RIGHTS
Section 3.1. Registration Upon Request.
(a) At any time commencing on the date hereof and continuing
thereafter, each Stockholder (any such Stockholder, whether registering
securities pursuant to this Section 3.1 or Section 3.2, shall be referred to as
a "Registering Stockholder") shall have the right to make written demand upon
the Company, on not more than five separate occasions (subject to the provisions
of this Section 3.1), to register under the Securities Act, any common stock or
other securities of the Company held by it (the securities subject to such
demand hereunder or subject to the provisions of Section 3.2 being referred to
in each case as the "Subject Securities"), and the Company shall use its best
efforts to cause such securities to be registered under the Securities Act as
soon as reasonably practicable so as to permit the sale thereof promptly;
provided that each such demand shall cover at least ________ shares of Common
Stock (subject to adjustment for stock splits, reverse stock splits, stock
dividends and similar events after the date hereof). In connection therewith,
the Company shall prepare, and as soon as reasonably practicable but in no event
later than 90 days of the receipt of the request, file, on Form S-3 if permitted
or otherwise on the appropriate form, a
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registration statement under the Securities Act to effect such registration.
Such registration shall be effected in accordance with the intended method or
methods of disposition specified by the Registering Stockholders (including, but
not limited to, an offering on a delayed or continuous basis pursuant to Rule
415 (or any successor rule to similar effect) promulgated under the Securities
Act). Each Registering Stockholder agrees to provide all such information and
materials and to take all such action as may be reasonably required in order to
permit the Company to comply with all applicable requirements of the Securities
Act and the SEC and to obtain any desired acceleration of the effective date of
such registration statement. If the offering to be registered is to be
underwritten, the managing underwriter shall be selected by the Registering
Stockholders and shall be reasonably satisfactory to the Company.
Notwithstanding the foregoing, the Company (i) shall not be obligated to prepare
or file more than one registration statement other than for purposes of a stock
option or other employee benefit or similar plan during any twelve-month period,
(ii) shall be entitled to postpone for a reasonable period of time (but in no
event later than 60 days), the filing of any registration statement otherwise
required to be prepared and filed by the Company if (A) the Company is, at such
time, conducting or about to conduct an underwritten public offering of
securities and is advised by its managing underwriter or underwriters in writing
(with a copy to the Registering Stockholders), that such offering would, in its
or their opinion, be materially adversely affected by the registration so
requested, or (B) the Company determines in its reasonable judgment and in good
faith that the registration and distribution of the Subject Securities would
interfere with any announced or imminent material financing, acquisition,
disposition, corporate reorganization or other material transaction of a similar
type involving the Company. In the event of such postponement, the Registering
Stockholders shall have the right to withdraw the request for registration by
giving written notice to the Company within 20 days after receipt of the notice
of postponement (and, in the event of such withdrawal, such request shall not be
counted for purposes of determining the number of registrations to which the
Registering Stockholders are entitled pursuant to this Section 3.1).
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(b) The Company shall not grant to any other holder of its
securities, whether currently outstanding or issued in the future, any
incidental or piggyback registration rights with respect to any registration
statement filed pursuant to a demand registration under this Section 3.1 and
without the prior consent of the Registering Stockholders, the Company will not
itself, and will not permit any other holder of its securities to, participate
in any offering made pursuant to a demand registration under this Section 3.1.
The Company may grant to other holders of its securities incidental or piggyback
registration rights on a primary offering by the Company which are no more
favorable to such holders than the provisions set forth in Section 3.2 are to
the Stockholders. If the Registering Stockholders consents to the inclusion of
offers and sales of any other securities in a registration pursuant to this
Section 3.1 and the underwriter(s) retained in connection with such registration
subsequently advise the Registering Stockholders that such offering would be
adversely affected by the inclusion of such other securities, the Registering
Stockholders may in their sole discretion exclude all or some of such securities
from such registration.
(c) Any registration requested by any Registering Stockholder
pursuant to this Section 3.1 shall not be deemed to have been effected (and,
therefore, not requested for purposes of this Section 3.1), (i) unless it has
become effective, (ii) if after it has become effective such registration is
interfered with by any stop order, injunction or other order or requirement of
the SEC or other governmental agency or court for any reason other than a
misrepresentation or an omission by the Registering Stockholders and, as a
result thereof, the Subject Securities requested to be registered cannot be
completely distributed in accordance with the plan of distribution set forth in
the related registration statement or (iii) if the closing pursuant to the
purchase agreement or underwriting agreement entered into in connection with
such registration does not occur. Any registration effected pursuant to Section
3.2 shall not be deemed to have been requested by a Registering Stockholder for
purposes of this Section 3.1.
Section 3.2. Incidental Registration Rights. If the Company proposes
to register any of its Equity Securities under the Securities Act for its own
account
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(other than (i) pursuant to Section 3.1 hereof, (ii) securities to be issued
pursuant to a stock option or other employee benefit or similar plan, and (iii)
securities proposed to be issued in exchange for securities or assets of, or in
connection with a merger or consolidation with, another corporation), the
Company shall, as promptly as practicable, give written notice to the
Registering Stockholders of the Company's intention to effect such registration.
If, within 15 days after receipt of such notice, a Registering Stockholder
submits a written request to the Company specifying the amount of Equity
Securities that it proposes to sell or otherwise dispose of in accordance with
this Section 3.2, the Company shall use its best efforts to include the
securities specified in the Registering Stockholder's request in such
registration. If the offering pursuant to such registration statement is to be
made by or through underwriters, the managing underwriters shall be chosen by
the Company and shall be reasonably satisfactory to the Registering Stockholders
and the Company, and the Registering Stockholders and such underwriter shall
execute an underwriting agreement in customary form. If the managing
underwriter reasonably determines in good faith and advises the Registering
Stockholders in writing that the inclusion in the registration statement of all
the Equity Securities proposed to be included would interfere with the
successful marketing of the securities proposed to be registered, then the
Company and the Registering Stockholders shall negotiate in good faith to agree
upon an equitable adjustment in the number or amount of securities of each to be
included in such underwriting (provided that in the event that the Company and
the Registering Stockholders are unable to agree upon an equitable adjustment in
the number or amount of securities of each to be included in such underwriting,
then the number of securities which the Company and the Registering Stockholders
propose to register shall be reduced pro rata (based upon the respective market
values of each party's respective share of the total number of securities
proposed to be registered). No registration effected under this Section 3.2
shall relieve the Company of its obligation to effect any registration upon
request under Section 3.1. If the Registering Stockholders are permitted to
participate in a proposed offering pursuant to this Section 3.2, the Company
thereafter may determine either not to file a registration statement relating
thereto, or to withdraw such registration statement, or otherwise not
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to consummate such offering, without any liability hereunder. Any underwriters
participating in a distribution of the Subject Securities pursuant to Sections
3.1 and 3.2 hereof shall use all reasonable efforts to effect as wide a
distribution as is reasonably practicable, and in no event shall any sale of
Subject Securities be made knowingly to any person (including its Affiliates and
any group in which that person or its Affiliates shall be a member, or the
Registering Stockholders or the underwriters know of the existence of such a
group or Affiliate) that, immediately prior to giving effect to any such sale,
beneficially owned Equity Securities representing five percent (5%) or more of
the Total Voting Power. The Registering Stockholders and the Company shall use
all reasonable efforts to secure the agreement of the underwriters, in
connection with any underwritten offering of its Equity Securities, to comply
with the foregoing.
Section 3.3. Registration Mechanics. (a) In connection with any
offering of Subject Securities registered pursuant to Section 3.1 or 3.2 herein,
the Company shall (i) furnish to the Registering Stockholders such number of
copies of any prospectus (including preliminary and summary prospectuses) and
conformed copies of the registration statement (including amendments or
supplements thereto and, in each case, all exhibits) and such other documents as
any Registering Stockholder may reasonably request; (ii)(A) use its best efforts
to register or qualify the Subject Securities covered by such registration
statement under such blue sky or other state securities laws for offer and sale
as the Registering Stockholders shall reasonably request and (B) keep such
registration or qualification in effect for so long as the registration
statement remains in effect; provided that the Company shall not be obligated to
qualify to do business as a foreign corporation under the laws of any
jurisdiction in which it shall not then be qualified or to file any general
consent to service of process in any jurisdiction in which such a consent has
not been previously filed or subject itself to taxation in any jurisdiction
wherein it would not otherwise be subject to tax but for the requirements of
this Section 3.3; (iii) use its best efforts to cause all Subject Securities
covered by such registration statement to be registered with or approved by such
other federal or state government agencies or authorities as may be necessary,
in the opinion of counsel to the Registering Stockholders, to enable the
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Registering Stockholders to consummate the disposition of such Subject
Securities; (iv) notify the Registering Stockholders any time when a prospectus
relating thereto is required to be delivered under the Securities Act upon
discovery that, or upon the happening of any event as a result of which, the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, in the light of the circumstances under which they were made, and
(subject to the good faith determination of the Company's Board of Directors as
to whether to permit sales under such registration statement), at the request of
any Registering Stockholder promptly prepare and furnish to it a reasonable
number of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such securities,
such prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading, in light of the circumstances under which
they were made; (v) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC; (vi) use its best efforts to list the Subject
Securities covered by such registration statement on the New York Stock Exchange
or on any other Exchange on which the Subject Securities are then listed, if
required by the rules of any such Exchange; (vii) use its best efforts to obtain
a "cold comfort" letter from the independent public accountants for the Company
in customary form and covering matters of the type customarily covered by such
letters as may be reasonably requested by the Registering Stockholders, in the
event of a registration effected pursuant to Section 3.1 hereof; (viii) execute
and deliver all instruments and documents (including in an underwritten offering
an underwriting agreement in customary form) and take such other actions and
obtain such certificates and opinions as the Registering Stockholders reasonably
request in order to effect an underwritten public offering; and (ix) before
filing any registration statement or any amendment or supplement thereto, and as
far in advance as is reasonably practicable, furnish to each Registering
Stockholder and its counsel copies of such documents. In connection with any
offering of Subject Securities registered pursuant to Section 3.1 or 3.2, the
Company shall (x) furnish to the
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underwriter, if any, unlegended certificates representing ownership of the
Subject Securities being sold in such denominations as requested and (y)
instruct any transfer agent and registrar of the Subject Securities to release
any stop transfer orders with respect to such Subject Securities. Upon any
registration becoming effective pursuant to Section 3.1, the Company shall use
its best efforts to keep such registration statement current for a period of 60
days (or 90 days, if the Company is eligible to use a Form S-3, or successor
form) or such shorter period as shall be necessary to effect the distribution of
the Subject Securities.
(b) Before filing with the SEC any registration statement referred to
herein or any amendments or supplements thereto, the Company shall furnish to
the Registering Stockholders or their respective counsel copies of all such
documents proposed to be filed, in order to give the Registering Stockholders or
their respective counsel sufficient time to review such documents, and such
documents may thereafter be filed subject to any timely and reasonable comments
of the Registering Stockholders or their respective counsel. The Company shall
(i) deliver promptly to the Registering Stockholders or their respective counsel
copies of all written communications between the Company and the SEC relating to
the registration statement, and (ii) advise the Registering Stockholders or
their respective counsel promptly of, and provide the Registering Stockholders
or their respective counsel with the opportunity to participate in (to the
extent reasonably practicable), all telephonic and other non-written
communications between the Company and the SEC relating to such registration
statement. The Company shall respond promptly to any comments from the SEC with
respect thereto, after consultation with the Registering Stockholders or their
respective counsel, and shall take such other actions as shall be reasonably
required in order to have each such registration statement declared effective
under the Securities Act as soon as reasonably practicable following the date
hereof.
(c) Each Registering Stockholder agrees that upon receipt of any
notice from the Company of the happening of any event of the kind described in
subdivision (iv) of this Section 3.3, it will forthwith discontinue its
disposition of Subject Securities pursuant to the registration statement
relating to such Subject Securi-
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ties until its receipt of the copies of the supplemented or amended prospectus
contemplated by subdivision (iv) of this Section 3.3 and, if so directed by the
Company, will deliver to the Company all copies (other than permanent file
copies) then in its possession of the prospectus relating to such Subject
Securities current at the time of receipt of such notice. If any Registering
Stockholder's disposition of Subject Securities is discontinued pursuant to the
foregoing sentence unless the Company thereafter extends the effectiveness of
the registration statement to permit dispositions of Subject Securities by the
Registering Stockholder for an aggregate of 60 days (or 90 days, if the Company
is eligible to use a Form S-3, or successor form), whether or not consecutive,
the registration statement shall not be counted for purposes of determining the
number of registrations to which the Registering Stockholders are entitled
pursuant to Section 3.1.
Section 3.4. Expenses. The Registering Stockholders shall pay all
agent fees and commissions and underwriting discounts and commissions related to
Subject Securities being sold by the Registering Stockholders and the fees and
disbursements of its counsel and accountants and the Company shall pay all fees
and disbursements of its counsel and accountants in connection with any
registration pursuant to this Article III. All other fees and expenses in
connection with any registration statement (including, without limitation, all
registration and filing fees, all printing costs, all fees and expenses of
complying with securities or blue sky laws) shall (i) in the case of a
registration pursuant to Section 3.1, be borne equally by the Registering
Stockholders and the Company and (ii) in the case of a registration pursuant to
Section 3.2, be shared pro rata based upon the respective market values of the
securities to be sold by theCompany, the Registering Stockholders and any other
holders participating in such offering; provided that the Registering
Stockholders shall not be obligated to pay any expenses relating to work that
would otherwise be incurred by the Company including, but to limited to, the
preparation and filing of periodic reports with the SEC.
Section 3.5. Indemnification and Contribution. (a) In the case of
any offering registered pursuant to this Article III, the Company agrees to
indemnify and hold each Registering Stockholder, each underwriter, if
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any, of the Subject Securities under such registration and each person who
controls any of the foregoing within the meaning of Section 15 of the Securities
Act, and any officer, employee or partner of the foregoing, harmless against any
and all losses, claims, damages, or liabilities (including reasonable legal fees
and other reasonable expenses incurred in the investigation and defense thereof)
to which they or any of them may become subject under the Securities Act or
otherwise (collectively "Losses"), insofar as any such Losses shall arise out of
or shall be based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in the registration statement relating to the sale of
such Subject Securities (as amended if the Company shall have filed with the SEC
any amendment thereof), or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading or (ii) any untrue statement or alleged untrue statement
of a material fact contained in the prospectus relating to the sale of such
Subject Securities (as amended or supplemented if the Company shall have filed
with the SEC any amendment thereof or supplement thereto), or the omission or
alleged omission to state therein a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided that the indemnification contained in this Section 3.5
shall not apply to such Losses which shall arise primarily out of or shall be
based primarily upon any such untrue statement or alleged untrue statement, or
any such omission or alleged omission, which shall have been made in reliance
upon and in conformity with information furnished in writing to the Company by
the Registering Stockholders or any such underwriter, as the case may be,
specifically for use in connection with the preparation of the registration
statement or prospectus contained in the registration statement or any such
amendment thereof or supplement therein.
(b) In the case of each offering registered pursuant to this Article
III, the Registering Stockholders and each underwriter, if any, participating
therein shall agree, substantially in the same manner and to the same extent as
set forth in the preceding paragraph, severally to indemnify and hold harmless
the Company and each person, if any, who controls the Company within the meaning
of Section 15 of the Securities Act, and the
25
<PAGE>
directors and executive officers of the Company, with respect to any statement
in or omission from such registration statement or prospectus contained in such
registration statement (as amended or as supplemented, if amended or
supplemented as aforesaid) if such statement or omission shall have been made in
reliance upon and in conformity with information furnished in writing to the
Company by the Registering Stockholders or such underwriter, as the case may be,
specifically for use in connection with the preparation of such registration
statement or prospectus contained in such registration statement or any such
amendment thereof or supplement thereto.
(c) Each party indemnified under this Section 3.5 shall, promptly
after receipt of notice of the commencement of any claim ("Claim") against such
indemnified party in respect of which indemnity may be sought hereunder, notify
the indemnifying party in writing of the commencement thereof. The failure of
any indemnified party to so notify an indemnifying party shall not relieve the
indemnifying party from any liability in respect of such Claim which it may have
to such indemnified party on account of the indemnity contained in this Section
3.5, unless (and only in the event) the indemnifying party was materially
prejudiced by such failure, and in no event shall such failure relieve the
indemnifying party from any other liability which it may have to such
indemnified party. In case any Claim in respect of which indemnification may be
sought hereunder shall be brought against any indemnified party and it shall
notify an indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate therein and, to the extent that it may desire,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof through counsel reasonably satisfactory to the indemnified party
by notifying the indemnified party in writing of such election within 10 days
after receipt of the indemnified party's initial notice of the Claim, and after
such notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under this Section 3.5 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof, other than reasonable costs of investigation (unless such
indemnified party reasonably objects to such assumption on the
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<PAGE>
grounds that there may be defenses available to it which are different from or
in addition to those available to such indemnifying party in which event the
indemnified party shall be reimbursed by the indemnifying party for the
reasonable expenses incurred in connection with retaining separate legal
counsel). If the indemnifying party undertakes to defend against such Claim
within such 10-day period, the indemnifying party shall control the
investigation, defense and settlement thereof; provided that (i) the
indemnifying party shall use its reasonable efforts to defend and protect the
interests of the indemnified party with respect to such Claim, (ii) the
indemnified party, prior to or during the period in which the indemnifying party
assumes control of such matter, may take such reasonable actions as the
indemnified party deems necessary to preserve any and all rights with respect to
such matter, without such actions being construed as a waiver of the indemnified
party's rights to defense and indemnification pursuant to this Agreement, and
(iii) the indemnifying party shall not, without the prior written consent of the
indemnified party, consent to any settlement which (A) imposes any Liabilities
on the indemnified party (other than those Liabilities which the indemnifying
party agrees to promptly pay or discharge), and (B) with respect to any non-
monetary provision of such settlement, would be likely, in the indemnified
party's reasonable judgment, to have an adverse effect on the business
operations, assets, properties or prospects of any Stockholder (in the event
that a Registering Stockholder or any of its Affiliates is the indemnified
party), or the Company (in the event that the Company is an indemnified party),
or such indemnified party. If the indemnifying party does not undertake within
such 10-day period to defend against such Claim, then the indemnifying party
shall have the right to participate in any such defense at its sole cost and
expense, but the indemnified party shall control the investigation, defense and
settlement thereof (provided that the indemnified party may not settle any such
Claim without obtaining the prior written consent of the indemnifying party
(which consent shall not be unreasonably withheld by the indemnifying party;
provided that in the event that the indemnifying party is in material breach at
such time of the provisions of this Section 3.5, then the indemnified party
shall not be obligated to obtain such prior written consent of the indemnifying
party) at the reasonable cost and expense of the indemnifying party
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<PAGE>
(which shall be paid by the indemnifying party promptly upon presentation by the
indemnified party of invoices or other documentation evidencing the amounts to
be indemnified). In addition to the foregoing, no indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which the
indemnified party could have been a party and indemnity could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability arising out
of such claim or proceeding.
(d) If the indemnification provided for in this Section 3.5 is
unavailable to an indemnified party or is insufficient to hold such indemnified
party harmless from any Losses in respect of which this Section 3.5 would
otherwise apply by its terms (other than by reason of exceptions provided
herein), then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall have a joint and several obligation to contribute to
the amount paid or payable by such indemnified party as a result of such Losses,
in such proportion as is appropriate to reflect the relative benefits received
by and fault of the indemnifying party, on the one hand, and such indemnified
party, on the other hand, in connection with the offering to which such
contribution relates as well as any other relevant equitable considerations.
The relative benefit shall be determined by reference to, among other things,
the amount of proceeds received by each party from the offering to which such
contribution relates. The relative fault shall be determined by reference to,
among other things, each party's relative knowledge and access to information
concerning the matter with respect to which the claim was asserted, and the
opportunity to correct and prevent any statement or omission. The amount paid
or payable by a party as a result of any Losses shall be deemed to include any
legal or other fees or expenses incurred by such party in connection with any
investigation or proceeding, to the extent such party would have been
indemnified for such expenses if the indemnification provided for in this
Section 3.5 was available to such party.
(e) The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 3.5 were determined by pro rata
allocation or by
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<PAGE>
any other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
Section 3.6. Rule 144. The Company covenants that it will file
the reports required to be filed by it under the Securities Act and the Exchange
Act and the rules and regulations adopted by the Commission thereunder (or, if
the Company is not required to file such reports, it will, upon the request of
any Stockholder, make publicly available other information), and it will take
such further action as any Stockholder may reasonably request, all to the extent
required from time to time to enable such Stockholder to sell Subject Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (i) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (ii) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any Stockholder, the Company
will deliver to such Stockholder a written statement as to whether it has
complied with such requirements.
SECTION 3.7. Holdback Agreement. The Company agrees that it and its
Affiliates will not effect any sale, offer for sale, or grant any option to
purchase any shares of common stock (or securities convertible into or
exchangeable or exercisable for common stock) (collectively, "Sales") during the
10-day period prior to, and the 90-day period (or such longer period, not to
exceed 120 days, as the managing underwriter(s) therefor determines) beginning
on the effective date of a registration statement filed pursuant to Section 3.1
without the consent of such managing underwriter(s). The Stockholders agree not
to effect any Sales during the 10-day period prior to, and the 90-day period (or
such longer period, not to exceed 120 days, as the managing underwriter(s)
therefor determines) beginning on the effective date of a registration statement
relating to a primary offering (other than one described in clauses (i), (ii) or
(iii) of the first sentence of Section 3.2 hereof) without the consent of such
managing underwriter(s); provided that this sentence shall be of no force and
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<PAGE>
effect if the Company effects a Sale or files any registration statement for the
benefit of any other party during such 120-day period.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Representations and Warranties of the Company. The Company
hereby represents and warrants to each of the Stockholders as follows:
(a) The execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the transactions
contemplated by this Agreement are within its corporate powers and have
been duly authorized by all necessary corporate action on its part. This
Agreement constitutes a legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, (i) except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally, including the effect of statutory and other
laws regarding fraudulent conveyances and preferential transfers, and (ii)
subject to the limitations imposed by general equitable principles
(regardless of whether such enforceability is considered in a proceeding at
law or in equity).
(b) The execution, delivery and performance of this Agreement by the
Company does not and will not contravene or conflict with or constitute a
default under the Company's Certificate of Incorporation or By-laws or any
of its material Contracts.
(c) Immediately after giving effect to both the Restructuring and the
Distribution (including, without limitation, after giving effect to the
distribution of shares of Spinco Common Stock to the holders of common
stock of Loral and the holders of options with respect to common stock of
Loral, who or which may be entitled to receive shares of Spinco Common
Stock pursuant to or in connection with the Distribution Agreement, the
Merger Agreement or
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<PAGE>
otherwise), (i) the Company's authorized capital stock shall consist of
________ shares of Spinco Common Stock and ________ shares of Preferred
Stock, of which ________ shares of Spinco Common Stock and ________ shares
of Preferred Stock shall be issued and outstanding, (ii) Loral will be the
record and beneficial owner of _______ shares of Preferred Stock, all of
which will be validly issued and fully paid and nonassessable and all of
which will be free of all Liens, (iii) except for the shares of Spinco
Common Stock and the shares of Preferred Stock specified in clause (i)
above, there will be no other Equity Securities, and (iv) the Wing
Stockholders will hold, in the aggregate, at least twenty percent (20%) of
the Total Voting Power.
ARTICLE V
TERM
Section 5.1. Term. The term (the "Term") of this Agreement shall
commence on the date hereof and shall continue until the earlier of (x) the date
on which the Voting Power of the Equity Securities, on a fully diluted basis,
beneficially owned by Loral and its Affiliates shall represent less than five
percent (5%) of the Total Voting Power, (y) the seventh anniversary of the date
hereof, or (z) a Change of Control (as defined in Section 1.1(c) above). Upon
expiration of the Term, the provisions of this Agreement shall terminate, and be
of no further force or effect, automatically without any further action on the
part of any parties hereto; provided that the provisions of Articles III and VI
shall continue without regard to the term limitation set forth in this sentence;
provided further that no such termination shall relieve any party of any
liability to the other parties hereto, to the extent such liability is incurred
prior to the expiration of the Term.
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<PAGE>
ARTICLE VI
MISCELLANEOUS
Section 6.1. Certain Restrictions. The Company shall not take or
recommend to its stockholders any action, including any amendment of its
Certificate of Incorporation, By-laws or stockholder rights plan, if any, which
would impose restrictions applicable to Loral and not to other securityholders
generally based upon the size of Loral' security holdings, the business in which
it is engaged or other considerations applicable to it and not to
securityholders generally. In addition, the Company shall not take or recommend
to its stockholders any action, including any amendment of its Certificate of
Incorporation, By-laws or stockholder rights plan, if any, which would likely
adversely affect in any material respect, either directly or indirectly, any of
the rights or obligations of the Stockholders under the provisions of this
Agreement.
The Stockholders agree that the Company may adopt a stockholders
rights plan similar to the stockholders rights plan adopted by Loral except that
Loral (and its Affiliates and associates) shall not be deemed to be an
"Acquiring Person" unless Loral and its Affiliates become the beneficial owner
of 25% or more of the outstanding shares of common stock of the Company.
Section 6.2. Entire Agreement. This Agreement and the Restructuring
Agreement (including the schedules and exhibits and the agreements and other
documents referred to therein, including, without limitation, the Tax Sharing
Agreement and the Transition Services Agreements) constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all other prior negotiations, commitments, agreements and
understandings, both written and oral, between the parties or any of them with
respect to the subject matter hereof.
Section 6.3. Fees and Expenses. Except as otherwise provided in this
Agreement, all costs and expenses incurred by the Stockholders and the Company
in connection with consummating such party's obligations
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<PAGE>
hereunder or otherwise shall be paid by the party incurring such cost or
expense.
Section 6.4. Access to Information. During the Term, the Company
shall provide to each Stockholder reasonable access to the books and records of
the Company and its subsidiaries during the regular business hours of the
Company and such subsidiaries, following the Company's receipt of a written
notice from such Stockholder requesting such access; provided that the Company
shall not be required to provide any confidential information if the Company
reasonably determines that the providing of such information would result in (x)
a violation of applicable antitrust laws or (y) create a substantial likelihood
of a significant adverse effect on the Company; provided, further, that the
Stockholder shall keep confidential any confidential information disclosed to it
except as required by law, service of process, interrogatories, or similar legal
process, and except for any such information which becomes publicly available
through no fault of the Stockholder.
Section 6.5. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF
NEW YORK WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES THEREOF (EXCEPT
IN THOSE CIRCUMSTANCES WHERE THE CORPORATE LAW OF THE COMPANY'S JURISDICTION OF
ORGANIZATION REQUIRES THE APPLICATION OF THE LAW OF THE COMPANY'S JURISDICTION
OF ORGANIZATION WITH RESPECT TO A PARTICULAR MATTER).
Section 6.6. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given upon (a) transmitter's
confirmation of a receipt of a facsimile transmission, (b) confirmed delivery by
a standard overnight carrier or when delivered by hand or (c) the expiration of
five Business Days after the day when mailed by certified or registered mail,
postage prepaid, addressed at the following addresses (or at such other address
for a party as shall be specified by like notice):
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(a) If to any of the Stockholders, to:
Loral Corporation
c/o Lockheed Martin Corporation
6801 Rockledge Drive
Bethesda, MD 20817
Telephone: (301) 897-6125
Telecopy No.: (301) 897-6333
Attention: General Counsel
and to:
Skadden, Arps, Slate, Meagher
& Flom
919 Third Avenue
New York, New York 10022
Telephone: (212) 735-3000
Telecopy No.: (212) 735-2000
Attention: Peter Allan Atkins, Esq.
Lou R. Kling, Esq.
and to:
O'Melveny & Myers
153 E. 53rd Street
New York, New York 10022
Telephone: (212) 326-2000
Telecopy No.: (212) 326-2160
Attention: C. Douglas Kranwinkle, Esq.
Jeffrey J. Rosen, Esq.
(b) If to the Company, to:
Loral Space & Communications Corporation
600 Third Avenue
New York, New York
Telephone: (212) 697-1105
Telecopy No.: (212) 602-9805
Attention: General Counsel
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<PAGE>
with a copy to:
Willkie Farr & Gallagher
153 E. 53rd Street
New York, New York 10022
Telephone: (212) 821-8000
Telecopy No.: (212) 821-8111
Attention: Robert B. Hodes, Esq.
Bruce R. Kraus, Esq.
In addition to providing any notice required to be given by the
Company pursuant to its Certificate of Incorporation in the manner specified
therein, the Company shall send to each Stockholder by telecopy in accordance
with this Section 6.6 a copy of each such notice.
Section 6.7. Successors and Assigns; Reclassifications; No Third
Party Beneficiaries. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any party hereto
(whether by operation of law or otherwise) without the prior written consent of
the other parties hereto (which consent may not be unreasonably withheld),
except that any party shall have the right, without the consent of any other
party hereto, to assign all or a portion of its rights, interests and
obligations hereunder to one or more direct or indirect subsidiaries, but no
such assignment of obligation shall relieve the assigning party from its
responsibility therefor. In the event of any recapitalization or
reclassification of any Equity Securities, or any merger, consolidation or other
transaction with like effect, the securities issued in replacement or exchange
for such Equity Securities shall be deemed Equity Securities hereunder. This
Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and nothing in this Agreement, express or implied, is intended to or
shall confer upon any other person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement; provided that the
indemnified parties referred to in Section 3.5 hereof are intended to be third
party beneficiaries of the provisions of Section 3.5 hereof, and shall have the
right to enforce such provisions as if they were parties hereto.
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<PAGE>
Section 6.8. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 6.9. Further Assurances. Each party hereto or person subject
hereto shall do and perform or cause to be done and performed all such further
acts and things and shall execute and deliver all such other agreements,
certificates, instruments and documents as any other party hereto or person
subject hereto may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
Section 6.10. Interpretation. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement. Unless otherwise
specified in this Agreement, all references in this Agreement to "days" shall be
deemed to be references to calendar days.
Section 6.11. Legal Enforceability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without affecting the validity or enforceability of the
remaining provisions hereof. Any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
Section 6.12. Consent to Jurisdiction. Each of the parties hereto
irrevocably and unconditionally (a) agrees that all suits, actions or other
legal proceedings arising out of this Agreement or any of the transactions
contemplated hereby (a "Suit") shall be brought and adjudicated solely in the
United States District Court for the District of Delaware, or, if such court
will not accept jurisdiction, in the Delaware Chancery Court or any court of
competent civil jurisdiction sitting in New Castle County, Delaware, (b) submits
to the non-exclusive jurisdiction of any such court for the purpose of any
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<PAGE>
such Suit and (c) waives and agrees not to assert by way of motion, as a defense
or otherwise in any such Suit, any claims that it is not subject to the
jurisdiction of the above courts, that such Suit is brought in an inconvenient
forum or that the venue of such Suit is improper. Each of the parties hereto
also irrevocably and unconditionally consents to the service of any process,
summons, pleadings, notices or other papers in a manner permitted by the notice
provisions of Section 6.6 hereof and agrees that any such form of service shall
be effective in connection with any such Suit; provided that nothing contained
in this Section 6.12 shall affect the right of any party to serve process,
pleadings, notices or other papers in any other manner permitted by applicable
Law.
Section 6.13. Specific Performance. Each of the parties hereto
acknowledges and agrees that in the event of any breach of this Agreement, each
non-breaching party would be irreparably and immediately harmed and could not be
made whole by monetary damages. It is accordingly agreed that the parties
hereto (a) will waive, in any action for specific performance, the defense of
adequacy of a remedy at law and (b) shall be entitled, in addition to any other
remedy to which they may be entitled at law or in equity, to compel specific
performance of this Agreement in any action instituted in any court referred to
in Section 6.12 hereof.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the day and year first above written.
LORAL CORPORATION
By:______________________________
Name:
Title:
LORAL SPACE & COMMUNICATIONS
CORPORATION
By:______________________________
Name:
Title:
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<PAGE>
Exhibit 99.13
CONFIDENTIALITY AND STANDSTILL AGREEMENT
This agreement will confirm our possible interest in preliminary
discussions ("DISCUSSIONS") which might lead to some form of negotiated
transaction between the parties (the "TRANSACTION"). During such Discussions,
we, which term (as well as the terms "us" and "party" when referring to Lockheed
Martin Corporation shall include Lockheed Martin Corporation and its affiliates
and their directors, officers, employees and Representatives (as hereinafter
defined) and you, which term (as well as the term "party" when referring to
Loral Corporation shall include Loral Corporation and its affiliates and their
directors, officers, employees and Representatives, may determine that it is
necessary and appropriate to exchange certain information relating to us or you
respectively. Any such information (whether written or oral) furnished (whether
before or after the date hereof) by you to us or by us to you, including your or
our respective financial advisors, attorneys, accountants or agents
(collectively, "REPRESENTATIVES") and all analyses, compilations, forecasts,
studies or other documents prepared by you or by us in connection with your or
our review of, or interest in, the Discussions or the Transactions which contain
or reflect any such information is hereinafter referred to as the "INFORMATION."
The term Information will not include information which (i) is or becomes
publicly available other than as a result of a disclosure by the receiving party
or (ii) is or becomes available to the receiving party on a nonconfidential
basis from a source (other than that party) which, to the best of the receiving
party's knowledge, is not prohibited from disclosing such information to it by a
legal, contractual or fiduciary obligation, or (iii) is independently developed
by the receiving party without reference to the Information.
Accordingly, it is hereby agreed that:
1. Each of the parties (i) will keep the Information confidential and will not
(except as required by applicable law, regulation or legal process, and
only after compliance with paragraph 3 below), without the prior written
consent to the party which furnished the Information, disclose the
Information in any manner whatsoever, and (ii) will not use the Information
other than in connection with the Transaction. Information may be revealed
to a receiving party's Representatives only if such Representatives (a)
need to know the Information for the purpose of evaluating, or advising the
receiving party with respect to the Transaction, (b) are informed of the
confidential nature of the Information and (c) agree to act in accordance
with the terms of this agreement.
2. Each of the parties will not (except as required by applicable law,
regulation or legal process, and only after compliance with paragraph 3
below), without the other party's prior written consent, disclose to any
person the fact that the Information exists or has been made available,
that either party is considering the Transaction, or that discussions or
negotiations are taking or have taken place concerning the Transactions or
any term, condition or other fact relating to any such Transaction or such
discussions or negotiations, including, without limitation, the status
thereof.
<PAGE>
3. In the event that we are requested pursuant to, or required by, applicable
law, regulation or legal process to disclose any of the Information, we
will notify you promptly so that you may seek a protective order or other
appropriate remedy or, in your sole discretion, waive compliance with the
terms of this agreement. Similarly, in the event that you are requested
pursuant to, or required by, applicable law, regulation or legal process to
disclose any of the Information provided by us, you will notify us promptly
so that we may seek a protective order or other appropriate remedy or in
our sole discretion, waive compliance with the terms of this agreement. In
the event that no such protective order or other remedy is obtained, that
we or you waive compliance with the terms of this agreement, or that
disclosure is legally required, the disclosing party will furnish only that
portion of the information which it is advised by counsel is legally
required and will exercise reasonable efforts to obtain reliable assurance
that confidential treatment will be accorded the Information.
4. If either party determines to cease discussions and/or not to proceed with
a Transaction, it will promptly inform the other party of that decision.
In that case, each party at its sole election will either (i) promptly
destroy all copies of the written Information in its possession and confirm
such destruction to the other party in writing, or (ii) promptly deliver to
the other party at the returning party's expense all copies of the written
Information in its possession.
5. The parties acknowledge that neither party or any of its controlling
persons within the meaning of Section 20 of the Securities Exchange Act of
1934, as amended, makes any express or implied representation or warranty
as to the accuracy or completeness of the Information furnished to the
other party, and the parties agree that no such person will have any
liability relating to the Information or for any errors therein or
omissions therefrom. The parties further agree that they are not entitled
to rely on the accuracy or completeness of the Information and that they
will be entitled to rely solely on such representations and warranties as
may be included in any definitive agreement with respect to a Transaction,
subject to such limitation and restrictions as may be contained therein.
6. The parties acknowledge that they are aware of the restrictions imposed by
the United States securities laws on the purchase or sale of securities by
any person who has received material, non-public information from the
issuer of such securities and on the communication of such information to
any other person when it is reasonably foreseeable that such other person
is likely to purchase or sell such securities in reliance upon such
information.
7. For a period of three years from the date of this agreement, neither you
nor we nor any of either of our controlled subsidiaries, will, unless
specifically invited by the other party ("party" in this paragraph 7 and in
paragraph 8 meaning either (i) Lockheed Martin Corporation or (ii) Loral
Corporation and any existing or newly organized subsidiary of Loral
Corporation the stock of which is distributed to the shareholders of Loral
Corporation, as the case may be) or its Board of Directors: (i) acquire,
offer to
2
<PAGE>
acquire, or agree to acquire, directly or indirectly, by purchase or
otherwise, any voting securities, or direct or indirect rights to acquire
any voting securities of the other party, or any assets of the other party
or any subsidiary or division thereof or of any such successor or
controlling person; (ii) make, or in any way participate in, directly or
indirectly, any "solicitation" of "proxies" (as such terms are used in the
rules of the Securities Exchange Commission) to vote, or seek to advise or
influence any person or entity with respect to the voting of, any voting
securities of the other party; (iii) make any public announcement with
respect to, or submit a proposal for, or offer of (with or without
conditions) any extraordinary transactions involving the other party or its
securities or assets; (iv) form, join or in any way participate in a
"group" (as defined in Section 13 (d) (3) of the Securities Exchange Act of
1934, as amended) in connection with any of the foregoing. The parties
agree that for the period specified above, neither will publicly request
the other (its officers, directors, employees and agents) or publicly
disclose any request, directly or indirectly, to waive any provisions of
this paragraph.
8. Each of the parties hereto agrees that, for a period of two years from the
date of this agreement, it and its controlled subsidiaries will not,
directly or indirectly, solicit for employment any employee of the other
party or any of its subsidiaries who became known to it as a result of the
Discussions or its consideration of a Transaction or any other person with
whom a party has direct contact in the course of negotiating any
Transaction, provided, however, that any such solicitation shall not be
deemed a breach of this agreement if (i) the personnel who perform such
solicitation have no access to or knowledge of any Information or this
agreement and (ii) none of the soliciting party's personnel who have access
to the Information have actual advance knowledge of such solicitation;
provided, further that nothing contained in this paragraph 8 shall be
deemed to limit in any manner our ability to offer employment to your
employees in the event of the consummation of a Transaction between us.
The term "solicit for employment" shall not be deemed to include general
solicitations of employment not specifically directed towards employees of
a party or any of its subsidiaries.
9. Each of the signatories acknowledge that remedies at law may be inadequate
to protect it against any actual or threatened breach of this agreement
and, without prejudice to any other rights and remedies otherwise available
to them, the signatories agree that each of them shall be entitled to
equitable relief, including injunction. In the event of litigation
relating to this agreement, if a court of competent jurisdiction determines
in a final, nonappealable order that this agreement has been breached then
the breaching signatory shall reimburse the nonbreaching signatory for
costs and expenses (including, without limitation, legal fees and expenses)
incurred in connection with all such litigation.
10. No failure or delay by either signatory in exercising any right, power or
privilege hereunder will operate as a waiver thereof, nor will any single
or partial exercise thereof preclude any other or further exercise thereof
or the exercise of any right, power or privilege hereunder.
3
<PAGE>
11. This agreement will be governed by and construed in accordance with the
laws of the State of New York.
12. Any notice or communication hereunder shall be in writing and shall be
delivered personally, telegraphed, telexed or sent by certified, registered
or express mail, postage prepaid. Any such notice shall be deemed given
when so delivered personally, telegraphed, telexed or sent by facsimile
transmissions or, if mailed, three (3) business days after the date of
deposit in the United States mail, by certified mail return receipt
requested as follows:
(i) If to us, to:
Lockheed Martin Corporation
6801 Rockledge Drive
Bethesda, Maryland 20817
Telephone: 301-897-6125
Telecopy: 301-897-6791
Attention: General Counsel
with a copy to:
O'Melveny & Myers
153 E. 53rd Street
New York, New York 10022
Telephone: (212) 326-2000
Telecopy: (212) 326-2160
Attention: Douglas C. Kranwinkle
and to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Telephone: (212) 735-3000
Telecopy: (212) 735-2001
Attention: Peter Allan Atkins
(ii) If to you, to:
Loral Corporation
600 Third Avenue
New York, New York 10016
Telephone: 212-697-1105
Telecopy: 212-682-9805
Attention: Michael B. Targoff
4
<PAGE>
with a copy to:
Willkie Farr & Gallagher
153 E. 53rd Street
New York, New York 10022
Telephone: (212) 821-8237
Telecopy: (212) 821-8111
Attention: Bruce R. Kraus, Esq.
13. This agreement contains the entire agreement between the signatories
concerning the confidentiality of the Information and other matters covered
hereby, and no modifications of this agreement or waiver of the terms and
conditions hereof will be binding, unless approved in writing by each of
the signatories.
Executed this 4th day of December, 1995.
LOCKHEED MARTIN CORPORATION LORAL CORPORATION
By: /s/ Frank H. Menaker, Jr. By: /s/ Michael B. Targoff
------------------------- ----------------------
Its: Vice President and Its: Senior Vice President
General Counsel and Secretary
------------------------ ---------------------
5
<PAGE>
Exhibit 99.14
[Letterhead of Lazard Freres & Co. LLC]
January 7, 1996
The Board of Directors
Loral Corporation
600 Third Avenue
New York, NY 10016
Dear Members of the Board:
We understand that Lockheed Martin Corporation (the "Company"), LAC
Acquisition Corporation ("LM Sub") and Loral Corporation ("Loral") have entered
into an Agreement and Plan of Merger, dated as of January 7, 1996 (the
"Agreement"), pursuant to which the Company will commence a tender offer (the
"Offer") to purchase all the issued and outstanding shares of Common Stock of
Loral ("Loral Common Stock") and associated preferred stock purchase rights for
$38.00 per share in cash. Pursuant to the Agreement, following consummation of
the Offer, LM Sub will merge (the "Merger") with and into Loral, and each
remaining outstanding share of Loral Common Stock, with the exception of holders
of dissenting shares, will be converted into the right to receive $38.00 in
cash, all as more fully provided in the Agreement. In accordance with the
Agreement and the Restructuring, Financing and Distribution Agreement (the
"Distribution Agreement") referred to therein, immediately prior to the
consummation of the Offer, Loral will declare a distribution (the
"Distribution") to holders of shares of Loral Common Stock of shares in a newly
formed corporation ("New Loral") which will hold certain assets, including
Loral's investments in Globalstar, L.P., Space Systems/Loral, Inc. ("SS/L"), and
K&F Industries, Inc. and $712 million in cash to be provided to the Company
pursuant to the Agreement, and be subject to certain liabilities. Such
consideration to be received by the holders of shares of Loral Common Stock in
the Offer, the Merger and the Distribution is hereinafter defined as the
"Consideration". Also pursuant to the Agreement, the Company will retain a
preferred stock interest in New Loral convertible into 20% of the common stock
of New Loral, and will assume certain guarantees of Globalstar, L.P. bank debt.
The Merger Agreement and the Distribution Agreement assume, with respect to the
distributions to holders of Loral Common Stock, that all options, restricted
shares and other securities convertible into or exchangeable for shares of Loral
Common Stock are exercised or otherwise participate in the distributions.
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of shares of Loral Common Stock of the aggregate
Consideration. In connection with this opinion, we have:
(i) Reviewed the financial terms and conditions of the proposed form of
the Agreement;
<PAGE>
Loral Corporation
Page 2
(ii) Reviewed the financial terms and conditions of the proposed form of
the Distribution Agreement;
(iii) Analyzed certain publicly available historical business and
financial information relating to Loral and Globalstar
Telecommunications Limited (together with Loral, a general partner
of Globalstar, L.P.) and certain non-public financial information
regarding Loral and the assets that will comprise New Loral;
(iv) Reviewed certain projected financial information for Loral and New
Loral furnished by Loral and New Loral;
(v) Held discussions with members of the senior management of Loral and
New Loral with respect to the businesses and prospects of Loral and
New Loral;
(vi) Considered certain terms of the agreements which govern the
interests in SS/L and Globalstar, L.P., including certain put rights
with respect to SS/L and certain restrictions on transfers relating
to Globalstar, L.P.;
(vii) Reviewed public information with respect to certain other companies
in lines of businesses we believe to be generally comparable to the
businesses of Loral and New Loral;
(viii) Reviewed the terms of selected transactions in industries generally
comparable to the businesses of Loral and New Loral;
(ix) Reviewed the historical stock prices and trading volumes of Loral
Common Stock and Globalstar Telecommunications Limited common stock;
(x) Reviewed the presentation by Lehman Brothers Inc. to Loral's Board
of Directors dated January 7, 1996 concerning New Loral; and
(xi) Conducted such other financial studies, analyses and
investigations as we deemed appropriate.
We have not had the opportunity to review the final documents that may be
used in connection with the Offer, the Merger or the Distribution, as such
materials have not yet been prepared or, in certain cases, finalized. Neither
have we had the opportunity to review the financial statements, pro forma
financial statements or registration statement for New Loral, which have also
not yet been prepared.
We have relied upon the accuracy and completeness of the foregoing
information, and have not assumed any responsibility for any independent
verification of such information or any independent valuation or appraisal of
any of the assets or liabilities of Loral or New Loral. With respect to
financial forecasts, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of
management of each of Loral and New Loral as to the future financial performance
of Loral and New Loral. We assume no responsibility for and express no view as
to such forecasts or the assumptions on which they are based.
Further, our opinion is necessarily based on economic, monetary, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof. Loral has not authorized us to solicit third party
indications of interest in acquiring Loral, New Loral or portions thereof.
<PAGE>
Loral Corporation
Page 3
In rendering our opinion, we have assumed that the transactions described
above will be consummated on the terms described in the forms of the agreements
reviewed by us, without any waiver of any material terms or conditions by Loral,
and that obtaining the necessary regulatory approvals for the transactions will
not have an adverse effect on New Loral.
Lazard Freres & Co. llc is acting as financial advisor to Loral in
connection with the transactions and will receive a fee for our services that is
contingent in part upon the consummation of the transactions. We have in the
past provided investment banking services to Loral, for which we have been paid
customary fees.
Our engagement and the opinion expressed herein are solely for the benefit
of Loral's Board of Directors and the holders of Loral Common Stock. It is
understood that this letter may not be disclosed or otherwise referred to
without our prior consent, except as may otherwise be required by law or by a
court of competent jurisdiction.
Based on and subject to the foregoing, we are of the opinion that the
aggregate Consideration is fair to the holders of Loral Common Stock from a
financial point of view.
Very truly yours,
LAZARD FRERES & CO. LLC
By /s/ Felix G. Rohatyn
_________________________
Managing Director
<PAGE>
EXHIBIT 99.15
[Letterhead of LORAL CORPORATION]
January 12, 1996
Dear Loral Shareholder:
This week we announced a series of strategic transactions that are
consistent with our long-term goal of delivering shareholder value and, at the
same time, achieve important objectives for our customers, employees and the
communities in which we operate.
The transactions are designed to provide you with significant present value,
through the cash sale of our defense electronics and systems integration
businesses to Lockheed Martin, and the ability to realize future value through
your continuing ownership of a newly formed public company that will
incorporate Loral's holdings in the fast-growing space and telecommunications
market.
The new company, to be called Loral Space & Communications Ltd., will
consist of Loral's holdings in Globalstar, Space Systems/Loral and other
affiliated businesses. (Its shares will be distributed to Loral shareholders
on a one-for-one basis.) Loral Space will have the benefit of concentrated
management focus, over $700 million in cash and no debt. It will be in a
position to take advantage of the promising growth opportunities that exist in
satellite-based businesses worldwide.
Accompanying this letter is a Schedule 14D-9, which describes the Board's
unanimous decision to recommend the transactions, and tender offer materials
of Lockheed Martin. These documents contain important information relating to
the transactions, and we urge you to read them carefully.
Sincerely,
/s/ Bernard L. Schwartz
Bernard L. Schwartz
Chairman of the Board of Directors
<PAGE>
Exhibit 99.16
LOCKHEED MARTIN AND LORAL
AGREE TO STRATEGIC COMBINATION
Lockheed Martin Will Acquire Loral's Defense Electronics
and System Integration Businesses for $9.1 Billion
Loral's Shareholders to Receive $38 Per Share in Cash and
Shares in New Loral Space and Communications Corporation
Lockheed Martin to Invest $344 Million for 20 Percent
of Loral Space at an Effective Price of $7.50 Per Share
Total Transaction Has Estimated Value In Excess of $10
Billion
BETHESDA, Maryland and NEW YORK CITY, January 8 -- Daniel M. Tellep, Chairman of
Lockheed Martin Corporation (NYSE:LMT), Norman R. Augustine, Lockheed Martin's
president and chief executive officer, and Bernard L. Schwartz, chairman and
chief executive officer of Loral Corporation (NYSE:LOR), today announced
agreement on a series of interrelated strategic transactions with an estimated
value exceeding $10 billion.
The three key elements of the agreement are: first, the combination of
the two companies' defense electronics and system integration businesses to
enhance competitiveness and opportunities for growth in the rapidly evolving
global environment; second, the distribution to Loral shareholders of its
holdings in the fast-growing space and telecommunications market through a newly
formed company to be called Loral Space and Communications Corporation; and
third, a purchase by Lockheed Martin of an equity position in Loral Space.
Under the agreement, which has been unanimously approved by both
companies' boards of directors:
. Lockheed Martin will acquire Loral's defense electronics and system
integration businesses for approximately $9.1 billion, including $2.1
billion of assumed debt. Of the total, $7 billion, or $38 in cash per
share, will be paid directly to Loral shareholders by Lockheed Martin
through a tender offer commencing no later than Friday, January 12.
. Loral shareholders also will receive for each share, one share of the newly
formed public company which will own Loral's present satellite and
telecommunications interests, including Globalstar (NASDAQ:GSTRF) and Space
Systems/Loral.
. Lockheed Martin will invest an additional $344 million for a 20% equity
position in Loral Space, at an effective price of $7.50 per share. Loral
Space will begin business with over $700 million in cash and no debt.
<PAGE>
. Lockheed Martin will provide Loral Space with support in key technologies
to further reinforce the strategic relationship.
. Schwartz will be chairman and CEO of Loral Space and will become vice
chairman of Lockheed Martin and join its board of directors.
The agreement represents the culmination of a long-term relationship
between Lockheed Martin and Loral, bringing together the technologies, resources
and talents of two of the most successful companies in the defense electronics
industry and creating a new space-based telecommunications company.
"The strategic combination with Loral solidifies Lockheed Martin's
leadership position as a world premier high technology company," said Tellep.
"It enhances our technology base, improves our competitiveness, expands our
global reach and provides new opportunities for growth. With some $30 billion in
annual sales and a broad portfolio of businesses spanning aerospace, defense,
commercial and civil programs, we are well positioned for the 21st century. Our
shareholders, customers and employees will benefit from this landmark event."
Schwartz said, "Our board and management team enthusiastically support
this transaction as the right move at the right time. It ensures our customers
and employees the long-term capabilities needed in our increasingly demanding
marketplace. The combined businesses build on the complementary cultures of
Lockheed Martin and Loral, and I look forward to working with our new partners.
At the same time, the transaction provides Loral shareholders with significant
present value together with continuing ownership in Loral Space, which itself
has substantial potential for shareholder value growth. We intend to create a
major space-based telecommunications enterprise, building on this foundation."
Augustine noted that the aerospace/electronics industry is continuing
to consolidate with a corresponding strengthening of a number of other large
competitors, both in the U.S. and abroad.
"The Lockheed Martin/Loral strategic combination expands our ability
to serve our customers in areas spanning the depths of the oceans to the reaches
of space. Moreover, the continued participation in the combined company of an
industry leader like Bernard Schwartz will further enhance our ability to
deliver shareholder value," Augustine said. "Financially, in 1996 the dilution
to earnings will be minimal, even before
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<PAGE>
considering synergy benefits, and accretive thereafter. With the cash flow of
the combined enterprise, we expect leverage to drop from 67% at the time of
closing to less than 60% by year end 1996 with strong debt coverage maintained,"
Augustine said.
Lockheed Martin Highlights
- --------------------------
When the transaction is complete, Lockheed Martin's annual combined
sales will reach approximately $30 billion with a total backlog of approximately
$47 billion. The combination with Loral enhances key core businesses --
electronics, tactical systems, and information and technology services -- with
major opportunities for improving competitiveness and capitalizing on
complementary strengths in system integration; electronic combat systems;
tactical missiles; data management systems; simulation and training systems; and
command, control and communications. The company will operate with a
discretionary research and development budget of approximately $1 billion per
year, and is expected to generate approximately $1.5 billion to $2.0 billion in
free cash annually.
Lockheed Martin currently is organized in five business sectors:
Aeronautics, Electronics, Energy & Environment, Information & Technology
Services, and Space & Strategic Missiles. When this transaction is completed,
the Loral business units initially will constitute a sixth sector, Tactical
Systems. A long-term consolidation plan will be developed following thorough
review and analysis to determine how to best integrate these businesses.
Tellep, who remains chairman of the board, Augustine, who becomes vice
chairman and continues as chief executive officer, and Schwartz, will form the
Office of the Chairman, which will address key strategic issues. Schwartz
intends to invest $10 million personally in Lockheed Martin common stock.
Two executive vice presidents and chief operating officers will report
to Augustine. Vance D. Coffman, executive vice president and chief operating
officer of Lockheed Martin, will have overall responsibility for the
Aeronautics, Energy & Environment and Space & Strategic Missiles businesses.
Frank C. Lanza, currently Loral's president and chief operating officer, also
will join Lockheed Martin's board of directors and serve as an executive vice
president and chief operating officer, with overall responsibility for the
Electronics, Information & Technology Services and Tactical Systems businesses.
In addition, Lanza will serve as president of Tactical Systems.
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<PAGE>
Loral Space Highlights
- ----------------------
Loral Space's space and telecommunications operations now will have
concentrated management focus, over $700 million in cash, no debt, a sufficient
financing in place to take advantage of a range of promising growth
opportunities in satellite-based businesses worldwide, including those that are
here now and those that will emerge in the future.
Loral Space has several principal operating assets. First is its 31%
interest in Globalstar, which is developing a $2 billion worldwide
satellite-based communications system capable of serving 10 million subscribers.
Loral Space is the managing general partner of Globalstar. Second is its 33%
interest in Space Systems/Loral, which is a leading commercial satellite
manufacturing company with annual sales of $1 billion. Other assets of the
enterprise will include all of Loral's Globalstar service provider franchises in
Canada, Mexico and Brazil; Loral's interest in the projected domestic and
international satellite DBS and broadband data projects, for example, Cyberstar;
and Loral's 22% interest in K&F Industries, a $250-million revenue aircraft
braking company. It is the intention over time to integrate the component
operating parts of Loral Space into a single entity.
"This transaction will enable the senior management of Loral Space to
focus on the satellite and space businesses, which have excellent potential for
growth," said Schwartz. "The participation of Lockheed Martin will enhance the
future of the new space company and will assure that the resources will be
available to complete the Globalstar project. Loral now will be a leading space
and communications company and have the opportunity to build and expand on its
current positions in satellite, data and information technologies, and direct
broadcast services."
At the same time it approved the Lockheed Martin strategic
combination, the Loral board of directors adopted a shareholder rights plan,
which is intended primarily to deter predatory or unfair acquisitions that might
interfere with the company's strategic objectives.
Terms of the Transaction
- ------------------------
Lockheed Martin's offer is contingent, among other things, on the
tendering of two-thirds of Loral's outstanding shares and government approvals,
including U.S. and European antitrust reviews.
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<PAGE>
Loral's board of directors will declare the distribution of Loral
Space and Communications Corporation shares to Loral shareholders of record
prior to closing the tender offer. The proceeds of the transaction received by
Loral's shareholders will be taxable to them. The two companies expect to close
the transaction by the end of February 1996.
A bank group, consisting of Morgan Guaranty Trust Co. of New York,
Bank of America and Citicorp USA, has committed $3.5 billion of financing and
has commenced the process to syndicate a $10-billion credit facility for
Lockheed Martin to support the tender offer.
Bear, Stearns & Co. is financial advisor to Lockheed Martin, will act
as dealer-manager in connection with the tender offer, and also rendered a
fairness opinion. Lazard Freres & Co, LLC and Lehman Brothers, Inc., are
financial advisors to Loral and Lazard has rendered a fairness opinion to
Loral's board of directors. The tender offer will be made pursuant to definitive
offering documents to be filed with the Securities and Exchange Commission.
Lockheed Martin, headquartered in Bethesda, Maryland, is a highly
diversified advanced technology company with current annual sales of $23
billion. It has 165,000 employees worldwide. Loral is a high technology company
that primarily concentrates in defense electronics, communications, space and
systems integration with annual sales of $6.7 billion. Headquartered in New York
City, Loral has 38,000 employees.
CONTACT:
Charles Manor/Lockheed Martin Corporation/301-897-6258
Joanne Hvala/Loral Corporation/212-697-1105
Ruth Pachman/Jim Fingeroth/Kekst and Co./212-593-2655
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