As filed with the Securities and Exchange Commission on October 15, 2003
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
LOCKHEED MARTIN CORPORATION
(Exact name of registrant as specified in its charter)
Maryland | 3760 | 52-1893632 | ||
(State of Incorporation) | (Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification No.) |
6801 Rockledge Drive
Bethesda, Maryland 20817
(301) 897-6000
(Address, including zip code, and telephone number, including area code, of registrants principal executive offices)
Frank H. Menaker
Senior Vice President and General Counsel
Lockheed Martin Corporation
6801 Rockledge Drive
Bethesda, Maryland 20817
(301) 897-6000
(Name, address, including zip code, and telephone number, including area code, of agent for service)
With copies to:
Glenn C. Campbell King & Spalding LLP 1730 Pennsylvania Ave., N.W. Washington, D.C. 20006 (202) 737-0500 |
Mark E. Mazo James E. Showen Hogan & Hartson L.L.P. 555 13th Street, N.W. Washington, D.C. 20004 (202) 637-5600 |
Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared effective.
If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, please check the following box. ¨
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
CALCULATION OF REGISTRATION FEE
Title of Class of Securities to be Registered |
Amount to be Registered |
Proposed Maximum Aggregate Offering Price |
Amount of Registration Fee | |||||||
Common Stock, $1.00 par value |
(1 | ) | $ | 1,937,813,084 | (2) | $ | 156,770 |
(1) | Omitted in reliance on Rule 457(o) |
(2) | Estimated solely for the purpose of calculating the registration fee and computed pursuant to Rules 457(f)(1) and 457(c) under the Securities Act of 1933, as amended, based on the market value of the Titan common stock to be exchanged in the merger, as the product of (i) $20.94, the average of the high and low sale prices of Titan common stock on The New York Stock Exchange on October 10, 2003 and (ii) the maximum possible number of shares of Titan common stock to be cancelled pursuant to the merger (calculated as 92,541,217 which is the sum of (a) 81,364,270 outstanding shares of Titan common stock, (b) 10,541,879 shares of Titan common stock issuable upon the exercise of outstanding employee and director options, (c) 97,952 shares of Titan common stock issuable upon exercise of outstanding warrants and (d) 537,116 shares of Titan common stock issuable upon conversion of Titans cumulative convertible preferred stock). |
The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this proxy statement/prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This proxy statement/prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
PROXY STATEMENT/PROSPECTUS
Dear Titan Stockholder:
A special meeting of the stockholders of The Titan Corporation will be held at [place and address], on [Day], , 200 ,] at [time] a.m., local time. At the special meeting, you will be asked to approve the merger of Titan with a subsidiary of Lockheed Martin Corporation. In the proposed merger, you may make one of the following elections regarding the type of merger consideration you wish to receive in exchange for your Titan common stock:
| a cash election of $22.00 in cash per share, without interest; |
| a stock election for Lockheed Martin common stock based on an exchange rate determined as described below; or |
| a combination election whereby 50% of your Titan shares will be exchanged for cash and 50% of your Titan shares will be exchanged for Lockheed Martin common stock based on the exchange rate. |
If you make a cash election or a stock election, the form of merger consideration that you actually receive will likely be adjusted as a result of the allocation procedures of the merger agreement which require that 50% of the shares of Titan common stock outstanding at the time of the merger must be exchanged for Lockheed Martin common stock, and 50% of the outstanding Titan shares must be exchanged for cash. If either the cash or stock election is oversubscribed, the allocation procedures may cause you to receive part cash and part Lockheed Martin common stock. The exchange rate will be determined by dividing $22.00 by the average trading price of Lockheed Martin common stock over a ten-day trading period, subject to lower and upper limits, or collars, of $46.00 and $58.00. Shares of Lockheed Martin common stock are listed on the New York Stock Exchange under the trading symbol LMT. On , 2003, the closing price of a share of Lockheed Martin common stock was $ .
The attached proxy statement/prospectus contains detailed information about the merger, the merger consideration and the procedures you must follow to elect the form of merger consideration you wish to receive. We encourage you to read this document carefully, including the Risk Factors beginning on page 19, for a description of factors that should be considered before you complete your proxy card or make your election with respect to the merger consideration.
Your vote is very important. Your board of directors has determined that the merger agreement and the merger are advisable, fair to and in the best interests of Titan and its stockholders. The merger cannot be completed unless the holders of a majority of the outstanding shares of Titan common stock vote to adopt the merger agreement and approve the merger. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE SIGN AND RETURN YOUR PROXY CARD OR DELIVER YOUR PROXY INSTRUCTIONS VIA THE INTERNET OR BY TELEPHONE. If you fail to submit your proxy, the effect will be a vote against the adoption of the merger agreement and approval of the merger.
On behalf of your board of directors, we encourage you to vote FOR the adoption of the merger agreement and approval of the merger and FOR the proposal to adjourn the special meeting, if necessary.
Sincerely, |
Gene W. Ray |
Chairman of the Board, President |
and Chief Executive Officer |
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or passed upon the adequacy or accuracy of this proxy statement/prospectus. Any representation to the contrary is a criminal offense.
This proxy statement/prospectus is dated , 2003, and is being first mailed to Titan stockholders on or about , 2003.
THE TITAN CORPORATION
3033 Science Park Road
San Diego, California 92121
(858) 552-9500
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD , 200
To the Stockholders of The Titan Corporation:
You are cordially invited to attend a special meeting of stockholders of The Titan Corporation to be held at [place and address], on [Day], , 200 , at [time] a.m., local time, to consider the following matters:
(1) | A proposal to adopt the merger agreement and approve the merger of Titan with a wholly-owned subsidiary of Lockheed Martin Corporation; |
(2) | A proposal to authorize Titan to adjourn the special meeting on one or more occasions, if necessary, (a) to solicit additional proxies if there are not sufficient votes at the time of the special meeting to approve proposal (1), (b) to allow extra time for the parties to satisfy other closing conditions to the merger, or (c) to calculate and announce the exchange rate before the vote on proposal (1) is taken; and |
(3) | Such other business as may properly come before the special meeting or any adjournments or postponements thereof. |
The accompanying proxy statement/prospectus forms a part of this notice and describes the terms and conditions of the merger agreement and includes a complete copy of the merger agreement as Annex A. Other important information is incorporated by reference in the proxy statement/prospectus from other documents. Please review all these materials carefully before submitting your proxy. Titans board of directors is soliciting your proxy.
This notice and the accompanying proxy statement/prospectus are being mailed to holders of our cumulative convertible preferred stock as well as holders of our common stock. However, only holders of record of Titan common stock at the close of business on , 200 will be entitled to vote at the special meeting or any adjournment or postponement thereof. As more fully described in the accompanying proxy statement/prospectus, we will redeem, at a price of $20.00 per share plus dividends in arrears, all shares of our cumulative convertible preferred stock that are not properly converted into our common stock before the close of business on , 200 , the redemption date. As a result, holders of our cumulative convertible preferred stock will not have the right to vote those shares at the special meeting. However, holders of our cumulative convertible preferred stock that properly convert their shares of cumulative convertible preferred stock into Titan common stock prior to the close of business on the redemption date will be entitled to elect the form of merger consideration they wish to receive upon completion of the merger.
To approve the merger, holders of a majority of the outstanding shares of Titan common stock must vote to adopt the merger agreement and approve the merger. To approve the proposal to adjourn the special meeting, holders of a majority of the shares of Titan common stock present or represented by proxy must vote to approve the adjournment proposal. Approval of the adjournment proposal is not a condition to the adoption of the merger agreement or approval of the merger. The Titan board of directors recommends that stockholders vote FOR both proposals.
To ensure your vote is counted, we urge you to vote using one of the following methods:
| sign the enclosed proxy card and mail it in the enclosed, prepaid and addressed envelope; |
| call toll-free 1-800-PROXIES and follow the instructions; or |
| access the web page at www.voteproxy.com and follow the on-screen instructions. |
If you attend the special meeting, you may revoke your proxy and vote in person even though you have submitted your proxy card or voted via the Internet or the toll-free number. Even if you plan to attend the special meeting, we urge you to submit a valid proxy promptly to ensure that your shares will be represented at the special meeting.
By order of the Board of Directors, |
Nicholas J. Costanza |
Senior Vice President, General Counsel and Secretary |
San Diego, California
, 2003
WHERE YOU CAN FIND MORE INFORMATION
Titan and Lockheed Martin file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any reports, statements or other information filed by Lockheed Martin or Titan at the SECs Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You also may obtain copies of this information by mail from the Public Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates, or from commercial document retrieval services. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. You also can inspect reports, proxy statements and other information about Lockheed Martin and Titan at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
The SEC maintains a website that contains reports, proxy statements and other information, including those filed by Lockheed Martin and Titan, at http://www.sec.gov. You also may access the SEC filings and obtain other information about Lockheed Martin and Titan through the websites maintained by Lockheed Martin and Titan, which are http://www.lockheedmartin.com and http://www.titan.com. The information contained in such websites is not incorporated by reference in this proxy statement/prospectus.
As allowed by SEC rules, this proxy statement/prospectus does not contain all the information you can find in the registration statement on Form S-4 filed by Lockheed Martin to register the shares of stock to be issued in the merger and the exhibits to the registration statement. The SEC allows Lockheed Martin and Titan to incorporate by reference information in this proxy statement/prospectus, which means that they can disclose important information to you by referring you to other documents filed separately with the SEC. The information incorporated by reference is deemed to be part of this proxy statement/prospectus, except for any information superseded by information in this proxy statement/prospectus. This proxy statement/prospectus incorporates by reference the documents set forth below that Lockheed Martin and Titan have previously filed with the SEC. These documents contain important information about the companies and their financial condition.
Lockheed Martin filings with the SEC
| Annual Report on Form 10-K for the year ended December 31, 2002; |
| Quarterly Reports on Form 10-Q for the quarters ended March 31, 2003 and June 30, 2003; |
| Current Reports on Form 8-K filed January 16, 2003, June 10, 2003, June 27, 2003 (as amended by Form 8-K/A filed July 22, 2003), August 8, 2003, August 26, 2003 and September 16, 2003; and |
| The description of Lockheed Martins common stock, $1.00 par value per share, contained in its Registration Statement on Form 8-B, filed with the Commission pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (as amended on Form 8-B/A filed on March 9, 1995), and any amendment or report filed for the purpose of updating such description. |
Titan filings with the SEC
| Annual Report on Form 10-K for the year ended December 31, 2002; |
| Quarterly Reports on Form 10-Q for the quarters ended March 31, 2003 and June 30, 2003; |
| Current Reports on Form 8-K filed on April 30, 2003, July 9, 2003, August 11, 2003 and September 17, 2003, and a Current Report on Form 8-K/A filed on June 19, 2003 (amending the Form 8-K filed on August 14, 2002); |
| The audited consolidated balance sheets of Jaycor, Inc. as of January 31, 2001 and 2002, the audited consolidated statements of operations, stockholders equity and cash flows of Jaycor, Inc. for each of the two years in the period ended January 31, 2002, and the notes related thereto and the related auditors report thereon included in the Current Report on Form 8-K filed on March 26, 2002; and |
| The description of Titans common stock included under the caption Securities to be Registered in Titans Registration Statement on Form 8-A, as filed on December 16, 1993, including any amendments or reports filed for the purpose of updating such description. |
All documents filed by Lockheed Martin and Titan pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act from the date of this proxy statement/prospectus to the date of the special meeting shall also be deemed to be incorporated herein by reference.
You may also obtain copies of any document incorporated in this proxy statement/prospectus, without charge, by requesting them in writing, by telephone or by e-mail from the appropriate company at the following addresses:
The Titan Corporation Investor Relations 3033 Science Park Road San Diego, California 92121 Telephone: (858) 552-9500 email: invest@titan.com |
Lockheed Martin Corporation Investor Relations 6801 Rockledge Drive Bethesda, Maryland 20817 Telephone: (301) 897-6598 email: investor.relations@lmco.com |
If you would like to request any documents, please do so by , 200 [5 business days before the special meeting] in order to receive them before the special meeting.
Neither Lockheed Martin nor Titan have authorized anyone to give any information or make any representation about the merger that is different from, or in addition to, that contained in this proxy statement/prospectus or in any of the materials that are incorporated by reference in this proxy statement/prospectus. Therefore, if anyone does give you information of this sort, you should not rely on it.
If you are in a jurisdiction where offers to exchange or sell, or solicitations of offers to exchange or purchase, the securities offered by this proxy statement/prospectus are unlawful, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this proxy statement/prospectus does not extend to you. The information contained in this proxy statement/prospectus speaks only as of the date of this document unless the information specifically indicates that another date applies.
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The Special Meeting |
10 | |||
Vote Required |
10 | |||
The Merger |
10 | |||
What You Will Receive in the Merger |
10 | |||
Recommendation of the Titan Board; Titans Reasons for the Merger |
12 | |||
Opinion of Relational Advisors LLC |
12 | |||
Lockheed Martins Reasons for the |
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Interests of Certain Persons in the Merger |
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Consent Solicitation and Exchange Offer for Titans Outstanding 8% Senior Subordinated Notes |
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Conditions to the Merger |
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Restrictions on Solicitation |
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Termination |
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Termination Fees |
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Material U.S. Federal Income Tax Consequences |
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Governmental and Regulatory Approvals |
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Redemption of Titan Preferred Stock |
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Comparison of Rights of Lockheed Martin and Titan Stockholders |
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Comparative Market Price Information |
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Listing and Trading of Lockheed Martin Common Stock |
17 | |||
Dissenters Rights |
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UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION |
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Recommendation of the Titan Board; Titans Reasons for the Merger |
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Interests of Certain Persons in the Merger; Conflicts of Interest |
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Consent Solicitation and Exchange Offer for Titans Outstanding 8% Senior Subordinated Notes |
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COMPARISON OF RIGHTS OF LOCKHEED MARTIN AND TITAN STOCKHOLDERS |
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ADOPTION OF ADJOURNMENT PROPOSAL |
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Annex A |
Agreement and Plan of Merger dated as of September 15, 2003 by and among Lockheed Martin Corporation, LMC Sub One, Inc. and The Titan Corporation | A-1 | ||
Annex B |
Opinion of Relational Advisors LLC | B-1 | ||
Annex C |
Section 262 of the Delaware General Corporation Law | C-1 |
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QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: | What is the proposed transaction that I am being asked to approve? |
A: | You are being asked to vote to adopt the merger agreement and approve the merger of Titan with a wholly-owned subsidiary of Lockheed Martin. In this proxy statement/prospectus, we refer to the agreement and plan of merger as the merger agreement. Under the merger agreement, Titan will be merged with and into LMC Sub One, a subsidiary of Lockheed Martin formed to complete the merger in a forward merger. However, under certain circumstances described in this proxy statement/prospectus, Titan may cause LMC Sub One to be merged with and into Titan in a reverse merger. In this proxy statement/prospectus, we alternately refer to the forward merger and the reverse merger as the merger. After the merger, LMC Sub One or Titan, as the successor in the merger, will continue to exist under Delaware law as a wholly-owned subsidiary of Lockheed Martin. |
Q: | What will I receive in exchange for my Titan common stock in the merger? |
A: | You may make one of the following elections regarding the type of merger consideration you wish to receive in exchange for your Titan common stock: |
| a cash election of $22.00 in cash per share, without interest; |
| a stock election for Lockheed Martin common stock based on an exchange rate determined as described below; or |
| a combination election whereby 50% of your Titan shares will be exchanged for cash and 50% of your Titan shares will be exchanged for Lockheed Martin common stock based on the exchange rate. |
If you make a cash election or a stock election, the form of merger consideration that you actually receive will likely be adjusted as a result of the allocation procedures of the merger agreement which require that 50% of the shares of Titan common stock outstanding at the effective time of the merger must be exchanged for Lockheed Martin common stock, and 50% of the outstanding Titan shares must be exchanged for cash. If either the cash or stock election is oversubscribed, the allocation procedures may cause you to receive part cash and part Lockheed Martin common stock.
Q: | If I receive Lockheed Martin common stock as merger consideration, how will the number of shares I receive be calculated? |
The number of shares of Lockheed Martin common stock that you will receive for each share of Titan common stock will be based on an exchange rate determined by dividing $22.00 by the average Lockheed Martin price. The average Lockheed Martin price means the average of the daily mean of the high and low sales prices per share of Lockheed Martin common stock for the ten trading days ending on, but not including, the third trading day prior to the effective time of the merger. For purposes of determining the exchange rate, Titan and Lockheed Martin have agreed to upper and lower limits, or collars, on the average Lockheed Martin price of $58.00 and $46.00. As a result, even if the average Lockheed Martin price as so calculated exceeded $58.00, the parties would still use $58.00 in determining the exchange rate and the exchange rate would be fixed at 0.3793. Similarly, even if the average Lockheed Martin price as so calculated was less than $46.00, the parties would still use $46.00 in determining the exchange rate and the exchange rate would be fixed at 0.4783.
Had the exchange rate been determined based on the ten-day trading period ending on , 2003, the most recent day prior to the printing of this proxy statement/prospectus, the average Lockheed Martin price would have been $ , and the exchange rate would have been .
1
The total number of shares of Lockheed Martin common stock you will receive will be the product of the exchange rate multiplied by the number of your shares of Titan common stock that are to be exchanged for Lockheed Martin common stock, rounding down to the nearest whole share. You will not receive any fractional shares of Lockheed Martin common stock in the merger. Instead, you will be paid cash for any fractional share based on the closing price per share of Lockheed Martin common stock on the trading day immediately before the effective time of the merger.
Q: | How will I know what the actual exchange rate is? |
A: | You may not know the exchange rate before submitting your vote on the adoption of the merger agreement and approval of the merger or making your election as to the form of merger consideration you wish to receive. Assuming that the merger closes on the day of the special meeting, Lockheed Martin will issue a press release at least two business days prior to the date set for the special meeting that will announce the exchange rate. If the special meeting is postponed or adjourned or the closing of the merger is delayed for any reason, Titan will issue subsequent press releases announcing the new special meeting date, the date to which the special meeting has been adjourned or the date on which the closing of the merger will occur, and, at least two business days prior to such later date, Lockheed Martin will issue another press release announcing the new exchange rate. All of these press releases also will be filed with the SEC and will be available on the SECs web site at www.sec.gov. |
Q: | How do I elect the form of merger consideration I wish to receive in the merger? How should I send in my stock certificates? |
A: | A letter of transmittal and election form is enclosed with this proxy statement/prospectus. If your shares of Titan common stock are registered in your own name, complete and sign the letter of transmittal and election form and send it to EquiServe Trust Company, N.A., the exchange agent for the merger, together with the stock certificates representing your Titan common stock. |
Q: | How do I make an election if I hold my shares of Titan common stock in street name? |
A: | If you wish to make a particular election and you hold your shares of Titan common stock in street name, you must follow the instructions provided by your bank or broker. |
Q: | Is there a deadline for making an election of the form of merger consideration that I wish to receive upon completion of the merger? |
A: | Yes. Your completed letter of transmittal and election form and stock certificates representing your shares of Titan common stock must be received by the exchange agent no later than 5:00 p.m., New York City time, on the last business day before the effective time of the merger. |
Q: | What if I do not send a letter of transmittal and election form or it is not received before the election deadline? |
A: | If the exchange agent does not receive a properly completed letter of transmittal and election form, together with stock certificates representing your shares of Titan common stock or a notice of guaranteed delivery from you before the election deadline, then you will receive a combination of cash for 50% of the shares of Titan common stock you own and Lockheed Martin common stock for the remaining 50% of the shares of Titan common stock you own. |
You bear the risk of delivery and should send your letter of transmittal and election form by courier, by hand or by fax, with stock certificates delivered by courier or by hand, to the appropriate addresses shown on the letter of transmittal and election form.
Promptly after the effective time of the merger, the exchange agent will provide stock certificate transmittal materials to the holders of Titan common stock who have not properly and timely completed the letter of transmittal and election form and surrendered their stock certificates. The transmittal materials will contain instructions for surrendering Titan stock certificates to the exchange agent in exchange for the merger consideration.
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Q: | What happens if the aggregate number of cash elections exceeds 50% of the outstanding shares of Titan common stock or if the aggregate number of stock elections exceeds 50% of the outstanding shares of Titan common stock? |
A: | Under the merger agreement, the number of shares of Titan common stock to be exchanged for cash must be equal to 50% of the total number of shares of Titan common stock outstanding immediately prior to the effective time of the merger. If, after the results of the letter of transmittal and election forms are calculated, the number of shares of Titan common stock to be exchanged for cash exceeds this 50% threshold, the exchange agent will determine the number of cash election shares that must be reallocated as stock election shares in order to achieve the 50% threshold. After the exchange agent makes this determination, all holders who have made cash elections will, on a pro rata basis, have a portion of their cash election shares reallocated as stock election shares so that the total number of shares of Titan common stock to be exchanged for cash will equal the 50% threshold. |
No reallocation will occur if a holder has made a cash election but would receive fewer than 20 shares of Lockheed Martin common stock. Instead, the cash election shares of the remaining holders of shares of Titan common stock will be reallocated on a pro rata basis, so that the 50% threshold is satisfied. Titan stockholders that make a combination election will not be subject to the allocation procedures.
Similarly, the number of shares of Titan common stock to be exchanged for shares of Lockheed Martin common stock also must be equal to the 50% threshold. If, after the results of the letter of transmittal and election forms are calculated, the number of shares of Titan common stock to be exchanged for Lockheed Martin common stock exceeds this 50% threshold, the exchange agent will determine the number of stock election shares that must be reallocated as cash election shares in order to achieve the 50% threshold. After the exchange agent makes this determination, all holders who have made stock elections will, on a pro rata basis, have a portion of their stock election shares reallocated as cash election shares so that the total number of shares of Titan common stock to be exchanged for shares of Lockheed Martin common stock will equal the 50% threshold.
As a result of the allocation procedures described above, if either the cash election or stock election is over oversubscribed, you may receive part cash and part Lockhead Martin common stock in exchange for your shares of Titan common stock.
Q: | What are the U.S. federal income tax consequences of the merger to Titan stockholders? |
A: | The tax consequences of the merger to you will depend on your particular facts and circumstances, the form of merger consideration you receive and the structure of the merger. You should consult your own tax advisor for a full understanding of the tax consequences of the merger. |
Assuming that the merger is completed as currently contemplated as a forward merger of Titan with and into LMC Sub One, you will not recognize any gain or loss for U.S. federal income tax purposes if you exchange your shares of Titan common stock solely for shares of Lockheed Martin common stock in the merger, except with respect to cash received in lieu of fractional shares of Lockheed Martin common stock. You will recognize gain or loss if you exchange your shares of Titan common stock solely for cash in the merger. You will recognize gain, but not loss, if you exchange your shares of Titan common stock for a combination of Lockheed Martin common stock and cash, but your taxable gain in that case will not exceed the cash you receive in the merger.
The structure of the merger could change from a tax-free forward merger into a taxable reverse merger, whereby LMC Sub One would be merged with and into Titan, if:
| Tax counsel to Lockheed Martin and Titan are unable to render an opinion at the effective time of the merger that the forward merger will be treated for U.S. federal income tax purposes as a tax-free reorganization solely because the aggregate value of the Lockheed Martin common stock to be delivered at closing would be insufficient to cause the merger consideration to meet the continuity of interest requirements under applicable tax regulations as described more fully under the heading The MergerMaterial U.S. Federal Income Tax Consequences; |
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| Lockheed Martin declines to increase the exchange rate of Lockheed Martin common stock to be delivered as merger consideration to the minimum extent necessary to cause the merger consideration to meet the continuity of interest requirements; and |
| Titan elects to restructure the proposed transaction as a taxable reverse merger rather than exercise Titans option to terminate the merger agreement under these circumstances. |
If the transaction were to proceed as a reverse merger under the scenario described above, you would recognize gain or loss, regardless of the type of consideration you receive, in an amount equal to the difference between (1) the sum of the cash and the fair market value of the shares of Lockheed Martin common stock you receive in the merger and (2) your adjusted basis in the shares of Titan common stock you exchange in the merger.
Q: | Am I entitled to dissenters rights? |
A: | Yes. You may dissent from the adoption of the merger agreement and approval of the merger and have the fair value of your shares of Titan common stock determined by a court. The fair value of your shares of Titan common stock, as determined by a court, may be more or less than the consideration to be paid in the merger. If the holders of more than 10% of Titans outstanding common stock properly dissent, Lockheed Martin is not required to complete the merger. For more information about dissenters rights in the merger, see The MergerDissenters Rights. |
To exercise dissenters rights, you must not vote in favor of the adoption of the merger agreement and approval of the merger or complete and submit a letter of transmittal and election form, and you must strictly comply with all of the applicable requirements of Delaware law summarized under the heading The MergerDissenters Rights.
We have included a copy of Section 262 of the Delaware General Corporation Law, or the DGCL, which governs dissenters rights, as Annex C to this proxy statement/prospectus.
Q: | What will happen to shares of Titans outstanding cumulative convertible preferred stock? Will holders of those shares have voting rights at the special meeting or receive special consideration in the proposed transaction? |
A: | We are mailing this proxy statement/prospectus to holders of Titans cumulative convertible preferred stock as well as holders of Titan common stock. However, only holders of record of Titan common stock at the close of business on , 2003 will be entitled to vote at the special meeting or any postponement or adjournment thereof. As more fully described elsewhere in this proxy statement/prospectus, Titan will redeem, at a price of $20.00 per share plus dividends in arrears, all shares of Titans cumulative convertible preferred stock that are not properly converted into Titan common stock before the close of business on , 2003, which is referred to as the redemption date. Because all outstanding shares of Titans cumulative convertible preferred stock will be redeemed prior to the date of the special meeting, holders of Titans cumulative convertible preferred stock will not have the right to vote those shares at the special meeting. However, holders of Titans cumulative convertible preferred stock that properly convert their shares of cumulative convertible preferred stock into Titan common stock prior to the close of business on the redemption date will be entitled to elect the form of merger consideration they wish to receive upon completion of the merger. |
Q: | In addition to considering the adoption of the merger agreement and approval of the merger, on what other matters am I being asked to vote? |
A: | Titans board of directors also is soliciting your proxy to authorize Titan to adjourn the special meeting on one or more occasions, if necessary, (a) to solicit additional proxies if there are not sufficient votes at the |
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time of the special meeting to adopt the merger agreement and approve the merger, (b) to allow additional time for the parties to satisfy other closing conditions to the merger, or (c) to calculate and announce the exchange rate before the vote on the merger. The affirmative vote of holders of a majority of shares of Titan common stock present or represented by proxy at the special meeting is required to approve the adjournment proposal. See Adoption of Adjournment Proposal for information regarding the adjournment proposal. |
Q: | Who can vote at the special meeting? |
A: | Holders of record of Titan common stock at the close of business on , 2003 can vote at the special meeting. On that date, shares of Titan common stock were outstanding and entitled to vote. Because Titan will redeem its cumulative convertible preferred stock before the special meeting, holders of this preferred stock will not be entitled to vote their preferred stock at the special meeting. |
Q: | How do the holders of Titan common stock vote their shares? |
A: | You may vote by mail by signing the enclosed proxy card and mailing it in the enclosed, prepaid and addressed envelope. You may also vote via the Internet or by telephone by following the voting procedures in the enclosed instructions. Votes submitted via the Internet or by telephone must be received by 12:00 midnight, New York City time, on , 2003. Submitting your proxy will not affect your right to vote in person if you decide to attend the special meeting. |
The telephone and Internet voting procedures are designed to authenticate stockholders identities, to allow stockholders to give their voting instructions and to confirm that stockholders instructions have been recorded properly. If you vote via the Internet, you may incur costs associated with electronic access, including charges from your Internet access provider and/or telephone company.
Also, you may vote your shares in person at the special meeting. Titan will pass out written ballots to anyone who wants, and is entitled, to vote at the special meeting. If you hold your shares in street name, you must request a legal proxy from your broker or bank in order to vote in person at the special meeting.
PLEASE EXAMINE YOUR PROXY CARD CLOSELY TO MAKE SURE YOU ARE VOTING ALL OF YOUR SHARES OF TITAN COMMON STOCK.
Q: | Will my shares of Titan common stock be voted if I do not return my proxy card or vote via the Internet or by telephone? |
A: | If you hold your shares of Titan common stock in street name, generally the broker or bank may only vote the shares which it holds for you in accordance with your instructions, unless the subject of the vote is a routine matter. In this case, if the broker or bank has not received your instructions within ten days of the special meeting, it may not vote your shares of Titan common stock on the adoption of the merger agreement and approval of the merger or on the proposal to adjourn the special meeting because these proposals are not considered routine matters by the New York Stock Exchange. |
If the broker or bank cannot vote on a particular matter because it is considered non-routine, there is a broker-non-vote on that matter. Abstentions and broker non-votes will be treated as shares present, in person or by proxy, and entitled to vote for purposes of determining a quorum at the special meeting but will have the same effect as votes against adoption of the merger agreement and approval of the merger and against the proposal to adjourn the special meeting, if necessary.
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It is important that you provide instructions to your broker or bank by voting your proxy promptly to ensure that all shares of Titan common stock you own will be voted as you wish at the special meeting.
YOU MAY HAVE GRANTED TO YOUR BROKER OR BANK DISCRETIONARY VOTING AUTHORITY OVER YOUR ACCOUNT. YOUR BROKER OR BANK MAY BE ABLE TO VOTE YOUR SHARES OF TITAN COMMON STOCK DEPENDING ON THE TERMS OF YOUR AGREEMENT WITH THEM.
Q: | How do I vote shares of Titan common stock held in Titan employee benefit plans? Are there special procedures that I need to follow? |
A: | Yes. If you own shares of Titan common stock through a Titan employee benefit plan, you will receive a separate voting instruction card and letter of transmittal and election form for the shares of Titan common stock allocated to you under those plans. Titan has the following employee benefit plans through which you may hold shares: the Titan Corporation Consolidated Retirement Plan, the AverStar, Inc. Profit Sharing & Savings Plan and the Jaycor, Inc. Employee Stock Ownership Plan. |
By completing the appropriate voting instruction card, you will provide voting instructions to the trustee of the applicable plan for shares of Titan common stock you hold through those plans. If the trustee does not receive voting instructions from you, the trustee may vote your shares of Titan common stock held in those plans in the same proportion as the shares of Titan common stock voted by all other respective plan participants on each proposal. If the trustee receives a signed but not voted instruction card, the trustee will vote your shares of Titan common stock on each proposal according to the recommendations of Titans board of directors.
By completing the letter of transmittal and election forms, you also will be instructing the trustee for the applicable plan to make a corresponding election for the shares of Titan common stock allocated to you under that plan. If you do not make an election, you will receive a combination of cash for 50% of the shares of Titan common stock you own through the plan and Lockheed Martin common stock for the remaining 50% of the shares of Titan common stock you own through the plan.
Q: | What vote is required for approval? |
A: | The affirmative vote of holders of a majority of the outstanding shares of Titan common stock entitled to vote at the special meeting is required to adopt the merger agreement and approve the merger. The affirmative vote of the holders of a majority of the shares of Titan common stock present or represented by proxy at the special meeting is required to adopt the adjournment proposal. |
Q: | Is Lockheed Martins business and financial condition relevant to my decision? |
A: | Yes. Even if you make a cash election, because of the allocation procedures discussed above, it is possible that you will receive Lockheed Martin common stock in the merger. Therefore, you should consider Lockheed Martins business and financial condition before you vote or make an election as to the form of merger consideration you wish to receive. In considering Lockheed Martins business and financial condition, you should review the information set forth in this proxy statement/prospectus, as well as the documents incorporated by reference, because that information contains detailed business, financial and other information about Lockheed Martin. |
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Q: | When do you expect the merger to be completed? |
A: | Lockheed Martin and Titan are working to complete the merger as promptly as possible. Lockheed Martin and Titan expect to complete the merger promptly after we receive Titan stockholder approval at the special meeting and receive all necessary regulatory approvals. Lockheed Martin and Titan currently anticipate that this will occur during the first quarter of 2004. Some of the conditions to completion of the merger, such as receiving necessary regulatory approvals and receipt of opinions of tax counsel, are not within Lockheed Martins or Titans control. |
Q: | What do I need to do now? |
A: | After carefully reading and considering the information contained in this proxy statement/prospectus, please complete and return your proxy as soon as possible, so that your shares of Titan common stock may be voted at the special meeting. |
Your proxy card will instruct the persons named on the proxy card to vote your shares of Titan common stock at the special meeting as you direct. If you sign and send in your proxy card and do not indicate how you want to vote, your proxy will be voted FOR adoption of the merger agreement and approval of the merger and FOR the proposal to adjourn the special meeting, if necessary. If you do not vote or if you abstain, the effect will be a vote against the proposals. Your vote is very important.
In addition, if you wish to elect to receive a particular form of merger consideration, you also must fill out and return to the exchange agent the letter of transmittal and election form included with this proxy statement/prospectus, together with the stock certificates or a notice of guaranteed delivery representing the shares of Titan common stock you wish to exchange.
Q: | May I change my vote after I have submitted my proxy card? |
A: | Yes. You may change your vote at any time before your proxy is voted at the special meeting. If your shares of Titan common stock are registered in your own name, you can do this in one of three ways: |
| signing another proxy card with new instructions with a later date or time; |
| delivering later proxy instructions via regular mail, the Internet or by telephone; or |
| voting in person at the special meeting. |
Any written notice of revocation or subsequent proxy should be delivered to Titans Corporate Secretary at 3033 Science Park Road, San Diego, CA, 92121, before the taking of the vote at the special meeting. If you transmit changed instructions by regular mail, you should allow sufficient time for your instructions to be delivered prior to the special meeting.
Q: | If I plan to attend the special meeting in person, should I still grant my proxy? |
A: | Whether or not you plan to attend the special meeting in person you should submit your proxy as soon as possible. Stockholders whose shares of Titan common stock are registered in their own name may submit their proxies by one of the following methods: |
| sign the enclosed proxy card and mail it in the enclosed, prepaid and addressed envelope; |
| call toll-free 1-800-PROXIES and follow the instructions; or |
| access the web page at www.voteproxy.com and follow the on-screen instructions. |
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Votes submitted via the Internet or by telephone must be received by 12:00 midnight, New York City time, on , 2003. Submitting a proxy will not affect your right to vote in person if you decide to attend the special meeting.
In addition, if you wish to elect to receive a particular form of merger consideration, you also must fill out and return to the exchange agent the letter of transmittal and election form included with this proxy statement/prospectus, together with the stock certificates representing the shares of Titan common stock you wish to exchange.
Q: | What does Titans board of directors recommend? |
A: | Titans board of directors has unanimously determined that the proposed merger agreement and the merger are advisable, fair to and in the best interests of Titan and its stockholders and recommends that you vote FOR the adoption of the merger agreement and approval of the merger. |
In addition, Titans board of directors has approved and adopted the proposal to adjourn the special meeting, if necessary. Titans board of directors recommends that you vote FOR the adjournment proposal. See Adoption of Adjournment Proposal for more information on this proposal.
Q: | Who can help answer my questions? |
A: | If you have any questions about the merger or if you need additional copies of this proxy statement/prospectus, the enclosed proxy card, the letter of transmittal and election form or any other materials relating to the proposed transaction, you should contact: |
The Titan Corporation
Investor Relations
3033 Science Park Road
San Diego, California 92121
Telephone: (858) 552-9500
email: invest@titan.com
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This summary is not intended to be complete and is qualified in all respects by the more detailed information appearing elsewhere in this proxy statement/prospectus. We encourage Titan stockholders to review this entire proxy statement/prospectus carefully. We have included a copy of the merger agreement in this proxy statement/prospectus as Annex A. The merger agreement, and not this proxy statement/prospectus, is the legal document that governs the merger. For information on how to obtain the documents that Titan and Lockheed Martin have filed with the SEC, see Where You Can Find More Information.
Lockheed Martin Corporation
6801 Rockledge Drive
Bethesda, Maryland 20817
(301) 897-6000
Lockheed Martin principally researches, designs, develops, manufactures, integrates and operates advanced technology systems, products and services. Lockheed Martin serves customers in domestic and international defense and civil and commercial sectors, with its principal customers being agencies of the United States government. Lockheed Martin is a Maryland corporation and was formed in March 1995 by combining the businesses of Lockheed Corporation and Martin Marietta Corporation. Lockheed Martin operates in five principal business areas: Aeronautics, Electronic Systems, Space Systems, Integrated Systems and Solutions, and Technology Services.
Lockheed Martins common stock is listed on the New York Stock Exchange under the symbol LMT. Lockheed Martins web address is www.lockheedmartin.com. The contents of that website are not part of this proxy statement/prospectus.
LMC Sub One, Inc.
6801 Rockledge Drive
Bethesda, Maryland 20817
(301) 897-6000
LMC Sub One is a Delaware corporation and a wholly-owned subsidiary of Lockheed Martin. LMC Sub One was incorporated on September 10, 2003, solely for the purpose of effecting the merger with Titan. It has not carried on any activities other than in connection with the merger agreement.
The Titan Corporation
3033 Science Park Road
San Diego, California 92121
(858) 552-9500
The Titan Corporation, a Delaware corporation, is a technology developer and systems integrator for the Department of Defense, the Department of Homeland Security, and intelligence and other key government agencies. Titan provides a range of services and systems solutions. These solutions and services include research and development, design, installation, integration, test, logistics support, maintenance and training. Titan also provides services and solutions to government agencies with sophisticated information systems. These include information processing, information fusion, data management, and communication systems. In addition, Titan develops and produces digital imaging products, sensors, lasers, electro-optical systems, threat simulation/training systems, intelligence electronic hardware, signal intercept systems, and complex military specific systems.
Titan common stock is listed on the New York Stock Exchange under the symbol TTN. Titans website address is www.titan.com. The contents of that website are not part of this proxy statement/prospectus.
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The special meeting will take place at [place and address] on [date] at [time] a.m., local time. At the special meeting, the holders of Titan common stock will be asked to adopt the merger agreement and approve the merger and to approve the proposal to adjourn the special meeting, if necessary. Because Titan will redeem its outstanding cumulative convertible preferred stock before the special meeting, holders of this preferred stock will not be entitled to vote their preferred stock at the special meeting.
The close of business on , 2003 is the record date for determining if you are entitled to vote at the special meeting. On that date, there were approximately shares of Titan common stock outstanding and entitled to vote. Each share of Titan common stock is entitled to one vote at the special meeting.
The affirmative vote of the holders of a majority of the outstanding shares of Titan common stock entitled to vote at the special meeting is required to adopt the merger agreement and approve the merger. The affirmative vote of the holders of a majority of the shares of Titan common stock present or represented by proxy at the special meeting is required to approve the adjournment proposal. On the record date, directors and executive officers of Titan beneficially owned and had the right to vote shares of Titan common stock entitling them to exercise approximately % of the voting power of Titan common stock.
If the conditions to the completion of the merger are satisfied, Titan will be merged with and into LMC Sub One in a forward merger. However, under certain circumstances described in this proxy statement/prospectus, Titan may cause LMC Sub One to be merged with and into Titan in a reverse merger. After the merger, LMC Sub One or Titan, as the successor in the merger, will continue its existence under Delaware law as a wholly-owned subsidiary of Lockheed Martin. The merger agreement is attached to this proxy statement/prospectus as Annex A and is incorporated in this proxy statement/prospectus by reference. You should read the merger agreement carefully, as it is the legal document that governs the merger.
What You Will Receive in the Merger (page 66)
You may make one of the following elections regarding the type of merger consideration you wish to receive in exchange for your Titan common stock:
| a cash election of $22.00 in cash per share, without interest; |
| a stock election for Lockheed Martin common stock based on an exchange rate determined as described below; or |
| a combination election whereby 50% of your Titan shares will be exchanged for cash and 50% of your Titan shares will be exchanged for Lockheed Martin common stock based on the exchange rate. |
Shares of Titan common stock held by Titan stockholders who have perfected dissenters rights will not be exchanged for the merger consideration at the effective time of the merger.
If you receive Lockheed Martin common stock in exchange for shares of Titan common stock, the number of shares of Lockheed Martin common stock that you will receive for each share of Titan common stock will be based on an exchange rate determined by dividing $22.00 by the average Lockheed Martin price. The average Lockheed Martin price means the average of the daily mean of the high and low sales prices per share of Lockheed Martin common stock for the ten trading days ending on, but not including, the third trading day prior to the effective time of the merger. For purposes of determining the exchange rate, Titan and Lockheed Martin
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have agreed to upper and lower limits, or collars, on the average Lockheed Martin price of $58.00 and $46.00. As a result, even if the average Lockheed Martin price as so calculated exceeded $58.00, the parties would still use $58.00 in determining the exchange rate and the exchange rate would be fixed at 0.3793. Similarly, even if the average Lockheed Martin price as so calculated was less than $46.00, the parties would still use $46.00 in determining the exchange rate and the exchange rate would be fixed at 0.4783. Under certain circumstances, Lockheed Martin has the right to increase the exchange rate of Lockheed Martin common stock to be delivered as merger consideration to the minimum extent necessary for the delivery of the tax opinion required as a closing conditions under the merger agreement. Had the exchange rate been determined based on the ten-day trading period ending on , 2003, the most recent day prior to the printing of this proxy statement/prospectus, the average Lockheed Martin price would have been $ , and the exchange rate would have been .
The allocation procedures set forth in the merger agreement require that 50% of the outstanding shares of Titan common stock outstanding at the time of the merger (excluding shares held by Titan stockholders who have perfected dissenters rights or any shares held by Lockheed Martin or Titan), be exchanged for Lockheed Martin common stock and the merger consideration payable with respect to the remaining 50% of the Titan shares must be paid in cash.
If the aggregate number of shares of Titan common stock to be exchanged for cash exceeds this 50% threshold, then a portion of the shares of Titan common stock for which cash elections are made will be exchanged for Lockheed Martin common stock on a pro rata basis so that the total number of shares of Titan common stock exchanged for cash equals the 50% threshold. If the aggregate number of shares of Titan common stock to be exchanged for Lockheed Martin common stock exceeds the 50% threshold, then a portion of the Titan common stock for which stock elections are made will be exchanged for cash on a pro rata basis so that the total number of shares of Titan common stock exchanged for Lockheed Martin common stock equals the 50% threshold.
No reallocation will occur if a holder has made a cash election but would receive fewer than 20 shares of Lockheed Martin common stock upon reallocation. Instead, the cash election shares of the remaining holders of shares of Titan common stock will be reallocated on a pro rata basis, so that the 50% threshold is satisfied.
Titan stockholders that make a combination election will not be subject to the allocation procedures described above.
If your shares of Titan common stock are registered in your own name and you wish to elect to receive a particular form of merger consideration, you must fill out and return to the exchange agent the letter of transmittal and election form included with this proxy statement/prospectus, together with the stock certificates representing the shares of Titan common stock you wish to exchange. If you wish to elect to receive a particular form of merger consideration and your shares of Titan common stock are held in street name, you must follow the instructions provided by your bank or broker.
The letter of transmittal and election form, related stock certificates and any other required documentation must be received by the exchange agent not later than 5:00 p.m., New York City time, on the last business day before the effective time of the merger. If the merger does not take place for any reason, your stock certificates or a notice of guaranteed delivery will be returned to you. If the exchange agent does not receive these materials from you before the election deadline, then you will receive a combination of cash for 50% of your shares of Titan common stock and shares of Lockheed Martin common stock for the remaining 50% of your shares of Titan common stock.
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Recommendation of the Titan Board; Titans Reasons for the Merger (page 42)
Titans board of directors has adopted the merger agreement and approved the merger. Titans board has determined that the merger agreement and the merger are advisable, fair to and in the best interests of Titan and its stockholders and recommends that Titan stockholders vote FOR the adoption of the merger agreement and approval of the merger. In reaching its decision, the Titan board considered a number of factors that are described in more detail in The MergerRecommendation of the Titan Board; Titans Reasons for the Merger. The Titan board of directors did not assign relative weight to any factors. In addition, the Titan board did not reach any specific conclusion on each factor considered but conducted an overall analysis of these factors. Individual members of the Titan board of directors may have given different weight to different factors.
Opinion of Relational Advisors LLC (page 45)
In deciding to adopt the merger agreement and approve the merger, Titans board of directors considered the opinion, dated September 15, 2003, of its financial advisor, Relational Advisors LLC, that as of that date and based on and subject to various assumptions, matters considered and limitations described in the opinion, the merger consideration was fair, from a financial point of view, to the holders of Titan common stock.
The written opinion of Relational Advisors LLC is attached as Annex B to this proxy statement/prospectus. We encourage you to read this opinion carefully and in its entirety.
Lockheed Martins Reasons for the Merger (page 41)
The Lockheed Martin board of directors approved the merger agreement on September 15, 2003 and believes that the merger is in the best interests of Lockheed Martin and its stockholders. In reaching its decision, the Lockheed Martin board considered a number of factors that are described in more detail in The MergerLockheed Martins Reasons for the Merger. The Lockheed Martin board did not assign relative weights to any factor and did not reach specific conclusions on each factor considered but conducted an overall analysis of these factors. Individual Lockheed Martin board members may have assigned different weights to different factors.
Treatment of Stock Options and Warrants (page 69)
At the effective time of the merger, each outstanding option or right to purchase shares of Titan common stock will fully vest and become exercisable in accordance with the terms and conditions of the plan or agreement under which it was granted, except that it will be exchanged for the right to receive shares of Lockheed Martin common stock. After the effective time of the merger, the number of shares of Lockheed Martin common stock subject to each Titan stock option will be the number of shares of Titan common stock subject to such Titan stock option prior to the effective time of the merger multiplied by the exchange rate, and the exercise price of each stock option will be adjusted by dividing the per share exercise price under such Titan stock option by the exchange rate.
At the effective time of the merger, each outstanding warrant to purchase Titan common stock will be exchanged for a warrant to acquire shares of Lockheed Martin common stock. Following the effective time of the merger, each outstanding Titan warrant will be exercisable for (1) $11.00 in cash per share of Titan common stock plus (2) the number of shares of Lockheed Martin common stock equal to the product of 50% of the aggregate number of shares of Titan common stock which would have been exercisable as of the effective time of the merger multiplied by the exchange rate.
Interests of Certain Persons in the Merger (page 49)
In considering the recommendation of Titans board of directors with respect to the merger agreement and the merger, you should be aware that some of the directors and executive officers of Titan have interests in the
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merger that are different from, or are in addition to, the interests of Titan stockholders generally. The members of Titans board of directors were aware of these interests of directors and executive officers and considered them when the board adopted the merger agreement, approved the merger and made its recommendation to Titan stockholders. These interests relate to, among other things:
| rights of some of Titans executive officers to receive cash payments and other benefits in the event of the termination of their employment under some circumstances in connection with the merger; |
| rights of some of Titans executive officers to receive retention, severance and bonus equal to target bonus under the 2003 Titan Annual Incentive Plan for 2003 or a greater bonus, if approved by the compensation committee of Titans board of directors; |
| the accelerated vesting and exercisability of options to purchase Titan common stock held by Titans executive officers and directors; |
| the right to continued director and officers insurance coverage for a period of six years, to be paid for by Lockheed Martin, of Titans directors and executive officers for acts or omissions occurring prior to the merger; and |
| the inclusion in the surviving corporations certificate of incorporation and bylaws following the merger of provisions requiring the surviving corporation to exculpate and indemnify Titans directors and officers. |
Consent Solicitation and Exchange Offer for Titans Outstanding 8% Senior Subordinated Notes (page 70)
In connection with the merger, Titan and Lockheed Martin have also agreed to commence a consent solicitation and a new exchange offer with respect to Titans outstanding 8% senior subordinated notes due 2011. In connection therewith, Titan has agreed to use commercially reasonable efforts to commence a consent solicitation to:
| amend the indenture governing the 8% senior subordinated notes such that the merger does not require a change in control offer to be made to the noteholders, to eliminate restrictive covenants contained in the indenture and to release the guarantors; and |
| amend the registration rights agreement to eliminate any registration default caused by the merger and to provide for the termination of the registration rights agreement. |
Lockheed Martin and Titan have also agreed to file a joint registration statement on Form S-4 to exchange Titans 8% senior subordinated notes for fully registered notes with amended terms, and a full and unconditional guarantee of payment by Lockheed Martin. Lockheed Martin and Titan have agreed to cooperate with each other with respect to the consent solicitation of Titans 8% senior subordinated noteholders and the exchange offer.
Successful completion of the consent solicitation, which requires consent of holders of a majority of the aggregate principal amount of the 8% senior subordinated notes, is a condition to Lockheed Martins obligation to complete the merger.
Conditions to the Merger (page 76)
The obligations of Lockheed Martin and Titan to complete the merger are subject to satisfaction of the following conditions:
| receipt of an opinion of counsel that the merger qualifies as a reorganization under Section 368(a) of the Internal Revenue Code; |
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| the other partys representations and warranties being true and correct, except such representations and warranties that have not had or would not reasonably be expected to have a material adverse effect on such party or its ability to perform its obligations under the merger agreement; |
| the other party having complied in all material respects with such partys covenants; |
| the adoption of the merger agreement and approval of the merger by Titans stockholders; |
| no laws having been adopted or promulgated and no temporary restraining order or preliminary or permanent injunction of any United States court or United States or other governmental authority having been issued that makes the merger illegal or otherwise prohibits its completion; |
| receipt of all necessary governmental waivers, consents, orders and approvals, except where the failure to obtain the same would not have a material adverse effect; |
| expiration or termination of the waiting period applicable to the completion of the merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or HSR Act, and the applicable antitrust laws of any necessary foreign jurisdictions imposing a mandatory waiting period; |
| the continuing effectiveness of the registration statement of which this proxy statement/prospectus forms a part, and the material compliance with all other applicable material state securities laws; and |
| the approval for listing on the New York Stock Exchange, subject to notice of issuance, of the Lockheed Martin common stock to be issued as merger consideration. |
Lockheed Martins obligations are further conditioned on satisfaction of the following conditions:
| there not having occurred any change, effect, event or circumstance that is reasonably likely to have a material adverse effect on Titans business, condition, financial or otherwise, assets or results of operations, subject to certain exceptions discussed under The Merger Agreement; |
| Titans delivery of an officers certificate regarding certain agreements, representations and warranties; |
| dissenting shares not constituting more than 10% of the number of shares of Titan common stock issued and outstanding; |
| Titans redemption of all outstanding shares of its cumulative convertible preferred stock; and |
| Titans successful completion of the consent solicitation with respect to its outstanding 8% senior subordinated notes. |
Restrictions on Solicitation (page 75)
Subject to certain exceptions, the merger agreement prohibits Titan, its subsidiaries and agents from directly or indirectly soliciting, knowingly encouraging, participating in any discussions regarding, furnishing any non-public information with respect to, or assisting or facilitating any proposal for any third party to acquire Titan, its subsidiaries, or more than 5% of Titans assets or capital stock.
The merger agreement may be terminated by the mutual consent of Lockheed Martin and Titan. Additionally, either Lockheed Martin or Titan may terminate the merger agreement if:
| the merger is not completed by March 31, 2004 (or May 31, 2004 if the parties are taking, contesting or resisting any matters relating to necessary regulatory approvals) through no fault of the party seeking to terminate the merger; |
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| the party seeking termination is not in material breach of the merger agreement and the other party has materially breached a representation, warranty, covenant or obligation of that party contained in the merger agreement and such breach is either not capable of being cured or, with respect to a covenant or agreement that is capable of being cured, has not been cured within thirty days of written notice of the breach; |
| Titan stockholders fail to adopt the merger agreement and approve the merger at the special meeting; or |
| Titans board of directors provides written notice to Lockheed Martin that it has determined to accept an alternative acquisition proposal that it believes is more favorable to Titan stockholders than the proposed merger with Lockheed Martin. |
Titan may terminate the merger agreement if counsel to Titan and Lockheed Martin are unable to give an opinion that the merger can be completed as a tax-free reorganization and Lockheed Martin does not elect to increase the exchange rate of Lockheed Martin common stock to be delivered as merger consideration to the minimum extent necessary to enable such opinions to be given.
Lockheed Martin may terminate the merger agreement if Titans board of directors adversely withdraws, modifies, withholds or changes its recommendation of the merger agreement or recommends an alternative acquisition transaction with a third party.
The merger agreement requires Titan to pay Lockheed Martin a termination fee of $60 million if the merger agreement is terminated under certain circumstances.
Material U.S. Federal Income Tax Consequences (page 59)
Assuming that the merger is completed as currently contemplated as a forward merger of Titan with and into LMC Sub One, you will not recognize any gain or loss for U.S. federal income tax purposes if you exchange your shares of Titan common stock solely for shares of Lockheed Martin common stock in the merger, except with respect to cash received in lieu of fractional shares of Lockheed Martin common stock. You will recognize gain or loss if you exchange your shares of Titan common stock solely for cash in the merger. You will recognize gain, but not loss, if you exchange your shares of Titan common stock for a combination of Lockheed Martin common stock and cash, but your taxable gain in that case will not exceed the cash you receive in the merger.
The structure of the transaction could change from a tax-free forward merger into a taxable reverse merger, whereby LMC Sub One would be merged with and into Titan, if:
| tax counsel to Lockheed Martin and Titan are unable to render an opinion at the effective time of the merger that the forward merger will be treated for U.S. federal income tax purposes as a tax-free reorganization solely because the aggregate value of the Lockheed Martin common stock to be delivered at closing would be insufficient to cause the merger consideration to meet the continuity of interest requirements under applicable tax regulations as described more fully in The MergerMaterial U.S. Federal Income Tax Consequences; |
| Lockheed Martin declines to increase the exchange rate of Lockheed Martin common stock to be delivered as merger consideration to the minimum extent necessary to cause the merger consideration to meet the continuity of interest requirements; and |
| Titan elects to restructure the proposed transaction as a taxable reverse merger of LMC Sub One with and into Titan rather than exercise Titans option to terminate the merger agreement under these circumstances. |
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If the transaction were to proceed as a reverse merger under the scenario described above, you would recognize gain or loss, regardless of the type of consideration you receive, in an amount equal to the difference between (1) the sum of the cash and the fair market value of the shares of Lockheed Martin common stock you receive in the merger and (2) your adjusted basis in the shares of Titan common stock you exchange in the merger.
Tax matters can be complicated, and the tax consequences of the merger to you will depend on your individual situation and circumstances. You should consult your own tax advisor to understand fully the tax consequences of the merger to you.
Governmental and Regulatory Approvals (page 57)
Under the HSR Act, the merger may not be completed until notifications have been given to the Federal Trade Commission, or FTC, and the Antitrust Division of the United States Department of Justice, and the specified waiting period has ended. Lockheed Martin and Titan each expect to file notifications with the FTC and the Department of Justice on or before October 31, 2003. The Department of Justice is reviewing the matter. In addition, the merger requires certain competition filings in foreign jurisdictions. Pre-merger competition filing is required in Brazil and Germany. Lockheed Martin and Titan filed their competition filings in Brazil on October 6, 2003 and expect to make their competition filing in Germany on or before October 31, 2003. The parties are still evaluating whether competition filings are required in other jurisdictions. Except for these antitrust clearances and compliance with applicable federal and state securities and corporate laws, Lockheed Martin and Titan are not aware of any other material governmental or regulatory approvals required to be obtained in order to complete the merger.
Some of the contracts performed by Titan involve activities such as assisting government customers evaluation of other contractors proposals or performance, including in some cases Lockheed Martin. As a result, in addition to reviewing the impact of the merger on competition, the Department of Justice and Department of Defense may consider whether Lockheed Martin can adequately mitigate any organizational conflict of interest issues the Titan contracts might create with Lockheed Martins existing businesses. Mitigation approaches could include implementation of firewalls or organizational separation of the evaluation contracts from the Lockheed Martin businesses performing or seeking to obtain contracts that would be subject to evaluation by Titan. If the agencies view these mitigation efforts as inadequate, The Department of Justice could require divestitures of certain contracts or businesses as a condition to the parties obtaining antitrust clearance. In addition, if the customer under a contract were to determine that organizational conflict of interest issues were raised by the merger with respect to that contract and that mitigation would be inadequate to address these issues, that customer could cancel the affected contracts.
Redemption of Titan Preferred Stock (page 69)
Under the merger agreement, Titan has agreed to use its reasonable best efforts to redeem all of its outstanding cumulative convertible preferred stock before the Titan special meeting. On , 2003, Titan mailed a notice of redemption together with a copy of this proxy statement/prospectus to holders of Titans cumulative convertible preferred stock informing such holders of the redemption date and other terms of the redemption, as well as their rights to convert their cumulative convertible preferred shares into Titan common stock and elect the form of merger consideration they wish to receive upon completion of the merger. Titans redemption of its outstanding cumulative convertible preferred stock is a condition to Lockheed Martins obligation to complete the merger.
Comparison of Rights of Lockheed Martin and Titan Stockholders (page 80)
Once the merger is completed, Titan stockholders who receive Lockheed Martin common stock as merger consideration in exchange for Titan common stock whether by election or as a result of the allocation provisions of the merger agreement, will become stockholders of Lockheed Martin. As Lockheed Martin stockholders, their
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rights will be governed by the Maryland General Corporation Law, or MGCL, and the charter and bylaws of Lockheed Martin. There are a number of differences between the charter and bylaws of Lockheed Martin and the MGCL and the certificate of incorporation and bylaws of Titan and the DGCL. These differences are summarized under Comparison of Rights of Lockheed Martin and Titan Stockholders.
Comparative Market Price Information (page 32)
Shares of Lockheed Martin common stock and Titan common stock are listed on the New York Stock Exchange under the trading symbols LMT and TTN. On September 15, 2003, the last full trading day prior to the public announcement of the proposed merger, Lockheed Martin common stock closed at $50.97 per share and Titan common stock closed at $16.96 per share.
On , 2003, the most recent practicable date prior to the printing of this proxy statement/prospectus, the closing price for Lockheed Martin common stock was $[ ] per share and the closing price for Titan common stock was $[ ] per share, each as reported on the New York Stock Exchange. We urge you to obtain current market quotations.
Listing and Trading of Lockheed Martin Common Stock (page 32)
Shares of Lockheed Martin common stock received by Titan stockholders in the merger will be listed on the New York Stock Exchange. After completion of the merger, shares of Lockheed Martin common stock will continue to be traded on the New York Stock Exchange, but shares of Titan common stock will no longer be listed or traded.
Under the DGCL, Titan stockholders have the right to dissent from the merger agreement and have the fair value of their shares of Titan common stock determined by the Delaware Court of Chancery. If the holders of more than 10% of Titans outstanding common stock properly dissent, Lockheed Martin is not required to complete the merger. A discussion of these dissenters rights is included in this proxy statement/prospectus under The MergerDissenters Rights beginning on page 62 and the relevant provisions of the DGCL are included as Annex C to this proxy statement/prospectus.
Shares of Titan common stock outstanding immediately prior to the effective time of the merger and held by a holder who does not vote to adopt the merger agreement and approve the merger or complete and submit a letter of transmittal and election form and who has properly demanded appraisal for such Titan common stock in accordance with Section 262 of the DGCL will not be exchanged for the relevant merger consideration and will be entitled only to the rights granted by the DGCL.
Legal Proceedings (page 64)
Class Action Lawsuits. Titan and members of Titans board of directors have been named as defendants in a purported class action lawsuit filed by a holder of Titan common stock in California Superior Court, San Diego County on September 18, 2003 challenging the proposed merger: Norman Brown v. The Titan Corporation, et al. The complaint alleges that the defendants breached fiduciary duties. The complaint contains a request for the court to prevent the completion of the merger. Titan plans to contest vigorously the allegations contained in the complaint. Titan and the members of Titans board of directors have not been served with process in this matter.
In addition, on September 10, 2003, Titan was named as a defendant in a purported class action lawsuit filed by a holder of common stock of SureBeam Corporation, Titans former subsidiary. The complaint alleges
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that Titan, as a control person of SureBeam within the meaning of the Securities Act, should be held liable for allegedly false and misleading statements contained in the prospectus issued in connection with SureBeams initial public offering, for which the plaintiffs seek statutory damages from Titan. Dr. Ray and Susan Golding, another of Titans current directors, also were named as defendants in their capacity as directors of SureBeam. Titan plans to contest vigorously the allegations contained in the complaint. For more information concerning these lawsuits, see The MergerLegal Proceedings.
Adoption of the Adjournment Proposal (Page 99)
Titans board of directors also is soliciting proxies to authorize Titan to adjourn the special meeting on one or more occasions, if necessary, (a) to solicit additional proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement and approve the merger, (b) to allow additional time for the parties to satisfy other closing conditions to the merger, or (c) to calculate and announce the exchange rate before the vote on the merger. The affirmative vote of the holders of a majority of the shares of Titan common stock present or represented by proxy at the special meeting is required to approve the adjournment proposal.
Titans board of directors recommends that Titan stockholders vote FOR the proposal to adjourn the special meeting, if necessary.
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In addition to the other information included in this proxy statement/prospectus, you should carefully consider the matters described below in determining whether to adopt the merger agreement and approve the merger.
You may receive a form of merger consideration different from the form of merger consideration you elect.
The consideration to be received by Titan stockholders in the merger is subject to the requirement that the aggregate number of shares of Titan common stock to be exchanged for Lockheed Martin common stock and the aggregate number of shares of Titan common stock to be exchanged for cash each must equal 50% of Titans outstanding shares immediately prior to the effective time. The merger agreement contains allocation procedures to achieve this result. If you make a cash election and the available cash is oversubscribed, then you will receive a portion of the merger consideration in Lockheed Martin common stock. If you make a stock election and the available Lockheed Martin common stock is oversubscribed, then you will receive a portion of the merger consideration in cash. Therefore, you may not receive exactly the form of consideration that you elect.
If the average Lockheed Martin price falls below $46.00, the value of your merger consideration will be less than $22.00 per Titan share.
Each share of Titan common stock will be exchanged for a fraction of a share of Lockheed Martin common stock at an exchange rate determined by dividing $22.00 by the average Lockheed Martin price. For purposes of determining the exchange rate, Titan and Lockheed Martin have agreed to upper and lower limits, or collars, on the average Lockheed Martin price of $58.00 and $46.00. As a result, even if the average Lockheed Martin price is calculated to be less than $46.00, the parties would still use $46.00 in determining the exchange rate. As a result, the exchange rate would be less than it would be in the absence of a collar and holders of Titan common stock would receive fewer shares of Lockheed Martin common stock than they would have received in the absence of the collar.
The exchange rate and number of shares of Lockheed Martin stock that you will receive is based on the average Lockheed Martin price, which could be lower than the market value of the shares.
The use of an exchange rate that is tied to an average trading price is intended to provide Titan stockholders with $22.00 in value of Lockheed Martin common stock for each share of Titan common stock exchanged for Lockheed Martin common stock, without permitting one-day trading spikes, arbitrage or other unusual market activity to artificially raise or lower the exchange rate. However, you may not be able to sell your shares at the average price. If the average Lockheed Martin price over the measurement period is higher than the market price of the Lockheed Martin common stock at the effective time of the merger, the Lockheed Martin common stock issued in the merger would be worth less than $22.00 per Titan share.
The value of the Lockheed Martin stock you receive in the merger may fluctuate after the merger. Neither Titan nor Lockheed Martin can predict how the Lockheed Martin common stock will trade subsequent to the effective time of the merger.
Stock price changes may result from a variety of factors, including general market and economic conditions, changes in Lockheed Martins businesses, operations and prospects, and regulatory considerations. Many of these factors are beyond Lockheed Martins control.
In addition, for Titan stockholders who hold their shares in certificated form, there will be a time period between the effective time of the merger and the time when Titan stockholders actually receive stock certificates evidencing Lockheed Martin common stock. Until stock certificates are received, Titan stockholders will not be able to sell their shares of Lockheed Martin common stock in the open market and, thus, will not be able to avoid losses resulting from any decline in the market price of Lockheed Martin common stock during this period. As a
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result, you might not be able to sell the Lockheed Martin common stock you receive for each share of Titan common stock exchanged in the merger for $22.00.
The merger may become fully taxable to Titan stockholders if the price of Lockheed Martin common stock declines significantly and other specified actions are taken by Lockheed Martin and Titan.
The structure of the merger could change from a tax-free forward merger, where you generally would recognize gain or loss only to the extent of the cash consideration you receive in the merger, into a taxable reverse merger, whereby LMC Sub One would be merged with and into Titan. If the transaction were to proceed as a reverse merger, you would recognize gain or loss, regardless of the type of consideration received, in an amount equal to the difference between (1) the sum of the cash and the fair market value of shares of Lockheed Martin common stock you receive in the merger and (2) your adjusted basis in the shares of Titan common stock you exchange in the merger.
The structure will change to a taxable reverse merger only if:
| tax counsel to Lockheed Martin and Titan are unable to render an opinion at the effective time of the merger that the forward merger will be treated for U.S. federal income tax purposes as a tax-free reorganization solely because the aggregate value of the Lockheed Martin common stock to be delivered at the effective time of the merger would be insufficient to cause the merger consideration to meet the continuity of interest requirements under applicable tax regulations, as described in more detail under The MergerMaterial U.S. Federal Income Tax Consequences; |
| Lockheed Martin declines to increase the exchange rate of Lockheed Martin common stock to be delivered as merger consideration to the minimum extent necessary to cause the merger consideration to meet the continuity of interest requirements; and |
| Titan elects to restructure the proposed transaction as a taxable reverse merger rather than exercise Titans option to terminate the merger agreement under these circumstances. |
Antitrust regulatory agencies may oppose or impose conditions on the merger.
Under the HSR Act, the merger may not be completed until notifications have been given to the FTC and the Department of Justice, and the specified waiting period has ended. Lockheed Martin and Titan each expect to file notifications with the FTC and the Department of Justice on or before October 31, 2003. The Department of Justice will review the transaction and has requested information on a voluntary basis from the parties concerning the transaction. The Department of Justice could challenge all or certain aspects of the merger by seeking or taking action to among other things:
| enjoin the merger; |
| impose conditions on the merger; |
| require divestiture of the shares of Titan common stock acquired in the merger; or |
| require divestiture of assets or businesses of Lockheed Martin or Titan. |
The merger agreement, however, provides that Lockheed Martin is not required to agree to divest any of its or Titans businesses or assets (other than assets having nominal monetary and strategic value to Lockheed Martin) or to any other material restrictions on its ability to own its assets and conduct its business.
Lockheed Martin and Titan do not know whether the Department of Justice will permit the HSR Act waiting period to expire without issuing a request for additional information. The issuance of a request for additional information, commonly known as a second request, would extend the HSR waiting period. Similarly, the parties do not know whether the Department of Justice will seek to impose conditions, substantial or otherwise,
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on Lockheed Martin or Titan. Lockheed Martin and Titan also do not know whether any state or foreign government or any third party will challenge the merger on antitrust grounds or the ultimate outcome of any such challenge.
In addition, the merger requires certain competition filings and in some cases approvals in foreign jurisdictions. Pre-merger competition filings are required in Brazil and Germany. The parties completed the filing in Brazil on October 6, 2003 and expect to make their competition filings in Germany on or before October 31, 2003. The parties are still evaluating whether competition filings would be required in other jurisdictions. No assurance can be given that all required foreign competition approvals will be obtained in a timely manner.
Some of the contracts performed by Titan involve activities such as assisting government customers evaluation of other contractors proposals or performance, including in some cases Lockheed Martin. We expect that the Department of Justice will consult with the Department of Defense and potentially other customers of Titan and Lockheed Martin in reviewing the impact of the merger on competition. As a result, the Department of Justice may consider whether Lockheed Martin can adequately mitigate any organizational conflict of interest issues the Titan contracts might create with Lockheed Martins existing businesses. Mitigation approaches could include the implementation of firewalls or organizational separation of the evaluation contracts from the Lockheed Martin businesses performing or seeking to obtain contracts that would be subject to evaluation by Titan. If the agencies view these mitigation efforts inadequate, Lockheed Martin would have to evaluate whether to divest the contracts in order to obtain antitrust clearance or satisfy customer concerns.
Directors and executive officers of Titan have interests in the merger in addition to their interests generally as stockholders of Titan.
You should be aware that directors and executive officers of Titan have interests in the merger in addition to their interests generally as stockholders of Titan. For a discussion of these interests, see The Merger Interests of Certain Persons in the Merger; Conflicts of Interest.
As a result of these interests, Titans directors and executive officers could be more likely to approve and recommend that stockholders vote in favor of the merger agreement and the merger than if they did not have these interests. Titans stockholders should consider whether these interests may have influenced these directors and executive officers to support or recommend the merger.
Titan may be unable to complete the consent solicitation with respect to its 8% senior subordinated notes, which may delay or prevent completion of the merger.
Under the merger agreement, Titans receipt of the consent of the holders of a majority of the aggregate principal amount of Titans 8% senior subordinated notes to amend the indenture governing the 8% senior subordinated notes and the registration rights agreement in favor of the holders of the 8% senior subordinated notes is a condition to Lockheed Martins obligations to complete the merger. There can be no assurance that the required consents can be obtained. If Titan is unable to obtain the consent of the holders approving the amendments described above and Lockheed Martin elects not to waive the consent solicitation condition, the merger cannot be completed under the terms of the merger agreement.
A class action lawsuit challenging the merger may result in costs to Titan and could prevent completion of the merger.
Since the signing of the merger agreement and the public announcement of the proposed merger on September 15, 2003, a lawsuit has been filed in California Superior Court, San Diego County, naming Titan and its directors as defendants and challenging the merger. The complaint generally alleges that Titan and its directors breached fiduciary duties. For a discussion of this lawsuit, see The MergerLegal Proceedings.
Titan may incur significant legal and other costs as a result of the complaint, regardless of its outcome. Should this complaint be successful, however, it could prevent the merger from going forward, thereby denying the parties the intended benefits of the merger. If the merger is completed, the court may still determine that the plaintiff is entitled to damages, fees, or other relief. In that event, the defendants may be found liable for some or all of any damages or attorneys fees awarded to plaintiffs.
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SELECTED HISTORICAL FINANCIAL DATA OF LOCKHEED MARTIN
The following selected financial data for each of the five years in the period ended December 31, 2002 have been derived from Lockheed Martins audited consolidated financial statements. The selected financial data as of June 30, 2003 and 2002, and for each of the six-month periods then ended, have been derived from Lockheed Martins unaudited condensed consolidated financial statements which include, in the opinion of Lockheed Martins management, all adjustments, consisting of normal recurring adjustments, necessary to present fairly the results of operations and financial position of Lockheed Martin for the periods and dates presented. Operating results for the six months ended June 30, 2003 are not necessarily indicative of results to be expected for the full fiscal year. This data should be read in conjunction with the respective audited and unaudited consolidated financial statements of Lockheed Martin, including the notes thereto, incorporated by reference in this proxy statement/prospectus. See Where You Can Find More Information.
As of or for the Six Months Ended |
As of or for the Year Ended December 31 | ||||||||||||||||||||||
2003 (2) |
2002 (3) |
2002 (4) |
2001 (5) |
2000 (6) |
1999 (7) |
1998 (8) | |||||||||||||||||
(In millions, except per share data) | |||||||||||||||||||||||
Income Statement Data: | |||||||||||||||||||||||
Net sales |
$ | 14,768 | $ | 12,256 | $ | 26,578 | $ | 23,990 | $ | 24,541 | $ | 24,999 | $ | 25,809 | |||||||||
Operating profit(1) |
$ | 975 | $ | 1,000 | $ | 1,158 | $ | 833 | $ | 1,105 | $ | 1,997 | $ | 2,487 | |||||||||
Earnings (loss) from continuing operations before cumulative effect of change in accounting |
$ | 492 | $ | 575 | $ | 533 | $ | 43 | $ | (477 | ) | $ | 729 | $ | 978 | ||||||||
Net earnings (loss) |
$ | 492 | $ | 557 | $ | 500 | $ | (1,046 | ) | $ | (519 | ) | $ | 382 | $ | 1,001 | |||||||
Earnings (loss) per common share: |
|||||||||||||||||||||||
Basic: |
|||||||||||||||||||||||
Continuing operations before cumulative effect of change in accounting |
$ | 1.10 | $ | 1.30 | $ | 1.20 | $ | 0.10 | $ | (1.19 | ) | $ | 1.91 | $ | 2.60 | ||||||||
Net earnings (loss) |
$ | 1.10 | $ | 1.26 | $ | 1.13 | $ | (2.45 | ) | $ | (1.29 | ) | $ | 1.00 | $ | 2.66 | |||||||
Diluted: |
|||||||||||||||||||||||
Continuing operations before cumulative effect of change in accounting |
$ | 1.09 | $ | 1.28 | $ | 1.18 | $ | 0.10 | $ | (1.19 | ) | $ | 1.90 | $ | 2.57 | ||||||||
Net earnings (loss) |
$ | 1.09 | $ | 1.24 | $ | 1.11 | $ | (2.42 | ) | $ | (1.29 | ) | $ | 0.99 | $ | 2.63 | |||||||
Cash dividends |
$ | 0.24 | $ | 0.22 | $ | 0.44 | $ | 0.44 | $ | 0.44 | $ | 0.88 | $ | 0.82 | |||||||||
Balance Sheet Data: | |||||||||||||||||||||||
Total assets |
$ | 24,795 | $ | 28,331 | $ | 25,758 | $ | 27,654 | $ | 30,426 | $ | 30,261 | $ | 28,744 | |||||||||
Short-term borrowings |
$ | | $ | | $ | | $ | | $ | 12 | $ | 475 | $ | 1,043 | |||||||||
Current maturities of long-term debt |
$ | 164 | $ | 762 | $ | 1,365 | $ | 89 | $ | 882 | $ | 52 | $ | 886 | |||||||||
Long-term debt |
$ | 6,075 | $ | 6,687 | $ | 6,217 | $ | 7,422 | $ | 9,065 | $ | 11,427 | $ | 8,957 | |||||||||
Stockholders equity |
$ | 6,091 | $ | 7,394 | $ | 5,865 | $ | 6,443 | $ | 7,160 | $ | 6,361 | $ | 6,137 |
(1) | Operating profit reflects earnings from continuing operations before interest expense and income taxes. |
(2) | Includes the effects of a charge related to exiting the commercial mail sorting business, a loss on the early repayment of debt and a gain on the partial reversal of Space Imaging, LLC guarantee which, on a combined basis, decreased earnings from continuing operations before taxes by $41 million, $27 million after tax ($0.06 per diluted share). |
(3) | Includes the effect of a research and development tax credit claim which increased earnings from continuing operations by $90 million ($0.20 per diluted share). |
(4) | Includes the effects of a write-down of telecommunications investments, a charge related to Russian advances and a write-down of an investment in Space Imaging and a charge related to recording of a guarantee and a research and development tax credit settlement which, on a combined basis, decreased earnings from continuing operations before income taxes by $1.1 billion, or $632 million after tax ($1.40 per diluted per share). In 2002, Lockheed Martin adopted FAS 142 which prohibits amortization of goodwill. |
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(5) | Includes the effects of a write-off of an investment in Astrolink and related costs, impairment of investments in Loral Space and Americom Asia-Pacific, a loss on early repayment of debt, gain on sale of surplus real estate and other portfolio shaping activities which, on a combined basis, decreased earnings from continuing operations before income taxes by $973 million, $651 million after tax ($1.50 per share). Also includes a gain from the disposal of a business and charges for Lockheed Martins exit from its global telecommunications business which is included in discontinued operations and which, on a combined basis, increased the net loss by $1 billion ($2.38 per diluted share). |
(6) | Reflects the business combination with COMSAT Corporation effective August 2000. Includes the effects of a loss related to the divestiture of AES, a loss on the early repayment of debt, a charge related to the Globalstar guarantee, an impairment charge related to ACeS, a gain on the sale of Control Systems, gain on sale of surplus real estate, partial reversal of CalComp reserve and other portfolio shaping activities which, on a combined basis, decreased earnings from continuing operations before income taxes by $685 million, $951 million after tax ($2.36 per diluted share). |
(7) | Includes the effects of a gain from the sale of an investment in L-3, gains from sales of surplus real state and other portfolio shaping activities which, on a combined basis, increased earnings from continuing operations before income taxes by $249 million, $162 million after tax ($0.42 per share). Also includes a cumulative effect adjustment relating to the adoption of SOP 98-5 regarding costs of start-up activities which, resulted in a charge that reduced net earnings by $355 million ($0.93 per diluted share). |
(8) | Includes the effects of a loss from the non-bankruptcy shut-down of the CalComp Technology, Inc. business, a gain from the sales of surplus real estate and other portfolio shaping activities which, on a combined basis, decreased earnings from continuing operations before income taxes by $162 million, $136 million after tax ($0.36 per share). |
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SELECTED HISTORICAL FINANCIAL DATA OF THE TITAN CORPORATION
The following selected financial data for each of the five years in the period ended December 31, 2002 have been derived from Titans audited consolidated financial statements. The financial information presented for the years ended and as of December 31, 1999 and 1998 has been restated from its original historical presentation to reflect acquisitions accounted for using the pooling of interests method that occurred during 2000 and discontinued operations subsequent to those years. The financial data as of June 30, 2003 and 2002, and for each of the six-month periods then ended, have been derived from Titans unaudited condensed consolidated financial statements which include, in the opinion of Titans management, all adjustments, consisting of normal recurring adjustments, necessary to present fairly the results of operations and financial position of Titan for the periods and dates presented. Operating results for the six months ended June 30, 2003 are not necessarily indicative of results to be expected for the full fiscal year. This data should be read in conjunction with the respective audited and unaudited consolidated financial statements of Titan, including the notes thereto, incorporated by reference in this proxy statement/prospectus. See Where You Can Find More Information.
Six Months Ended June 30, |
Year Ended December 31, |
|||||||||||||||||||||||||||
2003 |
2002 |
2002 |
2001 |
2000 |
1999 |
1998 |
||||||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||||||||||
Income Statement Data: |
||||||||||||||||||||||||||||
Revenues |
$ | 815,560 | $ | 659,979 | $ | 1,392,160 | $ | 974,497 | $ | 846,208 | $ | 741,225 | $ | 525,519 | ||||||||||||||
Operating profit (1) |
$ | 49,478 | $ | 46,649 | $ | 20,668 | $ | 27,711 | $ | 8,346 | $ | 78,794 | $ | 41,470 | ||||||||||||||
Income (loss) from continuing operations before discontinued operations and cumulative effect of change in accounting principle (2) |
$ | 13,022 | $ | 12,667 | $ | (13,244 | ) | $ | (3,457 | ) | $ | (15,334 | ) | $ | 37,660 | $ | 18,540 | |||||||||||
Income (loss) from discontinued operations, net of taxes (benefit)(3) |
(156 | ) | (17,947 | ) | (218,106 | ) | (95,157 | ) | (3,394 | ) | 97 | (17,085 | ) | |||||||||||||||
Cumulative effect of change in accounting principle, net of tax benefit |
| (40,111 | ) | (40,111 | ) | | | | (19,474 | ) | ||||||||||||||||||
Net income (loss) |
$ | 12,866 | $ | (45,391 | ) | $ | (271,461 | ) | $ | (98,614 | ) | $ | (18,728 | ) | $ | 37,757 | $ | (18,019 | ) | |||||||||
Basic earnings (loss) per share: |
||||||||||||||||||||||||||||
Income (loss) from continuing operations before discontinued operations and cumulative effect of change in accounting principle |
$ | 0.16 | $ | 0.17 | $ | (0.18 | ) | $ | (0.13 | ) | $ | (0.34 | ) | $ | 0.78 | $ | 0.43 | |||||||||||
Income (loss) from discontinued operations, net of taxes (3) |
| (0.24 | ) | (2.87 | ) | (1.63 | ) | (0.09 | ) | 0.01 | (0.41 | ) | ||||||||||||||||
Cumulative effect of change in accounting principle, net of taxes |
| (0.54 | ) | (0.53 | ) | | | | (0.47 | ) | ||||||||||||||||||
Net income (loss) |
$ | 0.16 | $ | (0.61 | ) | $ | (3.58 | ) | $ | (1.76 | ) | $ | (0.43 | ) | $ | 0.79 | $ | (0.45 | ) | |||||||||
Weighted average shares |
78,947 | 73,981 | 75,988 | 58,793 | 52,717 | 47,094 | 41,657 | |||||||||||||||||||||
Diluted earnings (loss) per share: |
||||||||||||||||||||||||||||
Income (loss) from continuing operations before discontinued operations and cumulative effect of change in accounting principle |
$ | 0.16 | $ | 0.13 | $ | (0.18 | ) | $ | (0.13 | ) | $ | (0.34 | ) | $ | 0.70 | $ | 0.42 | |||||||||||
Loss from discontinued operations, net of taxes (3) |
| (0.24 | ) | (2.87 | ) | (1.63 | ) | (0.10 | ) | | (0.40 | ) | ||||||||||||||||
Cumulative effect of change in accounting principle, net of taxes |
| (0.53 | ) | (0.53 | ) | | | | (0.45 | ) | ||||||||||||||||||
Net income (loss) |
$ | 0.16 | $ | (0.64 | ) | $ | (3.58 | ) | $ | (1.76 | ) | $ | (0.44 | ) | $ | 0.70 | $ | (0.43 | ) | |||||||||
Weighted average shares |
81,329 | 75,476 | 75,988 | 58,793 | 52,717 | 54,136 | 43,172 | |||||||||||||||||||||
Cash dividends on preferred stock |
$ | (344 | ) | $ | (345 | ) | $ | (689 | ) | $ | (690 | ) | $ | (692 | ) | $ | (695 | ) | $ | (778 | ) | |||||||
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As of June 30, 2003 |
As of December 31, | |||||||||||||||||
2002 |
2001 |
2000 |
1999 |
1998 | ||||||||||||||
Balance Sheet Data: |
||||||||||||||||||
Total assets |
$ | 1,286,347 | $ | 1,297,442 | $ | 1,451,919 | $ | 951,209 | $ | 627,550 | $ | 369,923 | ||||||
Total debt |
589,838 | 351,142 | 336,887 | 269,126 | 258,934 | 143,501 | ||||||||||||
Company obligated mandatorily redeemable convertible preferred securities of a subsidiary trust whose sole assets are senior subordinated debentures of Titan (5 3/4% HIGH TIDES) |
| 250,000 | 250,000 | 250,000 | | | ||||||||||||
Stockholders equity |
335,528 | 312,313 | 496,958 | 167,416 | 166,348 | 98,440 |
(1) | Operating profit reflects earnings from continuing operations before interest income and expense, income taxes, and debt extinguishment charges. Operating profit includes the effect of exit and restructuring charges and other of $3.3 million and $53.3 million in the six months ended June 30, 2002, and the year ended December 31, 2002, respectively. Acquisition and integrated related charges and other reflected in operating profit were $27.8 million, $28.8 million, $13.1 million and $7.1 million in 2001, 2000, 1999 and 1998, respectively. Operating profit in 2000 reflects a valuation allowance for accounts receivable of $10.0 million and a gain on investment of $2.1 million. Operating profit in 1999 includes the effect of a gain on investment of $41.8 million. Operating profit also reflects amortization of goodwill of $10.0 million, $9.9 million, $8.0 million and $3.2 million in 2001, 2000, 1999 and 1998, respectively, amortization of purchased intangibles of $5.7 million, $2.3 million and $2.7 million in 2002 and for the six-month periods ended June 30, 2003 and 2002, respectively, and deferred compensation charges of $27.8 million, $4.3 million, $5.5 million, $0.1 million and $0.0 million in 2002, 2001, 2000, 1999 and 1998, respectively, and $5.7 million and $2.4 million for the six-month periods ended June 30, 2003 and 2002, respectively. |
(2) | Income (loss) from continuing operations includes the effect of debt extinguishment costs of $12.4 million and $9.4 million in the six months ended June 30, 2003 and 2002, respectively, and $9.4 million and $6.3 million in 2002 and 2000, respectively. |
(3) | Income (loss) from discontinued operations per share is net of taxes (benefit) of $(109.3) million or $(1.44) per share, $(7.8) million or $(0.13) per share, $5.8 million or $0.11 per share, $1.4 million or $0.03 per share, and $(7.1) million or $(0.17) per share in 2002, 2001, 2000, 1999 and 1998, respectively, and $(3.1) million or $(0.04) per share and $(6.5) million or $(0.09) per share for the six-month periods ended June 30, 2003 and 2002, respectively. The $218.1 million or $2.87 per share charge in 2002 is related to the decision to divest LinCom Wireless and a remaining commercial information technology business, to sell or close the Titan Wireless segment and to sell certain commercial information technology operations within the Cayenta segment and the AverCom business. The $0.1 million or $0.00 per share charge in the six-month period ended June 30, 2003 is related to the exit of the Titan Wireless segment and the disposal or wind-down of Titans commercial information technology business and LinCom Wireless business. |
25
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed financial statements are based upon Lockheed Martins and Titans historical consolidated financial statements incorporated by reference in this proxy statement/prospectus, and have been prepared to reflect the proposed merger based on the purchase method of accounting. The unaudited pro forma combined condensed statements of earnings, which have been prepared for the six months ended June 30, 2003 and for the year ended December 31, 2002, give effect to the merger as if it had occurred at the beginning of each of the periods presented. The unaudited pro forma combined condensed balance sheet has been prepared as of June 30, 2003 and gives effect to the merger as if it had occurred on that date. Lockheed Martin prepared the unaudited pro forma adjustments based upon financial data requested from Titan, and upon preliminary estimates and assumptions. The final determination of the fair market value of the assets acquired and liabilities assumed and the final allocation of the purchase price are expected to be finalized within one year of the date of the merger and will be reflected in future filings. The final determinations may result in amounts that are materially different from the amounts reflected in the pro forma data presented herein and are subject to adjustment pending such final determinations.
The unaudited pro forma combined condensed financial statements are not necessarily indicative of actual or future financial position or results of operations that would have occurred or will occur upon completion of the merger. These statements do not include the effects of any estimated transition or restructuring costs which may be incurred in connection with integrating the operations of Titan into Lockheed Martin. It is not possible at this time to estimate the effect of such costs for pro forma purposes. Additionally, the unaudited pro forma combined condensed statements of earnings do not reflect any net cost savings or economies of scale that may have occurred had the merger been completed at the beginning of the respective periods.
The unaudited pro forma combined condensed financial statements are based upon, and should be read in conjunction with, the historical consolidated financial statements of Lockheed Martin and Titan, including the respective notes, which are incorporated by reference in this proxy statement/prospectus. See Where You Can Find More Information.
26
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF EARNINGS
For The Six Months Ended June 30, 2003 |
||||||||||||||||||||
(In millions, except per share data) | ||||||||||||||||||||
Historical Lockheed Martin |
Historical Titan |
Reclassifications |
Pro Forma Adjustments |
Pro Forma Combined |
||||||||||||||||
Net sales |
$ | 14,768 | $ | 816 | $ | (20 | )(a) | $ | 15,564 | |||||||||||
Cost of sales |
13,886 | 766 | $ | 1 | (12 | )(a),(b) | 14,641 | |||||||||||||
Earnings from operations |
882 | 50 | (1 | ) | (8 | ) | 923 | |||||||||||||
Other income and expenses, net |
93 | (11 | ) | (7 | )(c),(d) | 75 | ||||||||||||||
975 | 39 | (1 | ) | (15 | ) | 998 | ||||||||||||||
Interest expense |
259 | 17 | (9 | )(d) | 267 | |||||||||||||||
Earnings (loss) from continuing operations before income taxes |
716 | 22 | (1 | ) | (6 | ) | 731 | |||||||||||||
Income tax expense (benefit) |
224 | 9 | (1 | ) | (3 | )(e) | 229 | |||||||||||||
Earnings (loss) from continuing operations |
$ | 492 | $ | 13 | $ | | $ | (3 | ) | $ | 502 | |||||||||
Earnings (loss) from continuing operations per common share |
||||||||||||||||||||
Basic: |
||||||||||||||||||||
Weighted average shares |
447.1 | 78.9 | 464.3 | |||||||||||||||||
Per common share |
$ | 1.10 | $ | 0.16 | $ | 1.08 | ||||||||||||||
Diluted: |
||||||||||||||||||||
Weighted average shares |
450.6 | 81.3 | 470.2 | |||||||||||||||||
Per common share |
$ | 1.09 | $ | 0.16 | $ | 1.07 | ||||||||||||||
For The Year Ended December 31, 2002 |
||||||||||||||||||||
(In millions, except per share data) | ||||||||||||||||||||
Historical Lockheed Martin |
Historical Titan |
Reclassifications |
Pro Forma Adjustments |
Pro Forma Combined |
||||||||||||||||
Net sales |
$ | 26,578 | $ | 1,392 | $ | (29 | )(a) | $ | 27,941 | |||||||||||
Cost of sales |
24,629 | 1,371 | $ | 1 | (14 | )(a),(b) | 25,987 | |||||||||||||
Earnings from operations |
1,949 | 21 | (1 | ) | (15 | ) | 1,954 | |||||||||||||
Other income and expenses, net |
(791 | ) | (8 | ) | (21 | )(c),(d) | (820 | ) | ||||||||||||
1,158 | 13 | (1 | ) | (36 | ) | 1,134 | ||||||||||||||
Interest expense |
581 | 33 | (20 | )(d) | 594 | |||||||||||||||
Earnings (loss) from continuing operations before income taxes |
577 | (20 | ) | (1 | ) | (16 | ) | 540 | ||||||||||||
Income tax expense (benefit) |
44 | (7 | ) | (1 | ) | (5 | )(e) | 31 | ||||||||||||
Earnings (loss) from continuing operations |
$ | 533 | $ | (13 | ) | $ | | $ | (11 | ) | $ | 509 | ||||||||
Earnings (loss) from continuing operations per common share |
||||||||||||||||||||
Basic: |
||||||||||||||||||||
Weighted average shares |
445.1 | 76.0 | 462.3 | |||||||||||||||||
Per common share |
$ | 1.20 | $ | (0.18 | ) | $ | 1.10 | |||||||||||||
Diluted: |
||||||||||||||||||||
Weighted average shares |
452.0 | 76.0 | 471.5 | |||||||||||||||||
Per common share |
$ | 1.18 | $ | (0.18 | ) | $ | 1.08 |
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements.
27
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
As of June 30, 2003 |
||||||||||||||||||||
(In millions) | ||||||||||||||||||||
Historical Lockheed Martin |
Historical Titan |
Reclassifications |
Pro Forma Adjustments |
Pro Forma Combined |
||||||||||||||||
Assets |
||||||||||||||||||||
Current assets: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 1,909 | $ | 24 | $ | (1,294 | ) (c),(d) | $ | 639 | |||||||||||
Short-term investments |
229 | | 229 | |||||||||||||||||
Receivables |
3,405 | 330 | $ | 13 | 3,748 | |||||||||||||||
Inventories |
2,054 | 25 | 2,079 | |||||||||||||||||
Deferred income taxes |
1,284 | 103 | (8 | ) | 8 | 1,387 | ||||||||||||||
Other current assets |
705 | 129 | 12 | 846 | ||||||||||||||||
Total current assets |
9,586 | 611 | 17 | (1,286 | ) | 8,928 | ||||||||||||||
Property, plant and equipment |
3,259 | 66 | (22 | ) (f) | 3,303 | |||||||||||||||
Investments in affiliates |
1,079 | | 1,079 | |||||||||||||||||
Intangible assets related to contracts and programs acquired |
752 | | 192 | (f) |
|
944 |
| |||||||||||||
Cost in excess of net assets acquired |
7,380 | 466 | 1,581 | (f),(g) | 9,427 | |||||||||||||||
Other assets |
2,739 | 143 | (4 | ) | (41 | ) (f) | 2,837 | |||||||||||||
$ | 24,795 | $ | 1,286 | $ | 13 | $ | 424 | $ | 26,518 | |||||||||||
Liabilities and Stockholders Equity |
||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||
Accounts payable |
$ | 1,167 | $ | 76 | $ | 1,243 | ||||||||||||||
Customer advances and amounts in excess of costs incurred |
4,366 | | $ | 13 | 4,379 | |||||||||||||||
Salaries, benefits and payroll taxes |
1,178 | 69 | 1,247 | |||||||||||||||||
Income taxes |
223 | 223 | ||||||||||||||||||
Current maturities of long-term debt |
164 | 4 | $ | (4 | ) (d) | 164 | ||||||||||||||
Other current liabilities |
1,365 | 123 | 38 | 38 | (f) | 1,564 | ||||||||||||||
Total current liabilities |
8,463 | 272 | 51 | 34 | 8,820 | |||||||||||||||
Long-term debt |
6,075 | 586 | (341 | ) (d)(f) | 6,320 | |||||||||||||||
Post-retirement benefit liabilities |
1,525 | | 1,525 | |||||||||||||||||
Pension liabilities |
814 | | 814 | |||||||||||||||||
Other liabilities |
1,827 | 92 | (38 | ) | 7 | (f) | 1,888 | |||||||||||||
Stockholders equity: |
||||||||||||||||||||
Preferred stock |
| 1 | (1 | ) (c) | | |||||||||||||||
Common stock |
450 | 1 | 16 | (g),(h) | 467 | |||||||||||||||
Additional paid-in capital |
2,608 | 653 | 390 | (c),(g),(h) | 3,651 | |||||||||||||||
Retained earnings (deficit) |
4,645 | (314 | ) | 314 | (g) | 4,645 | ||||||||||||||
Treasury stock |
| (1 | ) | 1 | (g) | | ||||||||||||||
Unearned ESOP shares |
(33 | ) | | | (33 | ) | ||||||||||||||
Unearned compensation |
| (3 | ) | 3 | (g) | | ||||||||||||||
Accumulated other comprehensive income |
(1,579 | ) | (1 | ) | 1 | (g) | (1,579 | ) | ||||||||||||
Total stockholders equity |
6,091 | 336 | 724 | 7,151 | ||||||||||||||||
$ | 24,795 | $ | 1,286 | $ | 13 | $ | 424 | $ | 26,518 | |||||||||||
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements.
28
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(1) | Purchase Price |
As described in this proxy statement/prospectus, Lockheed Martin has agreed to acquire each outstanding common share of Titan for $22.00 per share in cash, Lockheed Martin common stock or a combination of cash and Lockheed Martin common stock. Titan stockholders who make a cash election or a stock election will likely have the form of their merger consideration adjusted as a result of the allocation provisions of the merger agreement that require that 50% of Titans outstanding shares of common stock be exchanged for Lockheed Martin common stock and 50% of Titans outstanding shares of common stock be exchanged for cash. Shares of Titan common stock will be exchanged for shares of Lockheed Martin common stock based on an exchange rate determined by dividing $22.00 by the average Lockheed Martin price during a ten-day measurement period. The average Lockheed Martin price will be subject to a lower and upper collar, as described elsewhere in this proxy statement/prospectus. The computation of the purchase price follows (in millions):
Purchase of 100% of outstanding common shares (80.6 million shares of Titan common stock at $22.00 per share) |
$ | 1,773 | |
Assumption of Titan stock options and warrants at fair value |
174 | ||
Estimated Lockheed Martin transaction costs |
6 | ||
Total purchase price |
$ | 1,953 | |
(2) | Reclassifications |
Reclassifications have been reflected in the unaudited pro forma combined condensed statements of earnings and balance sheet to conform the presentation of income tax balances, assets and liabilities of discontinued operations and other items to the format used by Lockheed Martin.
(3) | Pro Forma Adjustments |
The following adjustments are provided to reflect the merger on a pro forma basis:
(a) | To eliminate the sales and cost of sales between Lockheed Martin and Titan. No adjustments have been made to eliminate the related intercompany profit in ending inventories and the net intercompany receivables and payables at June 30, 2003, as such amounts are not considered material. |
(b) | To record the amortization of intangible assets related to contracts and programs acquired over an estimated composite life of 9 years and to eliminate Titans historical amortization of intangible assets. |
(c) | To reduce cash, stockholders equity and interest income due to Titans use of $14 million of cash to redeem its cumulative convertible preferred stock prior to closing and Lockheed Martins use of $893 million of cash and short-term investments in the acquisition of 50% of Titans common stock and estimated transaction costs. |
(d) | To reduce interest expense, interest income and cash to reflect Lockheed Martins use of $387 million of cash to repay borrowings outstanding under Titans line of credit. |
(e) | To record the federal income tax effect, using the 35% statutory rate, related to the net pro forma adjustments. |
(f) | To record the estimated fair values of the intangible assets related to contracts and programs acquired and cost in excess of net assets acquired (goodwill), as well as to adjust the other assets and liabilities of Titan to their estimated fair value. |
(g) | To eliminate Titans historical cost in excess of net assets acquired (goodwill) and stockholders equity balances. |
29
(h) | To record the assumed issuance of 17.2 million shares of Lockheed Martin common stock at an average price of $51.5125 per share and to record the assumption of Titans stock options and warrants at their estimated fair value. |
(4) | Computation of Pro Forma Earnings Per Common Share: |
Six Months Ended June 30, 2003 |
Year Ended December 31, 2002 | |||||
(In millions, except per share data) | ||||||
Pro Forma Basic Earnings Per Common Share: | ||||||
Earnings from continuing operations |
$ | 502 | $ | 509 | ||
Average number of common shares outstanding for basic earnings per share |
464.3 | 462.3 | ||||
Pro forma basic earnings per share from continuing operations |
$ | 1.08 | $ | 1.10 | ||
Pro Forma Diluted Earnings Per Common Share: | ||||||
Earnings from continuing operations |
$ | 502 | $ | 509 | ||
Average number of common shares outstanding for basic earnings per share |
464.3 | 462.3 | ||||
Dilutive stock options based on the treasury stock method |
5.9 | 9.2 | ||||
Average number of common shares outstanding for diluted earning per share |
470.2 | 471.5 | ||||
Pro forma diluted earnings per share from continuing operations |
$ | 1.07 | $ | 1.08 | ||
30
The following tables present historical and unaudited pro forma per share data of Lockheed Martin and Titan as of and for the six and twelve months ended June 30, 2003 and December 31, 2002, respectively. The data presented below should be read in conjunction with the historical consolidated financial statements of Lockheed Martin and Titan incorporated by reference in this proxy statement/prospectus and the pro forma financial information set forth under Pro Forma Financial Information in this proxy statement/prospectus.
Diluted earnings per share data are calculated using the diluted weighted average equivalent shares. Because the number of shares of Lockheed Martin common stock to be issued in the merger will not be known until three trading days prior to the completion of the merger, Titans equivalent per share data cannot be computed at this time. Hypothetical Titan equivalent per share data is presented below using the average of the daily mean of the high and low sales prices per share of Lockheed Martin common stock for the ten trading days ending on, but not including, the third trading day prior to September 15, 2003, which was $51.5125, and a resulting hypothetical exchange rate of 0.4271, and assumes no exercise of dissenters rights by Titan stockholders. Titans hypothetical equivalent per share data was calculated by multiplying the unaudited pro forma per Lockheed Martin share data by the hypothetical exchange rate of 0.4271.
Pro forma earnings per share from continuing operations were derived from the pro forma information presented under Unaudited Pro Forma Combined Condensed Financial Information. Pro forma cash dividends per share reflect Lockheed Martins cash dividends paid in the period indicated. The historical book value per share information was based upon outstanding shares of common stock for each respective company. The number of outstanding shares of Lockheed Martin common stock used in calculating the pro forma data has been adjusted to include the shares of Lockheed Martin common stock estimated to be issued in the merger, based upon the number of shares of Titan common stock outstanding at June 30, 2003.
As of or for the Six Months Ended June 30, 2003 |
As of or for the Year Ended December 31, 2002 |
||||||
Lockheed Martin Historical: |
|||||||
Earnings from continuing operations, per diluted share |
$ | 1.09 | $ | 1.18 | |||
Cash dividends per share |
$ | 0.24 | $ | 0.44 | |||
Book value per share |
$ | 13.52 | $ | 12.88 | |||
Titan Historical: (1) |
|||||||
Earnings (loss) from continuing operations, per diluted share |
$ | 0.16 | $ | (0.18 | ) | ||
Book value per share |
$ | 4.23 | $ | 4.00 | |||
Unaudited Pro Forma: |
|||||||
Per Lockheed Martin Share: |
|||||||
Earnings from continuing operations, per diluted share |
$ | 1.07 | $ | 1.08 | |||
Cash dividends per share |
$ | 0.24 | $ | 0.44 | |||
Book value per share |
$ | 15.30 | $ | 14.62 | |||
Per Hypothetical Titan Equivalent: |
|||||||
Earnings from continuing operations, per diluted share |
$ | 0.46 | $ | 0.46 | |||
Cash dividends per share |
$ | 0.10 | $ | 0.19 | |||
Book value per share |
$ | 6.53 | $ | 6.24 |
(1) | Titan did not pay cash dividends on its common stock in 2002 or the six months ended June 30, 2003. |
31
COMPARATIVE STOCK PRICES AND DIVIDENDS
Lockheed Martin common stock and Titan common stock are each listed and traded on the New York Stock Exchange under the symbols LMT and TTN, respectively. For the periods indicated, the following table sets forth the high and low sales prices per share of Lockheed Martin common stock and Titan common stock as reported on the New York Stock Exchange and the quarterly cash dividends per share paid by Lockheed Martin on its common stock.
Lockheed Martin Common Stock |
Titan Common Stock(1)(2) | ||||||||||||||
High |
Low |
Dividends |
High |
Low | |||||||||||
2001 |
|||||||||||||||
First Quarter |
$ | 39.50 | $ | 31.00 | $ | 0.11 | $ | 18.95 | $ | 11.71 | |||||
Second Quarter |
$ | 39.80 | $ | 34.05 | $ | 0.11 | $ | 18.70 | $ | 9.81 | |||||
Third Quarter |
$ | 46.00 | $ | 35.36 | $ | 0.11 | $ | 16.71 | $ | 12.07 | |||||
Fourth Quarter |
$ | 52.98 | $ | 42.40 | $ | 0.11 | $ | 21.57 | $ | 13.25 | |||||
2002 |
|||||||||||||||
First Quarter |
$ | 59.96 | $ | 45.85 | $ | 0.11 | $ | 18.66 | $ | 12.64 | |||||
Second Quarter |
$ | 71.52 | $ | 57.35 | $ | 0.11 | $ | 17.43 | $ | 12.72 | |||||
Third Quarter |
$ | 69.97 | $ | 52.30 | $ | 0.11 | $ | 13.64 | $ | 6.62 | |||||
Fourth Quarter |
$ | 65.55 | $ | 48.64 | $ | 0.11 | $ | 13.94 | $ | 8.86 | |||||
2003 |
|||||||||||||||
First Quarter |
$ | 58.95 | $ | 40.64 | $ | 0.12 | $ | 12.35 | $ | 6.82 | |||||
Second Quarter |
$ | 51.66 | $ | 43.32 | $ | 0.12 | $ | 10.88 | $ | 6.80 | |||||
Third Quarter |
$ | 55.00 | $ | 44.09 | $ | 0.12 | $ | 21.60 | $ | 10.01 | |||||
Fourth Quarter (through October 13, 2003) |
$ | 47.17 | $ | 45.03 | $ | 0.22 | $ | 21.09 | $ | 20.80 |
(1) | On August 5, 2002, Titan distributed a dividend to its stockholders of 0.6986 shares of SureBeam Corporation for each outstanding share of Titan common stock. The Titan common stock prices stated above for periods before August 5, 2002 are restated stock prices adjusted for the distribution of Titans ownership in SureBeam to its stockholders. The market prices were restated by dividing by 1.345, the same adjustment made by Titan to outstanding Titan stock options to maintain the same aggregate intrinsic value of the stock options before the spin-off. |
(2) | Titan did not pay cash dividends on its common stock in any period presented. |
On September 15, 2003, the last trading day prior to the announcement of the execution of the merger agreement, the closing price of Titan common stock was $16.96 per share and the closing price of Lockheed Martin common stock was $50.97 per share, each as reported on the New York Stock Exchange. On [ ], 2003 the most recent practicable trading day prior to the printing of this proxy statement/prospectus, the closing price of Titan common stock was $[ ] per share and the closing price of Lockheed Martin common stock was $[ ] per share. The market prices of shares of Titan common stock and Lockheed Martin common stock are subject to fluctuation. As a result, Titan stockholders are urged to obtain current market quotations. On [ ], there were approximately [ ] shares of Titan common stock outstanding and on [ ], there were approximately [ ] shares of Lockheed Martin common stock outstanding.
32
Lockheed Martin Dividend Policy
The holders of Lockheed Martin common stock receive dividends if and when declared by the Lockheed Martin board of directors out of funds legally available. Lockheed Martin expects to continue paying quarterly cash dividends on Lockheed Martin common stock. The declaration and payment of dividends after the merger will depend upon business conditions, operating results and the Lockheed Martin board of directors consideration of other relevant factors.
On September 15, 2003, Lockheed Martin announced that its board of directors has authorized an increase in the dividend paid on Lockheed Martins common stock from $0.12 per quarter to $0.22 per quarter. This increase in dividend will be effective for the dividend payable on December 31, 2003 to Lockheed Martin stockholders of record as of December 1, 2003.
33
Date, Time and Place of the Special Meeting
We are sending you this proxy statement/prospectus as part of a solicitation of proxies by Titans board of directors for use at the special meeting. We are first mailing this proxy statement/prospectus, including a notice of the special meeting and a form of proxy, on or about , 2003.
The special meeting is scheduled to be held at [place and address] on:
[Date]
[Time]
[Place]
Purpose of the Special Meeting
The purposes of the special meeting are to vote on:
(1) | a proposal to adopt the merger agreement and approve the merger; |
(2) | a proposal to authorize Titan to adjourn the special meeting on one or more occasions, if necessary, (a) to solicit additional proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement and approve the merger, (b) to allow additional time for the parties to satisfy other closing conditions to the merger, or (c) to calculate and announce the exchange rate before the vote on the merger; and |
(3) | such other matters as may properly come before the special meeting. |
Recommendations of the Titan Board
Titans board of directors has unanimously approved the merger agreement and the merger and determined that the merger agreement and the merger are advisable, fair to and in the best interests of Titan and its stockholders. Titans board of directors recommends that Titans stockholders vote FOR the adoption of the merger agreement and approval of the merger. See The MergerRecommendation of the Titan Board; Titans Reasons for the Merger for additional information regarding the merger.
Titans board of directors also has approved the adjournment proposal and recommends that Titans stockholders vote FOR the adjournment proposal. See Adoption of Adjournment Proposal for information regarding the adjournment proposal.
Required Vote
The affirmative vote of holders of a majority of the outstanding shares of Titan common stock entitled to vote at the special meeting is required to adopt the merger agreement and approve the merger. The affirmative vote of the holders of a majority of the shares of Titan common stock present or represented by proxy at the special meeting is required to approve the adjournment proposal.
Titans board of directors will not adjourn the special meeting unless the adjournment proposal is approved. Any other matters that may properly come before the meeting also will require the affirmative vote of holders of a majority of Titan common stock present or represented by proxy at the special meeting.
Each share of outstanding Titan common stock entitles its holder to one vote. Because Titan will redeem its cumulative convertible preferred stock before the special meeting, holders of this preferred stock will not be entitled to vote their preferred stock at the special meeting.
If you hold your shares in an account with a broker or bank, you must instruct the broker or bank on how to vote your shares. If a proxy card returned by a broker or bank holding shares indicates that the broker or bank
34
does not have authority to vote on the proposal to adopt the merger agreement and approve the merger, or the proposal to adjourn the special meeting, the shares will be considered present at the special meeting for purposes of determining the presence of a quorum, but will not be voted on these proposals. This is called a broker non-vote. Your broker or bank will vote your shares on these proposals only if you provide instructions on how to vote by following the instructions provided to you by your broker or bank.
Broker non-votes, abstentions and failures to vote will have the same effect as votes against the adoption of the merger agreement and approval of the merger. Failure to vote will have no effect on the adjournment proposal.
Record Date
Titans board of directors has fixed the close of business on , 2003 as the record date for the special meeting. At that date, there were shares of Titan common stock outstanding. Only holders of record of Titan common stock on the record date will be entitled to vote at the special meeting. Giving effect to the redemption of its cumulative convertible preferred stock, no other voting securities of Titan will be outstanding on the date of the special meeting.
As of the record date, directors and executive officers of Titan beneficially owned and had the right to vote shares of Titan common stock entitling them to exercise approximately % of the voting power of the Titan common stock.
Quorum
A majority of the shares of Titan common stock entitled to vote as of the record date must be present at the special meeting, either in person or by proxy, in order for there to be a quorum at the special meeting. Abstentions and broker non-votes will be treated as shares present and entitled to vote for purposes of determining a quorum at the special meeting. There must be a quorum for the votes on the merger agreement and the merger and the adjournment to be taken.
Proxies
Whether or not you plan to attend the special meeting in person you should submit your proxy as soon as possible. Stockholders whose shares of Titan common stock are registered in their own name may submit their proxies by one of the following methods:
| sign the enclosed proxy card and mail it in the enclosed, prepaid and addressed envelope; |
| call toll-free 1-800-PROXIES and follow the instructions; or |
| access the web page at www.voteproxy.com and follow the on-screen instructions. |
Votes submitted via the Internet or by telephone must be received by 12:00 midnight, New York City time, on , 2003. Submitting a proxy will not affect your right to vote in person if you decide to attend the special meeting.
The telephone and Internet voting procedures are designed to authenticate stockholders identities, to allow stockholders to give their voting instructions and to confirm that stockholders instructions have been recorded properly. If you vote via the Internet, you may incur costs associated with electronic access, including charges from your Internet access provider and/or telephone company.
Also, you may vote your shares of Titan common stock in person at the special meeting. Titan will pass out written ballots to anyone who wants, and is entitled, to vote at the special meeting.
Titan stockholders whose shares are held in street name must follow the instructions provided by their broker or bank to vote their shares. If you hold your shares of Titan common stock in street name, you must request a legal proxy from your broker or bank in order to vote at the special meeting.
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Titan stockholders who own shares of Titan common stock under the Titan employee benefit plans (e.g., the Titan Corporation Consolidated Retirement Plan, the AverStar, Inc. Profit Sharing & Savings Plan, or the Jaycor, Inc. Employee Stock Ownership Plan) will receive separate voting instruction cards. By completing the appropriate voting instruction card, plan participants may provide voting instructions to the trustee of the applicable plan for shares of Titan common stock held through that plan. If the trustee does not receive voting instructions from a plan participant, the trustee may vote the participants shares of under the respective plan in the same proportion as the shares of Titan common stock voted by all other respective plan participants on each proposal. If the trustee receives a signed but not voted instruction card, the trustee will vote the shares of Titan common stock according to the recommendations of the Titan board of directors on each proposal.
All properly submitted proxies received by Titan before the special meeting that are not revoked prior to being voted at the special meeting will be voted at the special meeting in accordance with the instructions indicated on the proxies or, if no instructions were provided, FOR adoption of the merger agreement and approval of the merger and FOR the adjournment proposal.
Proxies marked Abstain will not be voted at the special meeting. Abstentions and broker non-votes will have the same effect as votes against adoption of the merger agreement and approval of the merger and against the adjournment proposal. Accordingly, Titans board of directors urges you to promptly submit your proxy.
Submitting a proxy will impact your dissenters rights. See The MergerDissenters Rights and Annex C.
PLEASE EXAMINE YOUR PROXY CARD CLOSELY TO MAKE SURE YOU ARE VOTING ALL OF YOUR TITAN SHARES.
Other Matters
As of the date of this proxy statement/prospectus, Titans board of directors knows of no other matters that will be presented for consideration at the special meeting other than as described in this proxy statement/prospectus. If any other matters properly come before the special meeting of Titan stockholders, or any adjournments or postponements of the special meeting are proposed, and are properly voted upon, the enclosed proxies will give the individuals that they name as proxies discretionary authority to vote the shares represented by these proxies as to any of these matters. The individuals named as proxies intend to vote or not to vote in accordance with the recommendation of Titans board of directors.
Revocation
You may change your vote at any time before your proxy card is voted at the special meeting. If your shares of Titan common stock are registered in your name, you can do this in one of three ways:
| signing another proxy card with new instructions with a later date or time; |
| delivering later proxy instructions via regular mail, the Internet or by telephone; or |
| voting in person at the special meeting. |
Any written notice of revocation or subsequent proxy should be delivered to Titans Corporate Secretary at 3033 Science Park Road, San Diego, CA, 92121, before the taking of the vote at the special meeting. If you transmit changed instructions by regular mail, you should allow sufficient time for your instructions to be delivered prior to the special meeting. All properly submitted proxies received by Titan before the special meeting that are not revoked prior to being voted at the special meeting will be voted at the special meeting in accordance with the instructions indicated on the proxies or, if no instructions were provided, FOR adoption of the merger agreement and approval of the merger and FOR the adjournment proposal.
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If you have instructed a broker or bank to vote your shares, you must follow the instructions received from your broker or bank if you wish to change those instructions.
Solicitation of Proxies
In addition to soliciting proxies by mail, officers, directors and employees of Titan, without receiving additional compensation, may solicit proxies by telephone, telegraph, in person or by other means. Arrangements also will be made with brokerage firms and other custodians, nominees and fiduciaries to forward proxy solicitation materials to the beneficial owners of Titan common stock held of record by those persons, and Lockheed Martin and Titan will reimburse these brokerage firms, custodians, nominees and fiduciaries for related, reasonable out-of-pocket expenses they incur. Lockheed Martin and Titan will share equally their expenses incurred in connection with the printing and mailing of this proxy statement/prospectus.
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On September 15, 2003, Titans board of directors approved the merger agreement, the merger and the other transactions contemplated by the merger agreement. If the conditions to the merger are satisfied, Titan will be merged with and into LMC Sub One in a forward merger. However, under certain circumstances described in this proxy statement/prospectus, Titan may elect to restructure the proposed transaction and cause LMC Sub One to be merged with and into Titan in a reverse merger. After the effective time of the merger, LMC Sub One or Titan, as the successor in the merger, will continue its existence under Delaware law as a wholly-owned subsidiary of Lockheed Martin.
In the fall of 2002, Thomas G. Pownall, a former director of Titan and retired Chairman and Chief Executive Officer of Martin Marietta Corporation, a company that combined with Lockheed Corporation in March 1995 to form Lockheed Martin, contacted Gene W. Ray, Titans Chairman, President and Chief Executive Officer to introduce Frank H. Menaker, Senior Vice President and General Counsel of Lockheed Martin. In connection with that introduction, Mr. Menaker suggested that it could be mutually beneficial for Lockheed Martin and Titan if Dr. Ray met with Robert J. Stevens, Lockheed Martins President and Chief Operating Officer. Subsequently, Mr. Stevens sent Dr. Ray a letter suggesting they meet at a mutually convenient time.
Dr. Ray responded to Mr. Stevens in early October 2002, and the officers discussed generally the businesses of their respective companies. In the course of these discussions, Dr. Ray advised Mr. Stevens that Titan was not interested in being acquired. Mr. Stevens replied that he understood, but nevertheless invited Dr. Ray to meet with him and Vance D. Coffman, Chairman and Chief Executive Officer of Lockheed Martin. At a regularly scheduled meeting of Titans board of directors in November 2002, Dr. Ray informed Titans board of his conversation with Mr. Stevens. The Titan board advised Dr. Ray that Titan was not interested in being acquired.
In December 2002, Mr. Stevens contacted Dr. Ray to discuss possible strategic initiatives involving their respective companies. Dr. Ray reiterated that Titan was not interested in being acquired. Mr. Stevens replied that, while he understood that Titan was not for sale at this time, the invitation to meet together with Dr. Coffman remained open.
After the announcement of the acquisition of Veridian Corporation by General Dynamics in June 2003, Dr. Ray received information from Relational Advisors LLC regarding Titans implied value at the valuation multiples paid by General Dynamics for Veridian. This information implied that Titan may be able to command a significant premium to its then-current trading price through a similar transaction.
In mid July 2003, Dr. Ray contacted Mr. Stevens who suggested that they should talk further. On July 23, 2003, Titans board of directors authorized Dr. Ray and Titan executive management to meet with Lockheed Martin.
Dr. Ray and Mr. Stevens met on July 28, 2003. At the meeting, Mr. Stevens discussed Lockheed Martins desire to learn more about Titans business and consider possible strategic initiatives with Titan. After their discussion, Dr. Ray and Mr. Stevens agreed to convene a meeting among the key executives of each of Titan and Lockheed Martin to explore whether discussions between the two companies would be beneficial.
At a meeting held on August 6, 2003, in Washington, D.C., Dr. Ray, Nicholas J. Costanza, Titans Senior Vice President, General Counsel and Secretary and Mark W. Sopp, Titans Senior Vice President, Chief Financial Officer and Treasurer met with Jeffrey D. MacLauchlan, Lockheed Martins Vice President, Financial Strategies, and Mr. Menaker, who repeated Lockheed Martins interest in Titan. The parties discussed Lockheed Martins general business prospects, strategies and financial condition.
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During the August 6, 2003 meeting, members of Lockheed Martins management indicated that their review of Titan to date had been limited to publicly available information, but they would like to conduct detailed due diligence of Titan. On August 6, 2003, Titan and Lockheed Martin entered into a confidentiality agreement. At a telephonic Titan board meeting held on August 8, 2003, Dr. Ray informed Titans board of directors of the discussions at the August 6, 2003 meeting.
On August 12 and August 13, 2003, Lockheed Martin and Titan management met in San Diego, California. Titan management briefed Lockheed Martin on a variety of due diligence matters. Lockheed Martin made a number of follow-up due diligence requests, and the parties discussed the process for due diligence going forward.
On August 15, 2003, based on its preliminary due diligence review, Lockheed Martin wrote a letter to Dr. Ray suggesting that Lockheed Martin acquire Titan by merger for $20.00 per share of Titan common stock, which represented a 30% premium to the closing price of Titan common stock on August 14, 2003. Lockheed Martins letter proposed paying the acquisition price 50% in cash and 50% in Lockheed Martin common stock and was subject to due diligence and Lockheed Martin board of directors approval.
On August 20, 2003, Titans board of directors met to consider Lockheed Martins proposal compared to the prospect of Titan continuing to operate on an independent basis or Titan pursuing alternative strategic transactions. Titans board of directors received presentations from Titans management team and Relational Advisors, including:
| a summary of various advantages and disadvantages of a strategic transaction for Titan; |
| the potential opportunities and risks of remaining an independent company; |
| a preliminary valuation analysis of Titan; |
| an overview of other defense companies that would most likely be interested in acquiring Titan and capable of making an offer that would provide full value for Titan stockholders; |
| a summary of Lockheed Martins proposal; and |
| an overview of Lockheed Martins business, including a summary of Lockheed Martins recent publicly-filed financial statements as well as current research analysts reports on Lockheed Martin. |
Mr. Costanza also made a presentation regarding the Titan board of directors fiduciary obligations. Titans board of directors expressed an interest in pursuing a dialogue with Lockheed Martin but determined that the price was inadequate. Titans board of directors instructed Dr. Ray to tell Lockheed Martin that the $20.00 per share price did not provide a sufficient premium to Titan stockholders.
In the August 20, 2003 meeting, Titans board of directors authorized Dr. Ray to contact four other defense companies that were identified at the meeting as the companies most likely to be interested in and capable of consummating an acquisition of Titan. In selecting these companies, Titans board took into account, among other factors, the ability to make an offer that would provide full value for Titan stockholders, the ability to achieve regulatory approvals, financial ability to complete the transaction and strategic compatibility of Titans business with such companys existing business. Titans board of directors decided to conduct this selective confidential process rather than a more extensive public process based on its determination that a public process would not likely result in a proposal more favorable than Lockheed Martins offer and could disrupt Titans operations by creating uncertainty among employees and customers about Titans future.
To avoid potential disruption and to retain the services and expertise of management and key employees, Titans board of directors also, at the August 20, 2003 meeting, approved retention, severance and other payments to certain Titan employees upon a change of control of Titan, which will occur upon the completion of the merger. For additional information, see The MergerInterests of Certain Persons in the Merger; Conflicts of Interest. At this meeting, Titans board also approved the engagement of Relational Advisors to act as Titans financial advisor in connection with a possible transaction.
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Following that meeting, Titan contacted the four other defense companies identified. Two of the companies were not interested in pursuing discussions with Titan. On August 21, 2003, one of the companies, company A, executed a confidentiality agreement with Titan.
On August 23, 2003, members of Titans senior management met in San Diego with representatives of company A and presented them with information about Titans business and future prospects. Thereafter, communications continued between Titan management and representatives of company A regarding Titans business and a possible transaction.
On August 27, 2003, Dr. Ray and Mr. Costanza met with Dr. Coffman and Mr. MacLauchlan to discuss the potential business combination of Titan and Lockheed Martin, the cultures of each organization and the valuation of Titan. On August 28, 2003, another of the defense companies contacted by Titan, company B entered into a confidentiality agreement with Titan.
On August 29, 2003, Dr. Ray received a letter from Dr. Coffman outlining a revised Lockheed Martin proposal to acquire Titan. The offer consisted of $20.00 per share of Titan common stock in cash or $21.50 per share payable half in cash and half in Lockheed Martin common stock. The closing price of Titan common stock on August 28, 2003 was $16.19. The letter indicated that this revised proposal was non-binding subject to due diligence, approval by Lockheed Martins board of directors and completion of definitive documentation. Dr. Ray encouraged Lockheed Martin to submit a higher proposal than the $21.50 offer.
On August 30, 2003, company A notified Titan that it had decided not to pursue further discussions with Titan. On September 2, 2003, Dr. Ray gave the board an update on the discussions with each of the interested companies. Following the board meeting, Dr. Ray encouraged Lockheed Martin to review its offer and submit a higher price.
On September 3, 2003, members of Titans senior management met in San Diego with representatives of company B and presented them with information about Titans business and future prospects. On September 5, 2003, company B advised Dr. Ray that it had decided not to proceed with a transaction with Titan.
On September 5, 2003, Titan received a revised offer from Lockheed Martin of $22.00 per share of Titan common stock, payable half in cash and half in Lockheed Martin common stock. This offer was conditioned on due diligence, the approval of Lockheed Martins board of directors and completion of definitive documentation. The offer also proposed that the options to purchase shares of common stock of Titan under Titans stock options plans would be assumed by Lockheed Martin.
At a meeting held on September 5, 2003, the Titan board of directors discussed Lockheed Martins $22.00 per share offer and other terms of the proposed transaction. At the meeting, Relational Advisors made a presentation to the Titan board, including valuation analysis. Mr. Costanza, in conjunction with Titans outside legal counsel, Hogan & Hartson L.L.P., reviewed for the board of directors its fiduciary obligations. During the meeting, Dr. Ray left to call Lockheed Martin to discuss the Lockheed Martin offer.
Dr. Ray returned to the meeting and reported that Lockheed Martin was unwilling to increase its offer above $22.00 per share. The Titan board of directors continued discussions and unanimously determined that it was in the best interests of Titan and its stockholders to negotiate further with Lockheed Martin on other terms and conditions based on this $22.00 per share proposal. Following the meeting, Lockheed Martin provided Titan with a detailed list of due diligence items that it wanted to review. Titan and Lockheed Martin exchanged drafts of the merger agreement, and negotiations between the parties regarding various terms of the merger agreement continued through September 15, 2003.
On September 9, 2003 representatives of Lockheed Martin and Titan, including executive vice presidents from three of Lockheed Martins business segments and all but one of the eight business sector presidents of Titan, met to discuss reciprocal due diligence issues in McLean, Virginia. On the same day, a separate, inter- disciplinary subject-area due diligence team from Lockheed Martin met with representatives of Titan in San Diego, Lockheed Martins and Titans respective due diligence review continued through September 15, 2003.
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On September 12, 2003, the Titan board of directors held a telephonic meeting at which Titan management and its advisors reviewed the status of negotiations.
A special telephonic meeting of the board of directors of Lockheed Martin was held on September 15, 2003. Prior to the meeting, Lockheed Martin provided its directors with a summary of the terms and conditions of the proposed transaction and other briefing materials, including valuation analyses. The terms and conditions of the merger agreement were discussed and followed by questions from Lockheed Martin directors regarding the proposed transaction. After discussion and consideration of the facts and circumstances, Lockheed Martins board of directors approved the merger agreement.
A special telephonic meeting of the Titan board of directors was held on September 15, 2003. Prior to the special meeting, Titan provided each of its directors with a summary of the terms and conditions of the merger agreement, as well as a substantially final draft of the merger agreement itself, and a financial analysis of the transaction prepared by Relational Advisors, including valuation parameters and various research analysts reports on Lockheed Martin. Dr. Ray and a representative of Relational Advisors briefed the board of directors on the final results of negotiations with Lockheed Martin. Management and its advisors discussed the final terms and conditions of the merger agreement and answered questions from Titan directors. Relational Advisors reviewed its financial analysis of the merger consideration and rendered to Titans board of directors an oral opinion, later confirmed in writing and dated September 15, 2003, to the effect that, as of that date and based on and subject to the matters described in the opinion, the merger consideration to be received by the holders of Titan common stock was fair, from a financial point of view.
After discussion and consideration of the facts and circumstances, Titans board of directors unanimously determined that the merger with Lockheed Martin was advisable, fair to and in the best interests of Titan and its stockholders. Titans board of directors unanimously adopted the merger agreement with Lockheed Martin and unanimously resolved to recommend to Titan stockholders that they vote for adoption of the merger agreement and approval of the merger.
On the evening of September 15, 2003, the parties signed the merger agreement and issued a joint press release announcing the proposed merger. On the morning of September 16, 2003, Titan issued press releases announcing its intention to redeem its cumulative convertible preferred stock and the termination of Titans then-ongoing registered exchange offer relating to its 8% senior subordinated notes.
Lockheed Martins Reasons for the Merger
Lockheed Martins board of directors approved the merger agreement on September 15, 2003 and believes that the merger is in the best interests of Lockheed Martin and its stockholders. In reaching its decision, the board considered a number of factors, including but not limited to:
| the business, financial condition, results of operations and future prospects of Titan; |
| the complementary nature of Titans businesses, in relation to those of Lockheed Martin; |
| Titans well-trained and highly skilled employees; |
| the ability to offer a broader range of services and expanded capabilities to Lockheed Martins existing defense and intelligence customers in the areas of Federal government IT and technical services; |
| Titans relationships and reputation with defense, intelligence and other Federal government customers and prospects for growth and enhanced presence with those customers; |
| belief that the operating style and culture of Lockheed Martin would be well received by Titans employees and would increase the likelihood of a non-disruptive integration process; |
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| conviction that Lockheed Martins focus on mission success and customer service excellence would resonate well with Titans employees, result in a high rate of retention and minimize disruption in the support of Titans customers; |
| the expectation that Titan could be successfully integrated with Lockheed Martins existing businesses; |
| the terms of the merger agreement, including the termination fee; |
| the potential benefits and cost savings that could be realized as a result of the integration of Titans organizational structure with Lockheed Martin; and |
| the expectation that the Titan acquisition would be accretive to Lockheed Martins earnings per share. |
In addition, Lockheed Martins board of directors evaluated and balanced against the potential benefits of the merger a number of alternatives, including other possible internal and external investments. In this regard, the Lockheed Martin board of directors regularly considers and discusses Lockheed Martins strategic objectives and various strategic alternatives. As part of its disciplined growth strategy, Lockheed Martin has established a process to identify and evaluate potential acquisition prospects and other investment options in terms of their potential for long-term contribution to stockholder value. Based on the above factors, the board concluded that Titan represented an attractive investment opportunity in comparison to other options evaluated.
Lockheed Martins board of directors did not assign relative weights to the factors described above or the other factors it considered. In addition, the Lockheed Martin board did not reach any specific conclusion on each factor considered, but conducted an overall analysis of these factors. Individual members of the Lockheed Martin board may have given different weights to different factors.
Recommendation of the Titan Board; Titans Reasons for the Merger
Titans board of directors has unanimously determined that the merger with Lockheed Martin is advisable, fair to and in the best interests of Titan and its stockholders. The decision of the board of directors to approve and enter into the merger agreement and to recommend that stockholders vote FOR adoption of the merger agreement and approval of the merger was the result of careful consideration of numerous factors by the board of directors, including, without limitation, the following:
Merger Consideration Premium. The $22.00 per share merger consideration represented a premium of approximately 23% over the highest closing price of Titans common stock over the 12-month period prior to September 15, 2003, the last trading day before the public announcement of the signing of the merger agreement, approximately 30% over the closing price of Titans common stock on September 15, 2003 and approximately 35% over the average daily closing price of Titans common stock over the 30 trading day period ended September 15, 2003.
Merger Consideration. The board of directors considered favorably that Titan stockholders may elect, subject to the allocation procedures set forth in the merger agreement and described in this proxy statement/prospectus, to receive their merger consideration in the form of cash, Lockheed Martin common stock or a combination of Lockheed Martin common stock and cash in exchange for their shares of Titan common stock.
No Financing Conditions to Closing. The board of directors considered favorably Lockheed Martins ability to consummate the merger without requiring a financing condition in the merger agreement.
Tax-deferred Nature. The board of directors took into consideration the fact that the merger was intended to qualify as a reorganization under Section 368(a) of the Internal Revenue Code and was therefore expected to be tax-deferred to the stockholders of Titan (other than with respect to any cash consideration received or cash received in lieu of fractional shares).
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Ability to Accept a Superior Proposal. The provisions of the merger agreement permitted the board of directors to consider and accept an unsolicited superior proposal to comply with the board of directors fiduciary duties to Titan stockholders.
Value of Other Alternatives. In determining that a merger with Lockheed Martin was more favorable to Titan stockholders than remaining independent, the board of directors considered the merger consideration offered by Lockheed Martin as compared to the range of potential values if Titan remained independent, and risks associated with achieving those values. In addition, the board of directors, based in part upon the advice of Relational Advisors, believed it unlikely that a superior offer would be made for Titan, particularly since the four other defense companies contacted by Titans management following receipt of the Lockheed Martin offer declined to pursue a transaction with Titan.
Strategic Fit. Given the complementary rather than competitive nature of their respective businesses, Titans management advised the board of directors that a business combination with Lockheed Martin should be a strong strategic fit.
Employee and Customer Impact. Titans management advised its board of directors that it believed that the operating style and culture of Lockheed Martin would be well received by Titans employees and would increase the likelihood of a non-disruptive integration process.
Management also believed that Lockheed Martins focus on customer service excellence would resonate well with Titans employees, would result in a high rate of retention of Titans employees, and would therefore minimize any disruption in the support of Titans customers.
Opinion. The board of directors received the opinion of Relational Advisors as to the fairness, from a financial point of view, of the merger consideration to be received by the holders of Titans common stock, as described more fully under the caption Opinion of Relational Advisors LLC.
Independence Risks. Titans board of directors believed that a merger with Lockheed Martin was more favorable to Titan stockholders than remaining independent based on the potential value of such alternative and the risks associated with remaining independent. The main strategic and operational risks that the board of directors associated with Titan remaining independent included:
| risks associated with winning new contracts and generating organic revenue growth; |
| risks associated with performing Titans contracts, executing Titans business, and maintaining and increasing profit margins; |
| risks that Titan would not be able to continue to produce improved operating results in its core defense business given the relatively high current levels of funding by the Department of Defense and other governmental agencies as a result of policies sponsored by the Bush administration; |
| risks associated with finding suitable acquisition candidates, consummating acquisitions at acceptable prices, and integrating such acquisitions, since Titan has historically grown both organically and through acquisitions; |
| risks associated with successfully recruiting a chief operating officer and the ability of that person to execute Titans business plan; and |
| risks associated with potential compression of trading and transaction multiples in Titans industry sector, which multiples at that time appeared at or near cyclical highs. |
Due Diligence. The board of directors, in analyzing the stock portion of the merger consideration received, evaluated the due diligence reviews of Lockheed Martin undertaken by Titans management and its financial advisors. The board of directors also considered in this regard Lockheed Martins historical stock performance,
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and the liquidity provided to Titan stockholders due to the average daily trading volume of Lockheed Martins common stock and the absence of lock-up provisions covering shares of Lockheed Martin common stock to be received by Titan stockholders.
Titans board of directors also considered and balanced against the potential benefits of the merger a number of potentially adverse factors concerning the merger, including, without limitation, the following:
Value. The board of directors evaluated Titans opportunities for growth and potential for increased stockholder value if Titan were to stay independent.
Disruptions. The board of directors considered possible disruption to Titans businesses that may result from the announcement of the transaction and the resulting distraction of Titans managements attention from the day-to-day operations of Titans businesses.
Operating Restrictions. The board of directors noted the restrictions contained in the merger agreement on the operation of Titans and its subsidiaries businesses during the period between the signing of the merger agreement and the completion of the merger.
Regulatory. The board of directors evaluated the risks of significant costs, delays and the potential failure to satisfy the closing conditions to, or the termination of, the merger agreement if governmental and regulatory approvals necessary for the completion of the merger could not be obtained.
Consummation Risk. The board of directors weighed the possibility that the merger might not be completed and the effect of the resulting public announcement of termination of the merger agreement on:
| the market price of Titan common stock; and |
| Titans operating results, particularly in light of the costs incurred in connection with the transaction, including the potential requirement to pay the termination fee. |
Termination Fee. The board of directors considered the risk that Titans obligation to pay a termination fee to Lockheed Martin in certain circumstances might deter other parties from proposing an alternative transaction that might be more advantageous to Titan stockholders. In considering this provision, the board of directors took into account the concerns of Lockheed Martin, which the board of directors believed had made an attractive acquisition proposal conditioned on receipt of a termination fee, and the likelihood of there being a subsequent better offer which might be deterred by such a payment.
After taking into account all of the factors set forth above, as well as others, including the personal interests of Titans directors and executive officers as described more fully under The MergerInterests of Certain Persons in the Merger; Conflicts of Interest, the Titan board of directors agreed that the benefits of the merger outweighed the risks and that the merger agreement and the merger were advisable, fair to and in the best interests of Titan and its stockholders.
Although the foregoing discussion sets forth the material factors considered by Titans board of directors in reaching its recommendation, it may not include all of the factors considered by the board of directors of Titan, and each director may have considered different factors. In view of the variety of factors and the amount of information considered, the board of directors did not find it practicable to, and did not, make specific assessments of, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination. The determination was made after consideration of all of the factors as a whole and as a result of numerous meetings.
Titans board of directors has unanimously determined that the merger agreement and the merger are advisable, fair to and in the best interests of Titan and its stockholders. Accordingly, the board of directors unanimously recommends that Titan stockholders vote FOR the adoption of the merger agreement and approval of the merger.
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Opinion of Relational Advisors LLC
Relational Advisors LLC acted as Titans exclusive financial advisor in connection with the merger. Titan selected Relational Advisors based on Relational Advisors experience, reputation and familiarity with Titan. As part of its investment banking business, Relational Advisors routinely performs financial analyses with respect to businesses and their securities in connection with mergers and acquisitions.
In connection with Relational Advisors engagement, Titan requested that Relational Advisors evaluate the fairness, from a financial point of view, of the merger consideration that the holders of the outstanding shares of common stock of Titan will receive. On September 15, 2003, at a meeting of the Titan board of directors held to approve the proposed merger, Relational Advisors delivered an oral opinion to the Titan board, confirmed by delivery of a written opinion dated September 15, 2003, to the effect that, as of that date and based on and subject to various assumptions, matters considered and limitations described in the opinion, the merger consideration was fair, from a financial point of view, to the holders of Titan common stock.
The full text of Relational Advisors opinion describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Relational Advisors. This opinion is attached as Annex B and is incorporated in this proxy statement/prospectus by reference. Relational Advisors opinion is directed only to the fairness, from a financial point of view, of the merger consideration and does not address any other aspect of the merger or any related transaction. The opinion does not constitute a recommendation to any stockholder as to how to vote or act with respect to any matters relating to the proposed merger. You are encouraged to read this opinion carefully in its entirety. The summary of Relational Advisors opinion below is qualified in its entirety by reference to the full text of the opinion.
In arriving at its opinion, Relational Advisors reviewed, among other information it deemed relevant:
| the merger agreement; |
| annual reports to stockholders and annual reports on Form 10-K of Titan and Lockheed Martin for the three years ended December 31, 2002; |
| certain interim reports to stockholders and quarterly reports on Form 10-Q of Titan and Lockheed Martin; |
| certain other communications from Titan and Lockheed Martin to their respective stockholders; |
| certain internal financial analyses and forecasts for Titan prepared by its management; and |
| certain publicly available research analysts reports evaluating Titan and Lockheed Martin. |
In addition, Relational Advisors:
| reviewed the reported price and trading activity for the shares of Titan and Lockheed Martin common stock; |
| compared certain financial and stock market information for Titan and Lockheed Martin to similar information for certain other companies with publicly traded securities; |
| reviewed, to the extent publicly available, financial terms of certain recent business combinations in the federal information technology services and aerospace and defense sectors, specifically, and in other industries, generally; and |
| reviewed such other information and performed such other studies and analyses as it deemed relevant. |
Relational Advisors also held discussions with senior management of Titan and Lockheed Martin regarding their assessment of the strategic rationale for, and the potential benefits and challenges of, the transaction contemplated by the merger agreement and the past and current business operations, financial condition and future prospects of their respective companies.
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In connection with its review, Relational Advisors relied upon the accuracy and completeness of all of the financial, accounting and other information discussed or reviewed, assumed such accuracy and completeness for purposes of rendering its opinion, and did not assume any responsibility for independently verifying the accuracy or completeness of such financial, accounting and other information. In that regard, Relational Advisors made certain assumptions, including the following:
| the forecasts were reasonably prepared on a basis reflecting the best currently available estimates and judgments of Titan management; |
| the merger would be consummated as set forth in the merger agreement without waiver, modification or amendment of any material term, condition or agreement; and |
| in the course of obtaining any regulatory or third party consents, approvals or agreements in connection with the merger, no limitations, restrictions or conditions would be imposed that would have an adverse effect on Titan, Lockheed Martin, the consummation or the contemplated benefits of the merger. |
In addition, Relational Advisors was not requested to make, and did not make, an independent evaluation or appraisal of the assets and liabilities (including any derivative or off-balance-sheet assets and liabilities) of Titan or Lockheed Martin or any of their respective subsidiaries, and Relational Advisors was not furnished with any such evaluation or appraisal. Relational Advisors opinion was necessarily based upon information available to it, and financial, economic, market and other conditions as they existed, and could be evaluated, as of the date of the opinion. The opinion did not address the relative merits of the transaction contemplated by the merger agreement as compared to any alternative business transaction that might be available to Titan, nor did it address the underlying business decision of Titan to engage in the transaction contemplated by the merger agreement. In addition, Relational Advisors did not express any opinion as to the actual value of Lockheed Martin common stock when issued to the holders of Titan common stock pursuant to the merger or the prices at which the Lockheed Martin common stock would trade at any time. Although Relational Advisors evaluated the merger consideration from a financial point of view, Relational Advisors was not requested to, and it did not, recommend the specific consideration payable in the merger, which consideration was determined between Lockheed Martin and Titan. Except as described above, Titan imposed no other limitations on Relational Advisors with respect to the investigations made or procedures followed in rendering its opinion.
In preparing its opinion to Titans board of directors, Relational Advisors performed a variety of financial and comparative analyses, including those described below. The order in which the analyses are described does not represent the relative importance or weight given to the analyses performed by Relational Advisors. The summary of Relational Advisors analyses described below is not a complete description of the analyses underlying its opinion. The preparation of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a fairness opinion is not susceptible to partial analysis or summary description. Relational Advisors believes that its analyses must be considered as a whole and that selecting portions of its analyses and factors, without considering all analyses and factors, could create a misleading or incomplete view of the processes underlying its analyses and opinion.
In its analyses, Relational Advisors considered industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of Titan. No company, transaction or business used in Relational Advisors analyses as a comparison is identical to Titan or the proposed merger, and an evaluation of the results of those analyses is not entirely mathematical. Rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies or transactions analyzed. The estimates contained in Relational Advisors analyses and the ranges of valuations resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which
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businesses or securities actually may be sold. Accordingly, Relational Advisors analyses and estimates are inherently subject to substantial uncertainty.
In the course of preparing its opinion, Relational Advisors also reviewed and considered other information and data, including the historical price performance of Titan and Lockheed Martin common stock and the relationship between movements in Titan and Lockheed Martin common stock and selected companies in the federal information technology services and aerospace and defense sectors.
The following is a summary of the financial analyses underlying Relational Advisors opinion delivered to the Titan board of directors in connection with the merger.
Selected Trading Market Analysis. Using publicly available information, Relational Advisors reviewed the financial, operating and stock market data of the following selected publicly traded companies in the federal information technology services industry:
| Anteon International Corporation |
| CACI International Inc. |
| Dynamics Research Corporation |
| ManTech International Corporation |
| MTC Technologies, Inc. |
| PEC Solutions, Inc. |
| SI International, Inc. |
| SRA International Inc. |
Relational Advisors compared the enterprise values of Titan and the selected companies as multiples of sales and earnings before interest, taxes, depreciation and amortization, commonly referred to as EBITDA, for the latest 12 months and estimated calendar years 2003 and 2004. Relational Advisors also compared the equity values of Titan and the selected companies as multiples of the earnings per share, commonly referred to as EPS for the latest 12 months and estimated calendar years 2003 and 2004. Estimated financial data for the selected companies were based on actual results in the case of the latest 12 months and on most recently available consensus analysts estimates in the case of calendar years 2003 and 2004. Relational Advisors also compared the equity value per share for each company to the companys 2004 EPS, and compared that multiple to the companys consensus long-term EPS growth rates. Relational Advisors then applied a range of selected multiples derived from the selected companies to the corresponding pro forma financial data for Titan for the latest 12 months and estimated calendar year 2003 projections, and also to the 2004 projections of financial data prepared in accordance with generally accepted accounting principles, or GAAP. All estimates and projections for 2003 and 2004 of financial data prepared were based on Titans management estimates and projections. The pro forma estimates of Titans management for the latest 12 months and estimated 2003 results were used to eliminate restructuring and other one-time charges from the financial statements. All multiples were based on closing stock prices on September 12, 2003. This analysis indicated the following implied per share equity reference range for Titan as compared to the per share consideration in the merger of $22.00:
Implied Per Share Equity Reference Range |
$16.47 - $20.09 |
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Selected Transactions Analysis. Using publicly available information, Relational Advisors reviewed the implied enterprise values of the following 10 selected transactions in the federal information technology services and aerospace and defense sectors:
ACQUIROR | TARGET | |||||
| DRS Technologies, Inc. | | Integrated Defense Technologies, Inc. | |||
| General Dynamics Corp. | | Veridian Corp. | |||
| Computer Sciences Corp. | | DynCorp. | |||
| Northrop Grumman Corp. | | Newport News Shipbuilding Inc. | |||
| Northrop Grumman Corp. | | Litton Industries, Inc. | |||
| Investor Group | | Rockwell Collins, Inc. | |||
| BAE Systems plc | | Aerospace Electronics Systems business unit of Lockheed Martin | |||
| United Technologies Corp. | | Sundstrand Corp. | |||
| The BF Goodrich Company | | Coltec Industries, Inc. | |||
| General Electric Co. plc | | Tracor, Inc. |
Relational Advisors compared the enterprise values in the selected transactions as multiples of the latest 12 months and estimated forward calendar year sales and EBITDA, in each case as determined from publicly available analyst reports. Relational Advisors then derived an implied enterprise reference range for Titan by applying a range of selected multiples derived from the selected transactions to the projected pro forma financial data for Titan for the calendar year 2003, and GAAP projections for the calendar year 2004. Relational Advisors also compared the equity values of Titan and the selected transactions as multiples of projected 2003 pro forma calendar year EPS and GAAP 2004 calendar year EPS. All multiples for the selected transactions were based on publicly available financial information. This analysis indicated the following implied per share equity reference range for Titan, as compared to the per share consideration in the merger of $22.00:
Implied Per Share Equity Reference Range |
$16.48 - $19.40 |
General DynamicsVeridian Transaction Analysis. Relational Advisors separately reviewed the implied enterprise values of General Dynamics 2003 acquisition of Veridian Corporation, which Titan management considered as one of its most similar competitors. Relational Advisors compared the enterprise value in the transaction as a multiple of the latest 12 months, and the projected calendar year 2004 sales and EBITDA. Relational Advisors then derived an implied enterprise reference range for Titan by applying the multiples derived from the selected transaction to the projected pro forma financial data for Titan for the calendar year 2003, and GAAP financial data projections for the calendar year 2004. Relational Advisors also compared equity values of Titan and the selected transaction as multiples of projected 2003 pro forma calendar year EPS and GAAP calendar year 2004 EPS. All multiples for the selected transaction were based on publicly available financial information. This analysis indicated the following implied per share equity reference range for Titan, as compared to the per share consideration in the merger of $22.00:
Implied Per Share Equity Reference Range |
$20.26 - $24.07 |
Premiums Paid Analysis. Using publicly available information, Relational Advisors reviewed the acquisition price per share for selected 2003 acquisitions of U.S. publicly traded companies with total enterprise values between $500 million and $5 billion. Relational Advisors compared the acquisition price per share to the targets stock price one-day, one-week, and one-month prior to the announcement of the transaction to arrive at an implied range of stock price premiums. These one-day, one-week, and one-month premiums were applied to the corresponding stock prices of Titan, using September 12, 2003 as Titans reference point. All premiums for the selected transactions were based on publicly available financial information. This analysis indicated the following implied per share equity reference range for Titan, as compared to the per share consideration in the merger of $22.00:
Implied Per Share Equity Reference Range |
$21.13 - $21.65 |
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Discounted Cash Flow Analysis. Relational Advisors performed a discounted cash flow analysis of Titan to calculate the estimated present value of the stand-alone, after-tax free cash flows that Titan could generate over calendar years 2004 through 2008 and the value of Titan at the end of that period. Relational Advisors applied a range of EBITDA terminal value multiples of 8.8x to 10.8x to Titans calendar year 2008 estimated EBITDA. The present value of the cash flows and terminal values for each case were calculated using discount rates ranging from 10.5% to 12.5%. This analysis indicated the following implied per share equity reference range for Titan, as compared to the per share consideration in the merger of $22.00:
Implied Per Share Equity Reference Range |
$22.23 - $26.36 |
Relationships between Relational Advisors and Titan. Relational Advisors acted as financial advisor to Titan in connection with, and participated in certain of the negotiations leading to, the merger, although in so acting, Relational Advisors has not entered into an agency or other fiduciary relationship with Titan, its board of directors or stockholders, or any other person.
Titan retained Relational Advisors pursuant to an engagement letter, effective as of August 1, 2003. As compensation for Relational Advisors services in connection with the merger, Titan agreed to pay Relational Advisors an aggregate fee of approximately $8 million comprised of the following components:
| a cash retainer fee totaling $180,000, $45,000 of which became payable on August 1, 2003, with the remaining $135,000 becoming payable in $45,000 installments on each of November 1, 2003 and February 1, and May 1, 2004; |
| an additional cash opinion fee of $750,000, which became payable upon the rendering of Relational Advisors opinion; and |
| an additional cash fee equal to 0.3% of the total transaction value (all forms of equity plus debt) based on merger consideration of $20.00 per share of Titan common stock, plus 0.5% of the total transaction value (all forms of equity plus debt) in excess of $20.00 per share of Titan common stock, less the $750,000 opinion fee described immediately above. |
In addition, regardless of whether the merger is consummated, Titan has agreed to reimburse Relational Advisors for reasonable fees and disbursements of Relational Advisors counsel and other reasonable out-of-pocket expenses Relational Advisors incurs in connection with the merger or otherwise arising out of its retention under the engagement letter. Titan has also agreed to indemnify Relational Advisors and certain related persons against certain expenses and liabilities, including certain liabilities under the federal securities laws arising out of its engagement or the merger.
Relational Advisors has in the past provided financial advisory services to Titan unrelated to the merger, for which Relational Advisors has received compensation. Titan is an investor and limited partner, with approximately 40% partnership interest, in a fund currently managed by Titan Investment Partners, LLC, the general partner of which is an affiliate of Relational Advisors LLC. Dr. Ray is an investor and limited partner in one of a number of limited partnerships and managed accounts, which are managed by Relational Investors LLC, the general partner of which is an affiliate of Relational Advisors LLC. Dr. Rays limited partnership interest, which was purchased on the same terms offered to individuals making similarly sized investments, is less than 0.1% of the aggregate of the funds managed by Relational Investors. Relational Advisors currently serves as financial advisor to a former subsidiary of Titan, to which Titan remains a material creditor.
Interests of Certain Persons in the Merger; Conflicts of Interest
In considering the recommendation of Titans board of directors with respect to the merger, Titan stockholders should be aware that some of Titans directors and executive officers have interests in the merger that are different from, or in addition to, the interests of Titan stockholders generally. Titans board of directors was aware of these interests and considered them in adopting the merger agreement and approving the merger.
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Change in Control Agreements. In March 2000, Titan entered into executive agreements with Dr. Ray and Mr. Costanza, which provide special benefits after a change in control. The parties subsequently amended these agreements on September 15, 2003. Effective as of August 20, 2003, Titan also entered into an executive agreement with Mr. Sopp, which mirrors the executive agreement, as amended, for Mr. Costanza. Pursuant to these agreements, as amended, if (1) there is a change in control of Titan (which will occur at the effective time of the merger) and (2) the executive is terminated by Titan (or, after the merger, Lockheed Martin) other than for Cause (as defined below) or such executive terminates his employment for Good Reason (as defined below) within three years following such change in control or if the executive is terminated prior to a change in control and the executive reasonably believes that his termination arose in connection with or anticipation of a change in control, the terminated executive will be entitled to a lump sum payment amount equal to three times the sum of his base salary and his Highest Annual Bonus (as defined below). Each executive will have a right under these agreements to resign for Good Reason at the effective time of the merger by virtue of the fact that Titan will cease to be a publicly traded company. Also, the executive will receive a prorated bonus for the year of termination and continuation of the executives and his familys welfare benefits (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) for three years after the later of the executives date of termination or, as applicable, the expiration of the executives continuation coverage period under the Consolidated Omnibus Budget Reconciliation Act, referred to as COBRA. In addition, all options that have been previously granted to the executive to acquire shares of Titan or any affiliate of Titan that have not previously been forfeited or exercised will vest and become exercisable in full and will remain exercisable for the remainder of their original terms. Each executive will be entitled to outplacement services at a cost not to exceed $100,000 for his outplacement services to be paid by Titan (or, after the merger, Lockheed Martin). Furthermore, the executive will be deemed to have attained not less than six years of service and to have vested for all purposes under Titans supplemental retirement plan for key executives. As well, Dr. Ray will be provided with an office and secretary for a period of five years after his employment termination with a total estimated cost of $800,000. Titans 401(k) plan provides for full vesting of all accounts under the plan upon a change in control (as defined in the plan), which will occur at the effective time of the merger. In the event that the executive becomes subject to excise tax pursuant to Section 4999 of the Internal Revenue Code, the executive, subject to certain limitations, will be entitled to an additional tax gross-up payment in an amount that will result in the executive retaining an amount equal to the excise tax imposed upon the executive. Based on current compensation levels, the total estimated cost of the severance payments and continued welfare benefits payable to Dr. Ray, Mr. Costanza, and Mr. Sopp is, respectively, $5,466,000, $2,073,000 and $1,989,000. These estimates do not include any tax gross up payment which Titan (or, after the merger, Lockheed Martin) might be required to make pursuant to these agreements. Titan (or, after the merger, Lockheed Martin) will be obligated under these agreements to reimburse Dr. Ray, Mr. Costanza and Mr. Sopp for all legal fees and all expenses which they incur in asserting or in defending their rights under these agreements.
For purposes of the agreements with Dr. Ray, Mr. Costanza, and Mr. Sopp, the following definitions apply:
| Cause means (1) the executives willful and continued failure to perform his duties, provided that such failure has a material and injurious effect on Titan (or, after the merger, Lockheed Martin) and the executive has received a written demand for substantial performance and has not subsequently substantially performed; or (2) the executives willful gross misconduct or conviction of a felony (finally adjudicated and without further appeal) that is materially and demonstrably injurious to Titan (or, after the merger, Lockheed Martin). |
| Good Reason means (1) the assignment of the executive to any duties inconsistent with the executives position, authority, duties or responsibilities or any diminution of such position, authority, duties, or responsibilities; (2) any failure by Titan (or, after the merger, Lockheed Martin) to comply with the compensation and benefit provisions of the executives agreement; (3) Titan ceasing to be a publicly traded company; (4) Titan (or, after the merger, Lockheed Martin) requiring the executive to be |
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based at a location other than where the executive was employed immediately prior to the change in control or at any other location, which is less than 20 miles from such office, to be based at a location other than the principal executive offices of Titan if the executive was employed at such location immediately prior to the change in control, or to travel on company business to a substantially greater extent than required prior to the change in control; (5) any purported termination by Titan (or, after the merger, Lockheed Martin) of the executives employment otherwise than as permitted by the agreement; and (6) any failure by Titan (or, after the merger, Lockheed Martin) to require any successor to the company to expressly assume and agree to perform the agreement. |
| Highest Annual Bonus means the greater of the highest annualized bonus earned by the executive in the three fiscal years prior to the change in control or the annualized bonus paid or payable to the executive for the most recently completed fiscal year. |
In November 1995, Titan also entered into an executive severance agreement with Titans Senior Vice President and President, Information Products Sector, Ronald B. Gorda. The terms of the agreement provide that in the event of a change in control of Titan (which will occur at the effective time of the merger) and the termination of Mr. Gordas employment at any time during fifteen days prior to a change in control or the two year period after a change in control by Titan (or, after the merger, Lockheed Martin) other than for Cause (as defined below) or by Mr. Gorda for Good Reason (as defined below), Mr. Gorda will be paid a lump sum amount equal to two times the sum of his base salary and maximum bonus payable to Mr. Gorda in the year he receives notice of termination. Additionally, Mr. Gorda will receive a prorated maximum bonus for the year of termination and continuation of medical and dental benefits covering Mr. Gorda and his dependents for two years following the termination. In the event that any payments to be received by Mr. Gorda pursuant to the agreement will not be deductible by Titan (or, after the merger, Lockheed Martin) under Section 280G of the Internal Revenue Code, the payments will be reduced to such amounts as will ensure full deductibility. Based on his current compensation levels, the total estimated cost of the benefits payable to Mr. Gorda is $1,042,000. In addition, Titan (or, after the merger, Lockheed Martin) will be obligated under the agreement to reimburse Mr. Gorda for all legal fees and all expenses which he incurs in asserting or in defending his rights under his agreement.
For purposes of Mr. Gordas agreement,
| Cause means Mr. Gordas (1) conviction of a felony; (2) theft or embezzlement of property from Titan (or, after the merger, Lockheed Martin); or (3) willful misconduct or failure to substantially perform his duties, provided such misconduct or failure continues after Mr. Gorda has received written notice of his misconduct or performance failures. |
| Good Reason means (1) assignment of duties to Mr. Gorda inconsistent with his position or status immediately prior to a change in control or a substantial adverse alteration of Mr. Gordas title, position, functions, working conditions, or responsibilities; (2) relocation of Mr. Gordas worksite more than 30 miles from his office location immediately prior to the change in control; (3) a reduction in Mr. Gordas base salary or targeted bonuses; (4) Titans (or, after the merger, Lockheed Martins) failure to provide Mr. Gorda with benefits substantially similar to the benefits provided to him prior to the change in control; (5) the continuation or repetition, after Mr. Gordas written notice of objection, of harassing or denigrating treatment; or (6) any purported termination of Mr. Gordas employment without the termination notice required by the agreement. |
Retention, Severance, and Other Payments. On August 20, 2003, Titans board of directors adopted resolutions that provide retention, severance, and/or other payments and outplacement services to certain members of Titans management upon a change in control of Titan (which will occur at the effective time of the merger), and in some cases, the occurrence of certain other events.
The following 11 Titan board-elected senior vice presidents are eligible for retention, severance, and/or other payments and outplacement services: Robert J. Whalen; Lawrence J. Delaney; Earl A. Pontius; Ronald B. Gorda; Charles R. Saffell; Leslie A. Rose; Robert J. Osterloh; Paul W. Sullivan; A. Anton Frederickson; Allen D. Branch,
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and Thomas J. Brennan. The following nine Titan board-elected corporate vice presidents are eligible for retention, severance, and/or other payments and outplacement services: Deanna Lund; Dianne Dyer-Bruggeman; Ralph R. Williams; Cheryl Barr; John H. Dressendorfer; Mary Jo Potts; Michael Paige, Brian J. Clark; and Philip J. DeVera.
Under the 2003 Retention Plan, each of these same 11 board-elected senior vice presidents and each of these same nine board-elected corporate vice presidents also will receive: (1) a retention bonus equal to one-half annual base salary if he or she remains in continuous service with Titan (or, after the merger, Lockheed Martin) until the six month anniversary of a change in control (which will occur upon the effective time of the merger) and (2) an additional retention bonus equal to one-half annual base salary if he or she remains in continuous service with Titan until the one year anniversary of a change in control (which will occur at upon the effective time of the merger). The total estimated cost of the retention payments payable to these 11 board-elected senior vice presidents is $2,885,000. The total estimated cost of the retention payments payable to these nine board-elected corporate vice presidents is $1,716,000.
Also, pursuant to the resolutions, these same 11 board-elected senior vice presidents will each receive a special severance payment amount equal to two times annual base salary if there is a change in control (which will occur at the effective time of the merger) and his or her employment is terminated within two years of the date of such change in control by Titan (or, after the merger, Lockheed Martin) without Cause (as defined below) or by the individual for Good Reason (as defined below). These same nine board-elected corporate vice presidents will each receive a special severance payment in an amount equal to the product of (1) two months base salary and (2) the individuals complete or partial years of employment up to a maximum of ten years if there is a change in control (which will occur at the effective time of the merger) and his or her employment is terminated within one year of the date of such change in control by Titan (or, after the merger, Lockheed Martin) without Cause (as defined below) or such individual terminates his or her employment for Good Reason (as defined below). If an individual is entitled to receive a special severance payment under the resolutions and a severance payment under any other plan, agreement, or policy, Titan (or, after the merger, Lockheed Martin) will pay the individual the greater severance amount but not both severance amounts. Based on current compensation levels, the total estimated cost of the special severance payments payable to the 11 board-elected senior vice presidents is $6,198,000. The total estimated cost of the special severance payments payable to the nine board-elected corporate vice presidents is $1,696,000. Mr. Gorda will be eligible for severance under the resolutions or under his executive severance agreement, whichever is greater. Special severance payments also may be made to members of the management council.
For purposes of the special severance payments,
| Cause means (1) the individuals willful and continued failure to perform his or her duties, provided that such failure has a material and injurious effect on Titan (or, after the merger, Lockheed Martin) and the individual has received a written demand for substantial performance and has not subsequently substantially performed; or (2) the individuals willful gross misconduct or conviction of a felony (finally adjudicated and without further appeal) that is materially and demonstrably injurious to Titan (or, after the merger, Lockheed Martin). |
| Good Reason means (1) the reduction in the individuals cash compensation; or (2) the individuals main place of business is moved more than 50 miles from such location at the time of the change in control. |
Pursuant to the resolutions, Titan (or, after the merger, Lockheed Martin) will provide outplacement services for a period of six months to each of Titans board-elected senior vice presidents (other than Messrs. Costanza and Sopp) and board-elected corporate vice presidents whose employment is terminated by Titan (or, after the merger, Lockheed Martin) without Cause or by the individual for Good Reason within one year (two years in the case of board-elected senior vice presidents) of a change in control (which will occur at the effective time of the merger). All other headquarters employees who are terminated without Cause or who resign for Good Reason also will be eligible for outplacement services for one month. For purposes of the outplacement services, Cause and Good Reason are defined the same as for purposes of the severance payments described above.
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The resolutions provide that all members of Titans management who are participants in the Titan 2003 Annual Incentive Plan will be awarded their target bonus for 2003 or such greater amount as may be determined by the compensation committee of the Titan board of directors, including additional bonuses to Dr. Ray, Mr. Costanza and Mr. Sopp, upon the closing of a strategic transaction that will constitute a change in control (which will occur at the effective time of the merger). On September 15, 2003, the board of directors increased the target bonuses for Dr. Ray, Mr. Costanza and Mr. Sopp by 15% of their annual base salaries, having a respective value of $120,000, $51,000 and $48,750.
In addition, the resolutions provide that the Titan directors, executive management and board-elected senior vice presidents will continue to receive financial counseling and tax preparation services through April 15, 2005 and for such additional time as is necessary for the preparation of their tax returns for 2004. The aggregate estimated cost of such financial counseling and tax preparation services is $624,000.
Finally, the resolutions authorize Dr. Ray to award at his discretion, up to $1,500,000 in severance payments to employees of Titan (other than executive management, board-elected senior vice presidents, board-elected corporate vice presidents and members of the management council), and the resolutions provide that all headquarters employees of Titan (excluding Dr. Ray and Messrs. Costanza and Sopp) will receive their full salary and target bonus for 2003, whether or not terminated, and that these payments will be in addition to any other severance payments made to such employees other than (1) Dr. Ray and Messrs. Costanza and Sopp, who will receive severance payments pursuant to their change in control agreements and their target bonuses for 2003 described above, a (2) the 11 board-elected senior vice presidents, the nine board-elected corporate vice presidents and members of the management council, who will receive the special severance payments described above and their target bonuses for 2003.
Equity Plans. Under the merger agreement, at the effective time of the merger, each Titan stock option that is then outstanding and unexercised will fully vest and become exercisable, will be assumed by Lockheed Martin, and will be exchanged for an option to purchase shares of Lockheed Martin common stock, with an appropriate adjustment in the number of shares and exercise price per share to reflect the exchange rate in the merger agreement. After the merger, the terms of the Titan stock options and the stock options plans under which they were granted will continue to apply. See The Merger AgreementEffect on Titan Options.
On August 20, 2003, Titans board of directors adopted a resolution that amended all outstanding Titan stock options to provide that the right to exercise all such options will accelerate and fully vest upon a change in control (which will occur at the effective time of the merger).
Options to purchase in the aggregate 1,867,629 shares of Titan common stock held by the executive officers and directors of Titan will be accelerated and become fully vested and exercisable upon completion of the merger. Titans executive officers and directors will receive the following amounts as a result of the accelerated vesting of their options:
Dr. Gene W. Ray |
$ | ||
Nicholas J. Costanza |
|||
Mark W. Sopp |
|||
Charles R. Saffell, Jr. |
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Paul W. Sullivan |
|||
Allen D. Branch |
|||
Thomas J. Brennan |
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Lawrence J. Delaney |
|||
A. Anton Frederickson |
|||
Ronald B. Gorda |
|||
Robert J. Osterloh |
|||
Earl A. Pontius |
|||
Leslie A. Rose |
|||
Robert J. Whalen |
|||
All other directors and executive officers as a group ( persons) |
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These amounts are based on the number of unvested options held by each individual or group as of , 200 , the date of the special meeting, and assume that the options are exercised on the effective date of the merger for a net value equal to the difference between the merger consideration of $22.00 per share and the exercise price of the options. The actual amount that will be received by each individual or group as a result of the vesting of the options upon completion of the merger may be higher or lower depending on the actual price of Lockheed Martin common stock at the time of exercise. In addition, the executive officers and directors hold options to purchase, in the aggregate, 2,825,986 shares of Titan common stock that are currently fully vested and exercisable.
Indemnification; Directors and Officers Insurance. Under the merger agreement, at the effective time of the merger, the surviving corporation will, for six years following the merger, indemnify persons who were directors or officers of Titan or any Titan subsidiary before the merger with respect to all acts or omissions by such person in his or her capacity as a Titan director or officer of Titan or any Titan subsidiary. The merger agreement further requires that, for six years following the effective time of the merger, subject to certain limitations, the surviving corporation maintain coverage under a director and officer liability insurance policy at a level at least equal to that which Titan is maintaining for its officers and directors prior to the merger. The certificate of incorporation and bylaws of the surviving corporation will require the surviving corporation to exculpate and indemnify Titans directors and officers to the fullest extent permitted under Delaware law. Finally, Lockheed Martin has agreed to guarantee the performance of the surviving corporations obligations under the merger agreement.
Election and Election Procedures
Concurrently with the mailing of this proxy statement/prospectus, a letter of transmittal and election form will be mailed to each holder of record of Titan common stock on the record date for the special meeting. To be effective, a letter of transmittal and election form must be properly completed, signed and submitted to the exchange agent, accompanied by certificates representing the shares of Titan common stock as to which the election is being made, by 5:00 p.m., New York City time, on the last business day prior to the effective time of the merger. All elections will be irrevocable. If the merger is not completed for any reason, your stock certificates will be returned to you promptly following termination of the merger agreement.
Lockheed Martin will have the discretion, which it may delegate in whole or in part to the exchange agent, to determine whether letter of transmittal and election forms have been properly completed, signed and submitted and to disregard immaterial defects in letter of transmittal and election forms. The decision of Lockheed Martin or the exchange agent in such matters will be conclusive and binding. Neither Lockheed Martin nor the exchange agent will be under any obligation to notify any person of any defect in a letter of transmittal and election form.
You may make one of the following elections regarding the type of merger consideration you wish to receive in exchange for your Titan common stock:
| a cash election of $22.00 in cash per share, without interest; |
| a stock election for Lockheed Martin common stock based on an exchange rate determined as described below; or |
| a combination election whereby 50% of your Titan shares are exchanged for cash and 50% of your Titan shares are exchanged for Lockheed Martin common stock based on the exchange rate. |
Holders of Titan common stock who hold their shares as nominees, trustees or in other representative capacities may submit multiple letter of transmittal and election forms, provided that the representative certifies that each letter of transmittal and election form covers all the shares of Titan common stock held by that representative for a particular beneficial owner.
If a Titan stockholder does not submit a letter of transmittal and election form to the exchange agent by 5:00 p.m., New York City time, on the last business day prior to the effective time of the merger or if Lockheed Martin or the exchange agent determines that an election by a Titan stockholder was not properly made, then that
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Titan stockholder will receive cash for 50% of such stockholders shares of Titan common stock and Lockheed Martin common stock for the remaining 50% of such stockholders shares of Titan common stock.
Neither Titans board of directors nor its financial advisor makes any recommendation as to whether stockholders should elect to make a cash election, a stock election or a combination election. You must make your own decision with respect to such election, bearing in mind the tax consequences of the election you choose. See The MergerMaterial U.S. Federal Income Tax Consequences. You should return your letter of transmittal and election form, together with your stock certificate(s), by the election deadline, so that you may receive the merger consideration allocable to you promptly following completion of the exchange procedures that will take place after the merger is completed. See The MergerProcedures for Exchanging Titan Common Stock Certificates.
Under the merger agreement, the number of shares of Titan common stock to be exchanged for cash must be equal to 50% of the total number of shares of Titan common stock outstanding immediately prior to the effective time of the merger, excluding shares held by Titan stockholders who have perfected dissenters rights or any shares held by Lockheed Martin or Titan. If, after the results of the letter of transmittal and election forms are calculated, the number of shares of Titan common stock to be exchanged for cash exceeds this 50% threshold, the exchange agent will determine the number of cash election shares that must be reallocated as stock election shares in order to achieve the 50% threshold. After the exchange agent makes this determination, all holders who have made cash elections will, on a pro rata basis, have a portion of their cash election shares reallocated as stock election shares so that the total number of shares of Titan common stock to be exchanged for cash will equal the 50% threshold.
No reallocation will occur if a holder has made a cash election but would receive fewer than 20 shares of Lockheed Martin common stock upon reallocation. Instead, the cash election shares of the remaining holders of shares of Titan common stock will be reallocated on a pro rata basis so that the 50% threshold is satisfied.
Similarly, the number of shares of Titan common stock to be exchanged for shares of Lockheed Martin common stock also must satisfy the 50% threshold. If, after the results of the letter of transmittal and election forms are calculated, the number of shares of Titan common stock to be exchanged for Lockheed Martin common stock exceeds this 50% threshold, the exchange agent will determine the number of stock election shares that must be reallocated as cash election shares in order to achieve the 50% threshold. After the exchange agent makes this determination, all holders who have made stock elections will, on a pro rata basis, have a portion of their stock election shares reallocated as cash election shares so that the total number of shares of Titan common stock to be exchanged for shares of Lockheed Martin common stock will equal the 50% threshold.
Titan stockholders that make a combination election will not be subject to the reallocation provisions described above.
After the reallocation procedure is completed, all cash election shares and 50% of the shares of Titan common stock which are subject to combination elections will be exchanged for cash consideration, and all stock election shares and 50% of the shares of Titan common stock that are subject to combination elections will be exchanged for the stock consideration. Stock certificates previously evidencing shares of Titan common stock will, upon surrender, be exchanged for either the cash consideration, the stock consideration or a combination of cash and stock consideration, multiplied in each case by the number of shares previously evidenced by the canceled certificate. For additional information regarding your certificates, see The MergerProcedures for Exchanging Titan Common Stock Certificates.
Each share of Titan common stock held in the treasury of Titan and each share of Titan common stock owned by Lockheed Martin or any subsidiary of Lockheed Martin or Titan, other than in a fiduciary capacity, immediately prior to the effective time of the merger will be canceled and extinguished without any conversion thereof and no payment will be made with respect thereto.
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Procedures for Exchanging Titan Common Stock Certificates
Titan stockholders who surrender their stock certificates in connection with the completion of letter of transmittal and election forms prior to the election deadline will automatically receive the merger consideration allocated to them as the result of the merger promptly following completion of the allocation procedures.
Promptly after the effective time of the merger, the exchange agent will provide appropriate stock certificate transmittal materials to the holders of Titan common stock who have not already surrendered their stock certificates in connection with the completion of letter of transmittal and election forms prior to the election deadline. The transmittal materials will contain instructions for use in effecting the surrender to the exchange agent of Titan common stock certificates in exchange for the merger consideration. After the effective time of the merger, each holder of shares of Titan common stock issued and outstanding immediately prior to the effective time of the merger, other than Titan stockholders who have properly dissented, or who have already surrendered stock certificates in connection with the completion of a letter of transmittal and election form, must surrender for cancellation the certificate or certificates representing such shares to the exchange agent, together with a letter of transmittal duly executed and completed, in accordance with the instructions contained in the transmittal materials and any other documents reasonably required by the exchange agent or Lockheed Martin.
Until you surrender your stock certificate(s) representing your shares of Titan common stock:
| Lockheed Martin will not be obligated to deliver the merger consideration to you; and |
| if you receive shares of Lockheed Martin common stock in exchange for your shares of Titan common stock, no dividend or other distribution payable to you as a holder of record of Lockheed Martin common stock as of any time subsequent to the effective time of the merger will be paid to you. |
If you surrender your stock certificates after the effective time of the merger, promptly upon surrender of your Titan common stock certificates and any other documents reasonably required by the exchange agent or Lockheed Martin, Lockheed Martin will deliver to you the merger consideration, consisting, as applicable, of Lockheed Martin common stock certificates, together with all withheld dividends or other distributions, but without interest thereon, and any cash payments due, including any cash payment for a fractional share, without interest. After the effective time of the merger, each certificate representing your outstanding shares of Titan common stock prior to the effective time of the merger will be deemed for all corporate purposes to evidence only your right to receive the merger consideration in exchange for each such share.
Nine months after the effective time of the merger, any merger consideration held by the exchange agent that remains undistributed to the former stockholders of Titan will be delivered to Lockheed Martin upon demand, and any former Titan stockholder who has not already complied with the surrender and exchange procedures may thereafter look only to Lockheed Martin for payment of their claims for cash, Lockheed Martin common stock or any dividends or distributions with respect to Lockheed Martin common stock, all without any interest thereon.
None of Lockheed Martin, any subsidiary thereof or the exchange agent will be liable to any former holder of Titan common stock for any cash or shares of Lockheed Martin common stock delivered to public officials pursuant to any applicable abandoned property, escheat or similar law.
If any merger consideration is to be issued or paid in the name of a person other than the person in whose name the Titan common stock certificate being surrendered in exchange for the merger consideration is registered, it will be a condition of the payment and issuance of such merger consideration that the certificate so surrendered be properly endorsed or otherwise in proper form for transfer and that the person requesting the exchange pay or establish the prior payment or inapplicability of any transfer and other taxes required by reason of the payment of the merger consideration in the name of a person other than the registered holder of the Titan common stock certificate.
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Anticipated Accounting Treatment
Lockheed Martin will account for the merger under the purchase method of accounting in accordance with GAAP. Therefore, the total merger consideration paid by Lockheed Martin, together with the direct costs of the merger, will be allocated to Titans tangible and intangible assets and liabilities based on their fair market values, with any excess being treated as goodwill. The assets, liabilities and results of operations of Titan will be consolidated into the assets, liabilities and results of operations of Lockheed Martin after the effective time of the merger.
Governmental and Regulatory Approvals
United States Approvals. Under the HSR Act, the merger may not be completed until notifications have been given to the FTC and the Department of Justice and the specified waiting period has ended. Lockheed Martin and Titan each expect to file notifications with the FTC and the Department of Justice on or before October 31, 2003. The Department of Justice is reviewing the matter. The merger agreement requires that the parties each use their reasonable best efforts to cooperate in the filing of the HSR notifications and in connection with any request for additional information and documents and to promptly take reasonable actions to respond to inquiries from the Department of Justice regarding the legality of the merger under the antitrust laws. There can be no assurance, notwithstanding the efforts of Lockheed Martin and Titan, that the requisite approvals will be obtained, that no injunction or other order, regulation or ruling will be issued prohibiting the completion of the merger substantially on the terms contemplated by the merger agreement, or that any such approvals will not contain terms or conditions that cause such approvals to fail to satisfy the condition to the completion of the merger that all governmental waivers consents, orders and approvals legally required for completion of the merger shall have been obtained other than where such failure would not reasonably be expected to have a material adverse effect on Lockheed Martin.
In fulfilling the obligation to use their reasonable best efforts to resolve any regulatory objections to or issues related to the merger, Lockheed Martin and Titan may agree to terms and conditions not contemplated on the date hereof. Any decision to accept additional terms and conditions would be made by the applicable board or boards of directors depending on the facts and circumstances existing at the time. Those facts and circumstances may be different from the facts and circumstances existing at the time the parties entered into the merger agreement or at the time of the special meeting and could be more or less favorable to Titan, or its stockholders or Lockheed Martin. No stockholder approval is expected to be required or sought for any such decision. However, if Lockheed Martin and Titan agree to additional terms and conditions after the special meeting, Titan will make a new solicitation of proxies if stockholder approval is required by applicable law.
The Department of Justice has requested information on a voluntary basis from the parties concerning the transaction. The parties expect that the Department of Justice will consult with the Department of Defense and potentially the parties customers. The parties are cooperating with the Department of Justice and the Department of Defense to provide information in connection with the antitrust review. Representatives of Lockheed Martin and Titan have met with the Department of Justice and the Department of Defense to brief the agencies regarding the transaction and expect to continue to meet with representatives of those agencies in an attempt to address their questions about the transaction and obtain antitrust clearance for the transaction. If, as a result of their review, the agencies were to indicate that either has unresolved competitive concern, then Lockheed Martin and Titan may choose to discuss with representatives of the Department of Justice and the Department of Defense the terms and conditions necessary to resolve any regulatory objections to the merger. The antitrust review process contemplates that Lockheed Martins and Titans submission of information to the Department of Justice and the Department of Defense in connection with the antitrust review of this matter, as well as views expressed by representatives of the Department of Justice and the Department of Defense, be non-public. Likewise, the antitrust review process also contemplates that any discussions relating to conditions that might be required in order to conclude the Department of Justices antitrust review, which may take the form of negotiations, be non-public. Neither Lockheed Martin nor Titan undertake any obligation to publicly disclose the terms and conditions of ongoing discussions that may occur as part of the antitrust review process, as neither will have any assurance that the positions taken in these
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discussions by the staff of the Department of Justice or Department of Defense represent or will represent the final agency action with regard to the merger pending a final agency determination by the Assistant Attorney General of the Department of Justice Antitrust Division.
If the Department of Justice were to decide to issue a request for additional information, that request would extend the statutory waiting period for 30 days following substantial compliance by the parties with the information request. If the 30-day waiting period were to expire on a Saturday, Sunday or a legal holiday, the waiting period would be extended to 11:59 p.m., New York City time, on the next regular business day. Lockheed Martin and Titan could decide to voluntarily extend the 30-day HSR waiting period that would commence following substantial compliance with any formal request for additional information under the HSR Act to allow the Department of Justice additional time. If no agreement is reached prior to the expiration of the waiting period or any extension, the Department of Justice would decide whether or not to challenge the merger. If the Department of Justice were to challenge the merger, the parties have agreed to litigate against the Department of Justices attempt to obtain a preliminary injunction to prevent the consummation of the merger.
Under the merger agreement, Lockheed Martin is not required to agree to divest any of its or Titans businesses or assets (other than assets having nominal monetary and strategic value to Lockheed Martin) or to any other restrictions on its ability to own its assets and conduct its business. If the merger has not occurred within one year after the HSR Act waiting period expires or is terminated, Lockheed Martin and Titan may need to re-file the notifications with the FTC and the Department of Justice, and a new HSR Act waiting period and review process would begin from the date the filings are made.
Some of the contracts performed by Titan involve activities such as assisting government customers evaluation of other contractors proposals or performance, including in some cases Lockheed Martin. As a result, in addition to reviewing the impact of the merger on competition, the Department of Justice and the Department of Defense may consider whether Lockheed Martin can adequately mitigate any organizational conflict of interest issues the Titan contracts might create with Lockheed Martins existing businesses. Mitigation approaches could include implementation of firewalls or organizational separation of the evaluation contracts from the Lockheed Martin businesses performing or seeking to obtain contracts that would be subject to evaluation by Titan. If the agencies view these mitigation efforts as inadequate, Lockheed Martin would have to evaluate whether to divest the contracts in order to obtain antitrust clearance or satisfy customer concerns. In addition, if the customer under a contract were to determine that organizational conflict of interest issues were raised by the merger with respect to that contract and that mitigation would be inadequate to address these issues, that customer could cancel the affected contracts.
At any time before the effective time of the merger, the Department of Justice or the FTC can challenge the merger and take any action under the antitrust laws as either deems necessary or desirable in the public interest. The Department of Justice and the FTC may also take such action after the effective time of the merger. Private parties and state attorneys general may also bring legal action under federal or state antitrust laws under certain circumstances.
Foreign Approvals. The merger requires certain competition act filings in foreign jurisdictions. Pre-merger competition filings are required in Brazil and Germany. Lockheed Martin and Titan filed their competition filing in Brazil on October 6, 2003 and expect to make their competition filing in Germany on or before October 31, 2003. The parties are still evaluating whether competition act filings would be required in other foreign jurisdictions. No approval of the European Commission is required. Neither Lockheed Martin nor Titan is aware of any additional antitrust filing or approvals which are required in foreign jurisdictions.
No assurance can be given that all required foreign approvals will be obtained in a timely manner.
Other Approvals. Except for the antitrust clearances described above and compliance with applicable federal and state securities and corporate laws, Lockheed Martin and Titan are not aware of any other material governmental or regulatory approvals required to be obtained in order to complete the merger.
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Material U.S. Federal Income Tax Consequences
The following discussion summarizes the U.S. federal income tax consequences of the merger believed to be material to a U.S. Holder, as defined below, of Titan common stock who holds such shares of common stock as capital assets.
This discussion is based on the laws, regulations, rulings and decisions in effect on the date hereof, all of which are subject to change, possibly with retroactive effect, and to differing interpretations. Lockheed Martin and Titan have not sought and do not intend to seek any ruling from the Internal Revenue Service regarding any matters relating to the merger, and as a result, the Internal Revenue Service may disagree with or challenge any of the conclusions described in this proxy statement/prospectus.
This discussion is for general information only and does not address aspects of U.S. federal income taxation applicable to holders subject to special treatment under the Internal Revenue Code, including but not limited to financial institutions, tax-exempt organizations, mutual funds, insurance companies, S corporations or other pass-through entities, dealers in securities or foreign currency, holders who exercise dissenters rights, Non-U.S. Holders, as defined below, holders who acquired shares of Titan common stock pursuant to the exercise of employee stock options or otherwise as compensation or through tax-qualified retirement plans, traders in securities who elect the mark-to-market method of accounting for their securities holdings, persons that have a functional currency other than the U.S. dollar, holders of options granted under any Titan benefit plan, or holders who hold Titan common stock as part of a hedge against currency risk, straddle or constructive sale or conversion transaction. In addition, this discussion does not address the state, local or foreign tax consequences of the merger. This discussion is not intended to be, and should not be construed as, tax advice. You should consult your own tax advisor with respect to the federal, state, local and foreign tax consequences of the merger in light of your own tax situation.
For purposes of this discussion, we use the term U.S. Holder to mean a holder of Titan common stock that is (1) a citizen or resident of the United States, (2) a corporation, partnership or other entity created or organized under the laws of the United States or any of its political subdivisions, or (3) a trust if it (x) is subject to the supervision of a court within the United States and one or more U.S. persons control all substantial decisions of the trust, or (y) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. A Non-U.S. Holder is a holder that is not a U.S. Holder.
As described below, the merger agreement provides that the merger will be structured as a merger of Titan with and into LMC Sub One, a wholly-owned subsidiary of Lockheed Martin, which is termed a forward merger, provided Titan and Lockheed Martin receive an opinion of counsel at the time of the merger to the effect that the merger will be treated as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code. The issuance of the tax opinions at the time of the merger will depend on the facts as they exist at the time of the merger, and the tax opinions will be based on certain factual assumptions and on representations that are customary for similar transactions. If any of those factual assumptions or representations is or becomes inaccurate, the tax opinions may not be an appropriate basis for your tax position or the preparation of your tax return. The tax opinions will not be binding upon the Internal Revenue Service or the courts.
One particularly important representation that counsel have relied upon in rendering the opinions described below, and will rely upon in rendering their opinions at the time of the merger if the merger is consummated as a forward merger, is that the aggregate fair market value of the Lockheed Martin common stock issued in the merger will represent at least 40% of the aggregate value of the total consideration issued in connection with the merger, valued as of the closing of the merger and taking into account any cash payable to dissenting Titan stockholders, any cash paid in lieu of fractional shares of Lockheed Martin common stock, and cash paid to redeem the Titan preferred stock in connection with the merger. This representation must be accurate as of the closing of the merger in order for counsel to opine that the merger consideration meets the continuity of interest requirements under the applicable tax regulations. If the merger had occurred on October , 2003, then
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based upon the trading price of Lockheed Martin common stock on that date and the exchange rate that would have resulted from the average Lockheed Martin price calculated during the ten-day period ended October , 2003, and assuming that no Titan stockholders had exercised their rights as dissenting stockholders and no cash was paid in lieu of the issuance of fractional shares of Lockheed Martin common stock, the aggregate fair market value of the Lockheed Martin common stock issued in the merger would have represented about % of the value of the total consideration paid in connection with the merger. There is no guarantee, however, that the trading price of the Lockheed Martin common stock will be high enough at the closing of the merger to allow counsel to render the required tax opinions and the merger to be consummated as a forward merger.
If the required tax opinions cannot be delivered at the time of the merger and Lockheed Martin declines to increase the exchange rate of Lockheed Martin common stock to be delivered as merger consideration to the minimum extent necessary to cause the merger consideration to meet the continuity of interest requirements, then Titan, in its discretion, may elect to have the merger instead proceed as a merger of LMC Sub One with and into Titan, which is termed a reverse merger. If the merger is completed as a reverse merger, it will not qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code. The tax consequences to Titan stockholders of a reverse merger will be materially different from, and perhaps less favorable than, those of a forward merger, as described below.
Based on representation letters provided by Titan and Lockheed Martin and on certain customary factual assumptions, all of which must continue to be true and accurate in all material respects as of the effective time of the merger, and subject to certain customary limitations, it is the opinion of Hogan & Hartson L.L.P., counsel to Titan, and King & Spalding LLP, counsel to Lockheed Martin, that the material U.S. federal income tax consequences of the merger are as described below.
Tax Consequences of a Forward Merger
If you are a U.S. Holder and the merger is consummated as a forward merger, it will have the following material U.S. federal income tax consequences to you:
| if you exchange Titan common stock solely for Lockheed Martin common stock in the merger, you will not recognize gain or loss except to the extent you receive cash in lieu of a fractional share of Lockheed Martin common stock; |
| if you exchange Titan common stock solely for cash in the merger (including as the result of the exercise of dissenters rights), you will recognize gain or loss in an amount equal to the difference between the amount of cash you receive and your adjusted tax basis in your shares of Titan common stock; |
| if you exchange Titan common stock for a combination of Lockheed Martin common stock and cash, you will recognize gain (but not loss) in an amount equal to the lesser of: |
(1) | the cash you receive in the merger (excluding any cash you receive in lieu of a fractional share of Lockheed Martin common stock), and |
(2) | the excess, if any, of: |
(a) | the sum of the cash (excluding any cash you receive in lieu of a fractional share of Lockheed Martin common stock) and the fair market value of the Lockheed Martin common stock you receive (including any fractional share of Lockheed Martin common stock you are deemed to receive and exchange for cash), over |
(b) | your adjusted tax basis in the Titan common stock surrendered in the merger; |
| your tax basis in any Lockheed Martin common stock you receive in the merger (including any fractional share interest you are deemed to receive and exchange for cash) will equal your adjusted tax basis in the Titan common stock surrendered, increased by the amount of taxable gain, if any, you |
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recognize on the exchange and decreased by the amount of any cash you receive in the merger (excluding any cash you receive in lieu of a fractional share of Lockheed Martin common stock); and |
| your holding period for the Lockheed Martin common stock you receive in the merger will include your holding period for the shares of Titan common stock surrendered in the exchange. |
If you acquired different blocks of Titan common stock at different times and at different prices, you will determine any gain or loss separately with respect to each block of Titan common stock. In addition, your basis and holding period in your Lockheed Martin common stock will be determined by reference to the basis and holding period for each block of Titan common stock you exchange in the merger.
Taxation of Capital Gain or Loss. Subject to the discussion under Possible Treatment of Cash as a Dividend set forth below, gain or loss that you recognize in connection with the merger will be capital gain or loss, and will be long-term capital gain or loss if your holding period for your Titan common stock is more than one year as of the date of the merger. If you are a non-corporate holder of Titan common stock, this long-term capital gain generally will be taxed at a maximum U.S. federal income tax rate of 15%. The deductibility of any capital losses recognized as a result of the merger is subject to limitations.
Possible Treatment of Cash as a Dividend. The determination of whether the gain you recognize in the exchange will be treated as capital gain or dividend income will depend upon whether and to what extent the exchange reduces your deemed percentage stock ownership interest in Lockheed Martin. For purposes of this determination, if you receive both Lockheed Martin common stock and cash in the merger, you will be treated as if you first exchanged all of your shares of Titan common stock solely for Lockheed Martin common stock and then Lockheed Martin immediately redeemed a portion of that Lockheed Martin common stock in exchange for the cash that you actually received. Gain that you recognize in this deemed redemption of Lockheed Martin common stock will be treated as capital gain if there is a meaningful reduction in your deemed percentage ownership of Lockheed Martin. The Internal Revenue Service has ruled that a relatively minor reduction in the percentage stock ownership of a minority stockholder in a publicly held corporation whose relative stock interest is minimal and who exercises no control with respect to corporate affairs is a meaningful reduction. Accordingly, in most circumstances, any gain that you recognize in the exchange of Titan common stock for a combination of Lockheed Martin common stock and cash will be capital gain, and will be long-term capital gain if your holding period with respect to your shares of Titan common stock is more than one year as of the date of the merger. If you are a non-corporate holder of Titan common stock and are treated as having received a dividend as a result of the merger, such dividend generally will be taxed at a maximum U.S. federal income tax rate of 15%.
Cash Received in Lieu of a Fractional Share. Cash you receive in lieu of a fractional share of Lockheed Martin common stock will be treated as received in redemption of such fractional share, and you will recognize gain or loss in an amount equal to the difference between the cash received and the portion of your tax basis in the shares of Titan common stock allocable to such fractional interest. Such gain or loss generally will be capital gain or loss, and will be long-term capital gain or loss if your holding period for such shares of Titan common stock was more than one year as of the date of the merger.
Backup Withholding. Unless you comply with certain reporting or certification procedures or you are an exempt recipient (i.e., in general, corporations and certain other entities), you may be subject to backup withholding tax of 28% with respect to any cash payments received pursuant to the merger. You should consult your own tax advisor with respect to the application of withholding rules to any cash payments you receive pursuant to the merger.
Reporting. If you receive Lockheed Martin common stock as a result of the merger, you will be required to retain records pertaining to the merger and will be required to file with your U. S. federal income tax return for the year in which the merger takes place a statement setting forth certain facts relating to the merger.
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Tax Consequences of a Reverse Merger
If the merger is consummated as a reverse merger, it will constitute a sale or exchange of the Titan common stock upon which you will recognize gain or loss, regardless of whether you receive Lockheed Martin common stock, cash or a combination of Lockheed Martin common stock and cash. The amount of gain or loss you recognize will be equal to the difference between (1) the sum of the cash and the fair market value of the shares of Lockheed Martin common stock you receive and (2) your adjusted tax basis in the shares of Titan common stock you exchange in the merger. Such gain or loss will be capital gain or loss, and will be long-term capital gain or loss if your holding period for your Titan common stock is more than one year as of the date of the merger. If you are a non-corporate holder of Titan common stock, this long-term capital gain generally will be taxed at a maximum U.S. federal income tax rate of 15%. The deductibility of capital losses is subject to limitations. Unless you comply with certain reporting or certification procedures or you are an exempt recipient, you may be subject to backup withholding tax of 28% with respect to the cash and the fair market value of Lockheed Martin common stock you receive pursuant to the merger.
Holders of Titan common stock are entitled to appraisal rights under Section 262 of the DGCL. Under the DGCL, record holders of Titan common stock who continuously hold such shares through the effective time of the merger, who follow the procedures set forth in Section 262 and who do not vote in favor of adoption of the merger agreement and approval of the merger or submit a letter of transmittal and election form will be entitled to have their shares of Titan common stock appraised by the Delaware Court of Chancery and to receive payment of the fair value of such shares, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with a fair rate of interest, if any, as determined by the court. In such circumstances, the holders are entitled to appraisal rights because they hold stock of constituent corporations to the merger, and may be required by the merger agreement to accept merger consideration in the form of cash consideration.
If the holders of more than 10% of Titans outstanding common stock properly dissent, Lockheed Martin is not required to complete the merger.
THIS DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW PERTAINING TO APPRAISAL RIGHTS UNDER THE DGCL AND IS QUALIFIED IN FULL BY THE FULL TEXT OF SECTION 262 OF THE DGCL, WHICH IS REPRINTED IN ITS ENTIRETY AS ANNEX C TO THIS PROXY STATEMENT/PROSPECTUS. ALL REFERENCES IN SECTION 262 AND IN THIS SUMMARY TO A STOCKHOLDER OR HOLDER ARE TO THE RECORD HOLDER OF THE SHARES OF TITAN COMMON STOCK AS TO WHICH APPRAISAL RIGHTS ARE ASSERTED.
A PERSON HAVING A BENEFICIAL INTEREST IN SHARES OF TITAN COMMON STOCK HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A BROKER OR NOMINEE, MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW THE STEPS SUMMARIZED BELOW PROPERLY AND IN A TIMELY MANNER TO PERFECT THE APPRAISAL RIGHTS PROVIDED UNDER SECTION 262.
Under Section 262, where a proposed merger is to be submitted for approval at a meeting of stockholders, as in the case of the special meeting, not less than 20 days prior to the special meeting, Titan must notify each stockholder who was a stockholder on the record date for such meeting with respect to shares for which appraisal rights are available that appraisal rights are available and include in each such notice a copy of Section 262.
This proxy statement/prospectus constitutes the required notice to the record holders of Titan common stock, and a copy of Section 262 is attached to this proxy statement/prospectus as Annex C. Any stockholder who wishes to exercise appraisal rights should review the following discussion and Annex C carefully, because failure to timely and properly comply with the procedures specified will result in the loss of appraisal rights under the DGCL.
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A holder of shares of Titan common stock wishing to exercise his or her appraisal rights (a) must deliver to the Corporate Secretary of Titan, before the vote on the merger agreement at the special meeting, a written demand that reasonably informs Titan of the identity of the record holder and the record holders intention to demand appraisal of the record holders Titan common stock, (b) must not vote in favor of the merger agreement and (c) must not submit a letter of transmittal and election form. A proxy or vote against the merger shall not constitute a demand for appraisal. Failure to execute and return a letter of transmittal and election form to the exchange agent does not constitute a demand. ALL WRITTEN DEMANDS FOR APPRAISAL MUST BE DELIVERED TO: THE TITAN CORPORATION, 3033 SCIENCE PARK ROAD, SAN DIEGO, CALIFORNIA 92121, ATTENTION: CORPORATE SECRETARY.
A holder of shares of Titan common stock wishing to exercise his or her appraisal rights must hold his or her shares of record on the date the written demand for appraisal is made and must hold his or her shares continuously through the effective time of the merger. Accordingly, a record holder of Titan common stock who is the record holder of Titan common stock on the date the written demand for appraisal is made, but who thereafter transfers such stock prior to the completion of the merger, will lose any right to appraisal in respect of such shares.
Only a holder of record of shares of Titan common stock is entitled to assert appraisal rights for the shares of Titan common stock registered in that holders name. A demand for appraisal should be executed by or on behalf of the holder of record, fully and correctly, as such holders name appears on such holders stock certificates. If the shares of Titan common stock are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of the demand should be made in that capacity, and if the shares of Titan common stock are owned of record by more than one person, as in a joint tenancy or tenancy in common, the demand should be executed by or on behalf of all joint owners. An authorized agent, including one or more joint owners, may execute a demand for appraisal on behalf of a holder of record. However, the agent must identify the record owner or owners and expressly disclose the fact that, in executing the demand, the agent is agent for such owner or owners. A record holder such as a broker who holds shares of Titan common stock as nominee for several beneficial owners may exercise appraisal rights with respect to the shares of Titan common stock held for one or more beneficial owners while not exercising such rights with respect to the shares of Titan common stock held for other beneficial owners; in such case, the written demand should set forth the number of shares of Titan common stock as to which appraisal is sought. When no number of shares of Titan common stock is expressly mentioned, the demand will be presumed to cover all shares of Titan common stock held in the name of the record owner.
Stockholders who hold their shares of Titan common stock in brokerage accounts or other nominee forms and who wish to exercise appraisal rights must take all necessary steps in order that a demand for appraisal is made by the record holder of those shares and are urged to consult with their brokers to determine the appropriate procedures for the making of a demand for appraisal by the record holder.
Within ten days after the effective time of the merger, Lockheed Martin must send a notice of the effectiveness of the merger to each person who has properly asserted appraisal rights under Section 262 and has not voted in favor of or consented to the merger. Within 120 days after the effective time of the merger, but not thereafter, Lockheed Martin, or any holder of shares of Titan common stock who has complied with the procedures under Section 262 and who is entitled to appraisal rights under Section 262, may file a petition in the Delaware Court of Chancery demanding a determination of the value of the stock of all such stockholders. Lockheed Martin is not under any obligation to file a petition seeking the appraisal of the shares of Titan common stock. Accordingly, it is the obligation of the stockholders to initiate all necessary action to perfect their appraisal rights within the time prescribed in Section 262.
Within 120 days after the effective time of the merger, any stockholder who has complied with the requirements for exercise of appraisal rights will be entitled, upon written request, to receive from Lockheed Martin a statement setting forth the aggregate number of shares of Titan common stock not voted in favor of
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adoption of the merger agreement and approval of the merger and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares of Titan common stock. Such statements must be mailed within ten days after a written request has been received by Lockheed Martin or within ten days after expiration of the period for delivery of demands for appraisal under Section 262, whichever is later.
A holder of shares of Titan common stock will fail to perfect, or thereafter lose, his or her right to appraisal if, among other things, no petition for appraisal of shares of Titan common stock is filed within 120 days after the effective time of the merger, or if the stockholder delivers to Lockheed Martin a written withdrawal of his or her demand for appraisal.
If a petition for an appraisal is timely filed, after a hearing on such petition, the Delaware Court of Chancery will determine the stockholders entitled to appraisal rights and will appraise the fair value of their shares of Titan common stock, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. Stockholders considering seeking appraisal should be aware that the fair value of their shares of Titan common stock as determined under Section 262 could be more than, the same as or less than the value of the merger consideration they would receive pursuant to the merger agreement if they did not seek appraisal of their shares of Titan common stock and that investment banking opinions as to fairness from a financial point of view are not necessarily opinions as to fair value under Section 262. The Delaware Supreme Court has stated that proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court should be considered in appraisal proceedings.
The Delaware Court of Chancery will determine the amount of interest, if any, to be paid upon the amounts to be received by persons whose shares of Titan common stock have been appraised. The costs of the action may be determined by the Delaware Court of Chancery and taxed upon the parties as the Delaware Court of Chancery deems equitable. The Delaware Court of Chancery may also order that all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorneys fees and the fees and expenses of experts utilized in the appraisal proceeding, be charged pro rata against the value of all of the shares of Titan common stock entitled to appraisal.
If any holder of shares of Titan common stock who demands appraisal of his shares under Section 262 fails to perfect, or effectively withdraws or loses, his or her right to appraisal, as provided in the DGCL, such holder of Titan common stock will be deemed to have made a combination election in accordance with the merger agreement. See The Merger AgreementMerger Consideration. A holder may withdraw his or her demand for appraisal by delivering to Lockheed Martin a written withdrawal of his or her demand for appraisal and acceptance of the merger, except that any such attempt to withdraw made more than 60 days after the effective time of the merger will require the written approval of Lockheed Martin. Failure to follow the steps required by Section 262 of the DGCL for perfecting appraisal rights may result in the loss of such rights (in which event a stockholder will be treated as a stockholder who has made a combination election).
Any holder of shares of Titan common stock who has duly demanded an appraisal in compliance with Section 262 will not, after the effective time of the merger, be entitled to vote the shares of Titan common stock subject to such demand for any purpose or be entitled to the payment of dividends or other distributions on those shares (except dividends or other distributions payable to holders of record of shares of Titan common stock as of a date prior to the effective time of the merger).
Titan and members of Titans board of directors have been named as defendants in a purported class action lawsuit filed by a holder of Titan common stock in California Superior Court, San Diego County on September 18, 2003 challenging the merger: Norman Brown v. The Titan Corporation, et al., Case No. GIC818041.
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The complaint alleges that the defendants breached fiduciary duties. Specifically, the complaint alleges, among other things, that the Titan directors allegedly breached their fiduciary duties by: (1) failing to use appropriate procedures to maximize stockholder value, such as an active auction or open bidding, (2) attempting to inhibit the maximization of stockholder value by concealing Titans third quarter 2003 results until after the merger agreement was signed and disclosed, and (3) structuring the merger in a manner preferential to members of the board of directors.
The complaint contains a request for the court to prevent the completion of the merger and also contains requests for, among other things:
| a declaration that the complaint is properly maintainable as a class action; |
| a declaration and decree that the merger agreement was entered into in breach of the board of directors fiduciary duties and is therefore unlawful and unenforceable; |
| an injunction preventing the defendants from proceeding with the merger; |
| an injunction preventing the defendants from completing the merger, or a business combination with a third party, unless and until Titan adopts a procedure to obtain the highest possible price for shares of Titan common stock; |
| a direction to the Titan board of directors to exercise their fiduciary duties to obtain a transaction which is in the best interests of the Titan stockholders until the process for the sale or auction of Titan is completed; |
| attorneys and experts fees, costs and expenses; and |
| other and further relief as the court deems proper. |
Titan plans to contest vigorously the allegations contained in the complaint. Titan and the members of Titans board of directors have not been served with process in this matter.
On September 10, 2003, Titan was named as a defendant in a purported class action lawsuit filed by a holder of common stock of SureBeam Corporation, Titans former subsidiary. The complaint alleges that Titan, as a control person of SureBeam within the meaning of the Securities Act, should be held liable for allegedly false and misleading statements contained in the prospectus issued in connection with SureBeams initial public offering, for which the plaintiffs seek statutory damages from Titan. Dr. Ray and Susan Golding, another of Titans current directors, also were named as defendants in their capacity as directors of SureBeam. Titan plans to contest vigorously the allegations contained in the complaint.
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The following is a summary of the material provisions of the merger agreement. This summary is qualified in its entirety by reference to the merger agreement, which is incorporated by reference in its entirety and attached to this proxy statement/prospectus as Annex A. You should read the merger agreement in its entirety.
Form of the Merger. If the conditions to the merger are satisfied, Titan will be merged with and into LMC Sub One in a forward merger. LMC Sub One will be the surviving corporation following the merger and will continue its existence under Delaware law as a wholly-owned subsidiary of Lockheed Martin. The separate corporate existence of Titan will terminate at the effective time of the forward merger.
However, if the closing conditions set forth in the merger agreement have been satisfied or waived, or are reasonably expected to be satisfied, except that respective tax counsel to Lockheed Martin and Titan each are unable to render an opinion that the forward merger will be treated for U.S. federal income tax purposes as a tax-free reorganization because the aggregate value of the Lockheed Martin common stock to be delivered at closing would be insufficient to cause the merger consideration to meet the continuity of interest requirements specified in applicable tax regulations, Lockheed Martin has the option to increase the exchange rate of Lockheed Martin common stock to the minimum extent necessary to cause the merger consideration to meet the continuity of interest requirements and thereby permit the delivery of the tax opinions. If Lockheed Martin declines to increase the exchange rate as provided above, Titan has the option either to terminate the merger agreement or to elect to restructure the proposed transaction as a taxable reverse merger as described below. In the case of a reverse merger, LMC Sub One would be merged with and into Titan, and Titan will be the surviving corporation following the merger. The separate corporate existence of LMC Sub One would terminate at the effective time of the reverse merger. At the effective time of the merger, each share of Titan common stock will be exchanged for the right to receive the merger consideration described below.
Certificate of Incorporation and Bylaws of Surviving Corporation. If the forward merger is completed, the certificate of incorporation of LMC Sub One will become the certificate of incorporation of the surviving corporation after the merger. If the reverse merger is completed, the certificate of incorporation of Titan will be amended as set forth on Exhibit B to the merger agreement and will be the certificate of incorporation of the surviving corporation after the merger. The bylaws of LMC Sub One will become the bylaws of the surviving corporation after the merger.
Directors and Officers of Surviving Corporation. The directors of LMC Sub One and the officers of Titan in office immediately prior to the merger will be the directors and officers of the surviving corporation as of the effective time of the merger. Thereafter, such directors and officers will serve in accordance with the bylaws of the surviving corporation until their successors have been duly elected or appointed and qualified.
Effective Time of the Merger. The closing of the merger will take place on the third business day immediately following the date on which the last of the conditions to closing set forth in the merger agreement is satisfied or waived, or at such other time and place as Lockheed Martin and Titan may agree. At the closing, a certificate of merger will be filed with the Delaware Secretary of State which will establish the effective time of the merger.
Form of Consideration. You may make one of the following elections regarding the type of merger consideration you wish to receive in exchange for your Titan common stock:
| a cash election of $22.00 in cash, per share without interest; |
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| a stock election for Lockheed Martin common stock based on an exchanged rate determined as described below; or |
| a combination election whereby 50% of your Titan shares will be exchanged for cash and 50% of your Titan shares will be exchanged for Lockheed Martin common stock based on the exchange rate. |
Shares of Titan common stock held by Titan as treasury shares, shares held by Lockheed Martin or any of its subsidiaries, and shares held by Titan stockholders who have perfected dissenters rights will not be exchanged for the merger consideration at the effective time of the merger.
The number of shares of Lockheed Martin common stock that you will receive for each share of Titan common stock will be based on an exchange rate determined by dividing $22.00 by the average of the daily mean of the high and low sales prices per share of Lockheed Martin common stock for the ten trading days ending on, but not including, the third trading day prior to the effective time of the merger. For purposes of determining the exchange rate, Titan and Lockheed Martin have agreed to upper and lower limits, or collars, on the average Lockheed Martin price of $58.00 and $46.00. As a result, even if the average Lockheed Martin price as so calculated exceeded $58.00, the parties would still use $58.00 in determining the exchange rate and the exchange rate would be fixed at 0.3793. Similarly, even if the average Lockheed Martin price as so calculated was less than $46.00, the parties would still use $46.00 in determining the exchange rate and the exchange rate would be fixed at 0.4783.
The table below illustrates hypothetical exchange rates based upon selected average Lockheed Martin prices:
If the average Lockheed Martin price were: |
Then, the exchange rate would be: | |
$46.00 or less |
0.4783 | |
$48.00 |
0.4583 | |
$50.00 |
0.4400 | |
$52.00 |
0.4231 | |
$54.00 |
0.4074 | |
$56.00 |
0.3929 | |
$58.00 or more |
0.3793 |
Had the exchange rate been determined based on the ten-day trading period ending on , 2003, the most recent day prior to the printing of this proxy statement/prospectus, the average Lockheed Martin price would have been $ , and the exchange rate would have been .
The total number of shares Lockheed Martin common stock you will receive will be the product of the exchange rate multiplied by the number of your shares of Titan common stock that are to be exchanged for Lockheed Martin common stock, rounding down to the nearest whole share.
Fractional Shares. You will not receive any fractional shares of Lockheed Martin common stock in the merger. Instead, you will be paid cash for any fractional share based on the closing price per share of Lockheed Martin common stock on the trading day immediately before the effective time of the merger.
Changes in Price of Lockheed Martin Common Stock. Under the merger agreement, the ten-day valuation period will end on the trading day that is three trading days prior to the effective time of the merger. As a result, the exchange rate for determining the stock portion of the merger consideration will be fixed three trading days before the effective time of the merger. Because the market price of Lockheed Martin common stock fluctuates, the value of the Lockheed Martin common stock that Titan stockholders will receive in the merger may increase or decrease during the three trading day period between the end of the valuation period and the effective time of the merger.
The merger consideration generally is intended to provide, for each share of Titan common stock for which a cash election is not made, shares of Lockheed Martin common stock valued at $22.00, based on the average
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Lockheed Martin price as described above. Therefore, subject to an upper collar of $58.00 per share and a lower collar of $46.00 per share, a higher average Lockheed Martin price during the ten-day valuation period would result in fewer shares of Lockheed Martin common stock constituting the merger consideration, and a lower average Lockheed Martin price during the ten-day valuation period would result in more shares of Lockheed Martin common stock constituting the merger consideration.
You may not know the exchange rate before submitting your vote on the adoption of the merger agreement and approval of the merger. Assuming that the merger closes on the day of the special meeting, Lockheed Martin will issue a press release at least two business days prior to the date set for the special meeting that will announce the exchange rate. If the special meeting is postponed or adjourned or closing of the merger is delayed for any reason, Titan will issue subsequent press releases announcing the new meeting date, the date to which the special meeting has been adjourned or the date on which the closing of the merger will occur, and, at least two business days prior to such later date, Lockheed Martin will issue another press release announcing the new exchange rate. All of these press releases also will be filed with the SEC and will be available on the SECs web site at www.sec.gov.
Adjustment to Merger Consideration. If between the date of the calculation of the average price and the effective time of the merger, Lockheed Martin pays a dividend in, subdivides, combines into a smaller number of shares or issues by reclassification of its shares, any shares of Lockheed Martin common stock, the exchange rate will be adjusted accordingly to provide to Titan stockholders the same economic effect as contemplated by the merger agreement before such dividend, subdivision, combination or reclassification. If before the date of the calculation of the average Lockheed Martin price, Lockheed Martin pays a dividend in, subdivides, combines into a smaller number of shares or issues by reclassification of its shares, any shares of Lockheed Martin common stock, the $46.00 minimum and $58.00 maximum average price collars will be adjusted accordingly to provide to the Titan stockholders the same economic effect as contemplated by the merger agreement before such dividend, subdivision, combination or reclassification.
Allocation. Under the merger agreement, the number of shares of Titan common stock to be exchanged for cash must be equal to 50% of the total number of shares of Titan common stock outstanding immediately prior to the effective time of the merger, excluding shares held by Titan stockholders who have perfected dissenters rights or any shares held by Lockheed Martin or Titan. If, after the results of the letter of transmittal and election forms are calculated, the number of shares of Titan common stock to be exchanged for cash exceeds this 50% threshold, the exchange agent will determine the number of cash election shares that must be reallocated as stock election shares in order to achieve the 50% threshold. After the exchange agent makes this determination, all holders who have made cash elections will, on a pro rata basis, have a portion of their cash election shares reallocated as stock election shares so that the total number of shares of Titan common stock to be exchanged for cash will equal the 50% threshold.
No reallocation will occur if a holder has made a cash election but, would receive fewer than 20 shares of Lockheed Martin common stock. Instead, the cash election shares of the remaining holders of shares of Titan common stock will be reallocated on a pro rata basis so that the 50% threshold is satisfied.
Similarly, the number of shares of Titan common stock to be exchanged for shares of Lockheed Martin common stock also must be equal to the 50% threshold. If, after the results of the letter of transmittal and election forms are calculated, the number of shares of Titan common stock to be exchanged for Lockheed Martin common stock exceeds the 50% threshold, the exchange agent will determine the number of stock election shares that must be reallocated as cash election shares in order to achieve the 50% threshold. After the exchange agent makes this determination, all holders who have made stock elections will, on a pro rata basis, have a portion of their stock election shares reallocated as cash election shares so that the total number of shares of Titan common stock to be exchanged for shares of Lockheed Martin common stock will equal the 50% threshold.
Titan stockholders that make a combination election will not be subject to the reallocation provisions described above.
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Taxable Election. Titan and Lockheed Martin intend for the merger to qualify as a tax-free reorganization under the Internal Revenue Code. If, after applying the allocation procedures to the merger consideration described above, Titans and Lockheed Martins respective counsel cannot deliver the required opinions that the merger will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code solely because the value of Lockheed Martin common stock to be delivered in the merger is insufficient to cause the merger consideration to meet the continuity of interest requirements of the applicable tax regulations, but all other closing conditions set forth in the merger agreement have been or are reasonably expected to be satisfied, Lockheed Martin may agree to increase the exchange rate to the minimum extent necessary to cause the merger consideration to meet the continuity of interest requirements and thereby permit the delivery of the tax opinions described above.
If Lockheed Martin agrees to increase the exchange rate, Lockheed Martin must give written notice to Titan no later than 5:00 p.m., New York City time, on the third business day after the conditions to closing have been met or waived, referred to as the top-up notice. The top-up notice will include Lockheed Martins calculation of the increased exchange rate necessary to satisfy the continuity of interest requirement of the treasury regulations and will include written confirmation from counsel that, after giving effect to the increase in exchange rate and assuming no further declines in the value of the Lockheed Martin common stock prior to the effective time of the merger, the tax opinions can be delivered. If Lockheed Martin has not delivered the top-up notice within three business days after the conditions to close have been met or waived, Titan will have three business days to either terminate the merger agreement or notify Lockheed Martin that Titan will proceed with the reverse merger on a taxable basis. If Titan decides to proceed with the reverse merger, the condition to close requiring the delivery of the tax opinions will be considered waived. For more information on the closing conditions, see The Merger AgreementConditions.
Effect on Titan Options. At the effective time of the merger, each option outstanding under Titans stock option plans will fully vest, become exercisable and convert into an option to acquire Lockheed Martin common stock. At the effective time of the merger, each Titan option will be exercisable for a number of shares of Lockheed Martin common stock equal to the exchange rate multiplied by the number of shares of Titan common stock that would have been obtained upon exercise of the option immediately before the merger. At the effective time of the merger, the per share exercise price of each Titan option will be equal to the exercise price in effect immediately before the effective time of the merger divided by the exchange rate. The other terms of the Titan options and the Titan stock option plans under which such options were granted, other than those relating to vesting and exercisability, will continue to apply after the effective time of the merger. Titans employee stock purchase plans will terminate at the effective time of the merger and the offering periods will be deemed to end on the last trading day.
Effect on Titan Warrants. At the effective time of the merger, each outstanding warrant to purchase Titan common stock will be exchanged for a warrant to acquire Lockheed Martin common stock. Each outstanding Titan warrant will be exercisable for (1) $11.00 in cash per share of Titan common stock plus (2) the number of shares of Lockheed Martin common stock equal to the product of 50% of the aggregate number of shares of Titan common stock which would have been exercisable as of the effective time of the merger multiplied by the exchange rate. The exercise price under the warrant will equal the exercise price as of the effective time of the merger divided by the exchange rate. The duration, vesting and other terms of the Titan warrants will remain unchanged following the effective time of the merger.
Redemption of Titan Preferred Stock
Under the merger agreement, Titan has agreed to use its reasonable best efforts to redeem all of its outstanding cumulative convertible preferred stock before the Titan special meeting. On , 2003, Titan mailed a notice of redemption together with a copy of this proxy statement/prospectus to holders of Titans cumulative convertible preferred stock informing such holders of the redemption date and other terms of the redemption, as well as their rights to convert their cumulative convertible preferred shares into Titan common
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stock and elect the form of merger consideration they wish to receive upon completion of the merger. Titans redemption of its outstanding cumulative convertible preferred stock is a condition to Lockheed Martins obligation to complete the merger.
Consent Solicitation and Exchange Offer for Titans Outstanding 8% Senior Subordinated Notes
Under the merger agreement, Titan and Lockheed Martin have agreed to commence a consent solicitation and a new exchange offer with respect to Titans outstanding 8% senior subordinated notes due 2011. Titan has agreed to use commercially reasonable efforts to commence a consent solicitation to:
| amend the indenture governing the 8% senior subordinated notes such that the merger does not require a change in control offer to be made to the noteholders, to eliminate restrictive covenants contained in the indenture and to release the guarantors; and |
| amend the registration rights agreement to eliminate any registration default caused by the merger and to provide for the termination of the registration rights agreement. |
Lockheed Martin and Titan have also agreed to file a joint registration statement on Form S-4 to exchange Titans 8% senior subordinated notes for fully registered notes with amended terms, and a full and unconditional guarantee of payment by Lockheed Martin. Lockheed Martin and Titan have agreed to cooperate with each other with respect to the consent solicitation of Titans 8% senior subordinated noteholders and the exchange offer.
Successful completion of the consent solicitation, which requires consent of holders of a majority of the aggregate principal amount of the 8% senior subordinated notes, is a condition to Lockheed Martins obligation to complete the merger.
Representations and Warranties
The merger agreement contains customary representations and warranties of Titan, Lockheed Martin and LMC Sub One that expire upon completion of the merger as to, among other things:
| due organization, valid existence and good standing; |
| capitalization; |
| approval of the merger agreement and power and authorization to enter into the transactions contemplated by the merger agreement; |
| the binding effect of the merger agreement; |
| the governmental approvals required in connection with the closing of the transactions contemplated by the merger agreement; |
| the violations, conflicts or breaches of certain documents caused by the consummation of the transactions contemplated by the merger agreement; |
| the delivery and accuracy of filings with the SEC; |
| the maintenance of controls and procedures required under the Securities Exchange Act of 1934, as amended; |
| the absence of undisclosed liabilities; |
| the absence of certain material adverse changes or events since December 31, 2002; |
| pending or threatened litigation, actions and proceedings; |
| the tax treatment of the merger as a reorganization within the meaning of section 368(a) of the Internal Revenue Code; |
| the truth and accuracy of information supplied for inclusion or incorporation by reference in this proxy statement/prospectus; |
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| the payment of advisors or similar fees; and |
| the receipt of financial advisor opinions. |
In addition, the merger agreement contains representations and warranties by Titan that expire upon completion of the merger as to, among other things:
| its subsidiaries; |
| the absence of any violation of law, and the possession of governmental permits, licenses and approvals; |
| compliance with Titans organizational documents and agreements; |
| the required vote of the holders of Titan common stock to adopt the merger agreement and approve the merger and the transactions contemplated by the merger agreement; |
| the absence of certain transactions or events since June 30, 2003; |
| tax matters and Titans compliance with relevant tax laws; |
| Titans employee benefit plans and matters relating to the Employee Retirement Income Security Act of 1974, as amended; |
| Titans compliance with labor matters; |
| the ownership and condition of Titans real estate; |
| Titans compliance with environmental matters; |
| matters relating to Titans material contracts; |
| the ownership and condition of Titans intellectual property; |
| the applicability to the merger of anti-takeover statutes or other similar provisions; |
| matters relating to Titans government contracts; |
| Titans compliance with the Foreign Corrupt Practices Act of 1977, as amended; |
| the inapplicability of Titans stockholder rights plan to the merger; |
| the absence of discussions relating to any acquisition proposal; |
| the absence of loans from Titan to its present and former officers, directors and employees; and |
| the full force and effect of Titans insurance policies. |
In addition, the merger agreement contains representations and warranties by Lockheed Martin and LMC Sub One as to, among other things, the absence of any required vote of Lockheed Martins stockholders, Lockheed Martin having sufficient funds to pay the aggregate merger consideration as required by the merger agreement and other amounts contemplated by the merger agreement.
Covenants Under the Merger Agreement
Conduct of Titan Business. Titan has agreed in the merger agreement that, from September 15, 2003 until the effective time of the merger or earlier termination of the merger agreement, unless Lockheed Martin otherwise agrees in writing or unless otherwise disclosed in Titans disclosure schedules to the merger agreement, Titan will, and will cause its subsidiaries to:
| conduct its business in the ordinary and usual course of business and consistent with past practice; |
| use commercially reasonable efforts to preserve intact its business organizations and goodwill, keep available the services of its present officers and key employees, preserve the goodwill and business relationships with customers, suppliers and others having business relationships with Titan and not engage in any action, directly or indirectly, with the intent to adversely impact the transactions contemplated by the merger agreement; and |
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| use commercially reasonable efforts to maintain with financially responsible insurance companies insurance on its tangible assets and its business in amounts and against risks and losses as are consistent with past practice. |
In addition, Titan has agreed that, subject to certain exceptions, neither it nor any of its subsidiaries may, without Lockheed Martins prior written agreement:
| amend or propose to amend its certificate of incorporation or bylaws; |
| split, combine or reclassify its outstanding capital stock; |
| declare, set aside or pay any dividend or distribution payable in stock or property; |
| repurchase, redeem or otherwise acquire any of its outstanding shares of capital stock; |
| issue, sell, pledge or dispose of, or agree to issue, sell, pledge or dispose of, any shares of capital stock, any debt or equity securities convertible into, exchangeable for or exercisable for shares of capital stock, or rights to acquire capital stock, including options and warrants, or enter into any contract, agreement, arrangement or commitment with respect to the foregoing, except for issuances of Titan common stock pursuant to the exercise of rights or options outstanding as of September 15, 2003 under Titans stock option plans and warrants; |
| incur or become contingently liable with respect to any indebtedness; |
| redeem, purchase, acquire or offer to purchase or acquire any shares of its capital stock or any options, warrants or rights to acquire any of its capital stock or any security convertible into or exchangeable for its capital stock; |
| make any acquisition of assets or businesses or any other capital expenditures other than capital expenditures for fixed or capital assets in the ordinary course of business; |
| sell, pledge, dispose of or encumber any assets or businesses other than sales in the ordinary course of business; |
| loan, advance funds or make any investment in or capital contribution to any other person other than to any subsidiary; |
| enter into any contract, agreement, commitment or arrangement with respect to the five immediately foregoing items; |
| except as required by GAAP, revalue in any material respect any of its assets, including writing down the value of inventory or writing-off notes or accounts receivables, or change any method of accounting or accounting principles or practice; |
| except as required by law or as is consistent with past practice, make or change any tax election, change any tax accounting period, adopt or change any method of tax accounting, extend or waive any applicable statute of limitations with respect to taxes, file any amended tax return, enter into any closing agreement in respect of any tax claim, audit or assessment, or surrender any right to claim a tax refund, offset or other reduction in tax liability; |
| enter into any plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of Titan or its subsidiaries; |
| alter, through merger, liquidation, reorganization, restructuring or any other fashion, the corporate structure or ownership of any of Titans subsidiaries; |
| enter into any sale, lease or license or suffer to exist any lien in respect of its assets, other than: |
| permitted liens, |
| liens securing intercompany indebtedness, sales or dispositions of property or inventory in the ordinary course of business consistent with past practice, |
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| leases and licenses with a term of less than one year on property in the ordinary course, and |
| sales, leases or licenses with respect to immaterial assets; |
| grant any severance, retention or termination pay to, or amend any existing severance, retention or termination arrangement with, any current or former director, officer or employee of Titan or any of its subsidiaries; |
| increase or accelerate the payment or vesting of, benefits payable under any existing severance, retention or termination pay policies or employment agreements; |
| enter into or amend any employment, consulting, deferred compensation or other similar agreement with any director, officer, consultant or employee of Titan or any of its subsidiaries; |
| establish, adopt or amend (except as required by applicable law) any collective bargaining agreement, bonus, profit-sharing, thrift, pension, retirement, post-retirement medical or life insurance, retention, deferred compensation, compensation, stock option, restricted stock or other benefit plan or arrangement covering any present or former director, officer or employee, or any beneficiaries thereof, of Titan or any of its subsidiaries; |
| increase the compensation, bonus or other benefits payable to any director, officer or employee of Titan or any of its subsidiaries, except for salary increases as a result of employee promotions in the ordinary course of business consistent with past practice or required by the terms of existing arrangements, policies or agreements set forth in the disclosure schedule to the merger agreement; or |
| enter into or authorize an agreement with respect to any of the foregoing actions, or commit to take any action to effect any of the foregoing actions. |
Other Covenants. The merger agreement contains a number of mutual covenants of Titan and Lockheed Martin, including covenants relating to:
| obtaining governmental approval relating to regulatory matters; |
| contesting and resisting any action, including any legislative, administrative or judicial action, and having vacated, lifted, reversed or overturned any decree, judgment, injunction or other order that restricts, prevents or prohibits that consummation of the merger, except that neither party is required to contest or appeal any order issued by a United States Court of Appeals; |
| obtaining all necessary third party consents to the merger; |
| preparing and filing this proxy statement/prospectus and the accuracy of the information in it; |
| the paying of expenses and fees incurred in connection with the merger agreement and the transactions contemplated by the merger agreement; |
| cooperating with respect to public statements concerning the transactions contemplated by the merger agreement; |
| furnishing notice to each other of the occurrence or failure to occur of any event that would cause the representations and warranties in the merger agreement to be untrue or inaccurate in any material respect or any material failure to comply with or satisfy any covenant, condition or agreement in the merger agreement; |
| supplementing the disclosure schedules attached to the merger agreement prior to the closing of the merger; |
| preserving the tax treatment of the merger as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, and delivering certificates necessary to deliver certain tax opinions of counsel; |
| the adoption of resolutions of the boards of directors of Titan and Lockheed Martin relating to exemptions from liability under Rule 16b-3 under the Exchange Act; and |
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| the filing of a joint registration statement on Form S-4 to effect an offer to exchange Titans 8% senior subordinated notes for fully registered notes with amended terms, and a full and unconditional guarantee of payment by Lockheed Martin. |
The merger agreement also contains covenants requiring Titan to:
| hold the special meeting unless the merger agreement is terminated; |
| recommend, through Titans board of directors, adoption of the merger agreement and approval of the merger; |
| provide Lockheed Martin and its representatives with reasonable access consistent with applicable laws to its personnel, properties, books, contracts, commitments and records prior to the effective time of the merger; |
| mail this proxy statement/prospectus to Titan stockholders; |
| promptly advise Lockheed Martin in writing of any change or the occurrence of any event which may have a material adverse effect on Titan; |
| use its reasonable best efforts to redeem all outstanding shares of preferred stock of Titan before the date of the special meeting; |
| keep Lockheed Martin informed of, and cooperate with Lockheed Martin in connection with, stockholder litigation or claims against Titan or its directors or officers relating to the merger; |
| use reasonable best efforts to cause each affiliate of Titan to deliver to Lockheed Martin an agreement relating to resales by such affiliates of Lockheed Martin common stock acquired in the merger; and |
| use commercially reasonable efforts to (1) commence a consent solicitation with respect to the holders of Titans 8% senior subordinated notes, and amend Titans indenture such that the merger does not require a change in control offer to be made to the noteholders, (2) amend the indenture to eliminate restrictive covenants contained in the indenture and to release the guarantors and (3) amend the registration rights agreement to eliminate any registration default caused by the merger and to provide for the termination of the registration rights agreement. |
The merger agreement also contains covenants requiring Lockheed Martin to:
| adopt procedures to expedite delivery of the merger consideration, and shares of Lockheed Martin common stock upon the exercise of Titan stock options; |
| if necessary to secure termination of the waiting period under the HSR Act and if requested by Titan, offer and agree to sell or otherwise dispose or hold separate assets of Lockheed Martin, its affiliates, or Titan that have nominal monetary and strategic value to Lockheed Martin; |
| assume and perform Titans employment-related obligations under its benefit plans, employment policies, collective bargaining agreements and applicable local, state and federal laws but not to continue such plan, policies or agreements beyond the time such plans, policies or agreements otherwise could be lawfully terminated or modified; |
| provide Titans employees and the employees of its subsidiaries with salary and employee benefit plans and programs on substantially the same basis as the same are provided to similarly situated employees of Lockheed Martin and its affiliates, if and to the extent that such plans and programs provide the kinds of benefits that Titan and its subsidiaries provided such employees as of September 15, 2003, or alternatively to continue one or more of Titans existing benefit plans; |
| maintain Titans policies governing special severance and retention payments to employees following a change in control transaction in effect as of September 15, 2003, for a period of three years from the effective time of the merger; |
| for a period of six years after the effective time of the merger, cause the surviving corporation to indemnify and hold harmless directors and officers of Titan and its subsidiaries; |
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| for a period of six years after the effective time of the merger, maintain, and cause the surviving corporation to maintain, Titans directors and officers insurance and indemnification policy, or a substantially equivalent policy, for all present and former directors and officers of Titan and its subsidiaries; |
| for a period of six years after the effective time of the merger, cause the surviving corporation to maintain the existing indemnification provisions in the surviving corporations certificate of incorporation and bylaws; |
| maintain Titans books, records and files that exist at the effective time of the merger in accordance with Lockheed Martins document retention policies; |
| use reasonable best efforts to cause the shares of Lockheed Martin common stock to be issued as merger consideration to be approved for listing on the New York Stock Exchange, subject to official notice of issuance; |
| file one or more registration statements on Form S-8 and prepare and deliver prospectuses related thereto covering shares of Lockheed Martin common stock issuable with respect to stock options assumed by Lockheed Martin in the merger; and |
| cooperate with Titan with respect to the consent solicitation of its 8% senior subordinated noteholders. |
The merger agreement also contains the covenants that Titan will remain in control of its and its subsidiaries operations prior to the effective time of the merger.
No Solicitation by Titan. Titan has agreed, prior to the merger becoming effective, to certain limitations on its ability to take action with respect to other acquisition proposals. Notwithstanding these limitations, Titan may respond to certain superior proposals. Under the merger agreement:
| the term acquisition proposal means any inquiry, proposal or offer, including any proposal or offer to Titans stockholders, that constitutes or would reasonably be expected to lead to, a proposal for any tender offer, merger, consolidation, recapitalization, reorganization, share exchange, business combination, liquidation, dissolution or similar transaction involving Titan or any of its subsidiaries and a third party, or any acquisition by a third party of any capital stock of Titan, other than upon the exercise of Titans stock options that were outstanding on the date of the merger agreement in accordance with their terms, or any business or assets of Titan or any of its subsidiaries, other than acquisitions of a business or assets in the ordinary course of business that constitute less than 5% of the net revenues, net operating income and assets of Titan and its subsidiaries, taken as a whole, or any combination of the foregoing, in a single transaction or a series of related transactions; and |
| the term superior proposal means an acquisition proposal with respect to all of the outstanding shares of capital stock of Titan or all or substantially all of the assets of Titan if, with respect to such actions, in the good faith judgment of Titans board of directors, taking into account, among other things, the likelihood of consummation and the other terms and conditions of such acquisition proposal and after receipt of advice from its financial advisors, such acquisition proposal is believed to be reasonably likely to result in a transaction more favorable to the holders of Titan common stock than the merger. |
Except as set forth below, Titan, its subsidiaries and agents have agreed:
| not to solicit, initiate or knowingly facilitate or encourage any acquisition proposal; |
| not to participate or engage in discussions or negotiations concerning an acquisition proposal, and Titan and its subsidiaries and all third parties were required to immediately cease and cause to be terminated any existing discussions or negotiations with any such third parties conducted before the date of the merger agreement with respect to any acquisition proposal, or furnish or disclose to any person any information with respect to or in furtherance of any acquisition proposal, or provide access to Titans and its subsidiaries properties, books and records or other information or data with respect to or in furtherance of any acquisition proposal; |
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| not to grant any waiver or release under any confidentiality agreement, standstill agreement or similar agreement with respect to Titan or any of its subsidiaries; and |
| not to execute or enter into any agreement, understanding or arrangement with respect to any acquisition proposal, or approve or recommend or propose to approve or recommend any acquisition proposal or any agreement, understanding or arrangement relating to any acquisition proposal (or resolve or authorize or propose to agree to do any of the foregoing actions). |
Titan or its board of directors may take and disclose to Titans stockholders a position contemplated by Rule 14d-9 and Rule 14e-2(a) under the Exchange Act (or any similar communication required by applicable law) or make any legally required disclosure to stockholders with regard to any acquisition proposal.
If Titan receives an unsolicited bona fide proposal from a third party regarding a potentially superior proposal, Titan may furnish information pursuant to a confidentiality agreement in substantially the same form as the confidentiality agreement between Titan and Lockheed Martin and engage in negotiations and discussions with the third party. However, Titan may do so only if its board of directors determines in good faith and after receipt of (1) advice from its financial advisors that such acquisition proposal is reasonably likely to result in a transaction more favorable to the holders of Titan common stock than the merger and (2) advice from its outside legal counsel that such actions may be required by its fiduciary obligations under Delaware law.
Titan has agreed to provide written notice to Lockheed Martin within two business days of receipt if any acquisition proposal is received by, any information is requested from, or any discussions or negotiations are initiated or continued with Titan, its officers, directors, employees, agents or representatives, and to keep Lockheed Martin fully informed on a prompt basis of any material changes or additions to such proposal.
Prior to obtaining the approval of Titan stockholders with respect to the merger, Titans board of directors may terminate the merger agreement if (1) Titan provides at least five business days prior written notice to Lockheed Martin of its intention to terminate the merger agreement in the absence of any further action by Lockheed Martin, (2) during the five business day period, or longer if extended by the mutual agreement of Titan and Lockheed Martin, Titan agrees to negotiate in good faith with Lockheed Martin regarding such changes as Lockheed Martin may propose to the terms of the merger agreement, and (3) Titans board of directors has determined, after receipt of advice from its outside legal counsel and an independent financial advisor, that an acquisition proposal is a superior proposal taking into account any modifications to the terms of the merger agreement proposed by Lockheed Martin, and Titans board of directors determines in good faith that such actions are required by its fiduciary duties under Delaware law.
The parties obligations to complete the merger are subject to the following conditions:
| adoption of the merger agreement and approval of the merger by the requisite vote of the Titan common stockholders; |
| expiration or termination of the waiting period applicable to the completion of the merger under the HSR Act and any other necessary foreign antitrust law or regulation imposing a mandatory waiting period; |
| no laws having been adopted or promulgated and no temporary restraining order or preliminary or permanent injunction of any United States court or United States or other governmental authority makes the merger illegal or otherwise prohibits completion of the merger; |
| receipt and effectiveness as of the closing date of the merger of all governmental waivers, consents, orders and approvals legally required for the completion of the merger and the transactions contemplated by the merger agreement, other than those, the failure of which to obtain would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on Lockheed Martin; |
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| this proxy statement/prospectus having been declared effective under the Securities Act and no stop order suspending the effectiveness of this proxy statement/prospectus being in effect and no proceedings for such purpose being pending before or threatened by the SEC; and |
| approval for listing on the New York Stock Exchange, subject to official notice of issuance, of the shares of Lockheed Martin common stock to be issued as merger consideration. |
Lockheed Martin and LMC Sub Ones obligations to complete the merger are also subject to the following conditions:
| Titan must have performed in all material respects its agreements contained in the merger agreement required to be performed on or prior to the closing date; |
| Titans representations and warranties contained in the merger agreement must be true and correct at the time made and at the closing date, with only those exceptions as would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on Titan and would not materially impair Titans ability to perform its obligations under the merger agreement; |
| delivery to Lockheed Martin of a certificate regarding certain agreements, representations and warranties; |
| delivery to Lockheed Martin by King & Spalding LLP (or other reasonably acceptable counsel, including Hogan & Hartson L.L.P.), of an opinion to the effect that the merger will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, and such opinion not having been withdrawn as of the effective time of the merger; |
| there must not have occurred since the date of the merger agreement any change, effect, circumstance or event, individually or in the aggregate, that has had or is reasonably likely to have a material adverse effect, as defined below, with respect to Titan; |
| holders of more than 10% of Titans issued and outstanding shares of common stock must not have perfected their appraisal rights under Delaware law prior to the effective time of the merger; |
| redemption of Titans cumulative convertible preferred stock in accordance with the terms of the merger agreement; and |
| receipt of the consent of holders of a majority in aggregate principal amount of Titans 8% senior subordinated notes with respect to Titans consent solicitation to amend the indenture in order to eliminate restrictive covenants therein and release the guarantors thereunder, and to amend the registration rights agreement, and the effectiveness of such amendments. |
Titans obligation to complete the merger is also subject to the following conditions:
| Lockheed Martin and LMC Sub One must have performed in all material respects their agreements contained in the merger agreement required to be performed on or prior to the closing date; |
| Lockheed Martin and LMC Sub One representations and warranties contained in the merger agreement must be true and correct at the time made and at the closing date, with only those exceptions as would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on Lockheed Martin and would not materially impair Lockheed Martins ability to perform its obligations under the merger agreement; |
| delivery to Titan of a certificate regarding certain agreements, representations and warranties signed by an executive officer of Lockheed Martin and merger subsidiary; and |
| delivery to Titan by Hogan & Hartson L.L.P. (or other reasonably acceptable counsel, including King & Spalding LLP), of an opinion to the effect that the merger will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, and such opinion not having been withdrawn as of the effective time of the merger. |
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Under the merger agreement, a material adverse effect means, with respect to any entity,
| any adverse change, circumstance, fact, event or effect that, individually or in the aggregate with all other adverse changes, circumstances, facts, events and effects, is or is reasonably likely to be materially adverse to the business, condition, financial or otherwise, assets or results of operations of such entity and its subsidiaries taken as a whole, other than any change, circumstance, fact, event or effect relating to (1) the securities markets in general, (2) the economy in general, except if such entity is adversely affected in a materially disproportionate manner as compared to similarly situated entities, (3) the industries in which Lockheed Martin or Titan operate and not specifically relating to Lockheed Martin or Titan, including changes in legal, accounting or regulatory changes, or conditions, except if such entity is adversely affected in a materially disproportionate manner as compared to other comparable participants in such industries, or (4) the announcement of the merger and the performance of the obligations of the parties under the merger agreement, including any cancellations or delays in contract awards and any impact on relationships with customers, prime contractors, subcontractors or suppliers to the extent but only to the extent relating to the announcement of the merger or the performance of the obligations of the parties under the merger agreement, or |
| a material adverse effect on the ability of such entity to perform its obligations under the merger agreement. For purposes of this definition of material adverse effect, changes in the trading price of Lockheed Martin common stock or Titan common stock, as reported by the New York Stock Exchange, will not alone constitute a material adverse effect, whether occurring at any time or from time to time. |
Termination of the Merger Agreement
The merger agreement may be terminated at any time prior to the closing date, whether before or after adoption of the merger agreement and approval of the merger by Titan stockholders, by mutual written consent of Titan and Lockheed Martin;
Additionally, either Lockheed Martin or Titan may terminate the merger agreement if:
| the merger is not completed by March 31, 2004 (or May 31, 2004 if the parties are taking, contesting or resisting any matters relating to necessary government regulatory approvals) through no fault of the party seeking to terminate the merger; |
| the party seeking termination is not in material breach of the merger agreement and the other party has materially breached a representation, warranty, covenant or obligation of that party contained in the merger agreement and such breach is either not capable of being cured or, with respect to a covenant or agreement that is capable of being cured, has not been cured within 30 days of written notice of the breach; |
| Titans stockholders fail to adopt the merger agreement and approve the merger at the special meeting; or |
| the Titan board of directors provides written notice to Lockheed Martin that it has determined to accept a superior proposal. |
Titan may terminate the merger agreement if Lockheed Martin does not agree to increase the exchange rate of Lockheed Martin common stock to the minimum extent necessary to permit the delivery of the opinions of Titans and Lockheed Martins respective counsel, to the effect that the merger will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code.
Lockheed Martin may terminate the merger agreement if Titans board of directors withdraws, modifies, withholds or changes, in a manner adverse to Lockheed Martin, its approval or recommendation of the merger agreement or the merger, or approves, recommends or declares advisable an acquisition proposal or resolves or commits to do any of the foregoing, except that such right to terminate may be exercised on the earlier to occur of (1) public announcement by Titan of any of the foregoing or (2) 24 hours after Titans board of directors resolves or commits to do any of the foregoing.
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Titan must pay to Lockheed Martin a termination fee in an amount equal to $60 million, if the merger agreement is terminated:
| by Lockheed Martin, if Titans board of directors withdraws, modifies, withholds or changes, in a manner adverse to Lockheed Martin, its approval or recommendation of the merger agreement or the merger, or approves, recommends or declares advisable an acquisition proposal or resolves or commits to do any of the foregoing; |
| by either Titan or Lockheed Martin, if Titans board of directors has provided written notice to Lockheed Martin that it has determined to accept a superior proposal; or |
| by either Titan or Lockheed Martin because (A) the merger has failed to receive the necessary vote of the Titan stockholders at a meeting called for approval of the merger, or (B) if the closing of the merger has not occurred on or before March 31, 2004, or, if Titan and Lockheed Martin are taking any action to obtain requisite approvals and authorizations for the merger under the HSR Act or other regulatory law, or are contesting or resisting any action, including any legislative, administrative or judicial action, to restrict, prevent or prohibit the merger, before May 31, 2004 and (x) at or prior to the termination an acquisition proposal has been commenced or publicly disclosed and (y) within 12 months after termination, Titan enters into a definitive agreement, other than a confidentiality agreement, relating to, or has consummated, an acquisition proposal. |
If not paid by Titan when due, the termination fee will bear interest at JP Morgan Chase Banks prime rate plus 1% per annum. Titan will reimburse Lockheed Martin for its costs and expenses incurred solely in connection with any action to collect payment of the termination fee and interest thereon.
The merger agreement may not be amended except by action taken by the respective boards of directors of Lockheed Martin and Titan or their duly authorized committees. Any amendment must be in writing, signed on behalf of each of Titan, Lockheed Martin and LMC Sub One and in compliance with applicable law.
At any time prior to the effective time of the merger, Titan, Lockheed Martin and LMC Sub One may (1) extend the time for the performance of any of the obligations or other acts of the other party, (2) waive any inaccuracies in the representations and warranties contained in the merger agreement or in any document delivered pursuant to the merger agreement, and (3) waive compliance with any of the agreements or conditions contained in the merger agreement. Any agreement by any party to the merger agreement to an extension or waiver will be valid if set forth in an instrument in writing signed on behalf of the party.
The merger agreement may not be assigned by operation of law or otherwise, except that on or prior to the mailing of this proxy statement/prospectus, LMC Sub One may assign the merger agreement to a wholly-owned subsidiary of Lockheed Martin.
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COMPARISON OF RIGHTS OF LOCKHEED MARTIN AND TITAN STOCKHOLDERS
This section describes material differences between the rights of Titan common stockholders and the rights those stockholders will have as Lockheed Martin common stockholders following the merger. Lockheed Martin is incorporated under the laws of the State of Maryland, and the rights of Lockheed Martin stockholders are governed by the MGCL, Lockheed Martins charter and Lockheed Martins bylaws. Titan is incorporated under the laws of the State of Delaware, and the rights of Titan stockholders are governed by the DGCL, Titans certificate of incorporation, Titans bylaws and Titans stockholder rights agreement. As a result, once the merger is completed, whether by election or as a result of the allocation provisions of the merger agreement, Titan stockholders who receive Lockheed Martin common stock as merger consideration for Titan common stock will become stockholders of Lockheed Martin. As Lockheed Martin stockholders, their rights will be governed by the MGCL, Lockheed Martins charter and Lockheed Martins bylaws.
This summary is not an exhaustive list nor detailed comparison of the provisions discussed and is qualified in its entirety by reference to the MGCL, the DGCL and the governing corporate documents of Lockheed Martin and Titan. Titan stockholders who will become Lockheed Martin stockholders following the merger are encouraged to read the full text of Lockheed Martins charter and bylaws, which are set forth as exhibits to the registration statement of which this proxy statement/prospectus is a part. Copies of such governing corporate documents are available in the manner described in Where You Can Find More Information.
Titan (Delaware) |
Lockheed Martin (Maryland) | |||
Authorized Capital Stock: | Titans certificate of incorporation authorizes the following classes of shares:
200,000,000 shares of common stock (par value $.01 per share), and
5,000,000 shares of preferred stock (par value $1.00 per share).
Of the 5,000,000 shares of preferred stock authorized, Titans board of directors has designated the following series of preferred stock:
1,000,000 shares as series A junior participating preferred stock, and
1,068,102 shares as cumulative convertible preferred stock.
Currently, no shares of series A junior participating preferred stock and 688,029 shares of cumulative convertible preferred stock are outstanding. |
Lockheed Martins charter authorizes the following classes of shares:
1,500,000,000 shares of common stock (par value $1.00 per share),
50,000,000 shares of series preferred stock (par value $1.00 per share), and
20,000,000 shares of series A preferred stock (par value $1.00 per share).
Currently, no shares of series preferred stock or series A preferred stock are outstanding. | ||
Dividends and Share Repurchases: | The DGCL generally permits a corporation to declare and pay dividends out of surplus or, if there is no surplus, out of the net profits for the fiscal year in which the dividend is declared and/or for the preceding fiscal year as long as the amount of capital of | The MGCL generally permits a corporation to make a distribution, including dividends, redemptions or stock repurchases, unless prohibited by its charter or, if following the distribution, the corporation would not be able to pay its debts as they become |
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Titan (Delaware) |
Lockheed Martin (Maryland) | |||
the corporation following the declaration and payment of the dividend is not less than the aggregate amount of the capital represented by the issued and outstanding common stock of all classes having a preference upon the distribution of assets.
Under the DGCL, a corporation also may purchase or, if so provided in the corporations certificate of incorporation, redeem shares of any class of its capital stock, but subject generally to there being no impairment of capital of the corporation and provided that, immediately following any redemption, the corporation generally must have outstanding shares of one or more classes or series of capital stock which have full voting rights.
During the time that any series of Titan preferred stock is outstanding (if provided by the terms of the series), Titans board of directors may not declare or pay dividends on Titan common stock, unless dividends on all outstanding shares of the relevant class or series of Titan preferred stock for the current and all past dividend periods have been declared and paid or provision made for payment. |
due in the ordinary course of business or the corporations total assets would be less than the sum of its liabilities plus (unless the charter provides otherwise), senior liquidation preferences.
Under Lockheed Martins charter, holders of Lockheed Martin common stock are entitled to receive dividends and other distributions authorized by the board of directors, subject to the rights of holders of preferred stock. Holders of preferred stock are entitled to the dividends designated in the charter. | |||
Preemptive Rights: | Under Titans certificate of incorporation, Titan common stockholders have no preemptive rights to subscribe to any unissued shares of any class of Titan stock or any security convertible into shares of any class of Titan stock. | Under Lockheed Martins charter, stockholders have no preemptive rights to subscribe to any unissued shares of any class of Lockheed Martin stock or any securities convertible into shares of any class of Lockheed Martin stock. | ||
Number of Directors: | Under the DGCL, the board of directors of a Delaware corporation must consist of one or more members, with the number fixed by, or in the manner provided in, the certificate of incorporation or bylaws.
Currently, Titan has 11 directors, as fixed by its bylaws. The number of directors may be increased in the event |
Under the MGCL, each Maryland corporation must have at least one director, with the number specified in or fixed in accordance with the charter or bylaws of the corporation. Corporations that have elected to be governed by the Maryland unsolicited takeover statute described below are subject to special rules regarding the size of the board of directors. See Business |
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Titan (Delaware) |
Lockheed Martin (Maryland) | |||
of certain specified arrearages in dividend payments on Titans cumulative convertible preferred stock or by resolution of Titans board of directors amending Titans bylaws. No decrease in the number of directors shall shorten the term of any incumbent director. | Combinations and Unsolicited Takeovers.
Currently, Lockheed Martin has 14 directors. Lockheed Martins charter and bylaws provide that the number of directors shall not be less than 12 nor more than 24. The Lockheed Martin board of directors may increase or decrease the number of directors within these specified limits. No decrease in the number of directors shall shorten the term of any incumbent director. | |||
Terms of Directors: | Each Titan director serves until the next annual stockholders meeting after his or her election and until a successor has been duly elected and qualified. | Each Lockheed Martin director serves until the next annual stockholders meeting after his or her election and until a successor has been duly elected and qualified.
Under the MGCL, corporations that have elected to be governed by the unsolicited takeover statute may establish a classified board of directors in certain circumstances. See Business Combinations and Unsolicited Takeovers. | ||
Nomination of Directors: | Under Titans bylaws, subject to the rights of holders of Titans cumulative convertible preferred stock described below, Titans stockholders may nominate directors by following certain advance notice procedures set forth in Titans bylaws.
Holders of Titans cumulative convertible preferred stock are entitled to elect two directors to Titans board of directors in the event of a default in the payment of dividends on the cumulative convertible preferred stock. The size of Titans board in this event would be increased by two directors. |
Under Lockheed Martins bylaws, Lockheed Martin stockholders may nominate directors by following the advance notice procedures set forth in Lockheed Martins bylaws. | ||
Election of Directors and Cumulative Voting: | Under Titans bylaws, the director nominees receiving the greatest number of votes cast at a stockholders meeting at which a quorum is present are elected as directors.
The DGCL provides that the certificate of incorporation may provide for |
Unless a corporations charter or bylaws provide otherwise, the MGCL provides that the nominees receiving the greatest number of all the votes cast at a stockholders meeting at which a quorum is present will be elected as directors. To elect directors, Lockheed Martins |
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Titan (Delaware) |
Lockheed Martin (Maryland) | |||
cumulative voting in the election of directors. Shares of Titan common stock are not entitled to any cumulative voting rights. | bylaws require the affirmative vote of a majority of the votes entitled to be cast at a meeting duly called and at which a quorum is present. | |||
Under the MGCL, the charter may provide for cumulative voting in the election of directors. Lockheed Martins charter provides that if any person (other than Lockheed Martin, any of its subsidiaries and certain employee benefit plans) beneficially owns voting stock representing 40% or more of the votes entitled to be cast by all the holders of outstanding shares of voting stock, then: | ||||
the directors of Lockheed Martin will be elected by cumulative voting, and | ||||
one or more candidates may be nominated by certain disinterested directors or by any beneficial owner of voting stock having an aggregate market value of $250,000 or more. | ||||
Removal of Directors: | The DGCL provides that directors may be removed, with or without cause, by the holders of a majority of the shares entitled to vote on their election.
Subject to its certificate of incorporation, Titans bylaws provide that directors may be removed at any time, with or without cause, by the affirmative vote of the stockholders having a majority of the voting power of Titan. Under Titans certificate of incorporation, holders of Titans cumulative convertible preferred stock are entitled to elect two directors in the event of a default on dividend payments on such stock, and such directors may not be removed unless the vote or consent includes the holders of a majority of the outstanding shares of the cumulative convertible preferred stock. |
Unless otherwise provided in the charter, the MGCL generally provides that the stockholders of a corporation may remove any director, with or without cause, by the affirmative vote of a majority of all the votes entitled to be cast generally for the election of directors. Unless otherwise provided in the charter, the MGCL imposes certain limitations on removal of directors without cause:
if the stockholders of any class or series are entitled separately to elect one or more directors, a director elected by a class or series may not be removed without cause except by the affirmative vote of a majority of all the votes of that class or series,
if a corporation has cumulative voting for the election of directors and less than the entire board is to be removed, a director may not be removed without cause if the votes cast against his removal would be |
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Titan (Delaware) |
Lockheed Martin (Maryland) | |||
sufficient to elect him if then cumulatively voted at an election of the entire board of directors, or, if there is more than one class of directors, at an election of the class of directors of which he is a member, and
if the directors have been divided into classes, a director may not be removed without cause. Corporations that have elected to be governed by the unsolicited takeover statute are subject to special rules regarding removal of directors. See Business Combinations and Unsolicited Takeovers.
Under Lockheed Martins charter and bylaws, a director may be removed by the stockholders only for cause and only by the affirmative vote of at least 80% of the votes entitled to be cast in the election of directors. This provision precludes stockholders from removing incumbent directors and filling the vacancies created by such removal with their own nominees, except upon a substantial affirmative vote. | ||||
Vacancies on the Board of Directors: | Under the DGCL, unless the certificate of incorporation or bylaws provide otherwise, the board of directors may fill any vacancy on the board, including newly created directorships resulting from an increase in the number of directors.
Under Titans bylaws, a majority of the remaining directors, even if less than a quorum, may appoint a director or directors to fill a vacancy on the board, whether the vacancy occurs because of an increase in the number of directors or otherwise. However, if a vacancy is caused by removal, the successor must be elected by Titan stockholders at a special meeting called for that purpose. These bylaw provisions are subject to Titans certificate of incorporation which provides that holders of Titans |
The MGCL provides that stockholders may elect a successor to fill a vacancy on the board of directors which results from the removal of a director. Unless the charter or bylaws provide otherwise, a majority of the remaining directors, whether or not sufficient to constitute a quorum, may fill a vacancy which results from removal for any cause except an increase in the number of directors, which requires the vote of a majority of the entire board of directors. Lockheed Martins charter and bylaws do not alter these provisions.
Corporations that have elected to be governed by the unsolicited takeover statute are subject to special rules regarding vacancies. See Business Combinations and Unsolicited Takeovers. |
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Titan (Delaware) |
Lockheed Martin (Maryland) | |||
cumulative convertible preferred stock are entitled to elect two directors in the event of a default on dividend payments on such stock. In such case, the size of Titans board of directors would increase by two directors. | ||||
Amendment of Charter: | Under the DGCL, unless a greater vote is required by the certificate of incorporation, an amendment to the certificate of incorporation generally may be approved by a majority of the outstanding shares entitled to vote upon the proposed amendment following the adoption of a board resolution supporting such amendment.
Titans certificate of incorporation may be amended by a majority of the total shares outstanding and entitled to vote on the amendment. If any amendment would adversely affect the rights of any holders of a class or series of capital stock, or such holders are entitled to vote on the amendment, the vote of the holders of a majority of all outstanding shares of the class or series, voting as a class, is also necessary to authorize the amendment. |
Under the MGCL, the charter may be amended by the affirmative vote of two-thirds of all the votes of stockholders entitled to be cast on the matter, or, in cases in which class voting is required, of stockholders holding two-thirds of the voting power of that class, unless a different number, not less than a majority, is specified in the charter.
Except as described below, Lockheed Martins charter provides that a majority vote of the outstanding shares entitled to vote is required to amend the charter:
to amend or repeal provisions regarding removal of directors and certain general powers of directors requires the affirmative vote of at least 80% of the votes entitled to be cast in the election of directors,
to amend provisions regarding business combinations requires certain supermajority votes as described below under Business Combinations and Unsolicited Takeovers, and
to amend provisions regarding prohibitions on repurchases of stock at a premium (greenmail) requires the affirmative vote of at least 80% of the votes entitled to be cast by the holders of outstanding shares of voting stock, voting together as a single class. | ||
Amendment of Bylaws: | Under the DGCL, the power to amend the bylaws of a corporation is vested in the stockholders, but a corporation also may confer such power on the board of directors in its certificate of incorporation. Titans certificate of incorporation confers power to amend the bylaws on the board of directors. | The MGCL vests the power to alter and repeal the bylaws with the stockholders except to the extent the charter or bylaws vest such power with the corporations board of directors.
Lockheed Martins charter grants the board of directors the power to make |
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Titan (Delaware) |
Lockheed Martin (Maryland) | |||
Titans bylaws provide that a majority of Titans directors or Titans stockholders may amend or repeal the bylaws. Any bylaws made or altered by the stockholders may be altered by the board or may be altered or repealed by Titans stockholders. | and adopt, or to amend, rescind, alter or repeal, any of the bylaws at any regular or special meeting of the board or by unanimous written consent, and the bylaws grant the board the exclusive power to take such actions. | |||
Advance Notice Provisions for Stockholder Proposals: | Under Titans bylaws, notice of stockholder proposals must be delivered to Titan not later than the 60th day nor earlier than the 90th day before the first anniversary of the preceding years annual meeting. However, if the annual meeting is more than 30 days before or more than 60 days after the anniversary date of the preceding years annual meeting, the notice must be delivered not earlier than the 90th day nor later than the 60th day before the annual meeting, or the 10th day following the date on which Titan first publicly announces the annual meeting date. For each matter, the notice must include:
a brief description of the business desired to be brought before the meeting and the reasons for conducting that business at the annual meeting,
the name, age and business and residential addresses, as they appear on Titans records, of the stockholders proposing such business,
the class and number of Titans capital stock which are beneficially owned by the stockholder, and
any material interest of the stockholder in the proposed business. |
Under the MCGL, the charter or bylaws may require any stockholder submitting a proposal for consideration at a stockholders meeting to provide advance notice of the proposal to the corporation of not more than 90 days before the date of the meeting, or, in the case of an annual meeting, 90 days before the first anniversary of the preceding years annual meeting or the mailing date of the notice of the preceding years annual meeting. The charter or bylaws may specify another time.
Lockheed Martins bylaws generally require advance notice of any stockholder proposal to the corporation at least 90 days and not more than 120 days prior to the first anniversary of the proxy mailing date from the preceding years annual meeting. However, if the mailing date is advanced or delayed by more than 30 days from the anniversary date for the preceding years annual meeting, notice is required no earlier than 120 days and no later than 90 days prior to the mailing date, or 10 days following public announcement of the meeting date. The notice must be delivered in accordance with the bylaws. | ||
Stockholder Rights Agreements: | Titan is a party to a stockholder rights agreement with American Stock Transfer and Trust Company, as rights agent. Among other things, the Titan rights agreement provides that when specified events occur, holders of Titan common stock will be entitled to purchase from Titan a number of shares | Lockheed Martin does not have a stockholder rights agreement. |
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Titan (Delaware) |
Lockheed Martin (Maryland) | |||
of Titan common stock equal to two times the exercise price of the right, which is initially $42 but is subject to adjustment. For example, if the Titan common stock had a current market value of $21, a Titan stockholder would be entitled to purchase four shares of Titan common stock for $42. Under the Titan rights agreement, the rights are triggered by the earlier to occur of: | ||||
subject to certain exceptions, the tenth day following a public announcement by Titan that an acquiring person, which in general includes a person or group of affiliated or associated persons, has acquired, or obtained the right to acquire, beneficial ownership of 15% or more of Titans outstanding common stock, or
the 10th day following the commencement, or the first public announcement by any person or group of an intention to commence, a tender offer or exchange offer that would result in beneficial ownership by a person or group of 15% or more of Titans outstanding common stock. |
||||
The rights would cause substantial dilution to a person or group that attempts to acquire Titan on terms not approved by its board of directors. | ||||
Special Meetings of Stockholders: | Under Titans bylaws, special meetings of stockholders may be called by Titans board of directors, the chairman or the President pursuant to certain notice provisions. Titan stockholders have no right to request or call a special meeting of stockholders. However, under the advance notice provisions in the bylaws, Titan stockholders may nominate directors for election at a special meeting called by Titan for the purpose of electing directors. | Lockheed Martins bylaws provide that special meetings of stockholders may be called only by the chairman of the board, the chief executive officer, the board of directors, the executive committee or the secretary (upon written request of the holders of a majority of shares entitled to vote). At a special meeting of stockholders, the only business that may be conducted is the business specified in the meeting notice. |
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Titan (Delaware) |
Lockheed Martin (Maryland) | |||
Notice of Stockholders Meetings: | Under the DGCL, written notice of any stockholders meeting must be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting.
Under Titans bylaws, written notice of each stockholders meeting, whether annual or special, must be given to each stockholder of record entitled to vote at such meeting not less than 10 days nor more than 50 days before the date of the meeting. |
The MCGL requires the secretary to give written notice to each stockholder entitled to vote at the meeting, and each other stockholder entitled by applicable law to notice of the meeting. The notice must state the place, date and time of the meeting and, if a special meeting, the purpose or purposes for which the meeting is to be held, not less than 10 nor more than 90 days before each stockholder meeting. Stockholder meetings may be held at any place, as provided in the bylaws.
Lockheed Martins bylaws require the secretary to give notice of a stockholders meeting not less than 30 nor more than 90 days before the meeting. | ||
Voting Rights: | Subject to the voting rights of holders of Titans cumulative convertible preferred stock, each share of Titan common stock is entitled to one vote on each matter submitted to stockholders. Each holder of Titans cumulative convertible preferred stock is entitled to one-third vote per share of such stock. Holders of common stock and cumulative convertible preferred stock generally vote as a single class. | Under Lockheed Martins charter, common stockholders are entitled to one vote per share on each matter submitted to stockholders. Except as otherwise provided by law and subject to the rights of preferred stockholders, common stockholders possess all voting power. Matters submitted to stockholders for a vote generally require the affirmative approval of a majority of the outstanding shares of common stock. | ||
Stockholder Action by Written Consent in lieu of a Meeting: | Unless prohibited by the certificate of incorporation, the DGCL provides that stockholders may take action by written consent in lieu of a stockholders meeting if signed by the holders of outstanding stock having not less than the minimum number of votes that would have been required to approve such action.
Titans certificate of incorporation does not prohibit such action. Under Titans bylaws, stockholder action may be taken by written consent in lieu of a meeting if stockholders comply with advance notice and other procedural requirements. |
Under the MGCL, common stockholders may act without a meeting if a written consent which describes the action is signed by all stockholders entitled to vote on the matter and is filed with the meeting records. Unless the charter provides otherwise, the holders of any other class of stock that is entitled to vote in the election of directors may act by the written consent of the holders of the shares necessary to approve the action if the corporation gives notice to all stockholders within 10 days after the effective date of the action. Lockheed Martins charter does not prohibit such action. |
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Titan (Delaware) |
Lockheed Martin (Maryland) | |||
Business Combinations: | Titan is subject to Section 203 of the DGCL, which generally prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years following the time that the stockholder became an interested stockholder unless:
before that time, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder,
upon completion of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding those shares owned by persons who are directors and also officers and by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer, or
at or after that time, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder.
Section 203 defines business combination as:
any merger or consolidation of the corporation with the interested stockholder,
any sale, lease, exchange, mortgage, pledge, transfer or other disposition |
Under the MGCL, some business combinations, including a merger, consolidation, share exchange or, in some circumstances, an asset transfer or issuance or reclassification of equity securities, are prohibited for a period of time and require an extraordinary vote. These transactions include those between a Maryland corporation and the following persons (a Related Person):
an interested stockholder, which is defined as any person (other than a subsidiary) who beneficially owns 10% or more of the corporations voting stock, or who is an affiliate or an associate of the corporation who, at any time within a two-year period prior to the transaction, was the beneficial owner of 10% or more of the voting power of the corporations voting stock, or
an affiliate of an interested stockholder.
A person is not an interested stockholder if the board of directors approved in advance the transaction by which the person otherwise would have become an interested stockholder. The board of directors of a Maryland corporation also may exempt a person from these business combination restrictions prior to the time the person becomes a Related Person and may provide that its exemption is subject to compliance with any terms and conditions determined by the board of directors.
A Maryland corporation may elect not to be governed by these provisions by having its board of directors exempt various Related Persons, by including a provision in its charter expressly electing not to be governed by the applicable provision of Maryland law or by amending its existing charter with the approval of at least 80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation and two-thirds of the votes |
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Titan (Delaware) |
Lockheed Martin (Maryland) | |||
of 10% or more of the assets of the corporation involving the interested stockholder,
subject to specified exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder,
any transaction involving the corporation that increases the proportionate share of the stock of any class or series of the corporation owned by the interested stockholder, or
any receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.
Generally, Section 203 defines an interested stockholder as any entity or person owning 15% or more of the outstanding voting stock of the corporation or any entity or person affiliated with or controlling or controlled by that entity or person.
Titans certificate of incorporation and bylaws do not have supermajority or other special voting requirements for business combinations or other transactions. |
entitled to be cast by holders of shares other than those held by any Related Person. Lockheed Martins charter does not include any provision opting out of these statutory business combination provisions.
In addition to these statutory provisions, Lockheed Martins charter includes a separate provision requiring that any business combination involving a Related Person (as defined in Lockheed Martins charter) must be approved by at least:
80% of the outstanding shares of voting stock, and
67% of the outstanding shares of voting stock not owned by the Related Person.
This provision does not apply to a business combination approved by a two-thirds vote of the directors in office prior to the time a Related Person becomes a Related Person (and certain other directors designated from time to time as Continuing Directors) or if the consideration received by the stockholders other than the Related Person is not less than the highest price per share paid by the Related Person, and a proxy statement complying with the regulations of the Exchange Act shall have been sent to all stockholders in connection with the transaction. Under Lockheed Martins charter, this provision may be amended only by the same two supermajority votes required for approval of a business combination (unless such amendment is recommended by two-thirds of the Continuing Directors). | |||
Unsolicited Takeovers: | The DGCL does not have a similar statute. | The MGCL provides that a Maryland corporation which is subject to the Exchange Act and has at least three outside directors (who are not affiliated with an acquiror of the company) under certain circumstances may elect by resolution of the board of directors or by amendment of its charter |
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Titan (Delaware) |
Lockheed Martin (Maryland) | |||
or bylaws to be subject to statutory corporate governance provisions that may be inconsistent with the corporations charter and bylaws. Under these provisions, a board of directors may divide itself into three separate classes without the vote of stockholders such that only one-third of the directors are elected each year. A board of directors classified in this manner cannot be altered by amendment to the charter of the corporation. Further, the board of directors may, by electing to be covered by the applicable statutory provisions and notwithstanding the corporations charter or bylaws: | ||||
provide that a special meeting of stockholders will be called only at the request of stockholders entitled to cast at least a majority of the votes entitled to be cast at the meeting,
reserve for itself the right to fix the number of directors,
provide that a director may be removed only by the vote of at least two-thirds of the votes entitled to be cast generally in the election of directors, and
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