SEC Form PREM14A filed by Terran Orbital Corporation

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No. )

 

 

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

Check the appropriate box:

 

☒	Preliminary Proxy Statement

 

☐	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

☐	Definitive Proxy Statement

 

☐	Definitive Additional Materials

 

☐	Soliciting Material under § 240.14a-12

Terran Orbital Corporation

(Name of Registrant as Specified in its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check all boxes that apply):

 

☐	No fee required.

 

☐	Fee paid previously with preliminary materials.

 

☒	Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

 

PRELIMINARY PROXY STATEMENT DATED SEPTEMBER 9, 2024—SUBJECT TO COMPLETION

[—], 2024

Dear Stockholder:

We cordially invite you to attend a special meeting, which we refer to as the “special meeting,” of the stockholders of Terran Orbital Corporation, a Delaware corporation, which we refer to as “we,” “us,” “our,” “Terran” or the “Company,” to be held on [—], 2024 at [—], Eastern Time. The special meeting will be conducted exclusively online through a live audio webcast to facilitate stockholder attendance and to enable stockholders to participate fully and equally, regardless of size of holdings, resources or physical location. You will be able to attend the special meeting virtually by visiting www.virtualshareholdermeeting.com/LLAP2024SM, where you will be able to listen to the meeting live and vote online.

On August 15, 2024, the Company entered into an Agreement and Plan of Merger, which we refer to as the “merger agreement,” with Lockheed Martin Corporation, a Maryland corporation, which we refer to as “Lockheed Martin,” or “Parent” and Tholian Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Lockheed Martin, which we refer to as “Merger Sub,” providing for the merger of Merger Sub with and into the Company, with the Company surviving the merger as a wholly owned subsidiary of Lockheed Martin, which we refer to as the “merger.”

If the merger is consummated, each share of Company common stock, par value $0.0001 per share, which we refer to as “Company common stock,” issued and outstanding immediately prior to the effective time of the merger will, other than cancelled shares and dissenting shares (each as defined in the accompanying proxy statement), be converted into the right to receive $0.25 in cash, without interest.

At the special meeting, you will be asked to consider and vote on the following matters:

 

•

a proposal to approve the adoption of the merger agreement and the merger (which we refer to as the “merger agreement proposal”);

 

•

a proposal to approve, on a nonbinding advisory basis, compensation that will or may become payable to our named executive officers in connection with the merger (which we refer to as the “nonbinding merger-related compensation proposal”); and

 

•

a proposal to approve one or more adjournments of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement proposal (which we refer to as the “adjournment proposal”).

The board of directors of the Company, which we refer to as the “Board,” has unanimously approved, adopted and declared advisable the merger agreement and recommended that the Company’s stockholders vote in favor of the merger agreement proposal. The Board made its determination after consultation with its legal and financial advisors and consideration of a number of factors. The Board unanimously recommends that you vote (i) “FOR” approval of the merger agreement proposal; (ii) “FOR” approval of the nonbinding merger-related compensation proposal; and (iii) “FOR” approval of the adjournment proposal.

Your vote is very important, regardless of the number of shares that you own. The merger cannot be completed unless the holders of a majority of the outstanding shares of Company common stock entitled to vote thereon vote in favor of the merger agreement proposal.

The accompanying proxy statement provides you with detailed information about the special meeting, the merger agreement and the merger. A copy of the merger agreement is attached as Annex A to the accompanying proxy statement. We encourage you to carefully read the entire proxy statement and its annexes, including the merger agreement, along with all documents incorporated by reference in this proxy statement. You also may obtain additional information about the Company from documents we have filed with the Securities and Exchange Commission, which we refer to as the “SEC,” by following the instructions listed in the section of the accompanying proxy statement entitled “Where You Can Find More Information.”

 

1

If you have any questions or need assistance submitting a proxy to have your shares of Company common stock voted at the special meeting, please contact [—], the Company’s proxy solicitor, by calling toll free at [—], or for banks and brokers, collect at [—].

Thank you in advance for your cooperation and continued support.

Sincerely,

[—]

Marc Bell

Co-Founder, Chairman and Chief Executive Officer

The accompanying proxy statement is dated [—], 2024. The notice of meeting, the proxy statement and the form of proxy card are being mailed to our stockholders on or before [—], 2024.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE MERGER AGREEMENT OR THE MERGER, PASSED UPON THE MERITS OR FAIRNESS OF THE MERGER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE PROPOSED MERGER, OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

 

2

TERRAN ORBITAL CORPORATION

6800 Broken Sound Parkway NW, Suite 200

Boca Raton, FL 33487

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

 

Time and Date:		[—], Eastern Time, on [—], 2024
Place:		The special meeting will be conducted virtually via live audio webcast. You will be able to attend the special meeting virtually and vote online during the meeting by visiting www.virtualshareholdermeeting.com/LLAP2024SM.
Items of Business:		To consider and vote on:   •  a proposal to approve (a) the adoption of the Agreement and Plan of Merger, dated as of August 15, 2024, by and among Terran Orbital Corporation, a Delaware corporation, which we refer to as “we,” “us,” “our,” “Terran” or the “Company,” Lockheed Martin Corporation, a Maryland corporation, which we refer to as “Lockheed Martin” or “Parent,” and Tholian Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Lockheed Martin, which we refer to as “Merger Sub,” as it may be amended from time to time, which we refer to as the “merger agreement,” a copy of which is attached as Annex A to the accompanying proxy statement and is incorporated in its entirety into this notice and made a part hereof, and includes (i) as Exhibit A thereto the form of certificate of incorporation of the surviving corporation of the merger (as defined below), and (ii) as Exhibit B thereto the form of bylaws of the surviving corporation of the merger and (b) the merger (which we refer to, collectively, as the “merger agreement proposal”);   •  a proposal to approve, on a nonbinding advisory basis, compensation that will or may become payable to our named executive officers in connection with the merger (which we refer to as the “nonbinding merger-related compensation proposal”); and   •  a proposal to approve one or more adjournments of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement proposal (which we refer to as the “adjournment proposal”).
Record Date:		You may vote if you were a stockholder of record at the close of business on [—], 2024.
Proxy Voting:		Your vote is very important, regardless of the number of shares of Company common stock you own. The merger of Merger Sub with and into the Company, with the Company surviving the merger, which we refer to as the “merger,” and other transactions contemplated by the merger agreement cannot be consummated unless the merger agreement proposal is approved by the affirmative vote of the holders of a majority of the outstanding shares of Company common stock, par value $0.0001 per share, which we refer to as “Company common stock,” entitled to vote thereon. Even if you plan to attend the special meeting virtually, we request that you complete, sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or submit your proxy by telephone or the Internet prior to the special meeting to ensure that your shares of Company common stock will be represented and voted at the special meeting if you are unable to attend virtually. If you do not attend the special meeting virtually and fail to return your proxy card or fail to submit your proxy by telephone or the Internet, your shares of Company common stock will not be counted for purposes of determining whether a quorum is present at the special meeting and will have the same effect as a vote “AGAINST” the merger agreement proposal.

 

1

		If you are a stockholder of record, voting online at the special meeting will revoke any proxy previously submitted. If you hold your shares of Company common stock through a bank, brokerage firm or other nominee, you should follow the procedures provided by your bank, brokerage firm or other nominee in order to vote. As a beneficial owner of shares of Company common stock held in “street name,” you have the right to direct your bank, brokerage firm or other nominee on how to vote the shares of Company common stock in your account. You are also invited to attend the special meeting virtually. However, because you are not the stockholder of record, you may not vote your shares of Company common stock online at the special meeting, unless you request and obtain a legal proxy from your bank, brokerage firm or other nominee.
Recommendation:		The board of directors of the Company, which we refer to as the “Board,” has unanimously approved, adopted and declared advisable the merger agreement and recommended that the Company’s stockholders approve the merger agreement proposal. The Board made its determination after consultation with its legal and financial advisors and consideration of a number of factors. The Board unanimously recommends that you vote (i) “FOR” approval of the merger agreement proposal; (ii) “FOR” approval of the nonbinding merger-related compensation proposal; and (iii) “FOR” approval of the adjournment proposal.
Attendance:		Only stockholders of record or their duly authorized proxies have the right to vote at and attend the special meeting virtually. Beneficial owners of shares are invited to attend the special meeting virtually. Beneficial owners who wish to vote online at the meeting should obtain a legal proxy from their bank, broker or other nominee. If you are the representative of a corporate or institutional stockholder, you must present proof that you are the representative of such stockholder.
Appraisal Rights:		Under the General Corporation Law of the State of Delaware, as amended, and all rules and regulations promulgated thereunder, which we refer to as the “DGCL,” the Company’s stockholders of record and beneficial owners of Company common stock who do not vote in favor of the adoption of the merger agreement, and who properly demand appraisal of such shares of Company common stock (and do not effectively withdraw or otherwise waive or lose their right to appraisal) have the right to seek appraisal of the “fair value” of their shares of Company common stock as determined by the Delaware Court of Chancery pursuant to Section 262 of the DGCL, but only if they fully comply with all of the applicable legal requirements of Section 262 of the DGCL, which are summarized in this proxy statement in the section entitled “Appraisal Rights” beginning on page 108 and set forth in their entirety in Section 262 of the DGCL, which may be accessed without subscription or cost at the following publicly available website: https://delcode.delaware.gov/title8/c001/sc09/index.html#262. This means that if you perfect your appraisal rights, do not subsequently withdraw your demand for appraisal, do not otherwise waive or lose your right to appraisal, and follow the procedures set forth in Section 262 of the DGCL, you may be entitled to have your shares of Company common stock appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of your shares of Company common stock, exclusive of any elements of value arising from the accomplishment or expectation of the merger, as determined by the Delaware Court of Chancery, in lieu of receiving the merger consideration if you follow exactly the procedures set forth in Section 262 of the DGCL. The amount you ultimately receive in an appraisal proceeding may be less than, equal to or more than the amount you would have received under the merger agreement. See “Appraisal Rights” beginning on page 108.

 

2

WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING VIRTUALLY, PLEASE COMPLETE, DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE ENCLOSED PROXY CARD IN THE ACCOMPANYING PREPAID REPLY ENVELOPE, OR SUBMIT YOUR PROXY BY TELEPHONE OR THE INTERNET. IF YOU ATTEND THE SPECIAL MEETING VIRTUALLY AND VOTE ONLINE DURING THE SPECIAL MEETING, YOUR VOTE AT THE MEETING WILL REVOKE ANY PROXY PREVIOUSLY SUBMITTED. IF YOU HOLD YOUR SHARES OF COMPANY COMMON STOCK THROUGH A BANK, BROKERAGE FIRM OR OTHER NOMINEE, YOU SHOULD FOLLOW THE PROCEDURES PROVIDED BY YOUR BANK, BROKERAGE FIRM OR OTHER NOMINEE IN ORDER TO VOTE. AS A BENEFICIAL OWNER OF SHARES OF COMPANY COMMON STOCK HELD IN “STREET NAME,” YOU HAVE THE RIGHT TO DIRECT YOUR BANK, BROKERAGE FIRM OR OTHER NOMINEE ON HOW TO VOTE THE SHARES IN YOUR ACCOUNT.

 

[—], 2024

Boca Raton, FL

 

3

TABLE OF CONTENTS

 

SUMMARY			1
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER			15
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION			25
THE SPECIAL MEETING			26
Time, Place and Purpose of the Special Meeting			26
Record Date and Quorum			26
Attendance			26
Vote Required			26
Shares Owned by Our Directors and Executive Officers			28
Proxies and Revocation			29
Adjournments and Recesses			29
Appraisal Rights			29
Solicitation of Proxies; Payment of Solicitation Expenses			30
Questions and Additional Information			30
PARTIES TO THE MERGER			31
THE MERGER			32
Overview of the Merger			32
Directors and Officers of the Surviving Corporation			32
Background of the Merger			32
Reasons for the Merger; Recommendation of the Board of Directors			44
Opinion of Lincoln International LLC			50
Certain Prospective Financial Information			58
Financing of the Merger			60
Bridge Note Purchase Agreement			60
Amendments to Existing Debt Agreements			62
Amendments to Existing Intercreditor Agreement			62
Repayment Upon Closing of the Merger Agreement			63
Closing and Effective Time of the Merger			63
Procedures for Payment of Merger Consideration			63
Interests of Company Directors and Executive Officers in the Merger			63
Section 16 of the Exchange Act			71
Transaction Bonus Pool Payable upon Merger Closing			71
Certain Material U.S. Federal Income Tax Consequences of the Merger			72
THE MERGER AGREEMENT (PROPOSAL 1)			76
Explanatory Note Regarding the Merger Agreement			76
The Merger			76
Closing and Effective Time of the Merger			76
Conversion of Shares			77
Payment for Securities			77
Dissenting Shares			78
Treatment of Company Equity and Equity-Based Awards			78
Treatment of Company Warrants			79
Representations and Warranties			80
Definition of Material Adverse Effect			81
Covenants Relating to the Interim Operations of the Company’s Business			83
Open Source Audit and Remediation			86
Invention Assignment Agreements			86
Go-Shop; Covenants Regarding Non-Solicitation			86
Restrictions on Changes of Recommendation to Company Stockholders			89
Additional Agreements of the Parties to the Merger Agreement			91
Conditions to the Merger			95

 

i

Termination			97
Termination Fees			98
General Provisions			99
Related Agreements			100
Required Vote; Board Recommendation			102
NONBINDING MERGER-RELATED COMPENSATION PROPOSAL (PROPOSAL 2)			103
ADJOURNMENT OF THE SPECIAL MEETING (PROPOSAL 3)			104
MARKET PRICE OF COMPANY COMMON STOCK			105
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			105
APPRAISAL RIGHTS			108
DELISTING AND DEREGISTRATION OF COMPANY COMMON STOCK			114
CONDUCT OF OUR BUSINESS IF THE MERGER IS NOT COMPLETED			114
OTHER MATTERS			114
Other Matters for Action at the Special Meeting			114
Future Stockholder Proposals			114
Householding Information			115
WHERE YOU CAN FIND MORE INFORMATION			116
APPENDIX I: RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES (UNAUDITED)			I-1
ANNEX A: MERGER AGREEMENT			A-1
ANNEX B: OPINION OF LINCOLN INTERNATIONAL LLC			B-1

 

ii

 

1

 

2

 

3

 

4

 

5

 

6

 

7

 

8

 

9

 

10

 

11

 

12

 

13

 

14

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

The following questions and answers are intended to address briefly some commonly asked questions regarding the merger, the merger agreement and the special meeting. These questions and answers may not address all questions that may be important to you as a Company stockholder. Please refer to the “Summary” and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to in this proxy statement, which you should read carefully and in their entirety. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under “Where You Can Find More Information” beginning on page 116.

 

Q.	What is the proposed transaction and what effects will it have on the Company?

 

A.

The proposed transaction is the acquisition of the Company by Lockheed Martin pursuant to the merger agreement. If the merger agreement proposal is approved by our stockholders and the other closing conditions under the merger agreement are satisfied or waived, Merger Sub will merge with and into the Company, with the Company being the surviving corporation in the merger. As a result of the merger, the Company will become a wholly owned subsidiary of Lockheed Martin and will no longer be a publicly held corporation, and you will no longer have any interest in our future earnings or growth. In addition, the Company common stock will be delisted from the NYSE and deregistered under the Exchange Act, and we will no longer file periodic reports with the SEC on account of the Company common stock.

 

Q.	What will holders of Company common stock receive if the merger is consummated?

 

A.

Upon completion of the merger, you will be entitled to receive the merger consideration of $0.25 in cash, without interest, for each share of Company common stock that you own immediately prior to the closing of the merger, unless you are entitled to appraisal rights under the DGCL and fully comply with the requirements of Section 262 of the DGCL. For example, if you own 1,000 shares of Company common stock, you will receive $250 in cash in exchange for your shares of Company common stock, without interest. You will not receive any shares of the capital stock in the surviving corporation.

 

Q.	How does the merger consideration compare to the market price of Company common stock prior to announcement of the merger?

 

A.	The merger consideration of $0.25 per share of Company common stock represents an approximately 37.5% discount to the $0.40 closing share price of Company common stock on August 14, 2024, the last full trading day prior to the announcement of the Company’s entry into the merger agreement.

 

Q.	What will holders of Company equity incentive awards receive if the merger is consummated?

 

A.	Pursuant to the merger agreement, at the effective time:

 

•

each Company option that is outstanding and unexercised immediately prior to such time (i) that is unvested by its terms will be canceled for no consideration and (ii) that is vested and exercisable will automatically be canceled and converted into the right to receive an amount in cash (without interest) equal to the product of (x) the total number of shares underlying the Company option multiplied by (y) the excess, if any, of the merger consideration over the exercise price of such Company option, less any withholding for taxes. Any such Company option with respect to which the exercise price subject thereto is equal to or greater than the merger consideration will be canceled for no consideration. Following the effective time, any such canceled Company option will entitle the former holder of such Company option only to the payment described in this section, if any, which will be made by the surviving corporation (or its designee) within the later of ten days or the next ordinary course payroll following the effective time; and

 

15

•

each Company RSU will automatically become fully vested and will be canceled and converted into the right to receive an amount in cash (without interest) equal to the product of (x) the number of shares subject to such Company RSU multiplied by (y) the merger consideration, less any withholding for taxes. Following the effective time, any such canceled Company RSU will entitle the former holder of such Company RSU only to the payment described in this section, which will be made by the surviving corporation (or its designee) within the later of ten days or the next ordinary course payroll following the effective time; provided, however, notwithstanding the foregoing, if such Company RSU is subject to Section 409A of the Code and the regulations and guidance thereunder, such payment shall be paid in a manner that complies with Section 409A of the Code and the regulations and guidance thereunder.

 

Q.	What will holders of warrants to purchase shares of Company common stock receive if the merger is consummated?

 

A.

At the effective time, each outstanding SPAC Warrant will, in accordance with its terms, automatically and without any action on the part of the holder of such SPAC Warrant, cease to represent a SPAC Warrant exercisable for Company common stock and will become a merger warrant that the holder would have received if the holder had exercised the SPAC Warrant, in accordance with its terms, immediately prior to the effective time. If a holder of a merger warrant properly exercises the merger warrant within 30 days following the public disclosure of the consummation of the merger pursuant to a Current Report on Form 8-K filed with the SEC, the Warrant Price with respect to the exercise of the merger warrant will be reduced by an amount (in dollars and in no event less than zero) equal to the difference of (a) the warrant price in effect prior to such reduction minus (b) (i) the merger Consideration minus (ii) the Black-Scholes Warrant Value.

At the effective time, each outstanding Company Warrant will, in accordance with its terms, automatically and without any required action on the part of Lockheed Martin, Merger Sub, the Company or the holder of such Company Warrant, cease to represent a Company Warrant exercisable for Company common stock and will become a Company Warrant exercisable for the merger consideration (with respect to each share of Company common stock underlying such Company Warrant) that the holder would have received if the holder had exercised the Company Warrant by paying the exercise price in respect thereof in cash immediately prior to the effective time. To the extent a holder of a Company Warrant does not exercise the Company Warrant prior to the effective time, the surviving corporation will assume the obligations of any then-outstanding Company Warrant in accordance with the terms of the applicable warrant agreement or warrant issued thereunder. Notwithstanding the foregoing, if a holder of a Company Warrant that is outstanding and unexercised as of immediately prior to the effective time properly exercises such Company Warrant within 30 days following the public disclosure of the consummation of the merger, the exercise of such Company Warrant will be treated in accordance with the terms of the applicable warrant agreement or warrant issued thereunder.

 

Q.	How does the Board recommend that I vote?

 

A.	The Board unanimously recommends that you vote (i) “FOR” approval of the merger agreement proposal; (ii) “FOR” approval of the nonbinding merger-related compensation proposal; and (iii) “FOR” approval of the adjournment proposal.

 

Q.	Why is the Board recommending that I vote “FOR” approval of the merger agreement proposal?

 

A.	After careful consideration of various factors described in the section entitled “The Merger—Reasons for the Merger; Recommendation of the Board of Directors” beginning on page 44, the Board, by a unanimous vote of all directors:

 

•

determined that the merger, on the terms and subject to the conditions set forth in the merger agreement, is fair to, and in the best interests of the Company and its stockholders;

 

16

•

approved, adopted and declared advisable the merger agreement and the execution, delivery and performance of the merger agreement and the transactions contemplated thereunder, including the merger;

 

•

directed that the approval and adoption of the merger agreement (including the merger) be submitted to a vote at a meeting of the stockholders of the Company; and

 

•

recommended that the Company’s stockholders approve the adoption of the merger agreement and approve the merger on the terms and subject to the conditions set forth in the merger agreement.

 

Q.	When do you expect the merger to be consummated?

 

A.

We are working towards completing the merger as soon as possible. Assuming timely satisfaction of necessary closing conditions, including the approval by our stockholders of the merger agreement proposal, we currently anticipate that the merger will be consummated during the fourth quarter of 2024. However, we cannot guarantee that the merger will be completed in a timely fashion or at all.

 

Q.	What happens if the merger is not consummated?

 

A.

In the event that the merger agreement proposal is not approved by our stockholders or if the merger is not completed for any other reason, our stockholders will not receive any consideration from Lockheed Martin or Merger Sub for their shares of Company common stock. Instead, we would remain an independent public company, shares of Company common stock would continue to be listed and traded on the NYSE (as long as we are able to meet the NYSE continued listing requirements), we would continue to be required to file periodic reports with the SEC and our stockholders would continue to be subject to the same risks to which they currently are subject with respect to their ownership of Company common stock as previously disclosed in the SEC filings incorporated by reference in this proxy statement.

More importantly, the maturity date of the bridge notes is the earlier of (i) October 25, 2024, (ii) the closing of the merger, and (iii) the date that the bridge notes are accelerated because of the occurrence of an event of default under the bridge note purchase agreement (which would include, among others, the failure to obtain stockholder approval of the merger agreement or completion of the merger). As described in the section entitled “The Merger—Reasons for the Merger; Recommendation of the Board of Directors,” the Company does not have sufficient liquidity or alternative financing available to be able to repay the amounts due under the bridge note purchase agreement and its other existing debt agreements. Accordingly, if either (a) the merger agreement is not approved and adopted by our stockholders to permit the closing of the merger prior to October 25, 2024 or (b) the bridge notes are accelerated because of any other event of default under the bridge note purchase agreement, in either case, we will be forced to seek bankruptcy protection or other insolvency proceedings in order to preserve the value of our assets as much as possible as we would seek an orderly liquidation of the Company.

Under specified circumstances, the Company may be required to pay to Lockheed Martin a fee with respect to the termination of the merger agreement or Lockheed Martin may be required to pay to the Company a fee with respect to the termination of the merger agreement, as described in the section entitled “The Merger Agreement (Proposal 1)—Termination Fees” beginning on page 98.

 

Q.	Is the merger expected to be taxable to me?

 

A.

The exchange of shares of Company common stock for cash pursuant to the merger generally will be a taxable transaction for U.S. federal income tax purposes to U.S. holders. A U.S. holder that exchanges shares of Company common stock for cash in the merger generally will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between (a) the amount of cash received (determined before deduction of any applicable withholding taxes) with respect to such shares and (b) such U.S. holder’s adjusted tax basis in such shares. A non-U.S. holder generally will not be subject to U.S. federal income tax with respect to the exchange of shares of Company common stock for cash in the merger unless such non-

 

17

U.S. holder has certain connections to the United States, but may be subject to backup withholding tax unless the non-U.S. holder complies with certain certification procedures or otherwise establishes a valid exemption from backup withholding tax. The U.S. federal income tax consequences of the merger to a holder of Company common stock will depend on such holder’s own tax situation. You should read “The Merger—Certain Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 72 for a more detailed discussion of certain U.S. federal income tax consequences of the merger, including with respect to a holder of Company common stock that is a non-U.S. holder.

 

Q.	Do any of the Company’s directors or officers have interests in the merger that may differ from or be in addition to my interests as a stockholder?

 

A.

Yes. In considering the recommendation of the Board with respect to the merger agreement proposal, you should be aware that our directors and executive officers have interests in the merger that may be different from, or in addition to, the interests of our stockholders generally. The Board was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending that the merger agreement proposal be approved by the stockholders of the Company. See “The Merger—Interests of Company Directors and Executive Officers in the Merger” beginning on page 63.

 

Q.	Why am I receiving this proxy statement and proxy card or voting instruction form?

 

A.

You are receiving this proxy statement and proxy card or voting instruction form in connection with the solicitation of proxies by the Board for use at the special meeting because you owned shares of Company common stock as of the record date for the special meeting. This proxy statement describes matters on which we urge you to vote and is intended to assist you in deciding how to vote your shares of Company common stock with respect to such matters.

 

Q.	When and where is the special meeting?

 

A.

The special meeting of stockholders of the Company will be held on [—], 2024 at [—], Eastern Time. The special meeting will be conducted exclusively online through a live audio webcast to facilitate stockholder attendance and to enable stockholders to participate fully and equally, regardless of size of holdings, resources or physical location. You will be able to attend the special meeting virtually by visiting www.virtualshareholdermeeting.com/LLAP2024SM, where you will be able to listen to the meeting live and vote online.

 

Q.	What am I being asked to vote on at the special meeting?

 

A.	You are being asked to consider and vote on:

 

•

a proposal to approve the adoption of the merger agreement and the merger;

 

•

a proposal to approve, on a nonbinding advisory basis, the compensation that will or may become payable to our named executive officers in connection with the merger; and

 

•

a proposal to approve one or more adjournments of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the adoption of the merger agreement and the merger.

 

Q.	What vote is required for the Company’s stockholders to approve the merger agreement proposal?

 

A.	The approval of the merger agreement proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Company common stock entitled to vote thereon.

 

18

Because the affirmative vote required to approve the adoption of the merger agreement is based upon the total number of outstanding shares of Company common stock, if you fail to submit a proxy or to vote online during the special meeting, or if you vote “ABSTAIN,” or if you do not provide your bank, brokerage firm or other nominee with voting instructions, it will have the same effect as a vote “AGAINST” the merger agreement proposal.

 

Q.	What vote is required for the Company’s stockholders to approve the nonbinding merger-related compensation proposal and the adjournment proposal?

 

A.	Approval of the nonbinding merger-related compensation proposal requires the affirmative vote of a majority of the votes cast by the stockholders present in person (via the virtual meeting website) or represented by proxy at the special meeting and entitled to vote on the proposal.

Approval of the adjournment proposal requires the affirmative vote of a majority of the votes cast by the stockholders present in person (via the virtual meeting website) or represented by proxy at the special meeting and entitled to vote on the proposal, whether or not a quorum is present.

If you vote “ABSTAIN” on the nonbinding merger-related compensation proposal or the adjournment proposal, this will have no effect on these proposals. If you fail to submit a proxy or to vote online during the special meeting, or if you do not provide your bank, brokerage firm or other nominee with voting instructions, your shares of Company common stock will not be voted on these proposals, and thus will have no effect on these proposals.

 

Q.	Why am I being asked to cast a nonbinding advisory vote to approve merger-related compensation that the Company’s named executive officers will or may receive in connection with the merger?

 

A.	The SEC’s rules require us to seek a nonbinding advisory vote with respect to certain payments that will or may be made to our named executive officers in connection with the merger.

 

Q.	What will happen if stockholders do not approve the nonbinding merger-related compensation proposal at the special meeting?

 

A.

Approval of merger-related compensation that our named executive officers will or may receive in connection with the merger is not a condition to completion of the merger. The vote with respect to merger-related compensation is an advisory vote and will not be binding on us. Therefore, regardless of whether stockholders approve the nonbinding merger-related compensation proposal, if the merger agreement proposal is approved by the stockholders and the merger is completed, the compensation will still be paid to our named executive officers to the extent payable in accordance with the terms of the plans, contracts, or other legal arrangements governing such compensation.

 

Q.	Who can vote at the special meeting?

 

A.

All of our holders of Company common stock of record as of the close of business on [—], 2024, the record date for the special meeting, are entitled to receive notice of, and to vote at, the special meeting. Each holder of Company common stock is entitled to cast one vote on each matter properly brought before the special meeting for each share of Company common stock that such holder owned as of the record date.

 

Q.	What is a “broker non-vote”?

 

A.

Banks, brokerage firms or other nominees who hold shares in “street name” for customers have the authority to vote on “discretionary” proposals when they have not received instructions from beneficial owners. However, banks, brokerage firms or other nominees are precluded from exercising their voting discretion with respect to approving non-discretionary matters, such as the merger agreement proposal, the nonbinding merger-related compensation proposal and the adjournment proposal, and, as a result, absent specific instructions from the beneficial owner of such shares of Company common stock, banks, brokerage firms or other nominees are not empowered to vote those shares of Company common stock on non-discretionary matters, which we refer to generally as “broker non-votes.” Because none of the proposals to be voted on at

 

19

the special meeting is a routine matter for which brokers may have discretionary authority to vote, the Company does not expect any broker non-votes at the special meeting. If there are any broker non-votes, they would have the effect of a vote “AGAINST” the merger agreement proposal and would have no effect on the nonbinding merger-related compensation proposal and the adjournment proposal.

 

Q.	What constitutes a quorum for the special meeting?

 

A.

A quorum is necessary to transact business at the special meeting, including the approval of the merger agreement proposal and approval of the nonbinding merger-related compensation proposal. The holders of a majority in voting power of the stock of the Company issued and outstanding and entitled to vote at the special meeting, present in person (via the virtual meeting website) or represented by proxy, constitutes a quorum for the purposes of the special meeting. Abstentions will be counted as present for the purpose of determining whether a quorum is present. The special meeting may be adjourned whether or not a quorum is present.

 

Q.	How do I attend and participate at the virtual special meeting?

 

A.

Broadridge Financial Solutions, Inc., which we refer to as “Broadridge”, will host the special meeting. In order to attend the virtual special meeting and vote during the special meeting, please log into the meeting platform at: www.virtualshareholdermeeting.com/LLAP2024SM. You will be prompted to enter the unique control number received with your proxy materials to join and participate in the special meeting.

 

Q.	When should I log into the virtual special meeting?

 

A.	The special meeting will begin promptly at on [—], 2024 at [—], Eastern Time. You may login into the meeting platform beginning approximately 30 minutes before the meeting start time. We encourage attendees to log into the meeting at least 15 minutes before the start time to test your audio system.

 

Q.	Can I attend the virtual special meeting from a mobile device?

 

A.	Yes, you should be able to access the special meeting using any device capable of running the most common internet browsers.

 

Q.	Who can assist me if I have technical difficulties prior to or during the meeting?

 

A.

Broadridge will have technicians ready to assist you with any individual technical difficulties you may have accessing the virtual meeting. If you encounter any difficulties accessing the virtual special meeting during the check-in or meeting time, please call the technical support number that will be posted on the virtual special log-in page.

 

Q.	How can I vote my shares without virtually attending the special meeting?

 

A.	Whether you hold shares as a stockholder of record or a beneficial owner, you may direct how your shares are voted without virtually attending the special meeting, by the following means:

 

•

By Internet—Stockholders of record with Internet access may direct how their shares are voted by following the “Vote by Internet” instructions on the proxy card until 11:59 p.m. ET on [—], 2024. If you are a beneficial owner of shares held in street name, please check the voting instructions in the voting instruction card provided by your broker, bank or other intermediary for Internet voting availability.

 

•

By telephone—Stockholders of record who live in the United States or Canada may submit proxies by telephone by following the “Vote by Phone” instructions on the proxy card until 11:59 p.m. ET on [—], 2024. If you are a beneficial owner of shares held in street name, please check the voting instructions in the voting instruction card provided by your broker, bank or other intermediary for telephone voting availability.

 

20

•

By mail— If you elect to vote by mail, please complete, sign and date the proxy card where indicated and return it in the prepaid envelope included with the proxy card. Proxy cards submitted by mail must be received by the time of the special meeting in order for your shares to be voted. If you are a beneficial owner of shares held in street name, you may vote by mail by following the instructions for voting by mail in the voting instruction card provided by your broker, bank or other intermediary.

You will need the control number included on your proxy card if you vote by Internet or telephone.

 

Q.	What is the difference between holding shares as a stockholder of record and in “street name”?

 

A.

If your shares of Company common stock are registered directly in your name with our transfer agent, Continental Stock Transfer & Trust Company, you are considered, with respect to those shares of Company common stock, as the “stockholder of record.” This proxy statement, and your proxy card, have been sent directly to you by the Company.

If your shares of Company common stock are held through a bank, brokerage firm or other nominee, you are considered the beneficial owner of shares of Company common stock held in “street name.” In that case, this proxy statement has been forwarded to you by your bank, brokerage firm or other nominee who is considered, with respect to those shares of Company common stock, the stockholder of record. As the beneficial owner of shares of Company common stock held in “street name,” you have the right to direct your bank, brokerage firm or other nominee how to vote your shares of Company common stock by following the instructions of such bank, brokerage firm or other nominee for voting.

 

Q.	If my shares of Company common stock are held in “street name” by my bank, brokerage firm or other nominee, will my bank, brokerage firm or other nominee vote my shares of Company common stock for me?

 

A.

Your bank, brokerage firm or other nominee will only be permitted to vote your shares of Company common stock if you instruct your bank, brokerage firm or other nominee how to vote. You should follow the procedures provided by your bank, brokerage firm or other nominee regarding the voting of your shares of Company common stock. If you do not instruct your bank, brokerage firm or other nominee to vote your shares of Company common stock, your shares of Company common stock will not be voted and the effect will be the same as a vote “AGAINST” the merger agreement proposal and your shares of Company common stock will not have an effect on approval of the nonbinding merger-related compensation proposal or the adjournment proposal.

 

Q.	How can I change or revoke my proxy?

 

A.	You can change your vote before the vote is taken virtually at the special meeting. If you are a stockholder of record, you can change your vote by:

 

•

submitting a new proxy bearing a later date (which automatically revokes the earlier proxy) using any of the voting methods described above in the question entitled “—How can I vote my shares without attending the special meeting?”.

 

•

signing and delivering to our Secretary a written request to revoke your proxy vote.

 

•

signing and mailing a new, properly completed proxy card with a later date than your original proxy card; or

 

21

•

Virtually attending the special meeting and voting at the special meeting, which will supersede any proxy previously submitted by you. However, merely attending the special meeting will not cause your previously granted proxy to be revoked unless you specifically request it.

If you are a beneficial owner of shares held in street name, you may generally change your vote by (1) submitting new voting instructions to your broker, bank or other intermediary or (2) if you have obtained a legal proxy from the organization that holds your shares giving you the right to vote your shares, by virtually attending the special meeting and voting at the meeting. However, please consult that organization for any specific rules it may have regarding your ability to change your voting instructions.

 

Q.	What is a proxy?

 

A.

A proxy is your legal designation of another person, referred to as a “proxy,” to vote your shares of Company common stock. The written document describing the matters to be considered and voted on at the special meeting is called a “proxy statement.” The document used to designate a proxy to vote your shares of Company common stock is called a “proxy card.” The Board has designated Marc Bell and James Black, and each of them singly, with full power of substitution, as proxies for the special meeting.

 

Q.	If a stockholder gives a proxy, how will its shares of Company common stock be voted?

 

A.

Regardless of the method you choose to submit your proxy, the individuals named on the enclosed proxy card, as your proxies, will vote your shares of Company common stock in the way that you indicate. When completing the Internet or telephone proxy processes or the enclosed proxy card, you may specify whether your shares of Company common stock should be voted for or against or to abstain from voting on all, some or none of the specific items of business to come before the special meeting.

If you properly sign your proxy card but do not mark the boxes showing how your shares of Company common stock should be voted on a matter, the shares represented by your properly signed proxy will be voted (i) “FOR” approval of the merger agreement proposal; (ii) “FOR” approval of the nonbinding merger-related compensation proposal; and (iii) “FOR” approval of the adjournment proposal.

 

Q.	How are votes counted?

 

A.	With respect to the merger agreement proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.” Abstentions and broker non-votes (if any) will have the same effect as votes “AGAINST” the merger agreement proposal.

With respect to the nonbinding merger-related compensation proposal and the adjournment proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.” Abstentions and broker non-votes (if any) will have no effect on these proposals.

Because each of the proposals presented to the stockholders of the Company will be considered non-discretionary, we do not anticipate any broker non-votes at the special meeting.

 

Q.	What do I do if I receive more than one proxy or set of voting instructions?

 

A.

If you hold shares of Company common stock in more than one account, you may receive more than one proxy or set of voting instructions relating to the special meeting. These should each be voted or returned separately in accordance with the instructions provided in this proxy statement in order to ensure that all of your shares of Company common stock are voted.

 

22

Q.	What happens if I sell my shares of Company common stock before the special meeting?

 

A.

The record date for stockholders entitled to vote at the special meeting is earlier than both the date of the special meeting and the consummation of the merger. If you transfer your shares of Company common stock after the record date but before the special meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you transfer your shares and each of you notifies the Company in writing of such special arrangements, you will retain your right to vote such shares at the special meeting but will transfer the right to receive the merger consideration to the person to whom you transfer your shares. You will also lose the ability to exercise appraisal rights, if available, with respect to such shares in connection with the merger.

 

Q.	Who will solicit and pay the cost of soliciting proxies?

 

A.

The Company will pay all expenses of filing, printing and mailing this proxy statement, including solicitation expenses. The Company has engaged [—], [—], which we refer to as “[—],” to assist in the solicitation of proxies for the special meeting. The Company estimates that it will pay [—] a fee of approximately $[—], plus certain per holder charges for any calls made to holders of Company common stock. The Company will also reimburse [—] for certain out-of-pocket expenses and will indemnify [—] and its affiliates against certain claims, liabilities, losses, damages, and expenses. The Company may also reimburse banks, brokers or their agents for their expenses in forwarding soliciting materials to beneficial owners of Company common stock and in obtaining voting instructions from those owners. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

 

Q.	What do I need to do now?

 

A.

Even if you plan to attend the special meeting virtually, after carefully reading and considering the information contained in this proxy statement, please submit your proxy promptly to ensure that your shares are represented at the special meeting. If you hold your shares of Company common stock in your own name as the stockholder of record, please submit a proxy for your shares of Company common stock by (a) completing, signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope, (b) using the telephone number printed on your proxy card or (c) using the Internet proxy instructions printed on your proxy card. If you decide to attend the special meeting virtually and vote at the special meeting, your vote at the meeting will revoke any proxy previously submitted. If you are a beneficial owner of shares of Company common stock held in “street name,” please refer to the instructions provided by your bank, brokerage firm or other nominee to see which of the above choices are available to you.

 

Q.	Should I send in my stock certificates now?

 

A.

No. A letter of transmittal will be mailed to you promptly, and in any event within two business days, after the effective time of the merger, describing how you should surrender your shares of Company common stock for the merger consideration. If your shares of Company common stock are held in “street name” by your bank, brokerage firm or other nominee, you will receive instructions from your bank, brokerage firm or other nominee as to how to effect the surrender of your “street name” shares of Company common stock in exchange for the merger consideration. Please do NOT return your stock certificate(s) with your proxy.

 

Q.	What should I do if I have lost my stock certificate?

 

A.	If you have lost your stock certificate, please contact our transfer agent, Continental Stock Transfer & Trust Company, via email at [email protected] or by telephone at (800) 509-5586, to obtain replacement certificates.

 

Q.	May I exercise appraisal rights instead of receiving the merger consideration for my shares of Company common stock?

 

A.

Company stockholders of record or beneficial owners of Company common stock who do not vote in favor of the adoption of the merger agreement are entitled to exercise appraisal rights under Section 262 of the DGCL in connection with the merger if they take certain actions and meet certain conditions and otherwise strictly comply with the requirements of Section 262 of the DGCL. For additional information, see “Appraisal

 

23

Rights” beginning on page 108. The full text of Section 262 of the DGCL may be accessed without subscription or cost at the following publicly available website: https://delcode.delaware.gov/title8/c001/sc09/index.html#262. Because of the complexity of the DGCL relating to appraisal rights, if you wish to exercise your appraisal rights, we encourage you to seek the advice of legal counsel and your financial advisors.

 

Q.	Are there any other risks to me from the merger that I should consider?

 

A.	Yes. There are risks associated with all business combinations, including the merger. See “Cautionary Statement Concerning Forward-Looking Information” beginning on page 25.

 

Q.	Who can help answer my other questions?

 

A.

If you have additional questions about the merger, need assistance in submitting your proxy or voting your shares of Company common stock, or need additional copies of this proxy statement or the enclosed proxy card, please contact [—], our proxy solicitor, by calling toll free at [—], or for banks and brokers, collect at [—].

 

24

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION

This proxy statement contains forward-looking statements within the meaning of U.S. federal securities laws. The words “anticipate,” “assume,” “believe,” “budget,” “could,” “estimate,” “expect,” “forecast,” “initial,” “intend,” “may,” “outlook,” “plan,” “potential,” “project,” “proposed,” “should,” “scheduled,” “will,” “would,” and similar expressions are intended to identify forward-looking statements. There can be no assurance that the merger or any other future events will occur as anticipated, if at all, or that actual results will be as expected. These statements are not guarantees of future performance and are subject to risks and uncertainties. Actual results may differ materially due to factors such as: the failure to obtain, delays in obtaining, or adverse conditions contained in any required regulatory or other approvals for consummation of the merger, the possibility that the stockholders of the Company may not approve the merger at all or prior to the earlier of the maturity date of the bridge notes or the occurrence of an event of default under the bridge note purchase agreement, in which event we will be forced to seek bankruptcy protection or other insolvency proceedings in order to preserve the value of our assets much as possible as we would seek an orderly liquidation of the Company; the failure to consummate or a delay in consummating the merger for other reasons; the occurrence of any event, change or other circumstance or condition that could give rise to the termination of the merger agreement related to the merger; the Company’s business being disrupted due to transaction-related uncertainty; the diversion of the Company’s management’s or employees’ attention during the pendency of the merger from the Company’s ongoing business operations and other opportunities; the failure to successfully and timely integrate the Company and realize the benefits of the merger; the risk of litigation relating to the merger; competitive responses to the merger; unexpected liabilities, costs, charges or expenses resulting from the merger; and potential adverse reactions or changes to business relationships from the announcement or completion of the merger. These are only some of the factors that may affect the forward-looking statements contained in this proxy statement. For a discussion identifying additional important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, see the Company’s filings with the SEC, including, but not limited to, the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on April 1, 2024, its Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, filed with the SEC on August 12, 2024, and the prospectus supplements dated September 18, 2023 and July 23, 2024, each related to its Registration Statement on Form S-3, as amended (File No. 333-271093), which was declared effective by the SEC on April 18, 2023. The Company’s filings may be accessed through the investor relations page of its website, www.investors.terranorbital.com or through the website maintained by the SEC at www.sec.gov. Except where required by applicable law, the Company expressly disclaims a duty to provide updates to forward-looking statements after the date of this communication to reflect subsequent events, changed circumstances, changes in expectations, or the estimates and assumptions associated with them. The forward-looking statements in this proxy statement are intended to be subject to the safe harbor protection provided by the federal securities laws.

 

25

THE SPECIAL MEETING

Time, Place and Purpose of the Special Meeting

This proxy statement is being furnished to our stockholders as part of the solicitation of proxies by the Board for use at the special meeting to be held on [—], 2024, starting at [—], Eastern Time, or at any adjournment or postponement thereof. The special meeting will be conducted virtually via live audio webcast. If you held shares of Company common stock on the record date, you are invited to attend the special meeting virtually by visiting www.virtualshareholdermeeting.com/LLAP2024SM, where you will be able to listen to the meeting live and vote online. At the special meeting, holders of Company common stock will be asked to approve the merger agreement proposal, to approve the nonbinding merger-related compensation proposal and to approve the adjournment proposal.

Our stockholders must approve the merger agreement proposal in order for the merger to be consummated. If our stockholders fail to approve the merger agreement proposal, the merger will not be consummated. A copy of the merger agreement is attached as Annex A to this proxy statement, which we encourage you to read carefully in its entirety.

Record Date and Quorum

We have fixed the close of business on [—], 2024 as the record date for the special meeting, and only holders of record of Company common stock on the record date are entitled to vote at the special meeting. You are entitled to receive notice of, and to vote at, the special meeting if you owned shares of Company common stock at the close of business on the record date. On the record date, there were [—] shares of Company common stock outstanding and entitled to vote. The holders of Company common stock each have one vote per share of Company common stock.

The holders of a majority in voting power of the stock of the Company issued and outstanding and entitled to vote at the special meeting, present in person (via the virtual meeting website) or represented by proxy, will constitute a quorum for the transaction of business. Shares of Company common stock represented at the special meeting but not voted, including shares of Company common stock for which a stockholder directs voting “ABSTAIN,” will be counted for purposes of establishing a quorum. A quorum is necessary to transact business at the special meeting, including the approval of the merger agreement proposal and approval of the nonbinding merger-related compensation proposal. The special meeting may be adjourned whether or not a quorum is present. Once a share of Company common stock is represented at the special meeting, it will be counted for the purpose of determining a quorum at the special meeting and any recess or adjournment of the special meeting. However, if a new record date is set for the adjourned special meeting, then a new quorum will have to be established. In the event that a quorum is not present at the special meeting, the special meeting may be adjourned from time to time in accordance with applicable law by either the person presiding at the special meeting or the holders of voting stock representing a majority of the voting power present at the special meeting.

Attendance

Only stockholders of record or their duly authorized proxies or beneficial owners with proof of ownership have the right to attend the special meeting. If your shares of Company common stock are held through a bank, brokerage firm or other nominee, you must request and obtain a legal proxy from your bank, brokerage firm or other nominee in order to vote online. If you are the representative of a corporate or institutional stockholder, you must present proof that you are the representative of such stockholder.

Vote Required

Approval of the merger agreement proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Company common stock entitled to vote thereon. For the merger agreement proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.” Voting “ABSTAIN” will not be counted as a vote cast in favor of the merger agreement proposal but will count for the purpose of determining whether a quorum is present. If you fail to submit a proxy or to vote online during the special meeting, or if you vote “ABSTAIN,” it will have the same effect as a vote “AGAINST” the merger agreement proposal.

 

26

Approval of the nonbinding merger-related compensation proposal and approval of the adjournment proposal require the affirmative vote of a majority of the votes cast by the stockholders present in person (via the virtual meeting website) or represented by proxy at the special meeting and entitled to vote thereon with respect to the respective proposals. For the nonbinding merger-related compensation proposal and the adjournment proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.” For purposes of each of these proposals, if you fail to submit a proxy or to vote online during the special meeting, or if you have given a proxy and vote “ABSTAIN,” the shares of Company common stock will not be counted in respect of, and will not have any effect on, the proposal.

If your shares of Company common stock are registered directly in your name with our transfer agent, Continental Stock Transfer & Trust Company, you are considered, with respect to those shares of Company common stock, the “stockholder of record.” This proxy statement and proxy card have been sent directly to you by the Company.

If your shares of Company common stock are held through a bank, brokerage firm or other nominee, you are considered the beneficial owner of shares of Company common stock held in “street name.” In that case, this proxy statement has been forwarded to you by your bank, brokerage firm or other nominee who is considered, with respect to those shares of Company common stock, the stockholder of record. As the beneficial owner of shares of Company common stock held in “street name,” you have the right to direct your bank, brokerage firm or other nominee how to vote your shares by following the instructions of such bank, brokerage firm or other nominee for voting. If you hold your shares of Company common stock in “street name,” please contact your bank, brokerage firm or other nominee for the instructions of such bank, brokerage firm or other nominee on how to vote your shares. Please note that if you are a beneficial owner of shares of Company common stock held in “street name” and wish to vote online during the special meeting, you must provide a legal proxy from your bank, brokerage firm or other nominee at the special meeting.

Banks, brokerage firms or other nominees who hold shares in “street name” for customers have the authority to vote on “discretionary” proposals when they have not received instructions from beneficial owners. However, banks, brokerage firms or other nominees are precluded from exercising their voting discretion with respect to approving non-discretionary matters, such as the merger agreement proposal, the nonbinding merger-related compensation proposal and the adjournment proposal, and, as a result, absent specific instructions from the beneficial owner of such shares of Company common stock, banks, brokerage firms or other nominees are not empowered to vote those shares of Company common stock on non-discretionary matters, which we refer to generally as “broker non-votes.”

If you are a stockholder of record, you may vote your shares of Company common stock, or have such shares voted, on matters presented at the special meeting in any of the following ways:

 

•

By Internet—Stockholders of record with Internet access may direct how their shares are voted by following the “Vote by Internet” instructions on the proxy card until 11:59 p.m. ET on [—], 2024. If you are a beneficial owner of shares held in street name, please check the voting instructions in the voting instruction card provided by your broker, bank or other intermediary for Internet voting availability.

 

•

By telephone—Stockholders of record who live in the United States or Canada may submit proxies by telephone by following the “Vote by Phone” instructions on the proxy card until 11:59 p.m. ET on [—], 2024. If you are a beneficial owner of shares held in street name, please check the voting instructions in the voting instruction card provided by your broker, bank or other intermediary for telephone voting availability.

 

•

By mail— If you elect to vote by mail, please complete, sign and date the proxy card where indicated and return it in the prepaid envelope included with the proxy card. Proxy cards submitted by mail must be received by the time of the special meeting in order for your shares to be voted. If you are a beneficial owner of shares held in street name, you may vote by mail by following the instructions for voting by mail in the voting instruction card provided by your broker, bank or other intermediary.

 

27

If you are a beneficial owner of Company common stock held in “street name,” you will receive instructions from your bank, brokerage firm or other nominee that you must follow in order to have your shares of Company common stock voted. Those instructions will identify which of the above choices are available to you in order to have your shares voted. Please note that if you are a beneficial owner of Company common stock held in “street name” and wish to vote online during the special meeting, you must provide a legal proxy from your bank, brokerage firm or other nominee.

A control number, located on your proxy card, is designed to verify your identity and allow you to submit a proxy for your shares of Company common stock, and to confirm that your voting instructions have been properly recorded when submitting a proxy over the Internet or by telephone.

Please refer to the instructions on your proxy or voting instruction card to determine the deadlines for submitting a proxy over the Internet or by telephone. If you choose to submit your proxy by mailing a proxy card, your proxy card must be received by our Secretary by the time the special meeting begins. Please do not send in your stock certificates with your proxy card. Following the consummation of the merger, a separate letter of transmittal will be mailed to you that will enable you to surrender your stock certificates and receive the merger consideration.

If you vote by proxy, regardless of the method you choose to submit a proxy, the individuals named as your proxies on the enclosed proxy card, and each of them, with full power of substitution, will vote your shares of Company common stock in the way that you indicate. When completing the Internet or telephone proxy processes or the enclosed proxy card, you may specify whether your shares of Company common stock should be voted for or against or to abstain from voting on all, some or none of the specific items of business to come before the special meeting.

If you properly sign your proxy card but do not mark the boxes showing how your shares of Company common stock should be voted on a matter, the shares of Company common stock represented by your properly signed proxy will be voted (i) “FOR” approval of the merger agreement proposal; (ii) “FOR” approval of the nonbinding merger-related compensation proposal; and (iii) “FOR” approval of the adjournment proposal.

If you have any questions or need assistance voting your shares, please contact [—], our proxy solicitor, by calling toll free at [—], or for banks and brokers, collect at [—].

IT IS IMPORTANT THAT YOU SUBMIT A PROXY FOR YOUR SHARES OF COMPANY COMMON STOCK PROMPTLY. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING VIRTUALLY, PLEASE COMPLETE, DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE ENCLOSED PROXY CARD IN THE ACCOMPANYING PREPAID REPLY ENVELOPE, OR SUBMIT YOUR PROXY BY TELEPHONE OR THE INTERNET. STOCKHOLDERS WHO ATTEND THE SPECIAL MEETING MAY REVOKE THEIR PROXIES BY VOTING IN PERSON (VIA THE VIRTUAL MEETING WEBSITE).

Shares Owned by Our Directors and Executive Officers

As of the record date, the directors and executive officers of the Company beneficially owned and were entitled to vote, in the aggregate, [—] shares of Company common stock, representing approximately [—]% of the outstanding shares of Company common stock on the record date. Each of Marc Bell, our Co-Founder, Chairman and Chief Executive Officer, and Daniel Staton, our Vice Chairman, has entered into a voting and support agreement with Lockheed Martin, pursuant to which each agreed, among other things, to vote the shares of Company common stock beneficially owned by him in favor of the merger agreement proposal, and any proposal to adjourn or postpone the special meeting if there are not sufficient votes for approval of the merger agreement proposal at the special meeting, subject to the terms and conditions of such voting and support agreement.

The Company currently expects all other directors and at least a majority of executive officers entitled to vote on the proposals to vote all of their shares of Company common stock (i) “FOR” approval of the merger agreement proposal; (ii) “FOR” approval of the nonbinding merger-related compensation proposal; and (iii) “FOR” approval of the adjournment proposal.

 

28

Proxies and Revocation

Any stockholder of record entitled to vote at the special meeting may submit a proxy via the Internet, by telephone or by mail. If your shares of Company common stock are held in “street name” by your bank, brokerage firm or other nominee, you should instruct your bank, brokerage firm or other nominee on how to vote your shares of Company common stock using the instructions provided by your bank, brokerage firm or other nominee. If you fail to submit a proxy or to vote online during the special meeting, or if you vote “ABSTAIN,” or if you do not provide your bank, brokerage firm or other nominee with voting instructions, your shares of Company common stock will not be voted on the merger agreement proposal, which will have the same effect as a vote “AGAINST” the merger agreement proposal, and your shares of Company common stock will not be voted on the nonbinding merger-related compensation proposal or the adjournment proposal and thus will have no effect on the nonbinding merger-related compensation proposal or the adjournment proposal.

If you are a stockholder of record, you have the right to revoke a proxy, whether delivered over the Internet, by telephone or by mail, at any time before it is exercised, by submitting a later-dated proxy through any of the methods available to you, by giving written notice of revocation to our Secretary at Terran Orbital Corporation, 6800 Broken Sound Parkway NW, Suite 200, Boca Raton, FL 33487, or by attending the special meeting virtually and voting at the special meeting. Attendance at the special meeting alone will not revoke your proxy. If your stock is held in the name of a broker, bank or other nominee, you must obtain a proxy, executed in your favor, to be able to vote at the special meeting, and must follow instructions provided to you by your broker, bank or other nominee to revoke or change your voting instructions.

Adjournments and Recesses

Although it is not currently expected, the special meeting may be adjourned or recessed, including for the purpose of soliciting additional proxies, if there are insufficient votes at the time of the special meeting to approve the merger agreement proposal or if a quorum is not present at the special meeting. Other than an announcement to be made at the special meeting of the time, date and place of an adjourned meeting, an adjournment generally may be made without notice. Any adjournment or recess of the special meeting for the purpose of soliciting additional proxies will allow the Company’s stockholders who have already sent in their proxies to revoke them at any time prior to their use at the special meeting as adjourned or recessed.

Appraisal Rights

Under the DGCL, the Company’s stockholders of record and beneficial owners of Company common stock who do not vote in favor of the adoption of the merger agreement, and who properly demand appraisal of such shares of Company common stock (and do not effectively withdraw or otherwise waive or lose their right to appraisal) have the right to seek appraisal of the “fair value” of their shares of Company common stock as determined by the Delaware Court of Chancery pursuant to Section 262 of the DGCL, but only if they fully comply with all of the applicable legal requirements of Section 262 of the DGCL, which are summarized in this proxy statement in the section entitled “Appraisal Rights” beginning on page 108 and may be accessed without subscription or cost at the following publicly available website: https://delcode.delaware. gov/title8/c001/sc09/index.html#262. This means that if you perfect your appraisal rights, do not subsequently withdraw your demand for appraisal, do not otherwise waive or lose your right to appraisal, and follow the procedures set forth in Section 262 of the DGCL, you may be entitled to have your shares of Company common stock appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of your shares of Company common stock, exclusive of any elements of value arising from the accomplishment or expectation of the merger, as determined by the Delaware Court of Chancery, in lieu of receiving the merger consideration if you follow exactly the procedures set forth in Section 262 of the DGCL. The amount you ultimately receive in an appraisal proceeding may be less than, equal to or more than the amount you would have received under the merger agreement.

To exercise your appraisal rights, you must, among other things, (i) properly demand appraisal of the applicable shares of Company common stock before the vote is taken on the merger agreement proposal at the special meeting (and must not fail to perfect or effectively withdraw your demand or otherwise waive or lose your right to appraisal), (ii) hold your shares of Company common stock continuously on and from the date of making the written demand through the effective date of the merger, (iii) not vote (either virtually or by proxy) in favor of the merger agreement proposal,

 

29

and (iv) strictly comply with all other procedures for exercising your appraisal rights under Section 262. If you fail to follow exactly the procedures set forth in Section 262 of the DGCL, you will lose your appraisal rights. In addition, the Delaware Court of Chancery will dismiss appraisal proceedings in respect of the merger unless certain stock ownership conditions are satisfied by the persons seeking appraisal, as further described below. The requirements for exercising appraisal rights are further described in the section entitled “Appraisal Rights” beginning on page 108 and the text of the DGCL appraisal rights statute may be accessed without subscription or cost at the following publicly available website: https://delcode.delaware.gov/title8/c001/sc09/index.html#262. We encourage you to read these provisions carefully and in their entirety. In view of the complexity of the DGCL relating to appraisal rights, the Company’s stockholders of record or beneficial owners of shares of Company common stock who may wish to pursue appraisal rights should consult their legal and financial advisors promptly. The discussion of appraisal rights in this proxy statement is not a full summary of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262 of the DGCL, which may be accessed without subscription or cost at the following publicly available website: https://delcode.delaware.gov/title 8/c001/sc09/index.html#262.

Solicitation of Proxies; Payment of Solicitation Expenses

The Company has engaged [—], [—], to assist in the solicitation of proxies for the special meeting. The Company estimates that it will pay [—] a fee of approximately $[—], plus certain per holder charges for any calls made to holders of Company common stock. The Company will also reimburse [—] for certain out-of-pocket expenses and will indemnify [—] and its affiliates against certain claims, liabilities, losses, damages and expenses. The Company may also reimburse banks, brokers or their agents for their expenses in forwarding soliciting materials to beneficial owners of Company common stock and in obtaining voting instructions from those owners. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

Questions and Additional Information

If you have more questions about the merger or how to submit your proxy, or if you need additional copies of this proxy statement or the enclosed proxy card or voting instructions, please contact [—], our proxy solicitor, by calling toll free at [—], or for banks and brokers, collect at [—].

 

30

PARTIES TO THE MERGER

THE COMPANY

Terran Orbital Corporation

6800 Broken Sound Parkway NW, Suite 200

Boca Raton, Florida 33487

(561) 988-1704

Terran is a leading manufacturer of satellite products primarily serving the aerospace and defense industries. Terran provides end-to-end satellite solutions by combining satellite design, production, launch planning, mission operations, and on-orbit support to meet the needs of the most demanding military, civil, and commercial customers.

The Company common stock is publicly traded on NYSE under the symbol “LLAP”. The principal executive offices of Terran are located at 6800 Broken Sound Parkway NW, Suite 200, Boca Raton, Florida 33487, and our telephone number is (561) 988-1704.

For more information about the Company, see “Where You Can Find More Information” beginning on page 116.

LOCKHEED MARTIN

Lockheed Martin Corporation

6801 Rockledge Drive

Bethesda, Maryland 20817

(301) 897-6000

Lockheed Martin is a global defense technology company driving innovation and advancing scientific discovery. Our all-domain mission solutions and 21st Century Security vision accelerate the delivery of transformative technologies to ensure those we serve always stay ahead of ready. Lockheed Martin’s common stock is publicly traded on NYSE under the symbol “LMT.” Upon completion of the merger, the Company will be a wholly owned subsidiary of Lockheed Martin. The principal executive offices of Lockheed Martin are located at 6801 Rockledge Drive, Bethesda, Maryland 20817, and its telephone number is (301) 897-6000.

MERGER SUB

Tholian Merger Sub, Inc.

6801 Rockledge Drive

Bethesda, Maryland 20817

(301) 897-6000

Tholian Merger Sub, Inc., which we refer to as “Merger Sub,” is a Delaware corporation that was formed solely for the purpose of entering into the merger agreement and related agreements and consummating the merger and the other transactions contemplated thereby. Merger Sub is a wholly owned subsidiary of Lockheed Martin and has not engaged in any business except for activities incidental to its formation and as contemplated by the merger agreement. Upon the completion of the merger, Merger Sub will cease to exist and the Company will continue as the surviving corporation of the merger. The principal executive offices of Merger Sub are located at 6801 Rockledge Drive, Bethesda, Maryland 20817, and its telephone number is (301) 897-6000.

 

31

THE MERGER

This discussion of the merger is qualified in its entirety by reference to the merger agreement, which is attached to this proxy statement as Annex A. You should read the entire merger agreement carefully as it is the legal document that governs the merger.

The merger agreement provides that Merger Sub will merge with and into the Company. The Company will be the surviving corporation in the merger and will continue to do business following the merger. As a result of the merger, the Company will become a privately held company and will cease to be listed on any public market. You will not own any shares of the capital stock of the surviving corporation.

Overview of the Merger

The Company, Lockheed Martin and Merger Sub entered into the merger agreement on August 15, 2024. Under the terms of the merger agreement, Merger Sub will be merged with and into the Company, with the Company surviving the merger as a wholly owned subsidiary of Lockheed Martin. In connection with the merger, each share of Company common stock issued and outstanding immediately prior to the effective time (other than the cancelled shares and dissenting shares) will be automatically converted into the right to receive the merger consideration, without interest.

Following and as a result of the merger:

 

•

Company stockholders will no longer have any interest in, and will no longer be stockholders of, the Company, and will not participate in any of the Company’s future earnings or growth;

 

•

shares of Company common stock will no longer be listed on NYSE, and price quotations with respect to shares of Company common stock in the public market will no longer be available; and

 

•

the registration of shares of Company common stock under the Exchange Act will be terminated.

Directors and Officers of the Surviving Corporation

The directors of Merger Sub as of immediately prior to the effective time will be the initial directors of the surviving corporation, in each case until the earlier of their resignation or removal, or until their respective successors are duly elected and qualified, as the case may be. The officers of the Company immediately prior to the effective time will be the initial officers of the surviving corporation, in each case until the earlier of their resignation or removal, or until their respective successors are duly elected or appointed and qualified, as the case may be. Except as set forth under “The Mergers—Interests of Company Directors and Executive Officers in the Merger—Retention Bonus,” no definitive plans or agreements have been made by Lockheed Martin regarding the continued service of any of the Company’s officers after the merger closing.

Background of the Merger

The following is a summary of the principal events, meetings, negotiations and actions among the parties leading to the execution and public announcement of the merger agreement. This summary does not purport to describe every interaction among the Company, Lockheed Martin or other parties or their respective representatives.

On March 4, 2021, Tailwind Two Acquisition Corp., which we refer to as “Tailwind Two,” a Cayman Islands exempted company that was formed as a special purpose acquisition company, which we refer to as the “SPAC,” for the intended purpose of pursuing a business combination with an acquisition target, consummated its initial public offering and listed its securities on the NYSE under the symbol “TWNT.”

 

32

On October 28, 2021, Tailwind Two entered into an Agreement and Plan of Merger, which we refer to as the “Tailwind Merger Agreement,” by and among Tailwind Two, Titan Merger Sub, Inc., which we refer to as “SPAC Merger Sub,” a wholly owned subsidiary of Tailwind Two, and Terran Orbital Operating Corporation, formerly known as Terran Orbital Corporation, which we refer to as “Legacy Terran Orbital.” On March 25, 2022, Legacy Terran Orbital consummated the business combination with Tailwind Two and SPAC Merger Sub, which we refer to as the “Business Combination.” In connection with the Business Combination, SPAC Merger Sub merged with and into Legacy Terran Orbital, becoming a wholly owned subsidiary of Tailwind Two. Upon filing a notice of deregistration with the Cayman Islands Registrar of Companies and a certificate of incorporation and a certificate of corporate domestication with the Secretary of State of the State of Delaware, Tailwind Two became a Delaware corporation and changed its name to Terran Orbital Corporation. At the time of the signing of the Tailwind Merger Agreement, closing of the Business Combination and thereafter, the Company was an early-stage operating company with cash proceeds received by the Company at closing of the Business Combination, net of redemptions, of approximately $58.4 million. This meant the Company required a significant amount of additional capital in order to execute on its business plan.

As an early-stage company, the Company sought to invest in scaling its manufacturing to support its commercial operations. In September 2022, the Company had $35.8 million of cash and cash equivalents on hand, and in order to conserve its cash and due to the capital-intensive nature of the effort, the Company decided to focus its business on manufacturing satellites and satellite buses and abandon its PredaSAR business plan of developing a constellation of radar imaging satellites.

During the same time frame, the Company also began exploring additional sources of capital. As part of that process, the Company engaged in discussions with Lockheed Martin, which was an early investor in Legacy Terran Orbital, a major stockholder, and the Company’s primary commercial customer. These conversations resulted in the parties entering into a convertible note and warrant purchase agreement on October 31, 2022, providing for the issuance and sale to Lockheed Martin of the Convertible Notes for an aggregate principal amount of $100 million.

As of December 31, 2022, the Company had approximately $93.6 million in cash and cash equivalents.

In February 2023, the Company signed a significant contract to manufacture several hundred satellites for Rivada Space Networks, which we refer to as “Rivada.” Although the Company believed that Rivada was on the verge of obtaining financing for its constellation, Rivada ultimately did not obtain any material financing during 2023. Partly due to that fact, the Rivada program was delayed, and consequently, expected milestones and associated payments were postponed. The Company noted in its Annual Report on Form 10-K filed soon thereafter on March 23, 2023, which we refer to as the “2023 Form 10-K,” that the Company may be reliant on a single contract with Rivada for a substantial portion of its revenue in 2023 and future fiscal periods—and moreover if Rivada were unable to fund and maintain its operations, the Company’s financial condition would be materially adversely affected.

In the 2023 Form 10-K, the Company disclosed other risks and uncertainties associated with its business, industry, and ownership of securities, including that it derives a substantial portion of its revenue from Lockheed Martin and that it may be reliant on a single contract with Rivada for a substantial portion of its revenue in 2023 and future fiscal periods. It also noted that the economic viability of customers is not guaranteed over time and that it may not be able to convert orders in backlog, or sales opportunities presented in pipeline, into revenue.

In the spring of 2023, the Company began exploring additional financing options to cover its forecasted cash requirements. As a result, the Company completed an equity raise through a registered direct offering in May of 2023, which resulted in gross proceeds of $37.1 million.

During the summer of 2023, Company management began exploring a variety of options for the Company to obtain a cash infusion sufficient to fund its growth plans. These included informal discussions with various firms regarding a take-private transaction or a significant equity investment in the Company. Company management also explored various forms of alternative capital raise transactions. The Company disclosed that on June 30, 2023, it had approximately $48.6 million in cash and in cash equivalents.

On July 19, 2023, the Board held a special meeting. The purpose of the meeting was to update the Board on conversations that had occurred with interested parties regarding financing and strategic options that were being considered. Subsequently, over the next two months, the Board held a series of update meetings on the Company’s financial condition and management’s efforts to obtain additional capital. Marc Bell discussed certain expected upcoming program awards but noted that these awards would not solve the Company’s near-term liquidity issues due to their anticipated timing.

 

33

The Board met again on August 3, 2023. At this meeting, Mr. Bell provided an update on management’s communications with certain private equity firms. He also discussed potential financing transactions that were being explored. He noted that the magnitude of the Company’s cash needs was due in part to a major Company program being put on hold by the customer (which customer was not Lockheed Martin or Rivada), delaying a large initial payment that was expected when the program began. Gary Hobart, Chief Financial Officer of the Company at that time, provided an overview of the Company’s cash requirements, noting that delays in receiving collections on existing and new expected contract awards may result in the Company going into a negative cash position in the coming months, which may necessitate pursuing a capital raise. During this discussion, the Board discussed engaging Jefferies LLC, which we refer to as “Jefferies,” for advisory services associated with strategic alternatives to a capital raise. Jefferies previously advised the Company on other matters, including the issuance of the Convertible Notes to Lockheed Martin in October 2022.

The Board held a regular meeting on August 10, 2023. Mr. Bell provided an update on the Company’s pursuit of alternative financing opportunities. He then recommended that Jefferies be formally engaged to explore a sale of the Company or other strategic alternatives. The Board unanimously approved engaging Jefferies.

On August 11, 2023, the Company executed an engagement letter with Jefferies to provide transaction advisory services with respect to a strategic review process, which could include an investment, sale of the Company, “take private” transaction or an alternative strategic relationship.

On September 11, 2023, the Board established a special committee of the Board, which we refer to as the “Special Committee,” comprised solely of independent directors James LaChance, Stratton Sclavos and Thomas Manion, to address issues and considerations related to, among other things, the Company’s cash needs relative to projected liquidity position due to concerns raised with the Board by management of the Company (including uncertainty of timing of the award date for a program relating to the SDA’s Tranche 2 Transport Layer (T2TL) Beta constellation, receipt of advanced payments relating to such award, and if such payments would occur by the end of September 30, 2023), the assessment of financing options and alternatives and a potential financial restructuring of the Company. The Special Committee engaged King & Spalding LLP, which we refer to as “King & Spalding,” on September 12, 2023 to provide legal advice.

On September 14, 2023, the Special Committee approved the Company’s entry into a securities purchase agreement with certain investors in connection with a proposed confidentially marketed public offering, which we refer to as the “CMPO,” whereby the Company would sell and issue, in a registered public offering, equity securities. On September 18, 2023, the Special Committee approved the pricing terms of the CMPO. The Company closed the CMPO on September 25, 2023, resulting in $32.5 million of proceeds.

On September 21, 2023, the Board met with the Company’s financial advisor, Jefferies. Jefferies presented on industry conditions and the performance of other De-SPACs in the aerospace industry. Jefferies noted that unlike these companies, the Company was well-positioned as it had a number of contracts with commercial and government customers. Jefferies discussed the Company’s two options – to (i) attempt to remain independent and conduct future capital raises, increasing stockholder dilution, or (ii) seek a change in control transaction that would pull forward value for stockholders. Jefferies walked through a variety of potential structures for a strategic transaction and potential companies and firms that might provide a good fit as an acquiror of the Company.

The Board met again on October 6, 2023. Given the Company’s continuing cash constraints, notwithstanding the Company’s recently completed capital raise, the Board authorized management and Jefferies to initiate the strategic review process that had been briefed to the Board at a prior meeting. Following the Board’s direction, management and Jefferies put together materials to support a strategic review process. On October 24, 2023, Jefferies began the process of contacting various parties, including Lockheed Martin, to gauge their interest in a strategic transaction with the Company. Interested parties were placed under non-disclosure agreements and provided limited financial and operational information regarding the Company.

 

34

By October 26, 2023, Rivada had paid the Company $5 million. The Board met for a regular quarterly meeting on November 9, 2023. In that meeting, Mr. Bell described a letter received that day from its customer Rivada. As a result of that letter, management believed Rivada would provide a material payment in the near term, facilitating a restart of the Company’s work for this customer, which had been delayed. However, soon thereafter, because the Company had not received expected further milestone payments from Rivada and did not have a definitive schedule on whether further payments would be received, the Company determined it would remove the expected revenue contribution related to Rivada and would adjust its expected 2023 revenue from $250 million to $130 million. In late December 2023, Rivada made a payment which, along with another customer payment, was sufficient for the Company’s near-term capital requirements; however, such payments were not expected to address the Company’s long-term liquidity needs.

Lockheed Martin and the Company entered into a non-disclosure agreement with respect to a potential transaction on November 15, 2023. On November 16, 2023, the Company provided Lockheed Martin and other parties who had signed non-disclosure agreements with a first-round process letter requesting initial indications of interest in a strategic transaction with the Company on December 14, 2023.

On December 11, 2023, the Wall Street Journal published an article that indicated the Company was seeking a buyer. The Company filed a Current Report on Form 8-K with the SEC on the same day in response, noting the Company was engaged in a strategic review process and that it had engaged Jefferies to provide transaction advisory services in connection with this process, which could include an investment, sale of the Company, “take private” transaction or an alternative strategic relationship.

On December 19, 2023, the Board held a special meeting concerning the strategic review process. Greg Valentine from Jefferies provided an update on behalf of Jefferies. He indicated that in the prior few weeks, Jefferies had contacted 81 different parties concerning an acquisition of the Company or an alternative strategic transaction. Mr. Valentine noted 33 parties had entered into non-disclosure agreements, which we refer to “NDAs,” and received additional Company financial information as of that time. This process had resulted in six potential bidders who Jefferies expected to move to a second round. He described the remaining six potential bidders, which included Lockheed Martin and five other companies – Company A, B, C, D and E. Despite a deadline of December 14, 2023, to provide indications of interest, no formal indications of interest had been received. In order to maintain interest, Jefferies extended the time to provide indications of interest to the six interested companies, one of which had entered the process late and another that had yet to execute an NDA. Two of the interested parties had been delayed in completing their due diligence process to arrive at a formal indication of interest and so were provided extensions. Additionally, three of the other interested parties had completed very limited or no due diligence efforts up until that point and were subsequently provided extensions. Mr. Valentine also noted that the Company’s recent public disclosure of its strategic review process in the Current Report on Form 8-K filed with the SEC on December 11, 2023 had not resulted in additional interest from any parties that Jefferies had not already contacted or resulted in any new parties contacting Jefferies.

On December 27, 2023, Company E was the last remaining party in the process to execute an NDA and was subsequently provided Company materials and financial information.

As of December 31, 2023, the Company had approximately $71.7 million in cash and in cash equivalents.

On January 10, 2024, Company E officially withdrew from the Company’s strategic process.

On January 18, 2024, representatives of Lockheed Martin and Citibank, Lockheed Martin’s financial advisor, which we refer to as “Citi,” attended a management presentation by Jefferies and the Company at the Company’s offices in Irvine, California and toured the Company’s manufacturing facilities.

On January 19, 2024, representatives of Company A attended a management presentation by Jefferies and the Company at the Company’s offices in Irvine, California and toured the Company’s manufacturing facilities.

On January 19, 2024, the Board held a special meeting. Management provided an update to the Board regarding the status of the strategic review process.

 

35

On January 30, 2024, Company A officially withdrew from the strategic process. Company B, C and D never fully engaged in the strategic process nor made an offer to acquire the Company.

On February 9, 2024, Mr. Valentine from Jeffries provided an update on the strategic review process to the Board. At that time, he noted that the most interested potential bidder left was Lockheed Martin. The Board discussed the reasons for the apparent lack of strong interest in an acquisition of the Company, including the Company’s financial profile, lack of fit with current strategic objectives of various potential bidders, and the Company’s financial projections, which ascribed higher probability of win and progress to certain programs and proposals than the prospective bidders. Mr. Valentine noted that he understood that Lockheed Martin had expended considerable resources on the Company to date and that he believed an acquisition of the Company was a high priority for Lockheed Martin. The Board also raised and discussed the possibility of an earnout structure or other contingent value right to bridge any gap between the value ascribed to the Company by management and Jefferies and any bidder who might emerge with an offer. Jefferies was authorized by the Board to provide bidding instructions and a deadline to any interested parties. On February 14, 2024, Jefferies provided a second-round bid letter to representatives of Citi, setting a deadline of February 28, 2024 for a final offer. Between February 14 and February 20, 2024, Lockheed Martin and the Company conducted a series of due diligence calls covering a variety of operational topics. No offer was received by February 28, 2024, but Lockheed Martin requested and was granted an extended deadline for its final offer.

On March 1, 2024, Lockheed Martin, in response to the second-round bid letter, delivered a non-binding offer letter to the Company and filed a Schedule 13D/A with the SEC disclosing its offer. The non-binding offer letter provided for the acquisition of all equity in the Company for a price of $1.00 per share, which was less than the then trading price of the Company’s shares. We refer to this proposal as the “Lockheed Martin March Offer.” No other offers or written proposals were received at any time in connection with the Company’s strategic review process. Lockheed Martin’s counsel, Hogan Lovells, also provided a markup of the form merger agreement that the Company had prepared as part of the bid process.

The Board met on March 3, 2024 to discuss the Lockheed Martin March Offer. Representatives of Jefferies provided their opinion that given the perceived low value of the offer, the nature of conversations around the offer and the fact of the offer’s public disclosure, that the Board should consider adopting a shareholder rights plan to provide for additional control over the Company’s potential sale process and ensure the preservation of the Company’s long-term value for its stockholders. Following legal advice from the Company’s outside legal counsel, Akin Gump Strauss Hauer & Feld LLP, which we refer to as “Akin,” and further discussion, the Board adopted a shareholder rights plan and filed the rights agreement as an exhibit to a Current Report on Form 8-K filed with the SEC on March 4, 2024. Jefferies then provided its views on the Lockheed Martin March Offer and opined that the Board could attempt to negotiate for an improved offer from Lockheed Martin or wait until further progress on the Company’s business plan resulted in an increase in the Company’s stock price, leading to an improved offer. During the March 3, 2024 meeting, the Board delegated to the Special Committee and its advisors the authority to assess the Lockheed Martin March Offer and develop a strategy to respond to Lockheed Martin, as well as to make recommendations on these topics to the full Board.

During the weeks of March 4 and March 11, 2024, the Special Committee held various internal discussions, working group sessions and informal meetings with the Company’s management team to establish a process to gather the necessary information to properly evaluate the Lockheed Martin March Offer and formulate a strategy to respond to Lockheed Martin. Such necessary information included, among other things, the Company’s financial budget and forecast, probabilities and assumptions relating to the conversion of pipeline into backlog, potential future contract awards and the Company’s current and future operational capacity, each to the extent necessary to sufficiently understand the Company’s liquidity position and valuation as part of the Special Committee’s ongoing assessment of the Lockheed Martin March Offer. Additionally, in the week following the Lockheed Martin March Offer, Mr. LaChance, Chairman of the Special Committee and of the Company’s Audit Committee, spoke to Casey French, the Director of Corporate Development of Lockheed Martin, to discuss Lockheed Martin’s rationale for the Lockheed Martin March Offer and to establish a line of communication to Lockheed Martin as the Special Committee continued to evaluate the proposal. During March and April 2024, Mr. LaChance spoke with Mr. French on a regular basis to keep Lockheed Martin generally apprised of the fact that the Special Committee was continuing to consider the Lockheed Martin March Offer.

 

36

As part of the ongoing review of the Lockheed Martin March Offer, on March 20, 2024, the Special Committee met with representatives of Jefferies and King & Spalding to review the strategic outreach process conducted by Jefferies over the foregoing months, including a detailed discussion of the prospective buyers involved, feedback received during the process and any communications with prospective buyers since receiving the Lockheed Martin March Offer. The Special Committee discussed with Jefferies and King & Spalding the advisability of contacting certain interested parties and, upon the advice of Jefferies and King & Spalding, determined that it was advisable for Jefferies to initiate such communications with four of the buyer prospects, including a private equity buyer and three large strategic buyers. Jefferies’ contacts did not result in any further engagement with any of these parties.

On March 21, 2024, the Board held a regular quarterly meeting. At this meeting, Mr. Bell provided an update on the efforts of the Company’s major customer Rivada to obtain financing for its satellite constellation. He noted his understanding that if Rivada obtained significant funding, it was prepared to provide a material milestone payment to the Company, which he believed would impact the Company’s valuation and the Lockheed Martin March Offer. In its Annual Report on Form 10-K filed on April 1, 2024, which we refer to as “2024 Form 10-K,” the Company disclosed its view that its contract with Rivada was subject to uncertainty and its backlog may not be converted into revenue.

At the Board meeting, Mr. Bell also discussed the possibility of the Company conducting an “at the market” facility to raise capital through open market equity sales.

The 2024 Form 10-K also disclosed that the Company may require additional capital support, that its substantial amounts of debt and payment obligations could affect Company operations and financial condition, and there were substantial doubts about the Company’s ability to continue as a going concern.

Following the March 2024 Board meetings, the Special Committee, with the assistance of Jefferies and King & Spalding, continued to evaluate the Lockheed Martin March Offer in order to determine whether the Lockheed Martin March Offer was in the best interests of the Company’s stockholders. Such evaluation included discussions with management to best understand real-time information relating to the Company’s contract with Rivada and the likelihood and timing of payments from Rivada, the Company’s projected cash flows and ability to maintain compliance with the financial covenants under the Company’s existing debt documents, and the ability for the Company to pursue additional financing transactions. During this time, Mr. LaChance continued to speak with Mr. French on several occasions regarding the status of the Special Committee’s review of the Lockheed Martin March Offer and desire to reach a decision as quickly as possible; however, the Company did not respond to Lockheed Martin’s non-binding proposal during any of these discussions.

In April 2024, Mr. LaChance, on behalf of the Special Committee, and management of the Company invited Lockheed Martin to present Lockheed Martin’s non-binding proposal to the Board. On April 16, 2024, Mr. French, Mr. Scott Weiner, Vice President, Corporate Development of Lockheed Martin, and Mr. Robert Lightfoot, President of Lockheed Martin Space, attended a meeting at the Company’s offices in Irvine, California, at which Lockheed Martin discussed with the Company its assessment of the Company’s business and plans. During this meeting, management of the Company also presented updated information regarding the Company’s financial forecast, discussed program gross margins and presented its views on pipeline opportunities. During this meeting, Mr. LaChance suggested to Lockheed Martin management the concept of an earn-out or contingent valuation right, which we refer to as a “CVR,” as a potential way to bridge the valuation gap between the Lockheed Martin March Offer and the general views on valuation held by the Board and the Company at that time. The Company did not respond to Lockheed Martin’s proposal during this meeting. At this time, on March 31, 2024, the Company had approximately $43.7 million in cash and in cash equivalents.

On April 24, 2024, the Special Committee engaged Province LLC, which we refer to as “Province,” a nationally recognized financial advisory firm, to perform an additional and independent valuation analysis on the Company to guide the Special Committee and the Board in its ongoing evaluation of the Lockheed Martin March Offer.

On April 25, 2024, the Special Committee met with Province and King & Spalding to provide Province with the necessary background regarding the Company’s liquidity situation, 2024 revenue forecasts, pipeline and operational capacity, probability in winning new contracts and the details of the Lockheed Martin March Offer. The Special Committee also discussed the options available to the Company, including engaging with Lockheed Martin on the Lockheed Martin March Offer as well as alternatives to a sale of the company, including potential alternative sources for raising capital and potential consequences from a liquidity perspective if the timing of payments and winning contracts were to be unfavorable to the Company. The Special Committee also discussed potential implications of

 

37

letting the Lockheed Martin March Offer remain outstanding without a response while the Company explored other strategic alternatives, or the implications that could result from rejecting the Lockheed Martin March Offer. Over the following six weeks, Province prepared a valuation model to use in the Board’s strategic process and assisted the Special Committing in assessing a range of alternatives.

On April 30, 2024, Lockheed Martin informed the Company that it was withdrawing the Lockheed Martin March Offer and on May 2, 2024, Lockheed Martin filed a Schedule 13D/A with the SEC disclosing such information publicly. That same day, the Company publicly announced that its strategic review to maximize stockholder value was still ongoing.

On May 6, 2024, the Company’s Chief Transformation Officer, Mr. Gary Hobart, received an unsolicited email from a non-traditional micro-cap business lender, which we refer to as “Lender R,” offering potential liquidity solutions. On the same day, the Company had a conversation with Lender R and provided public information for review, and on May 13, 2024, a conference call was held between the Company and Lender R’s underwriting team. The following day, Lender R’s CEO provided verbal terms to Mr. Mathieu Riffel, the Company’s Acting CFO, for a $5 million unsecured term loan with a 30-week tenor and 117% annualized coupon, but the Company declined to pursue this financing due to the high interest rate. On May 22, 2024, Lender R provided slightly improved terms for a $5 million unsecured term loan with a 36-week tenor and 99% annualized coupon, which the Company again declined to pursue due to the high interest rate and small potential proceeds relative to its total capital requirements.

On May 7, 2024, the Special Committee met with King & Spalding and Province to discuss Lockheed Martin’s withdrawn proposal. At this meeting, Province presented the model it prepared for the Special Committee to assist with preparing a new proposal to Lockheed Martin and discussed, among other things, the projections regarding future operating results, sources and uses of liquidity for 2024 and valuation implications based on comparable company market performance, relative to forward projections. Additionally, the Special Committee discussed potential options moving forward, including further engagement with Lockheed Martin and bridging any valuation gap with a CVR that could provide additional value tied to the success of certain programs and bids that had a subjective probability of winning.

On May 13, 2024, Mr. LaChance contacted Mr. French to request a discussion. Thereafter, during May 2024, Mr. French and Mr. LaChance spoke periodically about the liquidity position of the Company. Mr. LaChance indicated that the Special Committee was continuing to evaluate the Lockheed Martin March Offer notwithstanding that it had been withdrawn, and that given the complex capital structure and uncertainty regarding various potential contracts, the valuation of the Company was difficult. Mr. LaChance also informed Mr. French that the Special Committee was intending to request Province to perform additional work in connection with the ongoing evaluation of the previously withdrawn Lockheed Martin March Offer, including an additional retainer payment.

On May 21, 2024, the Special Committee met again with King & Spalding to discuss the strategy for seeking to encourage Lockheed Martin to re-engage in discussions with the Company, including the potential terms of a proposal that the Company might make to Lockheed Martin, including a per-share price and contingent consideration tied to converting pipeline opportunities. The Special Committee decided to re-engage Province for additional work relating a valuation analysis to assist the Special Committee in its strategy for re-approaching Lockheed Martin.

On May 23, 2024, the Board held a regular meeting. Mr. Bell provided an update on the Company’s customer Rivada, noting Rivada was expecting an investment but that the Company was not relying on that expectation and would start reducing staff on the program in the next few weeks in the absence of positive developments. The Board discussed broader cost cutting measures that the Company should consider. Mr. Bell described certain initial steps that the Company was pursuing. Mr. Bell also provided an update on the Company’s bid for the Tranche 2 Transport Layer (T2TL) Gamma program, which we refer to as “Gamma,” with the U.S. Space Development Agency, which we refer to as the “SDA”, noting the Company was optimistic that it would win one of the awards, but that the timing of such decision was uncertain and could be several months in the future. In the Company’s Form 10-Q for the period ended June 30, 2024, the Company reduced its total backlog to $312.7 million, from $2.7 billion, as several uncertainties remained regarding Rivada’s ability to continue funding contract performance. Although, through late 2023 and early 2024, the Company did not consider milestone payments from Rivada as critical to liquidity, because other projects were anticipated to become operational in 2024, delays and cancellations in those projects led to increased reliance on anticipated milestone payments from Rivada to help fund interim cash requirements. The uncertainty in Rivada’s ability to pay also significantly deteriorated the Company’s cash forecast.

 

38

The Board discussed the Company’s ongoing liquidity outlook over the next quarter. Mr. Hobart noted that the Company was attempting to negotiate interim milestone payments with Lockheed Martin to receive payments earlier than currently planned. The failure of the Company’s original propulsion supplier to deliver in a timely fashion and the supplier’s subsequent termination had caused the Company to pivot to a new supplier, resulting in delays to the program, which had pushed out expected payments, constraining the Company’s liquidity profile. Mr. Hobart noted that the Company might need a permanent cash infusion of up to $120 million to cover the Company’s expected cash burn for the year.

On June 4, 2024, the Special Committee met with King & Spalding and Province to discuss the ongoing second phase of Province’s engagement, which involved Province conducting a more comprehensive due diligence review and providing certain preliminary opinions and preliminary analyses regarding the non-binding proposal Lockheed Martin had previously submitted (and subsequently withdrawn). Province discussed with the Special Committee the ongoing liquidity constraints of the Company, noted the difficulty in continuing to operate the business given its cash burn unless it found a solution to its liquidity constraints. During this meeting, the Special Committee also discussed approaching Lockheed Martin, including the timing for doing so and the potential terms of any counter-proposal. Further, the concept of including a CVR in the framework of a counter-proposal was discussed, specifically the high-level options for the scope of the CVR pool, which included (1) limiting the CVR pool to the Company’s contract with Rivada; (2) limiting the CVR pool to the Company’s three biggest program opportunities; or (3) proposing a broader construct that would include specified additional opportunities or a “fully-baked” scenario that would include Small-GEO and Direct-to-Device opportunities and capture all future contracts (other than with Lockheed Martin and the SDA). Province previewed possible pricing for the CVR within these different scenarios.

On June 12, 2024, the Special Committee met with King & Spalding and Province to set the framework for quantifying a potential CVR in an indicative proposal to Lockheed Martin. At this meeting, the Special Committee discussed a term sheet for an indicative proposal, including pricing, length of the exclusivity period and other items. The term sheet included $1.00 per share of contingent consideration in the form of the CVR, the scope of which would be tied to any pipeline opportunities not related to Lockheed Martin or the SDA. At this meeting, the Special Committee also discussed the numerous outstanding proposals and pipeline opportunities emerging as potential future awards, noted the potential for significant future growth, and talked about concerns given the ongoing liquidity and cash flow forecasts and challenging operating environment. The Special Committee also discussed the possibility of requesting advance payments from Lockheed Martin under the Tranche 1 “Monsoon” contract pursuant to which the Company had partially completed the satellite buses, which we refer to as the “Monsoon Advance Payment Request”. The Company had not yet earned a milestone payment due to the delayed receipt and integration of propulsion from its supplier.

On June 18, 2024, Mr. LaChance, at the direction of the Board, spoke with Mr. French and verbally presented a notional proposal consisting of $1.50 per share, with a $1.00 CVR upside, which we refer to as the “June 18 Proposal,” as well as the Monsoon Advance Payment Request previously discussed at the Special Committee meeting on June 12, 2024. Mr. French said he would convey the Monsoon Advance Payment Request and discuss the June 18 Proposal internally at Lockheed Martin, but indicated that he did not believe the June 18 Proposal would be workable.

On July 1, 2024, the Company met with investment bank H.C. Wainwright, which we refer to as “Wainwright,” to discuss the possibility of conducting a capital raise transaction. Due to covenant restrictions in the Company’s existing debt documents, Wainwright was tasked with finding a party to complete a transaction structured in a way that was either (i) allowable under the Company’s existing debt documents or (ii) reasonable to the Company’s existing lenders such that they would consent to the transaction. Following such discussion and to facilitate an expedient transaction, the Company entered into an engagement letter with Wainwright on July 1, 2024. Over the following two weeks and after consultation with Wainwright and Akin, the Company decided to pursue three potential transactions concurrently, with the final decision to be made at a later date: (1) a warrant inducement transaction, which we refer to as the “Proposed Warrant Inducement Transaction,” whereby the Company would reduce the strike-price on existing warrants purchased by an investor in its securities offerings in May and September 2023 and issue new warrants; (2) a working capital facility providing access to $25,000,000 from a new lender, with such capital to be used for working capital purposes and subject to an interest rate on borrowed amounts, which we refer to as a “Proposed Working Capital Facility”; and (3) an at-the-market offering, which we refer to as the “ATM,” providing for sales of common stock, from time to time, into the market at then-current market prices, subject to a maximum of 26,362,513 shares as allowable pursuant to the convertible note and warrant purchase agreement.

 

39

Between July 5, 2024 and July 13, 2024, the Company negotiated a term sheet with a prospective lender, with such term sheet providing for up to $25,000,000 under the structure of a Proposed Working Capital Facility. Subject to certain restrictions, a working capital facility was allowable under the existing debt documents with the Company’s existing lenders. However, after multiple rounds of negotiation with a prospective lender, the term sheet the Company received for a Proposed Working Capital Facility was not a true working capital facility as contemplated by the carve-outs from the covenants under the Company’s existing debt agreements, but rather was structured as a term loan and therefore was not permitted under the Company’s existing debt agreements.

On July 8, 2024, Mr. LaChance spoke with Mr. French about the June 18 Proposal. During that meeting, Mr. French reiterated Lockheed Martin’s previously communicated position with respect to the June 18 Proposal.

On July 9, 2024, the Special Committee met with King & Spalding and Province to discuss Mr. LaChance’s conversation with Mr. French the day earlier. The Special Committee noted for Province that if the time came for a meeting to discuss and negotiate a potential transaction with Lockheed Martin, then the Special Committee, Province and the Company’s management team would need to work together to prepare accordingly and support the proposed valuation relative to Lockheed Martin’s discounted cash flow (DCF) valuation. Mr. LaChance added that Mr. French was taking the June 18 Proposal to his investment committee.

On July 17, 2024, Mr. French spoke with Mr. LaChance and indicated that Lockheed Martin would be seeking a liquidity review of the Company, reiterated and confirmed that Lockheed Martin and was not willing to negotiate on the June 18 Proposal, and stated that Lockheed Martin was not interested in pursuing any new commercial agreements or a strategic transaction with the Company at that time, including because of Lockheed Martin’s concerns about the Company’s liquidity situation. Mr. French conveyed to Mr. LaChance that the Company should, however, contact Lockheed Martin if the Company ran into an immediate liquidity problem.

On July 17, 2024, the Special Committee met to discuss Mr. LaChance’s conversation with Mr. French earlier that day. In particular, the Special Committee focused on the anticipated impacts resulting from the Company’s short-term liquidity concerns and discussed available options.

On July 19, 2024, the Board held a special meeting. Mr. LaChance reported on Lockheed Martin’s rejection of the June 18 Proposal. Adarsh Parekh, Chief Financial Officer of the Company, provided an update on the potential financing options available to the Company, including the Proposed Working Capital Facility, which would likely require existing lender consent or cooperation to complete, the Proposed Warrant Inducement Transaction, which would require existing lender consent under the current terms of such proposed transaction by virtue of their equity consent right under the convertible note and warrant purchase agreement, or use of the Company’s ATM, which had been previously negotiated and was expected to be signed in the upcoming days. The Board endorsed management moving forward on multiple paths: exploring potential financing options that would not require a lender consent and engaging with Lockheed Martin on a potential sale of the Company.

On July 22, 2024, Jefferies met with Mr. Weiner from Lockheed Martin at the Farnborough air show and discussed the Company’s willingness to explore a sale transaction that would provide a near-term liquidity solution.

 

40

On July 23, 2024, the Company signed a sales agreement in connection with the ATM facility, which we refer to as the “Sales Agreement”. However, sales under such Sales Agreement could not occur until the Company had released its quarterly financial results.

On July 24, 2024, Mr. Parekh contacted Mr. French to request Lockheed Martin’s consent to enter into the Proposed Warrant Inducement Transaction. Mr. Parekh explained the urgency to obtain feedback from Lockheed Martin. Mr. Parekh also explained the terms of the Proposed Warrant Inducement Transaction, which Mr. Parekh believed would provide the Company with necessary near-term liquidity with a less significant dilutive impact, and on more favorable terms, than alternative transactions potentially available.

On July 25, 2024, Jefferies requested a follow-up call with Mr. French and Mr. Weiner to see if they intended to re-engage with the Company and what diligence they would require in order to transact. During this call, Jeffries communicated the dire cash position of the Company and said that the Company would be willing to transact at a below market price. Mr. French and Mr. Weiner informed Jefferies that Lockheed Martin would need additional detail on the Company’s bid on the SDA Gamma program, a 13-week liquidity forecast and obligations under the Company’s contract with Rivada before they could consider whether to reengage with the Company on a potential transaction to purchase the Company. Over the following days, the Company provided this information to Lockheed Martin by way of Jefferies.

On July 25, 2024, the Board held a special meeting to discuss the status of the Company’s efforts to obtain financing. Representatives from King & Spalding and Province were present. Mr. Bell noted that the Company’s options were to (i) obtain Lockheed Martin’s consent to facilitate a financing to bridge the Company’s liquidity constraints until an expected contract award and customer payment occurred or (ii) continue to explore a sale to Lockheed Martin. Management indicated that the Company had approximately three weeks before potentially exhausting its cash reserves. The Board discussed exploring a third parallel path, a Chapter 11 bankruptcy. The independent directors of the Board received legal advice from King & Spalding regarding the directors’ fiduciary duties in the context of an insolvency.

The Board met again on August 1, 2024 to discuss the current status of management activities and the Company’s ongoing liquidity concerns. Mr. Bell updated the Board on his efforts to have Lockheed Martin accelerate payments on active programs. Mr. Bell indicated his view that Lockheed Martin may have a continuing interest in acquiring the Company. He also provided an update on the Company’s negotiations with the SDA to finalize an expected contract award in the next two weeks, which would result in an initial material payment to the Company in order to begin work. Dan Moses, a representative of the Special Committee’s financial advisor, Province, gave his opinion that the Company should begin planning for a potential reorganization or liquidation given its very limited cash balance.

On August 1, 2024, Mr. Hobart and Mr. Bell contacted Mr. French to request Lockheed Martin’s consent to the Proposed Warrant Inducement Transaction. On August 2, 2024, Mr. LaChance called Mr. French and Mr. French expressed that Lockheed Martin was not supportive of the Proposed Warrant Inducement Transaction because it would not provide sufficient liquidity to solve the Company’s liquidity issues. Mr. French indicated in response to inquiries that in order for Lockheed Martin to consider exploring whether an acquisition of the Company would be possible, the price would have to be “in or around” $0.25 per share for the common stock. Mr. French indicated that in the case of any transaction there would need to be a bridge for the Company’s liquidity until closing and that the bridge would require a consent of existing lenders.

On August 3, 2024, Mr. Valentine from Jefferies spoke with a representative of Company F, a party that had previously executed an NDA in the fall of 2023 but had withdrawn its intent to remain in the Company’s strategic process, concerning a potential acquisition of the Company. Company F declined to conduct further diligence based on the Company’s financial and liquidity profile, as well as an overall shift in Company F’s strategy.

 

41

On August 4, 2024, the Special Committee met with King & Spalding and Province to discuss Mr. LaChance’s conversation with Mr. French on August 1, 2024 and August 2, 2024. A discussion then ensued about a potential transaction with Lockheed Martin and potential implications for the Company. In particular, the Special Committee discussed the value of engaging in discussions with Lockheed Martin in light of the Company’s short-term liquidity and prospects. The Special Committee agreed that three paths should be pursued in parallel: (1) potential equity capital raising through the ATM (up to the maximum allowable without Lockheed Martin’s consent); (2) exploration of a potential transaction with Lockheed Martin; and (3) engaging advisors to prepare the Company for a potential bankruptcy filing in case necessary. The Special Committee also determined that Mr. LaChance and Mr. Moses would request a call later that evening with Mr. French and a representative of Citi, in an effort to understand whether Lockheed Martin would be willing to consider a transaction with the Company. The Special Committee then discussed the strategy for ongoing engagement with Lockheed Martin if they were prepared to reengage. During that call, Lockheed Martin emphasized that they did not have a confirmed path to transact, that they were not presenting an offer to the Company, that if they were to explore a transaction, it would have to be for a price “in or around” $0.25 per share, and that the lending group would need to agree to put bridge financing in place.

On August 5, 2024, the Board held a special meeting. Mr. Bell discussed efforts to accelerate the SDA Gamma contract negotiations and award and the subsequent first milestone payment. He noted that Lockheed Martin was considering an offer of $0.25 per share for the common stock of the Company. He described Lockheed Martin’s view that the existing lender group would need to provide an immediate infusion of capital to bridge the Company to a closing of an acquisition. He advised that the Company and Board should commence negotiations with Lockheed Martin while simultaneously attempting to explore financing options. He noted ongoing discussions with a number of parties but that the requirement to get consent from the Company’s current debtholders made the ability to execute an alternative transaction uncertain. The Board expressed a preference for a financing resolution to the Company’s liquidity challenges, but barring the availability of sufficient financing, that it preferred a transaction with Lockheed Martin to bankruptcy. Mr. Hobart described the Company’s continuing cash needs. He noted even if the Company could raise capital now and bridge to an SDA Gamma award and payment, the Company would likely need to raise capital again later this year.

Also on August 5, 2024, in consideration of the Company’s worsening liquidity situation, the Company re-engaged with Lender R. On August 6, 2024, the Company had a conference call to update Lender R’s underwriting team, and the following day Lender R provided verbal terms for a $4 million unsecured term loan with a 26-week tenor, 145% annualized coupon, and $200,000 origination fee. Lender R noted that the economic terms of the proposal had changed because the Company’s cash runway had decreased since its prior proposal. No further action was taken given the unfavorable terms and limited size of the term loan, the prospect of negotiations with Lockheed Martin for a potential transaction, and the requirement for the existing lenders to sign a subordination agreement pursuant to the Company’s existing debt documents in order to access over $2,000,000 of this term loan.

During the week of August 5, 2024, Company management explored engaging bankruptcy counsel as part of the Board’s direction to continue to explore various alternative paths.

On August 6, 2024, the Board held a special meeting. The Board received an update on financing and discussed the process of bankruptcy planning. Mr. Bell indicated the Company’s current preferred path was to begin using the Company’s ATM that week in order to bridge to expected program milestone payments in the near future.

That same day, Mr. Valentine from Jefferies spoke to Company G, a party that was involved in the Company’s strategic process but had stated that it would not submit a bid for the Company, to gauge interest in an acquisition of the Company.

On August 7, 2024, Hogan Lovells and Akin met to discuss the merger agreement markup that Lockheed Martin had provided to the Company in March as part of the Lockheed Martin March Offer and whether revisions would need to be made to the draft agreement in the event the parties agreed to consider a transaction.

From August 7, 2024 to August 14, 2024, Lockheed Martin and the Company and their respective counsel negotiated the terms of a possible merger agreement that would be required in the event that Lockheed Martin decided to propose an acquisition of the Company, including a “go shop” provision given the potential compressed time period and potential offer price for the transaction. During this time, the Company also negotiated the terms of the bridge financing note purchase agreement that would be required under those circumstances with the bridge facility lenders comprised of Lockheed Martin, Beach Point and FP, each of whom were also existing lenders to the Company.

 

42

On August 8, 2024, Company G responded to Jefferies that it was unlikely that it would pursue a transaction with the Company.

On August 8, 2024, the Board held a special meeting. At that meeting, Mr. Bell outlined the Company’s options to bridge its liquidity deficit, including raising money through its ATM facility. Mr. Bell informed the Board that it would be unable to execute on its plan to raise money through its ATM facility in time to be able to bridge the deficit with proceeds from the ATM. Coupled with the inability of the Company to obtain consents from the existing lenders that would be needed to conduct alternative capital raises, Mr. Bell indicated that the Company was left with no viable options. He noted the possibility that certain small financing commitments might come through in the near term but was not optimistic. He further stated that Mr. French indicated that he would seek internal authorization for an acquisition of the Company at $0.25 per share and a $30 million bridge loan. He noted that if Lockheed Martin elected not to make a formal offer that he believed it would give the consents necessary under the Company’s debt agreements to permit the Company to engage in a separate capital raise. As a consequence of these developments, Mr. Bell recommended terminating efforts to use the ATM for now and focus on reaching agreement on a sale of the Company to Lockheed Martin. After discussing, the Board agreed that Mr. Bell should engage with Lockheed Martin and work on documenting a transaction, subject to the Board obtaining a fairness opinion from an independent financial advisor and a more fulsome consideration of the offer and potential alternatives. Subsequently, the Company engaged Lincoln to provide an opinion regarding the fairness, from a financial point of view, of the consideration to be received by stockholders in the proposed transaction with Lockheed Martin, pursuant to an engagement letter that provided that no portion of Lincoln’s fees were contingent on the conclusions set forth in the Opinion or the consummation of the transaction.

The Board also discussed suspending the Special Committee. The Board and its independent directors discussed the benefits of the independent directors and the full Board having direct oversight of continued discussions in the interest of time and efficiency, and the Board’s desire to be fully aware of all matters going forward rather than using a special committee. The independent directors of the Board agreed to suspend the Special Committee for the time being rather than continuing to delegate responsibilities to a Special Committee.

On the same day, Peter Krauss, Chief Operating Officer of the Company, was authorized to contact senior management at Rivada to see if an immediate cash payment could be made as an advance against a large milestone payment that the Company expected to bill Rivada for in the coming weeks. This request was viewed as a last option to pursuing a sale to Lockheed Martin or a bankruptcy filing. Rivada did not advance any payments to the Company.

During the period of August 9 through August 12, 2024, representatives from the Company, Jefferies, Lincoln, Lockheed Martin and Citi conducted multiple due diligence sessions covering the aspects of the Company’s financial and operational performance and expectations.

On August 12, 2024, the Company filed its Quarterly Report on Form 10-Q for the period ended June 30, 2024 with the SEC, reporting its second quarter earnings and disclosing $14.6 million of cash and cash equivalents as of July 31, 2024. The Company noted that if it were unable to raise capital it may be required to cease its operations, initiate insolvency proceedings or otherwise conduct a capital restructuring, divest its assets at unattractive prices or accept an offer to purchase the Company at a discount to its current market price of its outstanding shares.

On August 12, 2024, the Board held a special meeting. The purpose of the meeting was to consider a sale of the Company to Lockheed Martin. Representatives from Akin provided an overview of the directors’ fiduciary duties. Representatives from Jefferies gave an overview of the strategic review process from inception to date, the Company’s current liquidity, and the potential options available to the Company. The Board was generally in favor of pursuing a proposal from Lockheed Martin given the absence of viable alternatives.

On August 13, 2024, representatives from the Company, Jefferies and Akin met to discuss the final negotiation of terms of the bridge note purchase agreement and the merger agreement, including the operating covenants.

 

43

On August 14, 2024, the Board held a special meeting to consider the potential transaction with Lockheed Martin. Also on August 14, 2024, Lockheed Martin management approved a plan to acquire the Company at a price of $0.25 per share and Mr. French communicated that approval to the Company.

At the special meeting, representatives of Lincoln presented Lincoln’s financial analyses and rendered an oral opinion, confirmed by delivery of its written Opinion dated August 14, 2024 to the Board to the effect that, as of such date and based on and subject to various assumptions made, procedures followed, matters considered, and limitations and qualifications on the review undertaken in such opinion, the merger consideration to be received by the holders of common stock (other than holders of excluded shares) pursuant to the merger agreement was fair, from a financial point of view, to such holders. For a detailed discussion of the Opinion, see “—Opinion of Lincoln International LLC” below.

Representatives of Akin reviewed the terms of the proposed merger agreement and related bridge note purchase agreement, with a particular focus on the “go-shop” and “fiduciary out” provisions, efforts to secure regulatory approvals, financing, closing conditions, termination fees and termination rights, and remaining open points. The Board discussed the terms of the proposed merger agreement.

On the morning of August 15, 2024, the Board reconvened to discuss the final transaction agreements. Representatives of Akin provided their views on the resolution of the remaining open issues. Following consideration of the matters discussed during the course of the Board meeting, the Board unanimously (i) determined that the merger, on the terms and subject to the conditions set forth in the merger agreement, was fair to, and in the best interests of the Company and its stockholders, (ii) approved adopted and declared advisable the merger agreement and the execution, delivery and performance of the merger agreement and the transactions contemplated thereunder, including the merger, (iii) directed that the approval and adoption of the merger agreement (including the merger) be submitted to a vote at a meeting of the stockholders of the Company and (iv) recommended that the Company’s stockholders approve the adoption of the merger agreement and approve the merger on the terms and subject to the conditions set forth in the merger agreement. The Board also approved the terms and conditions of the bridge note purchase agreement and related agreements, including the voting and support agreements and amendments to the Company’s existing debt agreements.

On August 15, 2024, following approval of the Board, the Company and Lockheed Martin executed the merger agreement and the Company and the lenders executed the bridge note purchase agreement. That morning, prior to the commencement of trading on the NYSE, the Company and Lockheed Martin issued a joint press release announcing the transaction.

That same day, Jefferies initiated the process of contacting 79 different potential bidders as part of the Company’s exercise of its rights under the go-shop clause of the merger agreement.

After considering the proposed terms of the transaction, and taking into consideration the matters discussed during that meeting and prior meetings of the Board, including the factors described above and under the section entitled “— Reasons for the Merger; Recommendation of the Board of Directors,” the Board unanimously (a) determined that the merger, on the terms and subject to the conditions set forth in the merger agreement, is fair to, and in the best interests of the Company and its stockholders; (b) approved, adopted and declared advisable the merger agreement and the execution, delivery and performance of the merger agreement and the transactions contemplated thereunder, including the merger; (c) directed that the approval and adoption of the merger agreement (including the merger) be submitted to a vote at a meeting of the stockholders of the Company; and (d) recommended that the Company’s stockholders approve the adoption of the merger agreement and approve the merger on the terms and subject to the conditions set forth in the merger agreement.

Reasons for the Merger; Recommendation of the Board of Directors

At a meeting held on August 15, 2024, after careful consideration of the various factors discussed below, the Board, by a unanimous vote of all directors, (a) determined that the merger, on the terms and subject to the conditions set forth in the merger agreement, is fair to, and in the best interests of, the Company and its stockholders; (b) approved, adopted and declared advisable the merger agreement and the execution, delivery and performance of the merger

 

44

agreement and the transactions contemplated thereunder, including the merger; (c) directed that the approval and adoption of the merger agreement (including the merger) be submitted to a vote at a meeting of the stockholders of the Company; and (d) recommended that the Company’s stockholders approve the adoption of the merger agreement and approve the merger on the terms and subject to the conditions set forth in the merger agreement.

Before making its recommendation, the Board consulted with its outside legal and financial advisors and with the Company’s senior management team. In reaching its recommendation, the Board considered several factors relating to the merger agreement and the merger, each of which the Board believed supported its decision to recommend the merger, including the following (which factors are not necessarily presented in order of relative importance):

 

•

Limited Liquidity and Capital Resources; Going Concern Doubts. The Board considered the Company’s liquidity and capital resources in its recommendation of the merger and the merger agreement. As of July 31, 2024, the Company’s cash and cash equivalents balance totaled approximately $14.6 million, down from a balance of approximately $71.7 million as of December 31, 2023. In addition, as of June 30, 2024, the Company’s current assets balance relative to its current liabilities balance, which we refer to as “Net Working Capital,” reflected an approximately $86.6 million negative balance compared to an $2.1 million positive balance as of December 31, 2023. Without additional funding, the Company expected that its current liquidity would be insufficient to meet its obligations within the next twelve months and substantial doubt about the Company’s ability to continue as a going concern existed.

 

•

Business and Operating Risks Facing the Company. The Board considered the Company’s business and operating performance and outlook in its recommendation of the merger and the merger agreement, including:

 

•

Potential Acceleration of Debt Maturities Due to Uncertainty in Complying with Covenant Restrictions. The Company’s primary corporate debt agreements require the Company to hold an amount of unrestricted cash and cash equivalents of the greater of $20 million or 15% of certain aggregated funded indebtedness as of the end of each fiscal quarter, which we refer to as the “Liquidity Covenant.” Additionally, the primary corporate debt agreements contain a covenant requiring the Company’s Consolidated Adjusted EBITDA (as defined in the existing debt agreements) to be no less than $0 by December 31, 2024. The extension of the Consolidated Adjusted EBITDA covenant may be delayed by one quarter for every additional $25.0 million of net cash proceeds from qualified equity issuances, which we refer to as the “Consolidated Adjusted EBITDA Covenant.” As of June 30, 2024, approximately $295.6 million principal amount of the debt of the Company was subject to these financial covenants with related accrued but unpaid interest of approximately $2.1 million. Although the Company was in compliance with all financial covenants as of June 30, 2024, there was uncertainty regarding its ability to comply with the Liquidity Covenant on September 30, 2024 and with both the Liquidity Covenant and Consolidated Adjusted EBITDA Covenant in subsequent quarterly periods.

 

•

Significant Challenges in Financial Performance. The Company has experienced significant challenges in improving its financial performance. Despite the Company’s success in reporting record revenues of $135.9 million for the fiscal year ending December 31, 2023 and previously announced goals in late 2023 and in early 2024 of generating positive Adjusted EBITDA in 2024, for the six month period ending June 30, 2024, the Company reported revenues of approximately $57.6 million, a net loss of approximately $88.6 million and Adjusted EBITDA of approximately negative $45.6 million compared with revenues of approximately $60.4 million, a net loss of approximately $82.6 million and Adjusted EBITDA of approximately negative $43.9 million in the same six month period the year prior, reflecting an approximate $2.8 million and $1.7 million decline in revenues and Adjusted EBITDA year-over-year, respectively. See Appendix I for a reconciliation of Adjusted EBITDA to net loss (the most comparable GAAP measure) for the six months ended June 30, 2024 and 2023. For the Company to maintain adequate liquidity, meet quarterly debt covenants, and, ultimately, achieve profitability, it would need to realize a significant improvement in its financial performance and / or rely more heavily on capital raising activities and alternative financing sources.

 

45

•

Delay and Uncertainties in Customer Advances and Awards. As the Company has disclosed, it relies on winning new customer orders, timely execution of programs and, ultimately, collections from customers to provide liquidity and fund the Company’s business plan. The failure to win new orders, execute on programs on schedule or collect from customers in a timely manner would negatively impact the Company’s liquidity and increase its need to rely on raising capital for liquidity. As reported, the Company experienced increasing uncertainties regarding collections from Rivada as well as delays in performing on contracts. In addition, as of June 30, 2024, programs associated with Lockheed Martin represented 91% of the Company’s backlog, a significant portion of the value of which had already been advanced through upfront payments. The Board considered the impact of the new $254.0 million SDA Gamma award and projected collections related thereto but determined that the program was insufficient to offset the potential absence of Rivada collections and the negative Net Working Capital balance challenges. In turn, the Company would need to rely more heavily on capital raising activities and / or other new awards, the latter of which was unlikely to materialize in the immediate term.

 

•

Impact of Rivada; Decline in Backlog. As of the periods ended December 31, 2023 and March 31, 2024, the Company reported a backlog of approximately $2.7 billion, but as of the filing of its Form 10-Q for the period ended June 30, 2024, the Company reported a total backlog of approximately $312.7 million. The reduction resulted primarily from the removal of the unpaid portion of its agreement with Rivada. The Company determined that removing the remaining expected contract value of Rivada from backlog was warranted as several uncertainties remained regarding Rivada’s ability to continue funding contract performance. Through late 2023 and early 2024, the Company did not consider that milestone payments from Rivada were critical to liquidity, as other projects were anticipated to become operational in 2024. However, delays and cancelations in those projects led to increased reliance on anticipated milestone payments throughout 2024 from Rivada to help fund interim cash requirements. Recent uncertainty about Rivada’s ability to pay significantly deteriorated the Company’s cash forecast. In addition, the Board considered the potentially negative impact that the recently reported backlog decline may have on its financial stability and its capital raising, customer engagement and vendor management activities.

 

•

Lack of Available Financing Alternatives. Following Lockheed Martin’s withdrawal of the Lockheed Martin March Offer on April 30, 2024, the Company attempted to explore and pursue other near-term financing options from several parties. However, those efforts by the Company to raise capital were not successful.

After the Company received an unsolicited communication from Lender R regarding potential liquidity solutions in early May 2024, the Company and Lender R held numerous subsequent diligence sessions in hopes of arriving at amenable terms. However, after Lender R had presented two separate verbal terms, the Company determined that both offers were unacceptable due to the high interest rate attached to the financing and the fact that the total amount of cash proceeds from such financing would not have materially extended the liquidity runway for the business.

As the Company continued to exhibit a deteriorating liquidity profile, the Company engaged with Wainwright to explore alternative financing options throughout July 2024. As described in more detail in the section entitled “—Background of the Merger,” the Company decided to concurrently pursue three potential transactions: the Proposed Warrant Inducement, the Proposed Working Capital Facility and the ATM with Wainwright. During early July, the Company, Wainwright and a prospective lender negotiated a term sheet for the Proposed Working Capital Facility, which included an “equity-kicker” as an inducement to participate in the transaction. However, as a result of the equity-kicker feature, the Company was required to obtain consent of Lockheed Martin pursuant to the terms of the convertible note and warrant purchase agreement. Lockheed Martin provided notice to the Company that it would exercise its contractual right to forgo providing consent for any equity issuance, including but not limited to in connection with the Proposed Working Capital Facility.

 

46

In its effort to pursue multiple alternative financing options, the Company signed the ATM sales agreement on July 23, 2024. However, sales under the ATM sales agreement were not legally or contractually able to be made until the Company filed its Form 10-Q with the SEC in mid-August 2024. The Company and Board subsequently determined that the ATM program would not be able to serve as a timely solution to the Company’s liquidity issue.

As the Company continued to exhaust its remaining cash reserves, the Company again contacted Lockheed Martin and presented the Proposed Warrant Inducement Transaction in order to obtain consent for the equity-like transaction under the convertible note and warrant purchase agreement. The Company explained that it believed this solution would provide the Company with a sufficient cash runway until longer-term capital could be raised and that this solution was significantly less dilutive than other potential financing options. In early August, Lockheed Martin informed the Company that it was not supportive of, and would exercise its contractual right to forgo providing its consent for, the Proposed Warrant Inducement Transaction because it would not provide sufficient liquidity.

In early August 2024, the Company re-engaged with Lender R for a short-term, unsecured financing facility. Within two days, the Company received a verbal offer for a smaller sized facility that included more expensive economics. Lender R stated that it was unable to underwrite at previously provided terms because the Company’s liquidity situation had deteriorated since the date of its prior financing offer. The Company did not re-engage with Lender R once Lockheed Martin had provided its offer to the Company to acquire all shares of Company common stock at $0.25 per share.

 

•

Best Alternative for Maximizing Shareholder Value. The Board considered the uncertainty that the Company faced in obtaining suitable, alternative financing sources and the impact to the Company’s share price in a rapidly deteriorating liquidity position. In particular, the Board considered the trajectory of the trading price of the Company common stock, which in the three days prior to entering the Merger Agreement declined by more than 38% from $0.65 per share on August 12, 2024 to $0.40 per share on August 14, 2024. Additionally, the Board considered that the merger consideration was more favorable to the Company’s stockholders than the potential value that could reasonably be expected to result from an insolvency proceeding.

 

•

Receipt Immediately of Cash under the Bridge Note Purchase Agreement for Interim Working Capital to Maintain Current Business Operations. Concurrently with the execution of the merger agreement, the Company, the other note parties and Lockheed Martin entered into the bridge note purchase agreement pursuant to which the Company issued the bridge notes in an aggregate principal amount of $30.0 million. The Board believed that the immediate infusion of cash proceeds from the issuance of the bridge notes was critical in addressing the Company’s significant near term liquidity issues, including funding the Company’s obligations to make the approximately $4.1 million cash interest payment with respect to the FP notes, the BP/LM notes and the Convertible Notes (which we refer to collectively as the “first lien notes”) that was due on August 15, 2024 and providing interim capital for the Company to continue to maintain its current business operations, including its contractual obligations under existing national security programs and other expenses included in the approved budget required to be delivered by the Company on August 15, 2024 under the bridge note purchase agreement. The Board considered that an event of default under the first lien notes may have resulted in the holders of the first lien notes declaring all outstanding principal, accrued and unpaid interest of approximately $177.7 million as of June 30, 2024, to be immediately due and payable, thus jeopardizing the Company’s ability to operate as a going concern.

Under the bridge note purchase agreement, the Company is subject to negotiated affirmative and negative covenants and events of default as described in more detail under “—Bridge Note Purchase Agreement.” For example, a termination of the merger agreement by the Company, subject to certain exceptions (such as termination due to breaches by, or with the consent of, Lockheed Martin), would trigger an event of default

 

47

under the bridge note purchase agreement, which would permit the holders of the bridge notes to declare all unpaid principal and accrued and unpaid interest on the bridge notes to be immediately due and payable. The Board considered these terms and conditions of the bridge note purchase agreement and determined that it was in the best interest of the Company to execute the bridge note purchase agreement and the merger agreement.

 

•

Receipt of Fairness Opinion from its Financial Advisor Regarding the Merger. The Board considered the financial analyses and oral opinion presented by Lincoln, subsequently confirmed by the delivery of a written opinion of Lincoln, dated August 14, 2024, to the Board, that, as of such date and based upon and subject to the assumptions, limitations, qualifications, conditions and other matters set forth therein, the merger consideration to be received by the Company’s stockholders (other than Lockheed Martin and its affiliates (other than the Company)) pursuant to the merger agreement was fair from a financial point of view to such holders, all as more fully described below in the section of this proxy statement under the heading “—Opinion of Lincoln International LLC.” The full text of the written opinion of Lincoln, dated August 14, 2024, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B to this proxy statement.

 

•

Lack of Interest of Other Parties in Acquiring the Company. The Board considered the lack of interest shown by other parties during the strategic review process run by Jefferies which ultimately yielded one non-binding proposal from Lockheed Martin, publicly filed on Schedule 13D/A on March 1, 2024. Jefferies contacted 81 parties, of which 31 were financial buyers and 50 were strategic buyers. Of the 81 parties, 34 executed non-disclosure agreements and received certain non-public information on the Company during the strategic review process. All except six parties withdrew from the process before the non-binding indication of interest deadline of December 14, 2023, one of which was Lockheed Martin. No parties ultimately submitted any formal, written indications of interest. However Lockheed Martin submitted a verbal, non-binding indication of interest to continue in the process. The Board invited Lockheed Martin to participate in further diligence efforts of the Company.

In order to maintain interest, Jefferies provided the remaining six parties with extended timelines in order to accommodate their diligence requests in hopes of receiving non-binding indications of interest. Ultimately however, every party other than Lockheed Martin withdrew from the transaction process or declined to submit an offer of any kind. At the Board’s direction, after receipt of the Lockheed Martin March Offer and subsequent Schedule 13D/A filing, Jefferies contacted several parties that had expressed some level of interest in the first round. However, there was no further engagement and these efforts were abandoned.

 

•

Certain Prospective Financial Information. The Board considered certain limited prospective forecasts for the Company prepared by Company management, which reflected an application of various commercial assumptions of Company management. The Board considered the inherent uncertainty of attaining management’s prospective forecasts, including those set forth in “—Certain Prospective Financial Information,” and that, as a result, the Company’s actual financial results in future periods could differ materially from management’s forecasted results.

 

•

Likelihood of Completion. The Board believed that the merger likely would be consummated, particularly in view of the terms of the merger agreement and the closing conditions. In that regard, the Board noted:

 

•

the merger is not subject to any financing-related condition(s);

 

•

the merger is subject to a limited number of closing conditions; and

 

•

the merger agreement provides that, in the event of a failure of the merger to be consummated under certain circumstances, Lockheed Martin will pay the Company a $1,680,000 termination fee.

 

•

Terms of Merger Agreement. The Board assessed the terms and conditions of the merger agreement, including:

 

48

•

the Company’s right under the merger agreement to conduct a post-signing market check during the period which began on the date of the merger agreement and continues until 11:59 p.m. (New York City time) on September 13, 2024, which allows the Company to solicit, initiate, facilitate and encourage any inquiry or the making of any proposal or offer that constitutes a competing acquisition proposal, subject to certain terms and conditions (as more fully described under the heading “The Merger Agreement (Proposal 1)— Go-Shop; Covenants Regarding Non-Solicitation” beginning on page 86), and

 

•

the Board’s right, after complying with the terms of the merger agreement, to terminate the merger agreement prior to the date the Company stockholder approval is obtained in order to enter into an agreement with respect to a superior proposal, subject to the payment of a termination fee to Lockheed Martin of $1,680,000, provided that the termination fee will be $840,000 if the Company terminates the merger agreement for such specified circumstances prior to the no-shop period start date, as described under “The Merger Agreement (Proposal 1) — Termination—Termination Fee Payable by the Company” beginning on page 98.

 

•

Required Stockholder Approval. The merger agreement is subject to adoption by the Company’s stockholders, who are free to reject the merger agreement, and requires the affirmative approval of the holders of a majority of the outstanding shares of the Company in order to approve the adoption of the merger agreement.

 

•

Appraisal Rights. The availability of appraisal rights to the Company’s stockholders in connection with the merger.

The Board also weighed the factors described above against the following factors and risks that generally weighed against entering into the merger agreement (which factors and risks are not necessarily presented in order of relative importance):

 

•

No Stockholder Participation in Future Growth or Earnings. The Company will no longer exist as an independent company, and accordingly, Company stockholders will no longer participate in any future growth the Company may have or any potential future increase in its value.

 

•

Effect of Failure to Complete Transactions. Although the Company expects that the merger will be consummated, there can be no assurance that all conditions to the parties’ obligations to complete the merger will be satisfied, and thus it is possible that the merger may not be completed in a timely manner or at all. If the merger is not completed, (i) the Company will have incurred significant risk and transaction and opportunity costs, including the possibility of disruption to our operations, diversion of management and employee attention, employee attrition and a potentially negative effect on our business and customer and supplier relationships, (ii) the trading price of shares of Company common stock would likely be adversely affected and (iii) the market’s perceptions of the Company’s prospects could be adversely affected. More importantly, if either (a) the merger agreement is not approved and adopted by the Company’s stockholders to permit the closing of the merger prior to October 25, 2024 or (b) the bridge notes are accelerated because of any other event of default under the bridge note purchase agreement, in either case, the Company will be forced to seek bankruptcy protection or other insolvency proceedings in order to preserve as much the value of its assets as possible pursuant to a liquidation of the Company.

 

•

Closing Conditions. Completion of the merger would require approval of applications required to be filed with telecommunications regulatory authorities and the satisfaction of certain other closing conditions, including that no Company material adverse change has occurred, which conditions are not entirely within the Company’s control, and that there can be no assurances that any or all such conditions will be satisfied.

 

•

Interim Restrictions on Business. The Company’s management’s focus and resources may become diverted from other important business opportunities and operational matters while working to implement the merger, and the merger agreement imposes restrictions on the conduct of the Company’s business prior to the effective time of the merger, which could adversely affect the Company’s business.

 

49

•

Risk of Litigation. There is a risk of litigation arising in respect of the merger agreement or the transactions contemplated by the merger agreement.

 

•

Taxable Consideration. The merger will be a taxable transaction to the Company’s stockholders that are U.S. holders for U.S. federal income tax purposes and, therefore, such stockholders generally will be required to pay U.S. federal income tax on any gains they recognize as a result of the merger.

 

•

No Solicitation. The terms of the merger agreement prohibit the Company and its representatives, commencing with the no-shop period start date, from soliciting proposals or offers that constitute, or could reasonably be expected to lead to, a competing acquisition proposal or engaging in any discussions or negotiations regarding a competing acquisition proposal, which terms could reduce the likelihood that other potential acquirers would propose a competing acquisition proposal that may be more advantageous to our stockholders.

 

•

Termination Fee. If the merger is not consummated, subject to certain limited exceptions, we will be required to pay our own expenses associated with the merger agreement and the transactions contemplated thereby and, under certain circumstances, to pay Lockheed Martin a termination fee of $1,680,000 in connection with the termination of the merger agreement.

The foregoing discussion of the information and factors considered by the Board in reaching its conclusions and recommendations is not intended to be exhaustive, but includes certain of the material factors considered by the directors. In view of the wide variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, the Board did not find it practicable to, and did not attempt to, quantify, rank or assign any relative or specific weights to the various factors considered in reaching its determination and making its recommendation. In addition, individual directors may have given different weights to different factors. The Board considered all of the foregoing factors and any other factors as a whole and based its recommendation on the totality of the information presented.

The Board unanimously recommends that you vote (i) “FOR” approval of the merger agreement proposal; (ii) “FOR” approval of the nonbinding merger-related compensation proposal; and (iii) “FOR” approval of the adjournment proposal.

Opinion of Lincoln International LLC

The Board retained Lincoln to provide an opinion to the Board as to whether the merger consideration to be received by the Company’s stockholders (other than Lockheed Martin and its affiliates (other than the Company)) in the merger pursuant to the merger agreement was fair, from a financial point of view, to such stockholders. The Board selected Lincoln to act as its financial advisor because Lincoln is a nationally recognized investment banking firm with substantial experience in the provision of fairness opinions in connection with transactions similar to the merger. As part of its investment banking business, Lincoln is regularly engaged in the valuation of businesses and their securities in a range of industries in connection with mergers and acquisitions.

On August 14, 2024, Lincoln rendered its oral opinion to the Board (in its capacity as such), which was later confirmed by delivery of a written opinion, dated August 14, 2024, addressed to the Board that, as of the date of such opinion, and based upon and subject to the qualifications, procedures, limitations and assumptions set forth therein, the merger consideration to be received by the Company’s stockholders (other than Lockheed Martin and its affiliates (other than the Company)) in the merger pursuant to the merger agreement was fair, from a financial point of view, to such stockholders. At the instruction of the Company and the Board, Lincoln had assumed that the merger consideration would be $0.25 per share of Company common stock for purposes of the Opinion to the Board.

 

50

Lincoln’s Opinion was directed to the Board (in its capacity as such) and only addressed the fairness from a financial point of view of the merger consideration to be received by the Company’s stockholders (other than Lockheed Martin and its affiliates (other than the Company)) in the merger and did not address any other terms, aspects or implications of the merger, or any agreements, arrangements or understandings entered into in connection with the merger or otherwise (including the entry into and terms of the bridge note purchase agreement). The Opinion was authorized for issuance by the Opinion Review Committee of Lincoln. The summary of the Opinion in this proxy statement is qualified in its entirety by reference to the full text of its written Opinion, which is attached as Annex B to this proxy statement and which describes the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Lincoln in connection with the preparation of its Opinion. Neither Lincoln’s Opinion nor the summary of its Opinion and the related analyses set forth in this proxy statement are intended to be, and do not constitute advice or a recommendation to the Board, the Company or any stockholder as to how they should act or vote (or should have acted or voted) with respect to any matter relating to the merger or otherwise, or whether to proceed (or should have proceeded) with the merger or any related transaction. The Company’s stockholders are urged to read the entire Opinion carefully and in its entirety for a discussion of the procedures followed, assumptions made, matters considered, limitations of the review undertaken by Lincoln in connection with the Opinion, as well as other qualifications contained in the Opinion.

In connection with its Opinion, Lincoln, among other things:

 

•

Reviewed the following documents:

 

•

The Company’s audited financial statements for the fiscal year ended December 31, 2023 included in the Company’s Form 10-K filed with the SEC;

 

•

The Company’s unaudited interim financial statements for the fiscal year-to-date period ended June 30, 2024 included in the Company’s Form 10-Q filed with the SEC;

 

•

The Company’s budget and financial projections assuming a fully funded business plan for the fiscal years ending December 31, 2024 through December 31, 2028, prepared and provided by management of the Company, which we refer to as the “Financial Projections”;

 

•

The Company’s weekly liquidity forecast for the 21 weeks ended December 28, 2024;

 

•

A letter addressed to Lincoln by management of the Company which contains, among other things, representations regarding the accuracy of the information, data and other materials (financial or otherwise) provided to, or discussed with, Lincoln by or on behalf of the Company, dated August 14, 2024;

 

•

A draft of the merger agreement dated August 14, 2024;

 

•

A draft of the bridge note purchase agreement between the Company, the other note parties and the Purchasers dated August 13, 2024; and

 

•

Other documents relating to the history, past and current operations, financial conditions, and probable future outlook of the Company provided to Lincoln by management of the Company.

 

•

Discussed the business, financial outlook and prospects of the Company, as well as the terms and circumstances surrounding the merger, with management of the Company;

 

•

Reviewed certain financial, stock trading and other information for the Company, and compared that data and information with certain stock trading, financial and corresponding data and information for companies with publicly traded securities that Lincoln deemed relevant, none of which is directly comparable to the Company;

 

•

Reviewed certain financial, stock trading and other information for the Company and the merger, and compared that data and information with certain financial, stock trading and corresponding data and information for companies that have been subject to change of control M&A transactions that Lincoln deemed relevant, none of which is directly comparable to the Company and the merger;

 

51

•

Performed certain valuation and comparative financial analyses including a discounted cash flow analysis, an analysis of selected public companies and an analysis of change of control M&A transactions that Lincoln deemed relevant; and

 

•

Considered such other information and financial, economic and market criteria that Lincoln deemed relevant.

In performing its analyses and rendering its Opinion with respect to the merger, Lincoln had, with the consent of the Company, relied upon and assumed the accuracy and completeness of all of the financial, accounting, legal, tax and other information Lincoln reviewed, and Lincoln had not assumed any responsibility for the independent verification of, nor independently verified, any of such information. Lincoln relied upon the assurances of management of the Company that they were unaware of any facts or circumstances that would make such information materially incomplete or misleading.

Lincoln assumed, at the Board’s direction, that the financial forecasts, including the Financial Projections, provided to Lincoln by the Company were reasonably prepared in good faith on a basis reflecting the best currently available estimates and judgments of management of the Company and assuming the Company would be able to obtain financing in an amount sufficient to fund operations, and Lincoln assumes no responsibility for and expresses no opinion on the assumptions, estimates, and judgments on which such forecasts, including the Financial Projections, were based.

Lincoln further assumed that the merger will be consummated in a timely manner that complies in all respects with all applicable federal and state statutes, rules and regulations, and assumed that in the course of obtaining any necessary regulatory and third-party consents, approvals and agreements for the merger, no modification, delay, limitation, restriction, or condition will be imposed that will have an adverse effect on the Company or the merger.

Lincoln assumed that the merger will be consummated in accordance with the terms outlined in the merger agreement, by the Company and other documents made available to Lincoln, without waiver, modification or amendment of any term, condition or agreement therein that is material to Lincoln’s analysis.

Lincoln additionally assumed that there had been no material change in the assets, liabilities, business, condition (financial or otherwise), results of operations, or prospects of the Company since the date of the most recent financial statements made available to Lincoln. Lincoln further assumed that the final terms of the merger will not vary materially from those set forth in the copies or drafts, as applicable, reviewed by Lincoln, and that the final versions of all documents conform in all material respects to the drafts reviewed by Lincoln.

The Company had advised Lincoln, and Lincoln had relied upon and assumed for purposes of its analysis and its Opinion, that (i) the Company’s financial condition raised substantial doubt as to its ability to continue as a going concern and the financial and operating results and liquidity needs of the Company also raised substantial doubt as to the ability of the Company to continue as a going concern, (ii) the Company’s cash, cash equivalents, marketable securities and other sources of liquidity would be insufficient to enable the Company to fund normal operations beyond August 28, 2024, (iii) the Company had not been able to obtain, and did not believe it would be able to obtain, financing sufficient to fund the Company on terms acceptable to the Company, (iv) in the absence of the merger, the Company would not be able to operate as a going concern, and the Company may need to seek protection under Chapter 11 of the U.S. Bankruptcy Code and in such alternative transaction the recovery for the Company’s stockholders (other than Lockheed Martin and its affiliates (other than the Company)) would be materially less than the merger consideration to be received by the Company’s stockholders (other than Lockheed Martin and its affiliates (other than the Company)) in the merger, and (v) in a liquidation of the Company, the proceeds from the sale of its assets would be less than the amount required to satisfy its debts and liabilities.

Lincoln had prepared its Opinion as of the date thereof. The Opinion was necessarily based on financial, economic, market and other conditions as they existed and the information made available to Lincoln as of the date thereof.

 

52

Although subsequent developments may affect the Opinion, Lincoln does not have any obligation to update, revise or reaffirm the Opinion.

Lincoln did not evaluate the Company’s solvency and was not requested to make, and did not make, an independent evaluation or appraisal of the assets or liabilities (contingent, derivative, off-balance sheet or otherwise) of the Company or any of its subsidiaries, nor was Lincoln furnished with any such evaluations or appraisals. Lincoln was not requested to nor did Lincoln participate in the negotiation or structuring of the merger. Lincoln was not requested to nor did Lincoln seek alternative candidates for the merger.

Lincoln’s Opinion (i) did not address the underlying business decision of the Board or the Company to proceed with or effect the merger or the relative merits of the merger as compared to other transaction structures, transactions or alternative business strategies that exist for the Company, the effect of any other transaction in which the Company might engage, or whether the consideration to be received is the best possibly attainable under the circumstances, (ii) did not constitute advice or a recommendation to the Board or any stockholder as to how they should act or vote with respect to any matter relating to the merger, and (iii) only addressed the fairness from a financial point of view of the consideration to be received by the Company’s stockholders (other than Lockheed Martin and its affiliates (other than the Company)) in the merger and does not address any other terms, aspects or implications of the merger, or any agreements, arrangements or understandings entered into in connection with the merger or otherwise, including the entry into and terms of the bridge note purchase agreement. Lincoln expressed no opinion as to the fairness of any portion or aspect of the merger to (i) the holders of any securities, creditors or other constituencies of the Company, or any other party, except as expressly set forth therein, or (ii) any one group of the Company’s stockholders, creditors or other constituencies vis-à-vis any other group of the Company’s stockholders, creditors or other constituents (including, without limitation, the allocation of any consideration among or within such groups of stockholders, creditors or other constituents). The decision as to whether to proceed with the merger or any related transaction depends on an assessment of various factors, many of which are unrelated to the financial analyses on which the Opinion was based.

Lincoln expressed no opinion as to what the market price or value of the stock of the Company would be after the announcement of the merger. The Opinion should not be construed as a valuation opinion, a credit rating, a solvency opinion, an analysis of the Company’s credit worthiness, as tax advice, or as accounting advice. Lincoln also expressed no opinion about the amount or nature of any compensation or equity arrangement to be given to the Company’s officers, directors or employees, or class of such persons, in connection with the merger relative to the consideration in the merger.

It is understood that the Opinion was for the use and benefit of the Board (in its capacity as such) in connection with its evaluation of the merger. Lincoln has consented to the inclusion of the Opinion in its entirety to this proxy statement (including the annexes thereto) and the description thereof in this proxy statement. The Opinion does not create any fiduciary duty on the part of Lincoln to the Company, the Board, the Company’s stockholders or any other party.

Summary of Lincoln’s Financial Analysis

Set forth below is a summary of the material financial analyses reviewed by Lincoln with the Board on August 14, 2024 in connection with rendering its Opinion. The following summary, however, does not purport to be a complete description of the analyses performed or factors considered by, and underlying the Opinion of, Lincoln. Lincoln may have deemed various assumptions more or less probable than other assumptions, so the ranges resulting from any particular portion of the analyses summarized below should not be taken to be Lincoln’s view of the actual value of the Company. The order of the analyses described, and the results of these analyses, do not represent relative importance or weight given to these analyses by Lincoln. Some of the summaries of the financial analyses include information presented in tabular format. In order to fully understand the analyses, the table must be read together with the full text of the summary. The table is not intended to stand alone and alone does not constitute complete analyses.

In performing its analyses, Lincoln made numerous assumptions with respect to industry performance, general business and economic conditions, market and financial conditions, and other matters, many of which are beyond the control of Lincoln, the Company or any other parties to the merger. None of the Company or Lincoln or any other person assumes responsibility if future results are materially different from those discussed. Any estimates contained in these analyses are not necessarily indicative of actual values or predictive of future results or values, which may be

 

53

significantly more or less favorable than those suggested by such estimates. In addition, analyses relative to the value of the Company do not purport to be appraisals or reflect the prices at which the Company may actually be sold. Accordingly, the assumptions and estimates used in, and the results derived from, the financial analyses are inherently subject to substantial uncertainty. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before August 13, 2024 and is not necessarily indicative of current market conditions. Considering the data below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Lincoln’s financial analyses.

Despite the Company management’s significant doubt about the Company’s ability to continue as a going concern, as described in the assumptions set forth above, Lincoln analyzed the value of the Company on a hypothetical going concern basis. Lincoln estimated the enterprise value of the Company using the approaches described below, assumed the Company would be able to obtain financing in an amount sufficient to fund operations and the business plan contemplated by the Financial Projections, and assumed the Company continues to operate as a going concern.

Discounted Cash Flow Analysis

Lincoln performed a discounted cash flow analysis of the Company. A discounted cash flow analysis is a valuation methodology used to derive an intrinsic valuation of a company by calculating the present value of its estimated future cash flows. Lincoln performed a discounted cash flow analysis of the projected unlevered free cash flows of the Company for the fiscal years 2024 through 2028. Lincoln defined “free cash flow” as cash generated by the Company that is available either to reinvest, service debt, or distribute to security holders. The discounted cash flow analysis was used to determine the net present value of projected unlevered free cash flows utilizing an estimate of the Company’s weighted average cost of capital deemed appropriate for the discount rate. For purposes of its discounted cash flow analysis, Lincoln utilized and relied upon the Financial Projections, which provided a financial forecast for the fiscal years 2024 through 2028 assuming a fully funded business plan, and other financial information provided by management of the Company. For further information regarding the Financial Projections, see “Certain Prospective Financial Information.”

Lincoln calculated the Company’s projected unlevered free cash flows by taking Adjusted EBITDA, subtracting tax depreciation and amortization, subtracting estimated taxes using a 27.7% tax rate, adding back tax depreciation and amortization, and subtracting capital expenditures and changes in net working capital and net contract assets. Lincoln determined the net present value of the projected unlevered free cash flows using a range of weighted average cost of capital of 21.0% to 23.0%. Lincoln’s selected range of discount rates for the Company was based on the application of Lincoln’s professional judgment and experience, and was calculated using a capital asset pricing model and information derived from the selected comparable public companies. Lincoln calculated a range of terminal values of $744 million to $910 million using an exit EBITDA multiple range of 9.0x to 11.0x on 2028 projected Adjusted EBITDA. The exit EBITDA multiple was based on the companies and transactions selected in the “—Selected Public Companies Analysis” and “—Selected M&A Transactions Analysis,” discussed below.

Based on these assumptions, Lincoln’s discounted cash flow analysis indicated an estimated enterprise value range for the Company of $355 million to $450 million.

Selected Public Companies Analysis

Lincoln reviewed publicly available information and financial data related to selected public companies listed in the table below. Although none of these selected public companies is directly comparable to the Company, Lincoln selected these companies for its analysis based on, among other things, their relative similarity, primarily in terms of industry sector (manufacturers and providers of satellite solutions), contract backlog, program mix, relative size, historical and projected growth and profitability, capital intensity, geographic presence, customer mix, and other financial performance metrics, to those of the Company’s. None of the selected public companies were, of course, identical to the Company and Lincoln did not have access to nonpublic information regarding any of these companies. As a result, a complete valuation analysis cannot be limited to a quantitative review of the selected public companies, but also requires complex consideration and judgments concerning differences in financial and operating characteristics of such companies, as well as other factors that could affect their value relative to that of the Company’s. In evaluating the selected public companies, Lincoln made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond Lincoln’s control.

 

54

The tables below summarize observed historical and projected financial performance for the selected public companies and implied trading multiples of enterprise value to last 12 months, which we refer to as “LTM” revenue, estimated calendar year 2024 revenue, LTM EBITDA and estimated calendar year 2024 EBITDA for the selected public companies. For purposes of its analysis, Lincoln used certain publicly available historical financial data and equity analyst estimates for the selected public companies, and information provided by the Company. The table below summarizes certain observed trading multiples of the selected public companies as of August 13, 2024.

 

		LTM Financial Statistics								Revenue Growth																				EBITDA Margin
Selected Public Companies		Revenue				EBITDA				‘21A-‘23A CAGR				LTM				2024P				2025P				2026P				‘21A-‘23A Avg.				LTM				2024P				2025P				2026P
AST SpaceMobile, Inc.		$	1			($	161	)			NMF				NMF				NMF				791.3	%			473.2	%			NMF				NMF				NMF				27.0	%			57.8	%
Rocket Lab USA, Inc.			327				(139	)			98.2	%			41.0	%			72.8	%			38.2	%			52.7	%			(75.4	%)			(42.4	%)			(36.2	%)			(15.9	%)			3.5	%
MDA Space Ltd.			652				118				30.1	%			13.9	%			29.3	%			32.1	%			19.2	%			21.9	%			18.0	%			16.9	%			17.3	%			17.6	%
Redwire Corporation (1)			292				3				NMF				27.9	%			24.9	%			14.7	%			15.7	%			NMF				1.1	%			0.9	%			4.7	%			8.0	%
Intuitive Machines, Inc.			158				(60	)			4.7	%			86.7	%			181.7	%			70.5	%			24.2	%			(41.3	%)			(38.1	%)			(11.5	%)			(2.6	%)			5.4	%
Planet Labs PBC			228				(99	)			29.7	%			12.1	%			14.8	%			17.8	%			24.8	%			(61.1	%)			(43.5	%)			(33.6	%)			(17.6	%)			(12.1	%)
Mynaric AG			6				(78	)			51.3	%			21.9	%			NMF				163.2	%			42.2	%			NMF				NMF				(54.6	%)			5.8	%			11.7	%
GomSpace Group AB (publ)			24				(4	)			5.5	%			19.9	%			NA				NA				NA				(35.1	%)			(15.7	%)			NA				NA				NA
AAC Clyde Space AB (publ)			27				1				24.0	%			19.5	%			68.3	%			39.1	%			NA				(11.5	%)			2.3	%			NA				NA				NA
Low		$	1			($	161	)			4.7	%			12.1	%			14.8	%			14.7	%			15.7	%			(75.4	%)			(43.5	%)			(54.6	%)			(17.6	%)			(12.1	%)
Mean			190				(47	)			34.8	%			30.3	%			65.3	%			145.9	%			93.1	%			(33.8	%)			(16.9	%)			(19.7	%)			2.7	%			13.1	%
Median			158				(60	)			29.7	%			20.9	%			48.8	%			38.7	%			24.8	%			(38.2	%)			(15.7	%)			(22.6	%)			4.7	%			8.0	%
High			652				118				98.2	%			86.7	%			181.7	%			791.3	%			473.2	%			21.9	%			18.0	%			16.9	%			27.0	%			57.8	%
Terran		$	133			($	94	)			82.3	%			10.8	%			62.2	%			145.0	%			9.6	%			(88.8	%)			(70.9	%)			(36.8	%)			(0.5	%)			1.4	%

 

(1)	2021 to 2023 Revenue CAGR and 2021 to 2023 Average EBITDA margin are NMF due to the acquisition of QinetiQ Space N.V. on October 31, 2022

Note: Other NMF (which means “Not Meaningful Figure”) metrics due to a negative or de minimis financial statistic

 

Enterprise Value as a Multiple of (1)

Selected Publicly Companies

LTM Revenue

2024 Revenue

LTM EBITDA

2024 EBITDA

AST SpaceMobile, Inc.

NMF

NMF

NMF

NMF

Rocket Lab USA, Inc.

7.97x

6.16x

NMF

NMF

MDA Space Ltd.

2.48x

2.04x

13.8x

12.1x

Redwire Corporation

2.44x

2.34x

NMF

NMF

Intuitive Machines, Inc.

3.11x

2.19x

NMF

NMF

Planet Labs PBC

2.01x

1.81x

NMF

NMF

Mynaric AG

NMF

2.28x

NMF

NMF

GomSpace Group AB (publ)

3.17x

NA

NMF

NA

 

55

AAC Clyde Space AB (publ)

0.70x

0.41x

30.1x

NA

Low

0.70x

0.41x

13.8x

12.1x

Mean

3.13x

2.46x

21.9x

12.1x

Median

2.48x

2.19x

21.9x

12.1x

High

7.97x

6.16x

30.1x

12.1x

 

(1)	NMF metrics due to a negative or de minimis financial statistic

Selected M&A Transactions Analysis

Lincoln reviewed publicly available information related to selected acquisition transactions listed in the below table. Although none of these selected transactions is directly comparable to the merger, Lincoln selected these transactions for its analysis based on, among other things, the target company’s industry sector (manufacturers and providers of satellite solutions), the relative size of the transaction, and the availability of public information related to the selected transaction. None of the selected transactions were identical to the merger. As a result, a complete valuation analysis cannot be limited to a quantitative review of the selected transactions, but also requires complex consideration and judgments concerning differences in such transactions, as well as other factors that could affect their value relative to that of the merger.

The tables below summarize observed historical and projected financial performance for the Company and the selected transactions, as well as multiples of enterprise value to LTM revenue and LTM Adjusted EBITDA. For purposes of its analysis, Lincoln used certain publicly available historical financial data and equity analyst estimates for the selected transactions, and information provided by the Company.

 

Enterprise Value as a Multiple of

Announcement Date

Target Name

Acquiror Name

Enterprise Value ($ in millions)

LTM Revenue

LTM Adjusted EBITDA

Forward Synergy Adjusted EBITDA

April 2024 (1)

Intelsat S.A.

SES S.A.

$

5,033

2.39x

5.9x

4.5x

November 2023 (2)

Astra Space, Inc.

CEO & CTO of Astra Space, Inc.

76

2.56x

NMF

NA

August 2023 (3)

Ball Technologies Holdings Corp.

BAE Systems, Inc.

5,550

2.79x

19.6x

13.0x

December 2022 (4)

Aerojet Rocketdyne Holdings, Inc.

L3Harris Technologies, Inc.

4,784

2.20x

16.8x

12.0x

December 2022

Maxar Technologies Inc.

Advent International, L.P.

6,542

3.74x

15.4x

NA

April 2022 (5)

Telephonics Corporation

TTM Technologies, Inc.

330

1.22x

16.1x

9.0x

April 2021

ORBCOMM Inc.

GI Manager L.P.

1,100

4.47x

19.4x

NA

January 2021 (6)

FLIR Systems, Inc.

Teledyne Technologies Incorporated

7,987

4.15x

16.8x

14.4x

October 2020 (7)

Braxton Science & Technology Group, LLC

Parsons Government Services, Inc.

300

NA

NA

11.0x

September 2017 (8)

Orbital ATK, Inc.

Northrop Grumman Corporation

9,200

2.04x

15.1x

12.1x

February 2017 (9)

DigitalGlobe Inc.

MacDonald, Dettwiler and Associates Ltd.

3,402

4.69x

8.9x

7.3x

Low

$

75

1.22x

5.9x

4.5x

Mean

4,028

3.03x

14.9x

10.4x

Median

4,784

2.67x

16.1x

11.5x

High

9,200

4.69x

19.6x

14.4x

 

56

(1)	Forward synergy adjusted EBITDA multiple reflects the midpoint of 2024E EBITDA figures and adjusts for $228.9 million in operating expense synergies

 

(2)	LTM Revenue multiple based on February 2024 projections as defined in the PREM14C filing; LTM Adjusted EBITDA was found not meaningful due to negative financial metric

 

(3)	Forward synergy adjusted EBITDA multiple reflects 2024E EBITDA post cost synergies and net of $750 million of tax benefits

 

(4)	Forward synergy adjusted EBITDA multiple reflects 2024E adjusted EBITDA multiple including run-rate cost synergies

 

(5)	Forward synergy adjusted EBITDA multiple reflects full impact of cost synergies

 

(6)	Forward synergy adjusted EBITDA multiple reflects $80 million of long-term pre-tax synergies

 

(7)	Forward synergy adjusted EBITDA multiple reflects the NPV of a $42 million transaction-related tax benefit, before revenue and cost synergies

 

(8)	Forward synergy adjusted EBITDA multiple reflects $150 million cost savings in 2020

 

(9)	Forward synergy adjusted EBITDA multiple reflects midpoint of long-term synergies

To estimate a range of enterprise values for the Company, Lincoln applied valuation multiples to LTM Revenue and 2024 Revenue (based on the Financial Projections) for the Company as follows:

 

•

2.50x to 3.25x LTM Revenue of $133 million

 

•

1.50x to 2.00x 2024 Revenue of $220 million

The valuation multiple range was selected, in part, by taking into consideration historical and projected financial performance metrics of the Company relative to such metrics of the selected public companies and selected M&A transactions, including, but not limited to, the size of the Company on a revenue and Adjusted EBITDA basis, historical, estimated and projected revenue growth compared to the selected public companies, and historical, estimated and projected Adjusted EBITDA margins compared to the selected public companies, contract backlog, program mix, capital intensity, geographic presence, customer mix, and other financial performance metrics.

Based on these selected valuation multiples, the enterprise value indication of the Company ranged from $330 million to $435 million.

Summary of Analysis

As described in the sections above, Lincoln estimated ranges of indicated enterprise values for the Company derived from its (i) discounted cash flow analysis and (ii) selected public companies / selected M&A transactions analyses. Based on its discounted cash flow analysis, Lincoln calculated a range of indicated enterprise values for the Company of $355 million to $450 million and based on its selected public companies / selected M&A transactions analyses, Lincoln calculated a range of indicated enterprise values for the Company of $330 million to $435 million.

Lincoln then calculated ranges of indicated aggregate equity values of the Company by adding the present value of net operating loss tax benefits, which ranged from $37 million to $39 million, adding cash and cash equivalents in the amount of $31 million, and subtracting (i) total debt and debt like items in the amount of $319 million, (ii) the redemption liability related to the FP combination warrants in the amount of $25 million and (iii) the net working capital deficit in the amount of $85 million, resulting in ranges of indicated aggregate equity values of $0 million to $91 million derived from the discounted cash flow analysis and $0 million to $76 million derived from the selected public companies / selected M&A transactions analyses.

Lincoln then divided the ranges of indicated aggregate equity values of the Company by the number of shares of Company common stock outstanding on a fully diluted basis (including “in the money” options and warrants based on the treasury stock method), which ranged from 220,902,763 to 221,013,103, resulting in ranges of indicated aggregate equity values of $0.00 to $0.41 per share derived from the discounted cash flow analysis and $0.00 to $0.34 per share derived from the selected public companies / selected M&A transactions analyses. Lincoln then compared such ranges to the merger consideration of $0.25 per share.

 

57

Miscellaneous

Other than in connection with Lincoln’s Opinion, no other fees have been paid to Lincoln and its affiliates by the Company or Lockheed Martin during the last two years. Lincoln received customary fees from the Company for its services, in the amount of $750,000 of which a portion was payable upon Lincoln’s retention, and the balance of which was payable upon Lincoln having informed the Board that Lincoln was prepared to render the Opinion. No portion of Lincoln’s fee was contingent upon the conclusion reached in its Opinion or upon the closing of the merger. In addition, the Company has agreed to indemnify Lincoln and certain related parties against certain liabilities, and to reimburse Lincoln for certain expenses, arising in connection with or as a result of Lincoln’s engagement. Lincoln and its affiliates provide a range of investment banking and financial services and, in that regard, Lincoln and its affiliates may in the future provide, investment banking and other financial services to the Company, Lockheed Martin or their respective affiliates, for which Lincoln and its affiliates would expect to receive compensation.

Certain Prospective Financial Information

The Company does not as a matter of course make public projections as to future performance, earnings or other results due to the inherent unpredictability of projections and their underlying assumptions and estimates. Despite this general practice, the Company provided to Lockheed Martin (in connection with its due diligence review) and to Lincoln (in connection with the preparation of its valuation analyses and fairness opinion as described in the section entitled “—Opinion of Lincoln International LLC,” beginning on page 50 of this proxy statement) certain non-public unaudited financial projections for the Company as a stand-alone company, without giving effect to the merger, for the fiscal years 2024 through December 2028, which were discussed with the Board, and which are referred to as the “Financial Projections.” The Financial Projections were not prepared with a view toward public disclosure and the summary thereof is included in this proxy statement only because the Financial Projections (i) were made available to the Board in connection with its review of the potential business combination transaction with Lockheed Martin and its evaluation of strategic alternatives of the Company, (ii) were made available to Lockheed Martin in connection with its due diligence review and (iii) were used by Lincoln for purposes of preparing its valuation analyses and fairness opinion provided to the Board, as described in the section entitled “—Opinion of Lincoln International LLC” beginning on page 50 of this proxy statement. The summary of the Financial Projections is not being included in this proxy statement to influence any Company stockholder’s decision whether to vote in favor of the merger agreement proposal. The Financial Projections may differ from published analyst estimates and forecasts.

The Financial Projections do not necessarily comply with published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts, or generally accepted accounting principles, which we refer to as “GAAP” (and do not include footnote disclosures as may be required by GAAP). Neither KPMG LLP, which we refer to as “KPMG,” the Company’s independent auditors, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the prospective financial information herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the prospective financial information. The KPMG report included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 relates to the Company’s historical financial information and does not extend to the Financial Projections and should not be read to do so.

The Financial Projections, while presented with numerical specificity, necessarily were based on numerous variables and assumptions that are inherently uncertain and many of which are beyond the control of the Company’s management. Because the Financial Projections cover multiple years, by their nature, they become subject to greater uncertainty with each successive year. The assumptions upon which the Financial Projections were based necessarily involve judgments with respect to, among other things, future economic, competitive and financial market conditions, all of which are difficult or impossible to predict accurately and many of which are beyond the Company’s control, including general economic conditions, competition and the risks discussed in this proxy statement under the section entitled “Cautionary Statement Concerning Forward-Looking Information” beginning on page 25 of this proxy statement. The Financial Projections also reflect the assumptions as to certain business decisions that are subject to change and are susceptible to multiple interpretations and periodic revisions based on actual results, revised prospects for the Company’s business, competitive environment, changes in general business or economic conditions, or any other transaction or event that has occurred or that may occur and that was not anticipated when the Financial Projections were prepared. In addition, the Financial Projections might be affected by the Company’s ability to achieve proposed initiatives, objectives and targets over the applicable periods.

 

58

The Financial Projections treat the Company on a stand-alone basis and without giving effect to, and as if the Company never contemplated, the merger, including the impact of negotiating or executing the merger agreement, the expenses that may be incurred in connection with consummating the merger, the effect of any business or strategic decision or action that has been or will be taken as a result of the merger agreement having been executed or the effect of any business or strategic decisions or actions which would likely have been taken if the merger agreement had not been executed but which were instead altered, accelerated, postponed or not taken in anticipation of the merger.

There can be no assurance that the Financial Projections will be realized, and actual results may vary materially from those shown. The inclusion of the Financial Projections in this proxy statement should not be regarded as an indication that the Company or any of its affiliates, advisors, officers, directors or representatives considered or consider the Financial Projections to be predictive of actual future events or events that have occurred since the date of such forecasts, and the Financial Projections should not be relied upon as such. The Company has not updated the Financial Projections to reflect Company management’s current views of the Company or the Company’s future financial performance and the Financial Projections should not be treated as guidance with respect to the projected results for any period. Neither the Company, Lockheed Martin nor any of their respective affiliates, advisors, officers, directors or representatives can give any assurance that actual results will not differ materially from the Financial Projections, and none of them undertakes any obligation to update or otherwise revise or reconcile the Financial Projections to reflect circumstances existing after the date the Financial Projections were generated or to reflect the occurrence of future events even in the event that any or all of the assumptions underlying the Financial Projections are shown to be in error. The Company does not intend to make publicly available any update or other revision to the Financial Projections, except as otherwise required by law, and neither the Company, Lockheed Martin or, after the consummation of the merger, the surviving corporation, undertakes any obligation or otherwise to revise the Financial Projections after the date hereof, except to the extent required by law. Neither the Company, Lockheed Martin, nor any of their respective affiliates, advisors, officers, directors or representatives has made or makes any representation to any stockholder of the Company or other person regarding the ultimate performance of the Company compared to the information contained in the Financial Projections or that the Financial Projections will be achieved. The Company has made no representation to Lockheed Martin or its affiliates, in the merger agreement or otherwise, concerning the Financial Projections. The Financial Projections are forward-looking statements, and are expressly qualified in their entirety by the risks and uncertainties identified above and the cautionary statements contained in Item 1A of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 and Item 1A of Part II of the Company’s Quarterly Report on From 10-Q for the quarter ended June 30, 2024, as such risk factors may be amended, supplemented or superseded from time to time by other reports filed by the Company with the SEC from time to time, which are available on the SEC’s website at www.sec.gov.

Certain of the Financial Projections (including Adjusted Gross Profit and Adjusted EBITDA) are or may be considered non-GAAP financial measures. There are limitations inherent in non-GAAP financial measures, because they exclude charges and credits that are required to be included in a GAAP presentation. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by the Company may not be comparable to similarly titled amounts used by other companies. Financial measures provided to a financial advisor in connection with a business combination transaction such as the merger are excluded from the definition of non-GAAP financial measures and therefore are not subject to SEC rules regarding disclosures of non-GAAP financial measures, which would otherwise require a reconciliation of a non-GAAP financial measure to a GAAP financial measure. Therefore, no reconciliation of non-GAAP financial measures in the Financial Projections to GAAP measures was created or used in connection with preparing the Financial Projections and no such reconciliation of non-GAAP financial measures in the Financial Projections to GAAP measures was relied upon by the Board or Lincoln in connection with their respective evaluations of the merger.

In light of the foregoing factors and the uncertainties inherent in the Financial Projections, Company stockholders are cautioned not to place undue, if any, reliance on the Financial Projections. Neither the Company, Lockheed Martin nor any of their respective affiliates or representatives has made or makes any representation to any person regarding the ultimate performance of the Company compared to the information contained in the Financial Projections.

The following is a summary of the Financial Projections (which summary is not included in this proxy statement to induce any Company stockholder to vote in favor of approving the merger agreement proposal or approving any other proposals to be voted on at the special meeting):

 

59

(Dollars in millions)		2024E				2025E				2026E				2027E				2028E
Revenue		$	220			$	540			$	592			$	652			$	715
Adjusted Gross Profit (1)		$	32			$	113			$	129			$	188			$	212
Adjusted EBITDA (2)		($	81	)		($	3	)		$	8			$	63			$	83
Capital Expenditures		($	8	)		($	20	)		($	16	)		($	11	)		($	4	)
Net Working Capital (3)		$	65			$	71			$	93			$	102			$	114
Contract Assets		$	5			$	5			$	83			$	1			$	1
Contract Liabilities			130				79				139				195				216
Net Contract Assets		($	125	)		($	74	)		($	57	)		($	193	)		($	215	)

 

(1)	Adjusted Gross Profit is defined as gross profit or loss adjusted for (i) share-based compensation expense included in cost of sales and (ii) depreciation and amortization included in cost of sales.

(2)

Solely for purposes of the Financial Projections, Adjusted EBITDA is defined as net income or loss adjusted for (i) interest, (ii) taxes, (iii) depreciation and amortization, (iv) loss on extinguishment of debt, (v) change in fair value of warrant and derivative liabilities, and (vi) other non-recurring and/or non-cash items, and includes share-based compensation expense.

(3)	Solely for purposes of the Financial Projections, Net Working Capital excludes contract assets and contract liabilities.

The Financial Projections should be evaluated, if at all, in conjunction with the historical financial statements and other information regarding the Company incorporated by reference into this proxy statement.

Financing of the Merger

Completion of the merger is not subject to a financing condition. Lockheed Martin and Merger Sub have represented in the merger agreement that they currently have, and will have on the closing date of the merger, sufficient funds available (through credit arrangements or otherwise) to pay the merger consideration and all fees and related expenses required to be paid by Lockheed Martin and the surviving corporation pursuant to the merger agreement.

Bridge Note Purchase Agreement

On the bridge closing date, concurrently with the execution of the merger agreement, the note parties entered into the bridge note purchase agreement with the Purchasers and Wilmington Savings Fund Society, FSB, as administrative agent and as collateral agent, pursuant to which the Company issued bridge notes in an aggregate principal amount of $30,000,000. The principal balance of the bridge notes bears interest at a rate of 12% per annum, payable quarterly, with the first such interest payment required to be made on September 15, 2024. Interest is payable in cash or in kind, at the election of the Company. Interest paid in kind will accrete to the principal amount of the bridge notes. The maturity date of the bridge notes is the earlier of (i) October 25, 2024, (ii) the closing of the merger, and (iii) the date that the bridge notes are accelerated following the occurrence of an event of default under the bridge note purchase agreement. The obligations under the bridge notes are secured by a super-priority lien on the Collateral, including, without limitation, the Company’s subsidiaries Terran Orbital Operating Corporation, Tyvak Nano-Satellite Systems, Inc. and PredaSAR Corporation. The bridge notes are guaranteed, jointly and severally, by each of the guarantors. The proceeds from the sale of the bridge notes will be used for working capital and expenditures necessary to maintain the current business operations of the note parties, as contemplated in the note parties’ budget (which is subject to approval by the Purchasers). The Company may voluntarily prepay the bridge notes in whole or in part at any time and from time to time, without premium or penalty. The bridge notes are also subject to mandatory prepayment upon the occurrence of customary events such as certain asset sales or receipt of extraordinary receipts. Under the bridge note purchase agreement, the note parties are subject to negotiated affirmative and negative covenants and events of default, including the following:

 

60

Budget Requirement and Variance Limitations

On the bridge closing date, the Company delivered a 21-week operational budget that was approved by the Purchasers (such budget and any subsequent budget that is approved by the Purchasers is referred to herein as an “approved budget”). Beginning on the Friday of the first full week following the bridge closing date, and then no later than the Friday of each subsequent calendar week, the Company may deliver to the Purchasers a proposed updated budget, which must be approved by the Purchasers. If the period covered by the approved budget then in effect, which we refer to as the “current budget period,” elapses without the Company having delivered to the Purchasers a budget for the 13-week period following the current budget period that is approved by each Purchaser in its sole discretion, an immediate event of default under the bridge note purchase agreement is deemed to have occurred and continuing until waived in writing by each of the Purchasers. The Company may not permit (i) the amount of its actual disbursements of the type set forth in the “Program Cost of Goods Sold (COGs)”, “SG&A Expenses” and “Non-Operating Expenditures/Working Capital” line items set forth in an approved budget to exceed the budgeted amount of such disbursements shown in an approved budget by more than 10% on a line item basis, (ii) the amount of all other actual disbursements to exceed the budgeted amount of such disbursements shown in an approved budget by more than 20% on a line item basis and (iii) the amount of all of its actual disbursements (including disbursements of the type set forth in the “Program Cost of Goods Sold (COGs)”, “SG&A Expenses” and “Non-Operating Expenditures/Working Capital” line items set forth in an approved budget) to exceed the budgeted amount of such disbursements shown in an approved budget by more than 10% on a weekly aggregate basis. We refer to the foregoing clauses (i), (ii) and (iii), collectively, as the “budget variance”. The Company must also deliver with each proposed updated budget a variance report reflecting on a line item and an aggregate basis, the Company’s actual unrestricted cash receipts and cash disbursements compared to the approved budget for such immediately preceding week and for the period commencing on the bridge closing date through and including the end of the week immediately preceding the date of the variance report. For purposes of calculating the budget variance, any unused amounts set forth in the approved budget for any period of determination may be carried forward and used during subsequent periods.

Chief Administrative Officer

The Purchasers have the right to require the Company to retain a chief administrative officer, which we refer to as the “CAO,” from a nationally recognized advisory firm. Once and if retained, the CAO will assist the Company in, among other things, management of the Company’s business and preparation of the budget that is required to be provided to the Purchasers pursuant to the bridge note purchase agreement and the CAO’s consent is required for (i) proposed disbursements of the note parties during the term of the bridge note purchase agreement in excess of $100,000, (ii) employment decisions including hiring, layoffs or furloughs of employees and (iii) the incurrence of any material liability, including under customer or vendor contracts, in excess of $100,000. As of the date of this proxy statement, Lockheed Martin has not requested, and the Company has not appointed, a CAO.

Additional Covenant Limitations

The bridge note purchase agreement also includes limitations on the note parties’ ability to (i) incur indebtedness other than existing indebtedness, certain customary debt baskets and unsecured debt of up to an aggregate of $1,000,000 if such debt is included in the approved budget and, if the CAO has been appointed, approved by the CAO, (ii) incur liens other than existing liens, certain customary lien baskets and liens securing obligations of up to an aggregate of $1,000,000 if such liens are included in the approved budget and, if the CAO has been appointed, approved by the CAO, (iii) make any dispositions other than certain dispositions that are made in the ordinary course of the note parties’ business, (iv) pay cash dividends, and (v) conduct affiliate transactions, including that the requirement that all affiliate transactions must have been included in the approved budget and, if the CAO has been appointed, approved by the CAO.

Events of Default

The events of default in the bridge note purchase agreement include (i) failure to pay any principal of the bridge notes when due, (ii) failure to pay any amount other than principal on the bridge notes within five days of when due, (iii) failure to make a payment on other debt or swap contract if the principal amount of the underlying debt exceeds $1,000,000, or the occurrence of an event under any such debt that accelerates the debt thereunder or permits the holders of such debt to accelerate the debt or demand the repayment thereof, (iv) the occurrence of any event of default under the FP notes, the LP/BP notes or the Convertible Notes, (v) unless otherwise consented to by the Purchasers, (A) the termination of the merger agreement other than by the Company due to an uncured breach by Lockheed Martin

 

61

or (B) unless otherwise consented to by Lockheed Martin, a breach by the Company of the merger agreement that is not cured (to the extent capable of being cured) within any applicable cure period expressly set forth in the merger agreement and such breach lasts five days following the applicable cure period, if any and (vi) (A) the termination of the strategic cooperation agreement between the Company and Lockheed Martin other than by the Company due to an uncured breach by Lockheed Martin or (B) unless otherwise waived by Lockheed Martin, a breach by the Company of the strategic cooperation agreement that is not cured (to the extent capable of being cured) within 90 days after the earlier occurrence of knowledge of such breach by the Company or written notice thereof to the Company from Lockheed Martin.

Amendments to Existing Debt Agreements

Concurrently with the execution of the bridge note purchase agreement, (i) FP, holders of the FP notes, Terran Orbital Operating Corporation, as issuer, the Company and the other guarantors party thereto, and Wilmington Savings Fund Society, FSB, as administrative agent and as collateral agent entered into Amendment No. 4 to FP NPA that amends the FP note purchase agreement, (ii) Beach Point and Lockheed Martin, holders of the BP/LM notes, Terran Orbital Operating Corporation, as issuer, the Company and the other guarantors party thereto, and Lockheed Martin, as authorized representative for the purchasers entered the Ninth Amendment to BP/LM NPA that amends the LM/BP note purchase agreement, and (iii) Lockheed Martin, holder of the Convertible Notes, the Company, the guarantors named therein and the purchasers named therein entered into the First Amendment to Convertible NPA that amends the convertible note and warrant purchase agreement. Among other things, each of the debt amendments amends the applicable document to (i) permit the Company to issue the bridge notes and grant the liens securing the bridge notes, (ii) add a maturity date trigger (in the case of the Convertible Notes and the BP/LM notes held by Lockheed Martin, at the election of Lockheed Martin) upon the closing of the merger, (iii) conform the covenants therein to certain more restrictive covenants of the bridge note purchase agreement, including amending its liquidity covenant to postpone the first liquidity test date following the bridge closing date to December 31, 2024, and (iv) add a cross-default to the bridge note purchase agreement. The debt amendments do not require the compliance with an approved budget. In the case of the FP notes, notwithstanding the 2% prepayment premium set forth in the existing agreement to the extent any FP notes are prepaid prior to November 24, 2024, Amendment No. 4 to FP NPA has reduced such prepayment premium to $1 million in the event the FP notes are repaid in connection with the closing of the merger agreement.

On September 9, 2024, in order to facilitate the merger, each of FP and Beach Point voluntarily entered into the FP/BP Letter Agreement, in which FP and Beach Point agreed to reduce the amount payable to such parties by $9,000,000 in the aggregate, subject to, and contingent upon, the substantially concurrent consummation of the merger and the repayment in full in cash of all other amounts due to FP and Beach Point under their respective FP notes and BP/LM notes pursuant to the FP note purchase agreement and the LM/BP note purchase agreement.

Amendments to Existing Intercreditor Agreement

On the bridge closing date, the note parties and the collateral agents for the bridge notes, FP notes and BP/LM notes entered into the super-priority first lien intercreditor agreement that amends and restates the existing First Lien Intercreditor Agreement among the note parties and the collateral agents for the FP notes and the BP/LM notes dated November 24, 2021 to, among other things, govern the relative priorities of the collateral agents for the bridge notes, FP notes and the BP/LM notes and their respective security interests in the Collateral and certain other matters related to the administration of security interests in such Collateral.

On the bridge closing date, the note parties and the collateral agents for the bridge notes, FP notes, BP/LM notes and the Convertible Notes entered into the first lien/second lien intercreditor agreement that amends and restates the existing First Lien/Second Lien Intercreditor Agreement among the note parties and the collateral agents for the FP notes, BP/LM notes and the Convertible Notes dated October 31, 2022 to govern, among other things, the relative priorities of the collateral agents for the bridge notes, FP notes, BP/LM notes and the Convertible Notes and their respective security interest in the Collateral and certain other matters related to the administration of security interest in such Collateral.

 

62

Repayment Upon Closing of the Merger Agreement

All of the bridge notes, FP notes and the BP/LM notes held by Beach Point, and, at the election of Lockheed Martin, the Convertible Notes and the BP/LM notes held by Lockheed Martin shall be repaid in full (after giving effect to the FP/BP Letter Agreement) in cash upon the closing of the merger agreement.

Closing and Effective Time of the Merger

The closing of the merger will occur at 10:00 a.m. New York time on the second business day after the satisfaction or waiver of the closing conditions set forth in the merger agreement (other than those conditions that by their nature are to be satisfied by actions to be taken at the closing, but subject to the satisfaction or waiver of such conditions) or at such other place, date or time as the Company and Lockheed Martin may agree in writing. The merger will become effective upon the filing of a certificate of merger with the Secretary of State of the State of Delaware (or at such later time as is agreed between the parties and specified in the certificate of merger in accordance with the DGCL), which we refer to as the “effective time.” We intend to complete the merger as promptly as practicable, subject to receipt of the stockholder approval and the satisfaction of the other closing conditions. Although we currently expect to complete the merger during the fourth quarter of 2024, we cannot guarantee that the merger will be completed in a timely fashion or at all.

Procedures for Payment of Merger Consideration

As soon as reasonably practicable after the effective time and in any event not later than the second business day after the effective time, the surviving corporation will instruct the paying agent (as defined below) to mail to each holder of record of shares of Company common stock that were converted into the merger consideration a letter of transmittal and instructions for use in effecting the surrender of the certificates representing shares of Company common stock, which we refer to as “certificates” or non-certificated book-entry shares of Company common stock, which we refer to as “book-entry shares,” in exchange for the merger consideration. Upon surrender of a certificate or book-entry shares to the paying agent together with such letter of transmittal, duly completed and validly executed in accordance with the instructions provided by the paying agent, and such other documents as may be reasonably required by the paying agent, the holder of such certificates (or effective affidavits of loss in lieu thereof) or book-entry shares will be entitled to receive from the exchange fund an amount in cash equal to the product of (x) the number of shares represented by such holder’s properly surrendered certificates (or effective affidavits of loss in lieu thereof) or book-entry shares and (y) the merger consideration. No interest will be paid or accrued on any amount payable upon surrender of certificates (or effective affidavits of loss in lieu thereof) or book-entry shares. In the event of a transfer of ownership of shares of Company common stock that is not registered in the transfer records of the Company, payment upon surrender of the certificate may be paid to such a transferee if the certificate formerly representing such shares of Company common stock is presented to the paying agent, accompanied by all documents to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid or are not applicable.

You should not return your stock certificates with the enclosed proxy card, and you should not forward your stock certificates to the paying agent (described in the section entitled “The Merger Agreement (Proposal 1)—Payment for Securities” beginning on page 77) without a letter of transmittal. If you have lost a certificate, or if it has been stolen or destroyed, then before you will be entitled to receive the merger consideration, you will have to make an affidavit of the loss, theft or destruction and, if required by paying agent or Lockheed Martin, post a bond in such customary amount as indemnity against any claim that may be made against Lockheed Martin or paying agent with respect to such certificate. These procedures will be described in the letter of transmittal that you will receive, which you should read carefully in its entirety.

Interests of Company Directors and Executive Officers in the Merger

In considering the recommendation of the Board with respect to the merger agreement, you should be aware that the Company’s directors and executive officers have interests in the merger that may be different from, or in addition to, the interests of our stockholders generally, as more fully described below. The Board was aware of these interests and considered them, among other matters, in reaching the determination that the terms and conditions of the merger agreement and the merger are fair, advisable and in the best interests of the Company and its stockholders and in making their recommendations regarding approval of the merger agreement proposal as described in the section entitled “The Merger—Reasons for the Merger; Recommendation of the Board of Directors” beginning on page 44. The merger will be a “change in control” for purposes of the executive compensation and benefit plans and agreements described below. Such interests include the following and are more fully summarized herein:

 

63

•

the Company’s directors and executive officers unvested Company RSUs will fully accelerate upon the merger pursuant to the merger agreement;

 

•

employment agreements or offer letters with Messrs. Bell, Hobart, Villa, Parekh and Krauss provide for certain severance protections upon a qualifying termination;

 

•

Mr. Bell is entitled to receive a transaction bonus under the Transaction Bonus Pool (as defined below) and the Company’s other executive officers may be entitled to receive transaction bonuses under Transaction Bonus Pool;

 

•

certain of the Company’s executive officers may be entitled to receive retention bonuses from Lockheed Martin based on continued service following the effective time; and

 

•

the Company’s directors and executive officers are entitled to continued indemnification and insurance coverage under the merger agreement;

The following discussion sets forth certain of these interests for each person who has served as a director or executive officer of the Company since January 1, 2023.

Please see the section of this proxy statement entitled “—Quantification of Potential Payments and Benefits to the Company’s Named Executive Officers in Connection with the Merger” beginning on page 69 for additional information with respect to the compensation that our named executive officers may receive in connection with the merger.

Treatment of Company Equity and Equity-Based Awards

Company Options

At the effective time, each Company option that is outstanding and unexercised as of immediately prior to the effective time (i) that is unvested by its terms will be canceled for no consideration and (ii) that is vested and exercisable will automatically be canceled and converted into the right to receive an amount in cash (without interest) equal to the product of (x) the total number of shares underlying the Company option multiplied by (y) the excess, if any, of the merger consideration over the exercise price of such Company option, less any withholding for taxes. Any such Company option with respect to which the exercise price subject thereto is equal to or greater than the merger consideration will terminate and be canceled for no consideration. Following the effective time, any such canceled Company option will entitle the former holder of such Company option only to the payment described in this section, if any, which will be made by the surviving corporation (or its designee) within the later of ten days or the next ordinary course payroll following the effective time.

Company RSUs

At the effective time, each Company RSU that is outstanding as of immediately prior to the effective time will automatically become fully vested and will be canceled and converted into the right to receive an amount in cash (without interest) equal to the product of (x) the number of shares subject to such Company RSU multiplied by (y) the merger consideration, less any withholding for taxes. Following the effective time, any such canceled Company RSU will entitle the former holder of such Company RSU only to the payment described in this section, which will be made by the surviving corporation (or its designee) within the later of ten (10) days or the next ordinary course payroll following the effective time; provided, however, notwithstanding the foregoing, if such Company RSU is subject to Section 409A of the Code and the regulations and guidance thereunder, such payment shall be paid in a manner that complies with Section 409A of the Code and the regulations and guidance thereunder.

 

64

Table of Security Holdings

The following table sets forth, as of September 4, 2024 unless otherwise stated, for each person who has served as a director or executive officer of the Company since the beginning of our last fiscal year (i) the aggregate number of shares of Company common stock held directly or indirectly, (ii) the aggregate number of shares of Company common stock subject to outstanding and unexercised Company options, and (iii) the aggregate number of shares of Company common stock subject to outstanding Company RSUs. The values are calculated assuming (A) that the price per share of Company common stock is equal to the merger consideration of $0.25; (B) that the Company options are or will be fully vested and the value of each outstanding and unexercised Company option is equal to (1) the aggregate number of shares issuable upon the exercise of such Company option, multiplied by (2) the amount by which the merger consideration exceeds the exercise price of such Company option (or 0, if the exercise price of any such Company option is equal to or greater than the merger consideration); (C) the price for each share that is covered by the Company RSUs is equal to the merger consideration of $0.25. None of the directors or executive officers set forth in the table below hold directly or indirectly any warrants to purchase shares of Company common stock.

 

Name		Shares of Company Common Stock (#)				Company RSUs (#)(1)				Company Options (#)				Value ($)
Executive Officers
Wahid Azizpor			68,908				390,271				—				114,794.75
Richard Bays			30,716				180,615				—				52,832.75
Marc Bell			12,891,068				2,919,000				—				3,952,517.00
James S Black			50,174				201,000				—				62,793.50
Matthew Gann* (2)			159,462				28,016				110,340	(5)			46,869.50
Anthony J Gingiss* (3)			46,567				—				—				11,641.75
Gary A. Hobart			718,534				1,560,899				—				569,858.25
Stephen Alan Hobart* (4)			15,613				—				—				3,903.25
Peter Krauss			—				400,000				—				100,000.00
Mark Kula			70,517				388,125				—				114,660.50
Santina M Michel			70,060				324,084				—				98,536.00
Adarsh Parekh			—				300,000				—				75,000.00
Mathieu Riffel			47,105				236,171				—				70,819.00
Jonathan Siegmann*			—				—				—				—
Marco Villa			6,432,844				598,015				—				1,757,714.75
Directors
James LaChance			451,862				176,922				82,616	(5)			157,196.00
Thomas Manion			176,111				176,922				—				88,258.25
Richard Newton III			154,762				141,922				—				74,171.00
Tobi Petrocelli			129,275				141,922				—				67,799.25
Douglas Raaberg			154,762				141,922				—				74,171.00
Stratton Sclavos			172,091				337,031				—				127,280.50
Daniel Staton			13,286,022				141,922				—				3,356,986.00

 

*	No longer employed by the Company as of the date of this proxy statement.

(1)	Column includes both unvested Company RSUs and vested, but not yet settled, Company RSUs.

(2)

Mr. Gann’s holdings represent his vested, but not yet settled, Company RSUs as of August 13, 2024, the last date of Mr. Gann’s employment at the Company. His unvested Company RSUs were otherwise forfeited as of such termination, and his vested Company options will be forfeited if not exercised during the 90-day period following such termination.

(3)	Mr. Gingiss’s holdings represent his vested, but not yet settled, Company RSUs as of July 15, 2024, the last date of Mr. Gingiss’s employment at the Company. His unvested Company RSUs were otherwise forfeited as of such termination.

(4)	Mr. Stephen Hobart’s holdings represent his vested, but not yet settled, Company RSUs as of July 12, 2024, the last date of Mr. Stephen Hobart’s employment at the Company. His unvested Company RSUs were otherwise forfeited as of such termination.

(5)	The $1.41 exercise price of these Company options exceeds the $0.25 merger consideration, and at the effective time, these Company options (to the extent then outstanding and unexercised) will terminate and be canceled for no consideration.

 

65

Executive Employment Agreements

Marc Bell

Effective as of March 15, 2021, Mr. Bell entered into an employment agreement with the Company, which was amended and restated effective as of October 23, 2021, which we refer to as the “Bell employment agreement”. The Bell employment agreement provides for, among other things, (i) an annual base salary at least equal to $995,000, (ii) an annual target bonus opportunity equal to 200% of his annual base salary, (iii) eligibility to participate in any benefits plans generally made available to other executives and to receive vacation or sick time in accordance with our policy, and (iv) business expense reimbursement, including for business class flights or better flights (if business class is unavailable) and for non-leisure class hotels for business travel.

In addition to earned but unpaid compensation and accrued but unpaid expenses, upon Mr. Bell’s termination of employment by the Company without “cause” (as defined in the Bell employment agreement) or by him for “good reason” (as defined in the Bell employment agreement), in each case subject to his timely execution of a separation agreement and a release and his continued compliance the restrictive covenants contained in the Bell restrictive covenant agreement (as defined below) and the terms of any other confidentiality, non-disclosure or similar agreement between Mr. Bell and the Company or any of its affiliates, Mr. Bell would be entitled to receive the following severance payments and benefits: (i) an amount equal to 36 months of his then current annual base salary, paid in a lump sum within 70 days following his termination of employment; (ii) an amount equal to his target annual bonus for the year in which the termination occurs, paid in a lump sum within 70 days following his termination of employment; (iii) full acceleration of all outstanding equity awards granted to him as of the date of his termination of employment, except for any equity award that has not been outstanding for at least 12 months as of the date of his termination of employment; and (iv) subject to (x) his timely election of continuation coverage under COBRA, and (y) his continued copayment of premiums at the same level and cost to him as if he were an employee (excluding, for purposes of calculating cost, an employee’s ability to pay premiums with pre-tax dollars), continued payment of his health, dental, and vision insurance coverage during the 18-month period following the date of termination to the same extent that the Company paid for such coverage immediately prior to the date of termination of employment, in a manner intended to avoid any excise tax under Section 4980D of the Code, subject to the eligibility requirements and other terms and conditions of such insurance plans then in place. Mr. Bell is entitled to terminate his employment for any reason within 90 days following the occurrence of a “change in control” (as such term is defined under the 2014 amended and restated Company 2014 equity incentive plan) and such termination will be deemed to be a termination by Mr. Bell for “good reason” for all purposes of the Bell employment agreement.

The Bell employment agreement provides that, if any payments and other benefits provided for under the Bell employment agreement or otherwise to Mr. Bell constituted “parachute payments” within the meaning of Section 280G of the Code and would be subject to the excise tax imposed by Section 4999 of the Code, then any post-termination severance benefits would be either: (x) delivered in full, or (y) delivered as to such lesser extent which would result in no portion of such benefits being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999 of the Code, results in the receipt by him on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under Section 4999 of the Code.

Effective as of March 15, 2021, Mr. Bell was subject to an at-will employment, inventions assignment, non-compete, non-disclosure, and arbitration agreement, which subjects him to a noncompetition restriction during employment and for 12 months following his termination of employment for any reason, a nonsolicitation restriction during employment and for 12 months following his termination of employment for any reason, a perpetual duty of nondisclosure with respect to confidential information, and an assignment of inventions provision, which we refer to as the “Bell restrictive covenant agreement”.

 

66

Marco Villa

Effective as of March 22, 2021, Mr. Villa entered into an employment agreement with the Company, which we refer to as the “Villa employment agreement”. The Villa employment agreement provides for, among other things, (i) an annual base salary equal to $450,000, (ii) an annual target bonus opportunity equal to 100% of his annual base salary, (iii) eligibility to participate in any benefits plans generally made available to other executives and to receive vacation or sick time in accordance with our policy, and (iv) business expense reimbursement, including for business class or better flights (if business class is unavailable) and for non-leisure class hotels for business travel.

Upon any termination of his employment, Mr. Villa (or his designated beneficiary or estate, as the case may be) would be entitled to receive any accrued but unpaid annual base salary and expenses required to be reimbursed, and any vacation accrued but unused to the date of termination. In addition, upon Mr. Villa’s termination of employment without “cause” (as defined in the Villa Employment agreement) or by him for “good reason” (as defined in the Villa employment agreement), subject to his execution of a separation agreement and a release and his continued compliance with respective covenants, Mr. Villa would be entitled to receive the following severance payments and benefits: (i) an amount equal to 24 months of his then current annual base salary, paid in a lump sum within 70 days following his termination; (ii) an amount equal to his target annual bonus for the year in which the termination occurs, paid in a lump sum within 70 days following his termination; (iii) full acceleration of all outstanding equity awards granted to him as of the date of his termination of employment, except for any equity award that has not been outstanding for at least 12 months as of the date of his termination of employment; and (iv) subject to (x) his timely election of continuation coverage under COBRA, and (y) his continued copayment of premiums at the same level and cost to him as if he were an employee (excluding, for purposes of calculating cost, an employee’s ability to pay premiums with pre-tax dollars), continued payment by us of his health, dental, and vision insurance coverage during the 18-month period following the date of termination to the same extent that the Company paid for such coverage immediately prior to the date of termination, in a manner intended to avoid any excise tax under Section 4980D of the Code, subject to the eligibility requirements and other terms and conditions of such insurance plans then in place. The Villa employment agreement provides that in the event that any payments and other benefits provided for under the employment agreement or otherwise to Mr. Villa (i) constituted “parachute payments” within the meaning of Section 280G of the Code, and (ii) would be subject to the excise tax imposed by Section 4999 of the Code, then any such post-termination severance benefits would be either: (x) delivered in full, or (y) delivered as to such lesser extent which would result in no portion of such benefits being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999 of the Code, results in the receipt by him on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under Section 4999 of the Code.

Pursuant to the Villa employment agreement, Mr. Villa agreed to comply with terms of any confidentiality, nondisclosure or similar agreements between him and us and any of our affiliates. Effective March 22, 2021, Mr. Villa entered into an at-will employment, inventions assignment, non- compete, non-disclosure, and arbitration agreement, with the Company. The at-will employment, inventions assignment, non-compete, non-disclosure, and arbitration agreement provides for the same terms and conditions as the Bell restrictive covenant agreement.

Mr. Villa notified the Company of his intent to resign from his position as Chief Revenue Officer and Executive Vice President of the Company on June 10, 2024, with the effective date of such resignation to be determined at a future date. As of September 4, 2024, Mr. Villa remains employed by the Company as Chief Revenue Officer and Executive Vice President under the terms of his employment agreement and continues to be subject to the terms of the at-will employment, inventions assignment, non-compete, non-disclosure, and arbitration agreement.

Gary A. Hobart

Effective as of March 31, 2021, Gary Hobart entered into an employment agreement with the Company, which we refer to as the “G Hobart employment agreement”. The G Hobart employment agreement provides for the same terms and conditions as the Villa employment agreement, except as described below.

 

67

The G Hobart employment agreement provides for an annual base salary equal to $425,000 and an annual target bonus opportunity equal to 75% of his annual base salary.

Effective March 31, 2021, Gary Hobart entered into an at-will employment, inventions assignment, non- compete, non-disclosure, and arbitration agreement with the Company. The at-will employment, inventions assignment, non-compete, non-disclosure, and arbitration agreement provides for the same terms and conditions as the Bell restrictive covenant agreement.

Adarsh Parekh

On May 19, 2024, the Board appointed Adarsh Parekh as the Company’s Chief Financial Officer and Executive Vice President, effective as of June 17, 2024.

In connection with his appointment as Chief Financial Officer, the Company entered into an offer letter with Mr. Parekh, dated June 17, 2024, which we refer to as the “Parekh offer letter” and, together with the Bell employment agreement, the Villa employment agreement, and the G Hobart employment agreement, the “executive employment agreements”. The Parekh offer letter provides for the following compensation, among other things: (i) an annualized base salary of $425,000; and (ii) eligibility to participate in the Company’s annual performance-based bonus program, with a cash bonus target of 75% of annual salary and based on achievement of certain goals. If the Company terminates Mr. Parekh’s employment without “cause”, or if Mr. Parekh terminates his employment for “good reason,” (as such terms are defined in Mr. Parekh’s offer letter), Mr. Parekh is entitled to a cash payment equal to 12 months of his then-current base salary. If such termination occurs within 6 months following a change in control, Mr. Parekh is also entitled to immediate vesting of all outstanding equity awards granted by the Company.

Peter Krauss

On May 23, 2024, the Board appointed Peter Krauss as the Company’s Chief Operating Officer and Executive Vice President, effective as of June 1, 2024. Consistent with the foregoing and effective as of June 1, 2024, Mr. Krauss assumed the role of Principal Operating Officer of the Company.

In connection with his appointment as Chief Operating Officer, the Company entered into an offer letter with Mr. Krauss, dated May 20, 2024, that provides for the following compensation, among other things: (i) an annualized base salary of $450,000; and (ii) eligibility to participate in the Company’s annual performance-based bonus program, with a cash bonus target of 100% of annual salary and based on achievement of certain goals. If the Company terminates Mr. Krauss’s employment without “cause”, or if Mr. Krauss terminates his employment for “good reason” (as such terms are defined in Mr. Krauss’ offer letter), Mr. Krauss is entitled to a cash payment equal to 12 months of his then-current base salary. If such termination occurs within 6 months following a change in control, Mr. Krauss is also entitled to immediate vesting of all outstanding equity awards granted by the Company.

PIPE Investment Owed to Insider PIPE Investor

Concurrently with the signing of the merger agreement on August 15, 2024, the insider PIPE investor, which is an affiliate of one of the Company’s directors and stockholders, Daniel Staton, entered into the subscription agreement amendment to amend the subscription agreement originally entered into on October 28, 2021 in connection with the PIPE investment obligation. Pursuant to the subscription agreement amendment, the insider PIPE investor agreed to postpone its right to receive payments under the subscription agreement until the earlier of the merger closing, or the termination of the merger agreement in accordance with its terms. As consideration for postponing payments under the subscription agreement, upon the merger closing, the insider PIPE investor is entitled to receive, to the extent permitted under the debt facilities of the Company and its subsidiaries, a lump sum payment in cash of all accrued and unpaid amounts due and owing to the insider PIPE investor under the subscription agreement. The current balance of all accrued and unpaid amounts due to the insider PIPE investor is $11,250,000. In the event the merger agreement is terminated in accordance with its terms, the Company’s payment obligations with respect to such accrued amounts will be reinstated and payable in accordance with the original terms of the subscription agreement commencing on the next quarterly installment payment date following the termination of the merger.

 

68

Transaction Bonus Pool Payable upon Merger Closing

In order to retain and incentivize key executive officers and employees of the Company through the consummation of the transactions contemplated by the merger agreement, on September 6, 2024, contingent on the Company’s receipt of necessary consents, the Board approved a transaction bonus pool of $9,000,000, which we refer to as the “Transaction Bonus Pool.” Under the Transaction Bonus Pool, the Board has approved (i) an award to Marc Bell, the Co-Founder, Chairman and CEO, of $6,000,000, (ii) an award pool of $1,000,000 for awards to be made to certain other executive officers and in allocations to be approved by the Board prior to the merger closing date, which award we refer to as the “Officer Sub-Pool” and (iii) an award pool of $2,000,000 for awards to be made to other employees and in allocations to be approved by Marc Bell prior to the merger closing date. The awards under the Transaction Bonus Pool will be paid in cash on the closing date of the merger, subject to the employee’s continued employment with the Company or one of its subsidiaries on the closing date of the merger.

Retention Bonuses

To incentivize such executive officers to remain employed by the Company through and following the merger closing, each of Messrs. Azizpor, Bays, and Kula have entered into an employee retention agreement with Lockheed Martin that is subject to, and effective as of, the consummation of the merger by February 14, 2025. Pursuant to the employee retention agreement, if the executive officer remains actively employed with the Company until the first anniversary of the merger closing, which we refer to as the “retention date,” devotes his full effort and diligence to the operation and successful performance of his duties during such time, and agrees to certain post-employment covenants, he will be eligible to receive a retention bonus payment (for Mr. Azizpor, $175,000; for Mr. Bays, $165,000; and for Mr. Kula, $140,000), payable within 30 days following the retention date. If the executive officer terminates employment following the effective time but prior to the retention date as a result of death, disability or by the Company without cause, he will be eligible to receive a pro-rated retention bonus payment, payable within 90 days following such termination (but not later than March 15 of the following calendar year).

Indemnification and Insurance

The Company’s directors and executive officers will be entitled to certain ongoing indemnification and coverage for a period of six years following the effective time under the Company’s existing directors’ and officers’ insurance policies and the Company’s existing fiduciary liability insurance policies. This indemnification and insurance coverage is further described in the section entitled “The Merger Agreement (Proposal 1)—Additional Agreements of the Parties to the Merger Agreement—Indemnification and Insurance.”

Intent to Vote in Favor of the Merger

As of the record date, the directors and executive officers of the Company beneficially owned and were entitled to vote, in the aggregate, [—] shares of Company common stock, representing approximately [—]% of the outstanding shares of Company common stock on the record date. Each of Marc Bell, our Co-Founder, Chairman and Chief Executive Officer, and Daniel Staton, our Vice Chairman, has entered into a voting and support agreement with Lockheed Martin, pursuant to which each agreed, among other things, to vote the shares of Company common stock beneficially owned by him in favor of the merger agreement proposal.

The Company currently expects all other directors and at least a majority of executive officers entitled to vote on the proposals to vote all of their shares of Company common stock (i) “FOR” approval of the merger agreement proposal; (ii) “FOR” approval of the nonbinding merger-related compensation proposal; and (iii) “FOR” approval of the adjournment proposal.

Quantification of Potential Payments and Benefits to the Company’s Named Executive Officers in Connection with the Merger

This section and the table below set forth the information required by Item 402(t) of the SEC’s Regulation S-K regarding the payments and benefits that each of the Company’s named executive officers, which we refer to collectively as the “NEOs,” would receive in connection with the merger, or otherwise related to the merger, assuming (i) that the merger were consummated and each such NEO experienced a termination of employment without “cause” or due to the named executive officer’s resignation for “good reason” (as such terms are defined in the applicable agreements) on September 4, 2024 (which is the latest practicable date and is the assumed date only for purposes of this disclosure to determine such amount before the filing of this proxy statement); and (ii) a per share price of Company common stock of $0.25, which is the merger consideration. For additional details regarding the terms of the payments and benefits described below, see the discussion under the caption “Interests of Company Directors and Executive Officers in the Merger” above.

 

69

Except as expressly stated otherwise, the calculations in the table below do not attempt to forecast any adjustments in compensation that may occur following the date of this proxy statement, including any equity award forfeitures that may occur prior to the effective time, or any equity awards that, by their terms, vest irrespective of the merger prior to the effective time. As a result of the foregoing assumptions, which may or may not actually occur or be accurate on the relevant date, including the assumptions described in the footnotes to the table, the actual amounts, if any, to be received by an NEO may be more or less than such amounts set forth below. This merger-related compensation is the subject of the nonbinding merger-related compensation proposal.

 

Name		Cash ($)(1)				Equity ($)(2)				Perquisites/ Benefits ($)(3)				Other ($)(4)				Total ($)
Marc Bell			4,975,000				632,903				972				6,000,000				11,608,875
Gary Hobart			1,168,750				339,848				38,035				—				1,546,633
Marco Villa			1,350,000				137,425				38,035				—				1,525,460

 

(1)

Each of the NEOs are entitled to the severance payments provided under their executive employment agreements. With respect to Mr. Bell, the amount represents a lump sum payment equal to the sum of (a) 3.0 times his current annual base salary rate and (b) 100% of his target annual bonus amount. With respect to Messrs. Hobart and Villa, the amount represents a lump sum payment equal to the sum of (a) 2.0 times the NEO’s current annual base salary rate and (b) 100% of the NEO’s target annual bonus amount. With respect to Mr. Parekh, the amount represented a lump sum payment equal to 12 months’ base salary. The payments are “double-trigger” in that the NEO’s employment must be terminated by the Company without “cause” or by the NEO’s for “good reason” (as defined in the executive employment agreements). Details regarding the terms of these payments and the applicable release on which the payments are conditioned, are set forth in “Interests of Company Directors and Executive Officers in the Merger—Executive Employment Agreements” beginning on page 66.

(2)

The amount reflects the accelerated vesting of the outstanding Company RSUs held by each NEO. Pursuant to the terms of the merger agreement, any Company RSU outstanding as of the effective time (including the Company RSUs held by the NEOs) will fully vest as of the effective time. This accelerated vesting is a “single trigger” benefit and becomes payable as of the effective time. For a description of the treatment of equity awards in connection with the merger, see “Interests of Company Directors and Executive Officers in the Merger—Treatment of Company and Company-Based Equity Awards” above.

Set forth below are the values of the unvested Company RSUs held by each NEO that would vest immediately upon the consummation of the merger, determined by multiplying the number of unvested Company RSUs by the $0.25 merger consideration. None of the NEOs hold Company options.

 

70

Name		Unvested Company RSUs (#)				Acceleration Value of Company RSUs ($)
Marc Bell			2,531,612				632,903
Gary Hobart			1,359,393				339,848
Marco Villa			549,701				137,425

 

(3)

For each of Messrs. Bell, Hobart, and Villa, this amount represents the value of payments made by the Company for the cost of the applicable NEOs’ premiums for COBRA coverage for a period of 18 months. The continuation benefits for up to 18 months are “double trigger” and payable upon a termination without “cause” or for “good reason” (as defined in the applicable agreements) whether or not in connection with a “change in control”. The table below provides details on the value of continued participation in health and welfare benefits. Details regarding the terms of these payments and the applicable release on which the payments are conditioned, are set forth in “—Executive Employment Agreements” beginning on page 66.

 

Name		Value of Continued Participation in Health and Welfare Benefits ($)
Marc Bell			972
Gary Hobart			38,035
Marco Villa			38,035

 

(4)

As more fully described in “Interests of Company Directors and Executive Officers in the Merger — Transaction Bonus Pool Payable upon Merger Closing”, Mr. Bell is entitled to a $6,000,000 transaction bonus upon the closing of the merger, subject to Mr. Bell’s continued employment with the Company or one of its subsidiaries on the closing date of the merger. The transaction bonus is “single-trigger” and becomes payable at the effective time. The NEOs (other than Mr. Bell) could be allocated transaction bonuses from the Officer Sub-Pool, but whether Messrs. Hobart and/or Villa ultimately receive a transaction bonus, and the amount of any such transaction, is not determinable at this time.

Section 16 of the Exchange Act

Prior to the effective time, the Board, or an appropriate committee of non-employee directors of the Board, may adopt a resolution consistent with the interpretive guidance of the SEC, so that the disposition of any of Company equity securities (including derivative securities) pursuant to the merger agreement by any officer or director of the Company who is a covered person of the Company for purposes of Section 16 of the Exchange Act will be an exempt transaction for purposes of Section 16 of the Exchange Act.

 

71

Certain Material U.S. Federal Income Tax Consequences of the Merger

The following discussion is a summary of certain material U.S. federal income tax consequences of the merger that may be relevant to “U.S. holders” and “non-U.S. holders” (both terms defined below) whose shares of our common stock are converted into the right to receive cash pursuant to the merger. This discussion is for general information purposes only and is not tax advice. This discussion does not purport to consider all potential aspects of U.S. federal income taxation that might be relevant for holders of our common stock. This discussion is based on the Code, the applicable U.S. Treasury regulations promulgated under the Code, judicial decisions and published rulings and other administrative pronouncements issued by the U.S. Internal Revenue Service, which we refer to as the “IRS,” all as in effect as of the date of this proxy statement and all of which are subject to change or differing interpretations, possibly with retroactive effect that could result in U.S. federal income tax consequences different from those discussed below. This discussion does not address the consequences of any proposed changes in applicable laws. Any change or differing interpretation could alter the tax consequences to the holders described herein.

This discussion is not binding on the IRS or a court, and there can be no assurance that the tax consequences described in this discussion will not be challenged by the IRS or that they would be sustained by a court if so challenged. No ruling has been or will be sought from the IRS, and no opinion of counsel has been or will be rendered, as to any part of the discussion below regarding the U.S. federal income tax consequences of the merger. There can be no assurance that the IRS will not assert, and a court will not sustain, a position contrary to the U.S. federal income tax consequences discussed below.

For purposes of this discussion, the term “U.S. holder” means a beneficial owner of shares of our common stock prior to the effective time that, for U.S. federal income tax purposes, is not an entity or arrangement treated as a partnership and is or is treated as any of the following:

 

•

an individual who is a citizen or resident of the United States;

 

•

a corporation (including any entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

 

•

a trust that (a) is subject to the primary supervision of a court within the United States and the control of one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code) with the authority to control all substantial decisions of the trust or (b) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person; or

 

•

an estate the income of which is subject to U.S. federal income tax regardless of its source.

As used herein, a “non-U.S. holder” means a beneficial owner of shares of our common stock prior to the effective time that is neither a U.S. holder nor an entity or arrangement treated as a partnership for U.S. federal income tax purposes.

If a partnership or an entity or arrangement treated as a partnership or other “pass-through” entity for U.S. federal income tax purposes is the beneficial owner of our common stock, the tax treatment of a partner in such partnership will generally depend upon the status of the partner or the partnership, the activities of the partnership and the partner, and certain determinations made at the partnership or partner level. Accordingly, partnerships and the partners in such partnership (including entities or arrangements treated as partnerships or other “pass-through” entities for U.S. federal income tax purposes) holding our common stock should consult their own tax advisors regarding the U.S. federal income tax consequences of the merger to them in light of their own circumstances.

This discussion is limited to holders who hold shares of our common stock as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment), and does not address or consider all of the U.S. federal income tax consequences that may be applicable to holders of our common stock in light of their own particular circumstances, including the impact of the alternative minimum tax or the tax consequences to stockholders who validly exercise dissenters’ rights under the DGCL. In addition, this discussion is for general information only and does not address the U.S. federal income tax consequences of the merger to holders who are subject to special rules, including, without limitation:

 

72

•

banks, trusts and other financial institutions;

 

•

insurance companies;

 

•

brokers, dealers or traders in securities, commodities or currencies or traders that elect to mark-to-market their securities;

 

•

mutual funds;

 

•

“controlled foreign corporations,” “passive foreign investment companies,” and corporations that accumulate earnings to avoid U.S. federal income tax;

 

•

real estate investment trusts or regulated investment companies;

 

•

holders who hold their shares of common stock through individual retirement accounts or other tax-deferred accounts;

 

•

tax-exempt organizations;

 

•

governmental organizations; tax-qualified retirement plans or accounts or pension funds;

 

•

S corporations, partnerships or other entities or arrangements treated as partnerships or other pass-through entities for U.S. federal income tax purposes (and investors therein);

 

•

U.S. expatriates or certain former citizens or long-term residents of the United States;

 

•

entities subject to the U.S. anti-inversion rules;

 

•

holders who hold their shares of our common stock as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction, or other integrated investment;

 

•

U.S. holders subject to special tax accounting rules as a result of any item of gross income being taken account in an applicable financial statement (as defined in the Code);

 

•

U.S. holders deemed to sell our common stock under the constructive sale provisions of the Code;

 

•

U.S. holders whose functional currency is not the U.S. dollar;

 

•

except as expressly discussed below, U.S. holders that actually or constructively hold (or actually or constructively held at any time during the five-year period ending on the date of the company merger) 5% or more (by vote or value) of our common stock; and

 

•

holders who acquired their shares of our common stock through the exercise of Company stock options or otherwise as compensation.

In addition, this discussion does not address the impact of the 3.8% Medicare contribution tax imposed on certain income, any aspects of non-U.S., state, local, estate, gift, or other tax laws (or any U.S. federal tax laws other than those pertaining to income tax, such as estate or gift tax consequences) that may be applicable to a particular holder in light of its own circumstances.

 

73

Further, this discussion does not address any tax consequences of the merger to holders of stock options, restricted stock unit awards, performance-based restricted stock unit awards or warrants whose awards are canceled or exercisable in exchange for cash or cash-based awards pursuant to the merger. Such holders of stock options, restricted stock unit awards, performance-based restricted stock unit awards or warrants should consult their own tax advisors regarding the tax consequences of the merger to them in light of their own circumstances.

U.S. Holders

A U.S. holder’s receipt of the merger consideration in exchange for shares of our common stock generally will be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. holder whose shares of common stock are converted into the right to receive cash pursuant to the merger will recognize capital gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between (a) the amount of cash received (determined before deduction of any applicable withholding taxes) with respect to such shares and (b) the U.S. holder’s adjusted tax basis in such shares. Gain or loss must be determined separately for each block of shares (that is, shares acquired at the same cost in a single transaction). A U.S. holder’s adjusted tax basis will generally equal the price the U.S. holder paid for such shares less any distributions received that were in excess of the Company’s current and accumulated earnings and profits (but not reduced below zero). Such gain or loss will generally be long-term capital gain or loss if the U.S. holder’s holding period for such shares is more than one year at the effective time, and otherwise will be short-term capital gain or loss. Long-term capital gains recognized by individuals and certain other non-corporate U.S. holders are generally taxed at preferential U.S. federal income tax rates. The deductibility of capital losses may be subject to limitations.

Non-U.S. Holders

Cash received in the merger by a non-U.S. holder generally will not be subject to U.S. withholding tax (other than potentially to backup withholding tax, as discussed below) and will not be subject to U.S. federal income tax unless:

 

•

the gain is effectively connected with a trade or business of the non-U.S. holder in the United States (and, if required by an applicable income tax treaty, is attributable to a United States permanent establishment or fixed base maintained by such non-U.S. holder in the United States), in which case the non-U.S. holder generally will be subject to U.S. federal income tax on a net income basis in the same manner as if it were a U.S. holder, and, if the non-U.S. holder is a foreign corporation for U.S. federal income tax purposes, such gain may also be subject to an additional branch profits tax at a rate of 30% or at such lower rate as may be specified by an applicable income tax treaty;

 

•

the non-U.S. holder is a nonresident individual who was present in the United States for 183 days or more during the taxable year of the merger and certain other conditions are met, in which case the non-U.S. holder generally will be subject to U.S. federal income tax at a rate of 30% (or such lower rate as may be specified by an applicable income tax treaty between the United States and such holder’s country of residence) on the net gain derived from the disposition, which may be offset by certain U.S.-source capital losses of the non-U.S. holder, if any, provided the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses; or

 

•

shares of our common stock constitute United States real property interests by reason of the Company’s status as a “United States real property holding corporation,” which we refer to as a “USRPHC,” within the meaning of Section 897(c)(2) of the Code for U.S. federal income tax purposes within the shorter of the non-U.S. holder’s holding period or the five years preceding the merger and the non-U.S. holder owned, actually or constructively, more than 5% of shares of any class of our stock at any time during the shorter of the non-U.S. holder’s holding period or the five-year period preceding the merger, and, as a result, such gain is treated as effectively connected with a trade or business conducted by the non-U.S. holder in the United States. Although there can be no assurances in this regard, we believe that we are not, and have not been, a USRPHC at any time during the five-year period preceding the merger.

Non-U.S. holders are urged to consult their own tax advisors regarding the tax consequences to them of the merger.

 

74

Backup Withholding and Information Reporting

Generally, information reporting requirements may apply in connection with the payment of merger consideration to U.S. holders and, if effected by or through a U.S. office or broker, non-U.S. holders in connection with the merger. Further, a U.S. holder may be subject to backup withholding on all payments to which such U.S. holder is entitled in connection with the merger, unless the U.S. holder provides its correct taxpayer identification number and complies with applicable certification procedures or otherwise establishes a valid exemption from backup withholding. In addition, if the paying agent is not provided with a U.S. holder’s correct taxpayer identification number or other adequate basis for exemption, the U.S. holder may be subject to certain penalties imposed by the IRS. Each U.S. holder should complete and sign the IRS Form W-9 included as part of the letter of transmittal and timely return it to the paying agent in order to avoid backup withholding, unless a valid exemption applies and is established in a manner satisfactory to the paying agent.

Certain non-U.S. holders may also be subject to backup withholding unless they establish a valid exemption from backup withholding applies and establish such exemption in a manner satisfactory to the paying agent (such as by completing and signing an appropriate IRS Form W-8 or other applicable or successor form) and otherwise comply with the backup withholding rules. Non-U.S. holders should consult their own tax advisors regarding these matters in light of their own circumstances.

Backup withholding is not an additional tax. Rather, any amounts withheld under the backup withholding rules may be allowable as a refund or credit against a holder’s U.S. federal income tax liability, provided that certain required information is timely furnished to the IRS. Each holder should consult its own tax advisor regarding the information reporting and backup withholding rules in light of its own circumstances.

Additional Withholding Requirements Under FATCA

Subject to the proposed U.S. Treasury regulations discussed below, Sections 1471 through 1474 of the Code, and the U.S. Treasury regulations and administrative guidance issued thereunder, which we refer to as “FATCA,” impose a U.S. federal withholding tax of 30% on certain types of payments, including payments of the merger consideration, if paid to a “foreign financial institution” or a “non-financial foreign entity” (each as defined in the Code) (including, in some cases, when such foreign financial institution or non-financial foreign entity is acting as an intermediary), unless (a) in the case of a foreign financial institution, such institution enters into an agreement with the U.S. government to withhold on certain payments and to collect and provide to the U.S. tax authorities substantial information regarding direct and indirect U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are non-U.S. entities with U.S. owners), (b) in the case of a non-financial foreign entity, such entity certifies that it does not have any “substantial United States owners” (as defined in the Code) or provides the applicable withholding agent with a certification identifying the direct and indirect substantial United States owners of the entity (in either case, generally on an IRS Form W-8BEN-E), or (c) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules and provides appropriate documentation (such as an IRS Form W-8BEN-E). Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing these rules may be subject to different rules. Under certain circumstances, a non-U.S. holder might be eligible for refunds or credits of such taxes. Gross proceeds may be subject to withholding under FATCA; although under proposed U.S. Treasury regulations, no withholding would apply to such gross proceeds. The preamble to the proposed regulations specifies that taxpayers (including withholding agents) may generally rely on the proposed regulations pending finalization. Non-U.S. holders are encouraged to consult with, and rely solely upon, their own tax advisors regarding the effects of FATCA to them in light of their own circumstances.

Holders should consult their own tax advisors regarding the potential application of withholding under FATCA to them in light of their own circumstances.

This discussion is provided for general information only and is not tax advice. The U.S. federal income tax consequences described above are not intended to constitute a complete description of all potential tax consequences relating to the merger. Because individual circumstances may differ, each stockholder should consult its own tax advisor regarding the applicability of the rules discussed above to the stockholder and the particular tax effects to the stockholder of the merger in light of such stockholder’s particular circumstances and the application of state, local, non-U.S., estate, gift and other tax laws (or any U.S. federal tax laws other than those pertaining to income tax).

 

75

THE MERGER AGREEMENT (PROPOSAL 1)

The following is a summary of the material terms and conditions of the merger agreement. The description in this section and elsewhere in this proxy statement is qualified in its entirety by reference to the complete text of the merger agreement, a copy of which is attached as Annex A and is incorporated by reference into this proxy statement. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. We encourage you to read the merger agreement carefully and in its entirety because it is the legal document that governs the merger.

Explanatory Note Regarding the Merger Agreement

The merger agreement is included to provide you with information regarding its terms. Factual disclosures about the Company contained in this proxy statement or in the Company’s public reports filed with the SEC may supplement, update or modify the factual disclosures about the Company contained in the merger agreement. The representations, warranties, covenants and agreements described below and included in the merger agreement (a) were made only for purposes of the merger agreement and as of specific dates; (b) were made solely for the benefit of the parties to the merger agreement; and (c) may be subject to important qualifications, limitations and supplemental information agreed to by the Company, Lockheed Martin and Merger Sub in connection with negotiating the terms of the merger agreement. In particular, in your review of the representations and warranties contained in the merger agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purposes of establishing the circumstances in which a party to the merger agreement may have the right not to consummate the merger if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to the merger agreement, rather than establishing as facts the matters described therein. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to stockholders and reports and documents filed with the SEC and in some cases were qualified by the matters contained in a disclosure schedule that the Company delivered to Lockheed Martin in connection with the merger agreement, which we refer to as the “Company disclosure schedule” and which disclosures are not reflected in the merger agreement. Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this proxy statement, may have changed since the date of the merger agreement, and such subsequent developments or new information may not be included in this proxy statement.

The Merger

Upon the terms and subject to the conditions of the merger agreement and in accordance with the applicable provisions of the DGCL, Merger Sub, a wholly owned subsidiary of Lockheed Martin, will merge with and into the Company, with the Company continuing as the surviving corporation of the merger. As a result of the merger, the separate corporate existence of Merger Sub will cease, and the Company will become a wholly owned subsidiary of Lockheed Martin. We sometimes refer to the Company after the consummation of the merger as the “surviving corporation.” The certificate of incorporation of the Company will be amended and restated in its entirety by virtue of the merger, to read as set forth on Exhibit A to the merger agreement. The bylaws of the Company will be amended and restated in its entirety by virtue of the merger, to read as set forth on Exhibit B to the merger agreement. The directors of Merger Sub immediately prior to the effective time will be the initial directors of the surviving corporation. The officers of the Company immediately prior to the effective time will be the initial officers of the surviving corporation. Except as set forth under “The Mergers—Interests of Company Directors and Executive Officers in the Merger—Retention Bonus,” no definitive plans or agreements have been made by Lockheed Martin regarding the continued service of any of the Company’s officers after the merger closing.

Closing and Effective Time of the Merger

The closing of the merger will occur at 10:00 a.m. New York time on the second business day following the satisfaction or waiver of all of the closing conditions set forth in the merger agreement (other than those conditions that by their nature are to be satisfied at the closing, but subject to the fulfillment or waiver of such conditions) or at such other time, date or place as is agreed to in writing by Lockheed Martin and the Company. On the date of the closing date, the Company will (i) file the certificate of merger with the Secretary of State of the State of Delaware, which will be executed in accordance with and in the form required by the relevant provisions of the DGCL and (ii) make all other

 

76

filings or recordings required to be made by the parties under the DGCL in connection with the merger. The merger will become effective upon the filing with and acceptance of the certificate of merger by the Secretary of State of the State of Delaware (or at such later time as the Company and Lockheed Martin may agree in writing and specify in the certificate of merger in accordance with the relevant provisions of the DGCL). Although we currently expect to complete the merger promptly following the special meeting, we cannot specify when or assure you that all conditions to the merger will be satisfied or waived.

Conversion of Shares

At the effective time, each share of Company common stock outstanding immediately prior to the effective time (subject to certain customary exceptions specified in the merger agreement) will be canceled and converted automatically into the right to receive, upon the terms and subject to the conditions set forth in the merger agreement, the merger consideration of $0.25 per share in cash, without interest. Each share of Company common stock that (i) is owned by the Company (including as treasury stock) or any subsidiary of the Company, but excluding any share held by any Company benefit plan or trust related thereto, or (ii) is owned by Lockheed Martin or any wholly-owned subsidiary of Lockheed Martin (including Merger Sub) will, immediately prior to the effective time, no longer be outstanding and will be canceled and will cease to exist, for no consideration.

Payment for Securities

Prior to the effective time, Lockheed Martin will designate Computershare Trust Company, N.A. or if it is unavailable or unwilling, a United States bank or trust company reasonably acceptable to the Company to act as agent, which we refer to as the “paying agent,” for the payment of the merger consideration payable to the holders of shares of Company common stock (other than cancelled shares and dissenting shares). At the effective time, Lockheed Martin will deposit, or will cause to be deposited, with the paying agent, in trust for the benefit of the holders of shares of Company common stock at the effective time, a cash amount in United State dollars sufficient for the paying agent to pay the aggregate merger consideration pursuant to the merger agreement in exchange for all of the shares of Company common stock outstanding immediately prior to the effective time (other than the cancelled shares and dissenting shares), which cash amount we refer to as the “exchange fund.” If the exchange fund is inadequate to pay the amounts to which holders of shares of Company common stock may be entitled under the merger agreement, Lockheed Martin will promptly take all steps necessary to deposit or cause to be deposited in trust additional cash with the Paying Agent sufficient to make all payments required under the merger agreement.

As soon as reasonably practicable after the effective time and in any event not later than the second business day after the effective time, the surviving corporation will instruct the paying agent to mail to each holder of record of shares of Company common stock that were converted into the merger consideration a letter of transmittal and instructions for use in effecting the surrender of the certificates or book-entry shares in exchange for the merger consideration. Upon surrender of a certificate or book-entry shares to the paying agent together with such letter of transmittal, duly completed and validly executed in accordance with the instructions provided by the paying agent, and such other documents as may be reasonably required by the paying agent, the holder of such certificates (or effective affidavits of loss in lieu thereof) or book-entry shares will be entitled to receive from the exchange fund an amount in cash equal to the product of (x) the number of shares represented by such holder’s properly surrendered certificates (or effective affidavits of loss in lieu thereof) or book-entry shares and (y) the merger consideration. No interest will be paid or accrued on any amount payable upon surrender of certificates (or effective affidavits of loss in lieu thereof) or book-entry shares. In the event of a transfer of ownership of shares of Company common stock that is not registered in the transfer records of the Company, payment upon surrender of the certificate may be paid to such a transferee if the certificate formerly representing such shares of Company common stock is presented to the paying agent, accompanied by all documents to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid or are not applicable.

Each of the paying agent, the Company and its subsidiaries, Lockheed Martin, Merger Sub and their respective agents, as applicable, will be entitled to deduct and withhold any required withholding taxes from any amounts otherwise payable under the merger agreement.

 

77

At the effective time, the stock transfer books of the Company will be closed and there will be no further registrations of transfer on the stock transfer books of the surviving corporation of the shares of Company common stock that were outstanding immediately prior to the effective time. If, after the effective time, any certificate or book-entry share is presented to the surviving corporation, Lockheed Martin or the paying agent for transfer, the holder of certificates will be given a copy of the letter of transmittal referred to above and instructed to comply with the instructions in that letter of transmittal in order to receive the cash to which such holder is entitled pursuant to the merger agreement.

Any portion of the exchange fund (including the proceeds of its investments) that remains unclaimed by the stockholders of the Company prior to such time as such amounts would otherwise escheat to, or become property of, any governmental entity will, to the fullest extent permitted by applicable law, become the property of the surviving corporation, free and clear of any claims or interest of any person previously entitled thereto.

The paying agent will invest the exchange fund as directed by Lockheed Martin, except that investments are limited to direct short-term obligations of or short-term obligations fully guaranteed by the United States. No investment losses resulting from investment of the exchange fund will affect the amounts payable to any of the holders of shares of Company common stock. Any interest or any other income resulting from the investments will be paid to the surviving corporation.

In the event any certificate has been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such certificate to be lost, stolen or destroyed and, if required by Lockheed Martin or the paying agent, the posting by such person of a bond in customary amount as indemnity against any claim that may be made against it with respect to such certificate, the paying agent will issue in exchange for such lost, stolen or destroyed certificate a check in the amount of the number of shares of Company common stock represented by such lost, stolen or destroyed certificate multiplied by the merger consideration, without any interest thereon.

You should not send your certificates (if any) to the paying agent until you have received transmittal materials from the paying agent. Do not return your certificates (if any) with the enclosed proxy.

Dissenting Shares

Shares of outstanding Company common stock held by a holder of record or beneficial owner who has not voted in favor of the adoption of or consented in writing to the merger agreement, and who has exercised and perfected its demand for appraisal rights in accordance with, and who have complied with, Section 262 of the DGCL, which we refer to as “dissenting shares,” will not be converted into the right to receive the merger consideration, and instead will only be entitled to receive payment of the fair value of their dissenting shares in accordance with the provisions of Section 262 of the DGCL, unless the holder fails to perfect or effectively waives, withdraws or loses its rights to appraisal and payment under Section 262 of the DGCL. If any such holder of record or beneficial owner fails to perfect or effectively waives, withdraws or loses its rights of appraisal under Section 262 of the DGCL, then the right of such holder to be paid the fair value of such dissenting shares will be deemed to have been cancelled and converted into the right to receive the merger consideration, without interest at the effective time. The Company will give Lockheed Martin prompt notice of any demands received by the Company for appraisal, attempted withdrawals of any demand, and any other documents or instruments served pursuant to the DGCL and received by the Company relating to rights of appraisal, and Lockheed Martin will have the right to participate in and control all negotiations and proceedings with respect to such appraisal notices and demands. Prior to the effective time, the Company will not make any payment with respect to any demands for appraisal or offer to settle or settle any such demands, waive any failure to timely deliver a written demand for appraisal or any failure to otherwise comply with the provisions of Section 262 of the DGCL or agree to do any of the foregoing, in each case without Lockheed Martin’s consent.

Treatment of Company Equity and Equity-Based Awards

At the effective time, each Company option that is outstanding and unexercised as of immediately prior to the effective time (i) that is unvested by its terms will be canceled for no consideration and (ii) that is vested and exercisable will automatically be canceled and converted into the right to receive an amount in cash (without interest) equal to the product of (x) the total number of shares underlying the Company option multiplied by (y) the excess, if any, of the merger consideration over the exercise price of such Company option, less any withholding for taxes. Any such Company option with respect to which the exercise price subject thereto is equal to or greater than the merger consideration will terminate and be canceled for no consideration. Following the effective time, any such canceled Company option will entitle the former holder of such Company option only to the payment described in this section, if any, which will be made by the surviving corporation (or its designee) within the later of ten days or the next ordinary course payroll following the effective time.

 

78

At the effective time, each Company RSU that is outstanding as of immediately prior to the effective time will automatically become fully vested and will be canceled and converted into the right to receive an amount in cash (without interest) equal to the product of (x) the number of shares subject to such Company restricted stock unit multiplied by (y) the merger consideration, less any withholding for taxes. Following the effective time, any such canceled Company RSU will entitle the former holder of such Company restricted stock unit only to the payment described in this section, which will be made by the surviving corporation (or its designee) within the later of ten days or the next ordinary course payroll following the effective time; provided, however, notwithstanding the foregoing, if such Company restricted stock unit is subject to Section 409A of the Code and the regulations and guidance thereunder, such payment will be paid in a manner that complies with Section 409A of the Code and the regulations and guidance thereunder.

Treatment of Company Warrants

At the effective time, each outstanding SPAC Warrant will, in accordance with its terms, automatically and without any action on the part of the holder of such SPAC Warrant, cease to represent a SPAC Warrant exercisable for Company common stock and will become merger warrant that the holder would have received if the holder had exercised the SPAC Warrant, in accordance with its terms, immediately prior to the effective time. If a holder of a merger warrant properly exercises the merger warrant within 30 days following the public disclosure of the consummation of the merger pursuant to a Current Report on Form 8-K filed with the SEC, the Warrant Price with respect to the exercise of the merger warrant will be reduced by an amount (in dollars and in no event less than zero) equal to the difference of (a) the warrant price in effect prior to such reduction minus (b) (i) the merger Consideration minus (ii) the Black-Scholes Warrant Value.

At the effective time, each outstanding Company Warrant will, in accordance with its terms, automatically and without any required action on the part of Lockheed Martin, Merger Sub, the Company or the holder of such Company Warrant, cease to represent a Company Warrant exercisable for Company common stock and will become a Company Warrant exercisable for the merger consideration (with respect to each share of Company common stock underlying such Company Warrant) that the holder would have received if the holder had exercised the Company Warrant by paying the exercise price in respect thereof in cash immediately prior to the effective time. To the extent a holder of a Company Warrant does not exercise the Company Warrant prior to the effective time, the surviving corporation will assume the obligations of any then-outstanding Company Warrant in accordance with the terms of the applicable warrant agreement or warrant issued thereunder. Notwithstanding the foregoing, if a holder of a Company Warrant that is outstanding and unexercised as of immediately prior to the effective time properly exercises such Company Warrant within 30 days following the public disclosure of the consummation of the merger, the exercise of such Company Warrant will be treated in accordance with the terms of the applicable warrant agreement or warrant issued thereunder, including the repurchase by the surviving corporation of certain Company Warrants at their fair value using the Black Scholes option pricing formula in such Company Warrants.

Treatment of Existing Notes, FP Combination Warrants and PIPE Investment Obligation

Contingent on and effective immediately prior to the effective time:

 

•

the Convertible Notes will be treated in accordance with certain provisions of the convertible note and warrant purchase agreement and will be prepaid in accordance with its terms;

 

•

all the obligations under the LM/BP note purchase agreement will be prepaid in accordance with its terms;

 

•

all obligations under the FP note purchase agreement will be prepaid in accordance with its terms, and all obligations under the FP combination warrants will be paid in accordance with the FP combination warrants.

The obligations pursuant to the PIPE investment obligation will be paid in full by Lockheed Martin and be extinguished effective concurrently with the effective time.

 

79

Representations and Warranties

The merger agreement contains representations and warranties by the Company to Lockheed Martin and Merger Sub, on the one hand, and Lockheed Martin and Merger Sub, in each case, to the Company, on the other hand, regarding aspects of their respective businesses, financial condition and structure, as well as other facts pertinent to the merger. These representations and warranties are in many respects subject to materiality, knowledge and other similar qualifications contained in the merger agreement and expire at the effective time. The representations and warranties of each of the Company, on the one hand, and Lockheed Martin and Merger Sub, on the other hand, were made solely for the benefit of the other party or parties, as applicable. In addition, those representations and warranties were intended not as statements of actual fact, but rather as a way of allocating risk between the parties, were modified by the confidential disclosure schedule accompanying the merger agreement, were subject to the materiality standards described in the merger agreement (which may differ from what may be viewed as material by you) and were made only as of the date of the merger agreement and the closing date or another date as is specified in the merger agreement. Information concerning the subject matter of these representations or warranties may have changed since the date of the merger agreement. The Company and Lockheed Martin will provide additional disclosure in their SEC reports to the extent that they are aware of the existence of any material facts that are required to be disclosed under federal securities laws and that might otherwise contradict the terms and information contained in the merger agreement and will update such disclosure as required by federal securities laws.

The Company made a number of representations and warranties to Lockheed Martin and Merger Sub, including representations and warranties related to the following matters:

 

•

the organization, standing and power and other corporate matters of the Company and its subsidiaries;

 

•

the ownership of the Company’s subsidiaries;

 

•

the capital structure of the Company and its subsidiaries;

 

•

the authorization, execution, delivery and enforceability of the merger agreement by the Company and its subsidiaries;

 

•

the absence of conflicts or violations under the Company or its subsidiaries’ organizational documents, contracts or law, and required consents and approvals;

 

•

the Company and its subsidiaries’ reports, schedules, forms, statements and other documents filed with the SEC and the accuracy of the information in those documents;

 

•

the absence of undisclosed liabilities for the Company and its subsidiaries;

 

•

the accuracy of the information supplied by the Company and its subsidiaries for this proxy statement;

 

•

the conduct of the Company and its subsidiaries’ business and the absence of certain adverse changes or events since December 31, 2023;

 

•

the Company and its subsidiaries’ taxes, tax returns and other tax matters;

 

•

the Company and its subsidiaries’ employee benefit plans and other employee benefits matters;

 

•

certain labor matters related to the Company and its subsidiaries;

 

•

the absence of material litigation for the Company and its subsidiaries;

 

•

the Company and its subsidiaries’ compliance with applicable laws and permits;

 

80

•

the Company’s compliance with export controls and economic sanctions laws;

 

•

the Company and its subsidiaries’ environmental liabilities;

 

•

the Company and its subsidiaries’ owned and leased real property and rights-of-way;

 

•

the Company and its subsidiaries’ intellectual property;

 

•

certain matters relating to the Company and its subsidiaries’ privacy, data security and information technology;

 

•

the Company and its subsidiaries’ material contracts and the absence of a material breach of such contracts;

 

•

the Company and its subsidiaries’ government contracts and bids;

 

•

the receipt by the Board of an opinion from Lincoln, the Company’s financial advisor;

 

•

investment banker’s, broker’s or finder’s fees in connection with the consummation of the merger; and

 

•

the Company and its subsidiaries’ telecommunication licenses.

Each of Lockheed Martin and Merger Sub also made a number of representations and warranties to the Company, including representations and warranties related to the following matters:

 

•

the organization, standing and power and other corporate matters of Lockheed Martin and Merger Sub;

 

•

the ownership of and operations of Merger Sub;

 

•

the authorization, execution, delivery and enforceability of the merger agreement by Lockheed Martin and Merger Sub;

 

•

the absence of conflicts or violations under Lockheed Martin and Merger Sub’s organizational documents, contracts or law, and required consents and approvals;

 

•

the accuracy of the information provided by Lockheed Martin or its subsidiaries for this proxy statement;

 

•

absence of material litigation, investigations, claims or judgments against Lockheed Martin and its subsidiaries;

 

•

availability of funds by Lockheed Martin and Merger Sub to pay for the merger consideration; and

 

•

Lockheed Martin and Merger Sub’s compliance with export controls and economic sanctions laws.

Definition of Material Adverse Effect

Many of the representations and warranties of Lockheed Martin, Merger Sub and the Company are qualified by materiality qualifications or a “Company material adverse effect” or “Parent material adverse effect” qualification as discussed below.

For purposes of the merger agreement, a “Company material adverse effect” means any effect, change, condition, circumstance, event or occurrence that, individually or in the aggregate, (a) would reasonably be expected to have a material adverse effect on the Company’s ability to consummate the merger, or (b) has had, or would reasonably be expected to have, a material adverse effect on the business, assets, operations, results of operations, or condition (financial or otherwise) of the Company and its subsidiaries, taken as a whole. However, none of the following will constitute or be taken into account in determining whether a Company material adverse effect has occurred or would reasonably be expected to occur:

 

81

•

any effect, change, event or occurrence generally affecting (i) the industry in which the Company and its subsidiaries operate, or (ii) the economy, credit or financial or capital markets, in the United States or elsewhere in the world, including changes in interest or exchange rates;

 

•

any effect, change, event or occurrence to the extent arising out of, resulting from or attributable to:

 

•

changes in law or in GAAP or in accounting standards, or any changes in the interpretation or enforcement of any of the foregoing, or any changes in general legal, regulatory or political conditions;

 

•

the announcement, pendency or performance of the merger agreement or the consummation of the transactions contemplated by the merger agreement, including the merger, only to the extent resulting in an adverse impact on commercial relationships with customers, suppliers and distributors;

 

•

any outbreak, escalation or worsening (or de-escalation or improvement) of hostilities, including but not limited to acts of war (whether or not declared) or sabotage or terrorism;

 

•

volcanoes, tsunamis, epidemics, pandemics or diseases or outbreaks (including COVID-19), earthquakes, hurricanes, tornados, other natural disasters, or any acts of God;

 

•

any action taken (or not taken) by the Company or any of its subsidiaries that is required by the merger agreement or with Lockheed Martin’s written consent or at Lockheed Martin’s written request;

 

•

any change resulting or arising from the identity of, or any facts or circumstances relating to, Lockheed Martin and Merger Sub or any of their respective affiliates;

 

•

any change in the Company’s or any of its subsidiaries’ credit ratings;

 

•

any decline in the market price, or change in trading volume, of the capital stock of the Company; and

 

•

any failure to meet any internal or public projections, forecasts, guidance, estimates, milestones, budgets or internal or published financial or operating predictions of revenue, earnings, cash flow or cash position (it being understood that the matters described in the seventh, eight, and ninth sub-bullets of the second bullet will not prevent or otherwise affect a determination that the underlying cause of any such change, decline or failure referred to therein is a Company material adverse effect).

However, as to the matters described in the first bullet and third and fourth sub-bullet of the second bullet above, such effects may be taken into account to the extent they have a materially disproportionate adverse effect on the Company and its subsidiaries, taken as a whole, as compared to other participants in the industry in which the Company and its subsidiaries operate.

For purposes of the merger agreement a “Parent material adverse effect” means any event, development, change or effect that prevents or has a material and adverse effect on the ability of Lockheed Martin to consummate the merger and the other transactions contemplated by the merger agreement.

 

82