`GUY COFFMAN,
`
`
`
`
`-against-
`
`Plaintiff,
`
`
`LORAL SPACE & COMMUNICATIONS,
`INC., MARK H. RACHESKY, MICHAEL B.
`TARGOFF, JOHN D. HARKEY JR.,
`ARTHUR L. SIMON, JOHN P. STENBIT,
`and JANET T. YEUNG,
`
`
`Defendants.
`
`
`
`
`CASE NO.: __________________
`
`COMPLAINT
`
`DEMAND FOR JURY TRIAL
`
`
`
`
`Case 1:21-cv-04007 Document 1 Filed 05/05/21 Page 1 of 18
`
`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
`
`
`
`Plaintiff Guy Coffman (“Plaintiff”), by and through his attorneys, alleges the following
`
`upon information and belief, including investigation of counsel and review of publicly available
`
`information, except as to those allegations pertaining to Plaintiff, which are alleged upon personal
`
`knowledge:
`
`NATURE OF THE ACTION
`
`1.
`
`This is an action brought by Plaintiff against Loral Space & Communications, Inc.
`
`(“Loral Space” or the “Company”) and members of the Company’s board of directors (collectively
`
`referred to as the “Board” or the “Individual Defendants” and, together with Loral Space, the
`
`“Defendants”) for their violations of Sections 14(a) and 20(a) of the Securities Exchange Act of
`
`1934 (“Exchange Act”), 15 U.S.C. §§ 78n(a), 78t(a) respectively, United States Securities and
`
`Exchange Commission (“SEC”) Rule 14a-9, 17 C.F.R. § 240.14a-9, and for breaching their
`
`fiduciary duty of candor. Plaintiff’s claims arise in connection with the proposed merger between
`
`the Company and Telesat Corporation (“Telesat”) and its subsidiaries (the “Proposed
`
`Transaction”).
`
`
`
`1
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`Case 1:21-cv-04007 Document 1 Filed 05/05/21 Page 2 of 18
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`2.
`
`On November 24, 2020, Loral Space entered into an Agreement and Plan of
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`Merger with Telesat (the “Merger Agreement”). Pursuant to the terms of the Merger Agreement,
`
`Telesat will merge into Loral Space and each share of Loral Space common stock Loral
`
`stockholders not affiliated with the funds managed by MHR Fund Management LLC (“MHR
`
`Funds”) will beneficially own 26.1% of the economic interests in combined company, with the
`
`MHR Funds, Public Sector Pension Investment Board (“PSP Investments”) and management
`
`shareholders of Telesat beneficially owning the remaining 36.6%, 36.7% and 0.7%, respectively,
`
`of the economic interests in the combined company (the “Exchange Ratio”).
`
`3.
`
`On April 26, 2021, in order to convince Loral Space’s public common stockholders
`
`to vote in favor of the merger, the Board authorized the filing of a materially incomplete and
`
`misleading Form F-4 Registration Statement (the “Registration Statement”) with the SEC. The
`
`Registration Statement contains material omissions concerning: (i) the financial projections for
`
`Loral Space, (ii) the valuation analyses performed by the Company’s financial advisor, LionTree
`
`Advisors LLC (“LionTree”); (iii) the conflicts and compensation to be received by the Company’s
`
`other financial advisor, Credit Suisse Securities (USA) LLC (“Credit Suisse”) for its role in the
`
`Proposed Transaction; and (iv) the post-merger ownership structure.
`
`4.
`
`The shareholder vote will be scheduled in the coming weeks as Telesat and Loral
`
`Space expect that the merger will close in the second or third quarter of 2021 (the “Shareholder
`
`Vote”). It is imperative that the material information that has been omitted from the Registration
`
`Statement is disclosed to the Company’s stockholders prior to the Shareholder Vote so they can
`
`properly determine whether to vote for or against the Proposed Transaction.
`
`5.
`
`For these reasons, and as set forth in detail herein, Plaintiff asserts claims against
`
`Defendants for violations of Sections 14(a) and 20(a) of the Exchange Act, Rule 14a-9, and
`
`
`
`2
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`Case 1:21-cv-04007 Document 1 Filed 05/05/21 Page 3 of 18
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`Delaware State law. Plaintiff seeks to enjoin Defendants from taking any steps to consummate the
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`Proposed Transaction unless and until the material information discussed below is disclosed to
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`Loral Space’s public common stockholders sufficiently in advance of the upcoming Shareholder
`
`Vote or, in the event the Proposed Transaction is consummated, to recover damages resulting from
`
`the Defendants’ misconduct.
`
`JURISDICTION AND VENUE
`
`8.
`
`This Court has jurisdiction over all claims asserted herein pursuant to Section 27 of
`
`the Exchange Act and 28 U.S.C. § 1331 because the claims asserted herein arise under Sections
`
`14(a) and 20(a) of the Exchange Act and Rule 14a-9.
`
`9.
`
`This Court also has jurisdiction over the duty of candor claim pursuant to 28 U.S.C.
`
`§ 1367.
`
`10. Personal jurisdiction exists over each Defendant either because the Defendant
`
`conducts business in or maintains operations in this District, or is an individual who is either
`
`present in this District for jurisdictional purposes or has sufficient minimum contacts with this
`
`District as to render the exercise of jurisdiction over each Defendant by this Court permissible
`
`under the traditional notions of fair play and substantial justice. “Where a federal statute such as
`
`Section 27 of the [Exchange] Act confers nationwide service of process, the question becomes
`
`whether the party has sufficient contacts with the United States, not any particular state.” Sec. Inv’r
`
`Prot. Corp. v. Vigman, 764 F.2d 1309, 1315 (9th Cir. 1985). “[S]o long as a defendant has
`
`minimum contacts with the United States, Section 27 of the Act confers personal jurisdiction over
`
`the defendant in any federal district court.” Id. at 1316.
`
`11. Venue is proper in this District under Section 27 of the Exchange Act, 15 U.S.C. §
`
`78aa, as well as 28 U.S.C. § 1391, because Defendants are found or are inhabitants or transact
`
`
`
`3
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`Case 1:21-cv-04007 Document 1 Filed 05/05/21 Page 4 of 18
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`business in this District. Indeed, the Company maintains its business address in this District, its
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`financial and legal advisors are headquartered in this District, and its stock trades on the Nasdaq
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`which is also headquartered in this District. See, e.g., United States v. Svoboda, 347 F.3d 471, 484
`
`n.13 (2d Cir. 2003) (collecting cases).
`
`PARTIES
`
`12.
`
`13.
`
`Plaintiff has maintained shares of Loral Space common stock at all relevant times.
`
`Defendant Loral Space & Communications, Inc. is incorporated under the laws of
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`Delaware with its principal executive offices located at 600 Fifth Ave, 16th Floor, New York,
`
`NY, 10020. The Company’s common stock trades on the Nasdaq under the ticker symbol
`
`“LORL”.
`
`14.
`
`Individual Defendant Mark H. Rachesky is, and has been at all relevant times, the
`
`former Chief Executive Officer and Non-Executive Chairman of the Board.
`
`15.
`
`Individual Defendant Michael B. Targoff is, and has been at all relevant times, a
`
`director of Loral Space.
`
`16.
`
`Individual Defendant John D. Harkey Jr. is, and has been at all relevant times, a
`
`director of Loral Space.
`
`17.
`
`Individual Defendant Arthur L. Simon is, and has been at all relevant times, a
`
`director of Loral Space.
`
`18.
`
`Individual Defendant John P. Stenbit is, and has been at all relevant times, a director
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`of Loral Space.
`
`19.
`
`Individual Defendant Janet T. Yeung is, and has been at all relevant times, a director
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`of Loral Space.
`
`20.
`
`The defendants identified in paragraphs 14 through 19 are collectively referred to
`
`
`
`4
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`Case 1:21-cv-04007 Document 1 Filed 05/05/21 Page 5 of 18
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`herein as the “Board” or the “Individual Defendants,” and together with Loral Space, the
`
`“Defendants.”
`
`SUBSTANTIVE ALLEGATIONS
`
`A. Background of the Proposed Transaction
`
`21.
`
`Loral Space is a satellite communications company. Loral holds a 62.7% economic
`
`interest Telesat Canada, a global operator of telecommunications and direct broadcast satellites
`
`used to distribute video entertainment programming and broadband data and to provide access to
`
`Internet services and other value-added communications services. Telesat is also developing a
`
`global constellation of low earth orbit satellites.
`
`22.
`
`Privately held and headquartered in Ottawa, Canada, with offices and facilities
`
`around the world, Telesat’s principal shareholders are PSP Investment and Loral Space.
`
`23.
`
`On November 24, 2020, Loral Space authorized the announcement of the Proposed
`
`Transaction. The press release stated in relevant part as follows:
`
`Loral Enters Into Agreement With PSP Investments And Telesat to Combine
`Loral And Telesat Into A New Public Company
`
`NEW YORK – November 24, 2020 – Loral Space & Communications Inc.
`(NASDAQ:LORL) today announced that it has entered into a definitive agreement
`with Public Sector Pension Investment Board (PSP Investments) and Telesat
`Canada (Telesat) to combine Loral and Telesat into a new Canadian public
`company (New Telesat). Upon closing of the transaction, the stockholders in Loral,
`together with PSP Investments and certain current and former management
`shareholders of Telesat, will beneficially own all of the equity in New Telesat in
`approximately the same proportion as their current, indirect ownership in Telesat.
`Loral stockholders not affiliated with the funds managed by MHR Fund
`Management LLC (MHR Funds) will beneficially own 26.1% of the economic
`interests in New Telesat, with the MHR Funds, PSP Investments and management
`shareholders of Telesat beneficially owning the remaining 36.6%, 36.7% and 0.7%,
`respectively, of the economic interests in New Telesat (such percentages have been
`subjected to rounding adjustments). New Telesat shares will initially be listed on
`the Nasdaq Global Select Market, and New Telesat is also considering a listing for
`its shares on a Canadian stock exchange. New Telesat’s governance provisions will
`
`
`
`5
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`

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`Case 1:21-cv-04007 Document 1 Filed 05/05/21 Page 6 of 18
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`contain special features designed to maintain majority Canadian board and voting
`control.
`
`In addition, Loral announced that its Board of Directors has declared a special
`dividend of $1.50 per share for an aggregate dividend of approximately $46.4
`million. The dividend is payable on December 17, 2020 to holders of record of
`Loral voting and non-voting common stock as of the close of business on December
`4, 2020.
`
`Michael B. Targoff, Vice Chairman of Loral, said, “The transaction announced
`today reflects our long-standing efforts to maximize value for Loral stockholders.
`This transaction will consolidate all of the equity ownership of Telesat in the capital
`structure of New Telesat and will bring substantial benefits to Loral stockholders.
`In addition to affording Telesat the benefits of being a publicly traded Canadian
`company through New Telesat, Loral stockholders may elect to hold their interests
`directly in New Telesat, which should over time lead to improved liquidity. We
`are extremely pleased to have finally achieved this result.” Commenting on the
`declaration of the special dividend, Mr. Targoff said, “At Loral, we have now
`fulfilled our stated intention to distribute substantially all of our cash to
`stockholders except for what is needed to fund working capital and certain other
`liabilities.”
`
`Dr. Mark H. Rachesky, Chairman of the Board of Directors of Loral, said, “The
`conclusion of this transaction represents an important milestone in our plan to
`deliver significant value to all Loral stockholders. Telesat is revolutionizing the
`provision of broadband internet connectivity worldwide by developing the most
`advanced constellation of low earth orbit (LEO) satellites and integrated terrestrial
`infrastructure ever conceived. The ownership structure of New Telesat will
`facilitate access to the capital markets for continued advancement of LEO,
`positioning New Telesat for substantial growth to further enhance shareholder
`value.”
`
`Regarding today’s dividend declaration, Dr. Rachesky said, “The Loral Board has
`worked diligently over the last decade to maximize value for shareholders, first, by
`successfully turning around and selling our former satellite manufacturing business
`for over $1 billion and next by using the strong free cash flow generated at Telesat
`to enable Telesat to invest in its state-of-the-art satellite fleet and to pay
`extraordinary dividends. In addition to the significant equity interest in New
`Telesat that the Loral stockholders will collectively receive in the transaction, the
`Loral Board has delivered to stockholders cash dividends, including the dividend
`declared today, of over $49 per share, or an aggregate in excess of $1.5 billion.”
`
`The definitive agreement provides for Loral stockholders to receive, at their
`election and subject to the terms and conditions of the definitive agreement, shares
`of New Telesat or limited partnership units of a Canadian partnership (Telesat
`Partnership), which limited partnership units will be exchangeable by the holder for
`
`
`
`6
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`

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`Case 1:21-cv-04007 Document 1 Filed 05/05/21 Page 7 of 18
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`shares of New Telesat. New Telesat will be the controlling general partner of
`Telesat Partnership. While the exchange of Loral stock for shares of New Telesat
`is anticipated to be taxable to U.S. stockholders to the extent of any gain, it is
`anticipated that Loral U.S. stockholders that elect to receive limited partnership
`units of Telesat Partnership in lieu of receiving shares of New Telesat will do so on
`a tax deferred basis. The limited partnership units of Telesat Partnership, while not
`transferable, will otherwise have substantially the same economic and voting rights
`as the shares of New Telesat. Loral stockholders who elect to receive limited
`partnership units of Telesat Partnership will, however, like all other holders of
`limited partnership units of Telesat Partnership, be required to hold their units for
`at least six months following closing of the transaction before they may exchange
`their limited partnership units of Telesat Partnership for shares of New Telesat. The
`exchange of limited partnership units of Telesat Partnership for shares of New
`Telesat is anticipated to be a taxable transaction to U.S. stockholders.
`
`The definitive agreement also provides for PSP Investments to exchange
`substantially all of its interests in Telesat for limited partnership units of Telesat
`Partnership, with the balance of its interests in Telesat being exchanged for shares
`in New Telesat. Other holders of Telesat shares and derivatives have the option to
`exchange their equity or retain their direct interests in Telesat (the beneficial
`ownership percentages referred to in this press release assume that such
`shareholders will exchange their interests in Telesat for shares of New Telesat).
`
`Loral and Telesat will also make certain cash payments to PSP Investments in
`connection with the transaction, including a payment of $7 million and a payment
`to adjust for the value of Loral’s non‑Telesat assets and liabilities at the time of the
`closing of the transaction.
`
`The transaction, which is subject to customary closing conditions, including
`approval by Loral stockholders (as further described below) and certain regulatory
`approvals, is expected to close in the second or third quarter of 2021. As of
`November 23, 2020, there were outstanding 21,427,078 shares of Loral voting
`common stock, 9,505,673 shares of Loral non‑voting common stock and 92,857
`Loral restricted stock units.
`
`Loral’s Board of Directors has set a record date of November 30, 2020 for
`stockholders entitled to vote at the stockholder meeting to be held to approve the
`transaction (the stockholder meeting). The record date is subject to change based
`on the timing of the mailing of the proxy statement for the stockholder meeting.
`The MHR Funds have entered into an agreement to vote 30% of the shares of
`outstanding Loral voting common stock in favor of the transaction. In addition to
`the approval of the transaction by the holders of a majority of the outstanding Loral
`voting common stock, the transaction is also subject to approval (the Majority of
`the Unaffiliated Vote) by holders of the majority of the outstanding voting common
`stock held by Loral stockholders not affiliated with PSP Investments, the MHR
`Funds or other transaction participants (Unaffiliated Shares).
`
`
`
`7
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`Case 1:21-cv-04007 Document 1 Filed 05/05/21 Page 8 of 18
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`In addition, in connection with the transaction, the Loral Board of Directors has
`adopted a shareholder rights plan that would be triggered if a party (other than the
`MHR Funds) acquires or announces the intention to acquire shares of Loral voting
`common stock such that after giving effect to the acquisition the party would own
`more than 15% of the Unaffiliated Shares, or for those Loral stockholders (other
`than the MHR Funds) already over such 15% threshold, if such stockholder
`increases its ownership of such Unaffiliated Shares by 0.001% or more. The
`shareholder rights plan will expire immediately upon the first to occur of receipt of
`the Majority of the Unaffiliated Vote, termination of the definitive transaction
`agreement and November 23, 2021. The MHR Funds have also entered into a
`separate standstill agreement prohibiting the MHR Funds and their affiliates from
`acquiring more than an additional 6% of the outstanding shares of Loral voting
`common stock prior to the conclusion of the stockholder meeting.
`
`An independent special committee of the Loral Board (the Special Committee) and
`the Loral Board received a fairness opinion from Loral’s financial advisor,
`LionTree Advisors LLC (LionTree). The Special Committee and the Loral Board
`each approved the transaction and determined it to be fair to the Loral stockholders
`not affiliated with the MHR Funds. The definitive transaction agreement was also
`approved by the Board of Directors of each of PSP Investments and Telesat.
`
`In connection with the transaction, LionTree and Credit Suisse Securities (USA)
`LLC acted as financial advisors, Willkie Farr & Gallagher LLP acted as legal
`counsel, McCarthy Tétrault LLP acted as Canadian legal counsel, and DLA Piper
`LLP acted as U.S. tax counsel, to Loral. Cleary Gottlieb Steen & Hamilton LLP
`acted as legal counsel, and Goodmans LLP acted as Canadian legal counsel, to the
`Special Committee.
`
`24.
`
`The Proposed Transaction may inordinately compensate Telesat and reward the
`
`Individual Defendants, at the expense of the Company’s common stockholders. Therefore, it is
`
`imperative that stockholders receive the material information (discussed in detail below) that
`
`Defendants have omitted from the Registration Statement, which is necessary for stockholders to
`
`properly exercise their corporate suffrage rights and in order to cast an informed vote on the
`
`Proposed Transaction.
`
`B. The Registration Statement Omits Certain Material Information
`
`25.
`
`On April 26, 2021, Defendants authorized the filing of a materially incomplete and
`
`misleading Registration Statement with the SEC. The Individual Defendants were obligated to
`
`
`
`8
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`Case 1:21-cv-04007 Document 1 Filed 05/05/21 Page 9 of 18
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`carefully review the Registration Statement before it was filed with the SEC and disseminated to
`
`the Company’s stockholders to ensure that it did not contain any material misrepresentations or
`
`omissions. However, the Registration Statement misrepresents or omits material information
`
`concerning, among other things, the companies’ financial projections, as well as LionTree’s
`
`financial analyses. This information is necessary for Loral Space’s stockholders to make an
`
`informed decision on how to vote their shares, in violation of Sections 14(a) and 20(a) of the
`
`Exchange Act, and SEC Rule 14a-9.
`
`26.
`
`First, the Registration Statement omits Loral Space’s financial projections,
`
`including cash flow projections and projected revenues, for all projections other than 12-Month
`
`Cash Spending. This omission is especially egregious as Telesat is a private company, and so
`
`stockholders have no means to evaluate the adequacy of the Exchange Ratio compared to their
`
`current holdings in the Company (which trades on a public market). Stockholders are instead being
`
`asked to dilute their position in the Company, and to accept a new stake in a pro forma entity
`
`containing Telesat. Indeed, without providing any projections, Company stockholders will receive
`
`a misleading picture about the projected returns from their new holdings in Telesat.
`
`27.
`
`By example, if projections for Loral Space for 2021 were to reveal an increase in
`
`cash flows, stockholders would be more apt to vote against the merger, and inversely the same
`
`holds true. By choosing any and all of the Company’s projections, the Board has chosen to
`
`blindfold stockholders to fundamental valuation information, and instead, left stockholders out in
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`the dark with only market data for guidance. This is not a game of poker where a player must
`
`conceal his unexposed cards, the object of a Registration Statement is to put all one’s cards on the
`
`table face-up. In this case only some of the cards were exposed—the others were concealed—and
`
`so must be disclosed.
`
`
`
`9
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`Case 1:21-cv-04007 Document 1 Filed 05/05/21 Page 10 of 18
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`28.
`
`Second, the Registration Statement omits material information regarding the
`
`financial analyses performed by LionTree. With respect to LionTree’s Net Value Impact to Loral
`
`Stockholders (other than Excluded Parties) Analysis for the Company, the Registration Statement
`
`fails to disclose: (i) the assumptions for utilizing a 7% to 8% discount rate when calculating the
`
`net present value of the Loral stockholders’ pro rata portion of such incremental costs (net of
`
`tax impacts); (ii) the inputs and assumptions for calculating the payments to be made at the
`
`Closing under the Transaction Agreement based on Loral management’s projections; (iii) the
`
`inputs and assumptions for the estimation of the undiscounted net value of the cash benefit of
`
`Loral’s deferred tax assets; (iv) the assumptions for calculating a $3.971 million in one-time
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`integration expenses; (v) the payments expected to be made in connection with the closing;
`
`and (vi) the reasons for assuming that a $11.290 million and $21.534 million range supports
`
`the financial fairness of the consideration to be received by such Loral stockholders.
`
`29.
`
`Fairness opinions are fundamental to the M&A process and is ultimately what
`
`stockholders rely upon in their determination to vote for or against a transaction. Unfortunately,
`
`fairness opinions are also vulnerable to manipulation, which is why it is of the utmost important
`
`that stockholders have analyses available—such as those omitted here—to determine whether
`
`those metrics are reasonable, or whether they were unreasonably selected in order to obtain a
`
`finding of fairness. In valuing transactions such as these, it becomes all the more critical. As one
`
`highly respected professor explained in one of the most thorough law review articles regarding the
`
`fundamental flaws of fairness opinions, in a financial analysis a banker takes management’s
`
`forecasts, and then makes several key choices “each of which can significantly affect the final
`
`valuation.” Steven M. Davidoff, Fairness Opinions, 55 Am. U.L. Rev. 1557, 1576 (2006). Such
`
`choices include “the appropriate discount rate, and the terminal value…” Id. As Professor Davidoff
`
`
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`10
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`Case 1:21-cv-04007 Document 1 Filed 05/05/21 Page 11 of 18
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`explains:
`
`There is substantial leeway to determine each of these, and any change can
`markedly affect the discounted cash flow value. For example, a change in the
`discount rate by one percent on a stream of cash flows in the billions of dollars can
`change the discounted cash flow value by tens if not hundreds of millions of
`dollars….This issue arises not only with a discounted cash flow analysis, but with
`each of the other valuation techniques. This dazzling variability makes it difficult
`to rely, compare, or analyze the valuations underlying a fairness opinion unless full
`disclosure is made of the various inputs in the valuation process, the weight
`assigned for each, and the rationale underlying these choices. The substantial
`discretion and lack of guidelines and standards also makes the process vulnerable
`to manipulation to arrive at the “right” answer for fairness. This raises a further
`dilemma in light of the conflicted nature of the investment banks who often provide
`these opinions.
`
`Id. at 1577-78. Therefore, in order for stockholders to determine how to vote they need access to
`
`the above information, and the omission of these metrics makes each financial analysis identified
`
`inherently misleading.
`
`30.
`
`Third, the Registration Statement omits material information regarding Credit
`
`Suisse. Indeed, the Registration Statement completely omits what compensation Credit Suisse is
`
`expected to receive for its role in the Proposed Transaction. The Registration Statement further
`
`fails to disclose whether Credit Suisse has performed past services for Telesat or its affiliates, and
`
`if so, the timing and nature of the services and the amount of compensation received by Credit
`
`Suisse for providing the services. The omission of the above-referenced material information
`
`renders the Registration Statement false and misleading.
`
`31.
`
`Fourth, the Registration Statement fails to accurately disclose the expected
`
`ownership structure in the post-merger company. Indeed, when applying the Exchange Ratio to
`
`the current holdings of Telesat’s stockholders, the result is inconsistent and therefore materially
`
`misleading. Loral Space’s stockholders have a clear and unambiguous interest in understanding
`
`how their shares are going to be treated following the merger and how their holdings will be
`
`
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`11
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`Case 1:21-cv-04007 Document 1 Filed 05/05/21 Page 12 of 18
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`impacted. The failure to disclose this information, or clarify it such that it is not misleading, is a
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`violation of the federal securities laws.
`
`32.
`
`In sum, the omission of the above-referenced information renders the Registration
`
`Statement materially incomplete and misleading, in contravention of the Exchange Act. Absent
`
`disclosure of the foregoing material information prior to the Shareholder Vote, Plaintiff will be
`
`unable to make an informed decision concerning whether to vote his shares, and he is thus
`
`threatened with irreparable harm, warranting the injunctive relief sought herein.
`
`COUNT I
`
`(Against All Defendants for Violation of Section 14(a) of the Exchange Act)
`
`Plaintiff incorporates each and every allegation set forth above as if fully set forth
`
`33.
`
`herein.
`
`34.
`
`Section 14(a)(1) of the Exchange Act makes it “unlawful for any person, by the use
`
`of the mails or by any means or instrumentality of interstate commerce or of any facility of a
`
`national securities exchange or otherwise, in contravention of such rules and regulations as the
`
`Commission may prescribe as necessary or appropriate in the public interest or for the protection
`
`of investors, to solicit or to permit the use of his name to solicit any Registration Statement or
`
`consent or authorization in respect of any security (other than an exempted security) registered
`
`pursuant to section 78l of this title.” 15 U.S.C. § 78n(a)(1).
`
`35.
`
`Rule 14a-9, promulgated by the SEC pursuant to Section 14(a) of the Exchange
`
`Act, provides that Registration Statement communications shall not contain “any statement which,
`
`at the time and in the light of the circumstances under which it is made, is false or misleading with
`
`respect to any material fact, or which omits to state any material fact necessary in order to make
`
`the statements therein not false or misleading.” 17 C.F.R. § 240.14a-9.
`
`
`
`12
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`Case 1:21-cv-04007 Document 1 Filed 05/05/21 Page 13 of 18
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`36.
`
`The omission of information from a Registration Statement will violate Section
`
`14(a) and Rule 14a-9 if other SEC regulations specifically require disclosure of the omitted
`
`information.
`
`37.
`
`Defendants have issued the Registration Statement with the intention of soliciting
`
`the Company’s common stockholders’ support for the Proposed Transaction. Each of the
`
`Individual Defendants reviewed and authorized the dissemination of the Registration Statement,
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`which fails to provide critical information regarding the valuation analyses performed by LionTree
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`in support of its fairness opinion.
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`38.
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`In so doing, Defendants made untrue statements of fact and/or omitted material
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`facts necessary to make the statements made not misleading. Each of the Individual Defendants,
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`by virtue of their roles as officers and/or directors, were aware of the omitted information but failed
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`to disclose such information, in violation of Section 14(a). The Individual Defendants were
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`therefore negligent, as they had reasonable grounds to believe material facts existed that were
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`misstated or omitted from the Registration Statement, but nonetheless failed to obtain and disclose
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`such information to the Company’s stockholders although they could have done so without
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`extraordinary effort.
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`39.
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`The Individual Defendants knew or were negligent in not knowing that the
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`Registration Statement is materially misleading and omits material facts that are necessary to
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`render it not misleading. The Individual Defendants undoubtedly reviewed and relied upon most
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`if not all of the omitted information identified above in connection with their decision to approve
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`and recommend the Proposed Transaction; indeed, the Registration Statement states that the
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`LionTree reviewed and discussed its financial analyses with the Board, and further states that the
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`Board considered the financial analyses, as well as the fairness opinions and the assumptions made
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`Case 1:21-cv-04007 Document 1 Filed 05/05/21 Page 14 of 18
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`and matters considered in connection therewith. Further, the Individual Defendants were privy to
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`and had knowledge of the projections for the Company and the details surrounding the process
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`leading up to the signing of the Merger Agreement. The Individual Defendants knew or were
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`negligent in not knowing that the material information identified above has been omitted from the
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`Registration Statement, rendering the sections of the Registration Statement identified above to be
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`materially incomplete and misleading. Indeed, the Individual Defendants were required to,
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`separately, review LionTree’s analyses in connection with their receipt of the fairness opinions,
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`question the LionTree as to its derivation of fairness, and be particularly attentive to the procedures
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`followed in preparing the Registration Statement and review it carefully before it was
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`disseminated, to corroborate that there are no material misstatements or omissions.
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`40.
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`The Individual Defendants were, at the very least, negligent in preparing and
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`reviewing the Registration Statement. The preparation of a Registration Statement by corporate
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`insiders containing materially false or misleading statements or omitting a material fact constitutes
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`negligence. The Individual Defendants were negligent in choosing to omit material information
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`from the Registration Statement or failing to notice the material omissions in the Registration
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`Statement upon reviewing it, which they were required to do carefully as the Company’s directors.
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`Indeed, the Individual Defendants were intricately involved in the process leading up to the signing
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`of the Merger Agreement and preparation and review of the Company’s financial projections.
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`41.
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`Loral Space is also deemed negligent as a result of the Individual Defendants’
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`negligence in preparing and reviewing the Registration Statement.
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`42.
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`The misrepresentations and omissions in the Registration Statement are material to
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`Plaintiff, who will be deprived of their right to cast an informed vote if such misrepresentations
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`and omissions are not corrected prior to the Shareholder Vote. Plaintiff has no adequate remedy
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`Case 1:21-cv-04007 Document 1 Filed 05/05/21 Page 15 of 18
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`at law. Only through the exercise of this Court’s equitable powers can Plaintiff be fully protected
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`from the immediate and irreparable injury that Defendants’ actions threaten to inflict.
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`COUNT II
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`(Against the Individual Defendants for Violations of Section 20(a) of the Exchange Act)
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`Plaintiff incorporates each and every allegation set forth above as if fully set forth
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`43.
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`herein.
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`44.
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`The Individual Defendants acted as c