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Simmons Seeks 10 Million Lockheed Shares from ESOP

August 31, 1990

WASHINGTON (AP) _ Texas billionaire Harold C. Simmons wants Lockheed Corp. to sell him 10 million shares of common stock and to amend its antitakeover defense to facilitate the sale.

NL Industries Inc., a Simmons-controlled Houston chemicals concern, has asked Lockheed to sell 10 million shares in Lockheed’s employee stock ownership plan for $35 per share.

NL also agreed not to vote those shares for three years to allay management fears that the 10 million additional shares would give away control of the company to Simmons who lost a proxy battle with the defense contractor in March.

Simmons’ offer was disclosed Thursday in a filing with the Securities and Exchange Commission, in which he also reported that companies he controls hold 19.8 percent of Calabasas, Calif.-based Lockheed - up from an 18.94 percent stake in March.

″We have received the letter and have no further comment until we can review the proposal,″ Scott Hallman, a Lockheed spokesman, said Thursday.

Lockheed closed down 37 1/2 cents Thursday to $26.37 1/2 in trading on the New York Stock Exchange.

According to the SEC filing, Simmons companies spent more than $14 million between Aug. 15 and Wednesday buying 510,700 Lockheed shares at prices ranging between $28.75 and $26.25.

That put 12.5 million Lockheed shares under the Dallas billionaire’s control.

Simmons, who has been increasing his Lockheed holdings since March 1989, lost a proxy fight with the aviation concern in March, after Lockheed Chairman Daniel M. Tellep rebuffed his request for board representation .

In addition to trying to oust Lockheed’s board of directors at the annual shareholders meeting, Simmons sought to eliminate a shareholder rights plan, also known as a poison pill defense. The poison pill would make it prohibitively expensive for anyone to buy 20 percent or more of the company’s common stock.

In a letter to Tellep, NL President J. Landis Martin asked Lockheed to amend the poison pill to allow the purchase of 10 million shares from the Lockheed ESOP. That would increase his stake in Lockheed to more than 35 percent.

Analysts have said the ESOP, which held 17 percent of Lockheed’s stock when created, effectively blocks a Lockheed takeover because in Delaware - where the company is incorporated - a buyout must be approved by holders of 85 percent of a company’s stock.

The company created the ESOP last year shortly after Simmons revealed, as required by the SEC, that he held more than 5 percent of Lockheed’s shares. Simmons reduced his holdings from 5.9 percent to 4.2 percent after the ESOP was created.

In his letter to Tellep, Martin claimed the ESOP ″added approximately $500 million in debt to the company’s balance sheet,″ as well as increased interest payments.

If Lockheed management objected to the sale of ESOP shares, then it should amend the poison pill to allow NL to buy 10 million shares on the open market, Martin wrote.

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