According to a Memorandum of Opinion issued by The Delaware Chancery Court, after an April 7, 2006 meeting, Loral’s board of directors appointed a special committee to evaluate a proposed equity financing deal with MHR. The Special Committee, consisting of only two members, was to be chaired by John Harkey, who was also an advisor to MHR, and had both a close personal and professional history with Mark Rachesky. The second was Arthur Simon, who was retired and had no experience in serving on a special negotiating committee.

As noted in the opinion issued by The Delaware Chancery Court, John Harkey’s primary experience was in the restaurant industry. Furthermore, during the same time period that he served as chairman of the special committee for Loral, he was soliciting investments from MHR for interest he had in the restaurant industry.

“Harkey’s close relationship with MHR was evidenced by the fact that he was personally soliciting investments from MHR late in the negotiation process. In early September, 2006, Harkey emailed an MHR analyst proposing that MHR invest $30 million for a 40% stake in Joe’s Crab Shack, a potential investment that Harkey’s company, Consolidated Restaurants, was pursuing. Harkey told MHR that ‘[i]f we can slide into this one, it is exciting’. Approximately a month later and only weeks before the Securities Purchase Agreement was signed, Harkey sought a $40 million investment by MHR in his own company.”