<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 3, 1994
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
COMSAT CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DISTRICT OF COLUMBIA 4813 52-0781863
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification
incorporation or Classification Code Number)
organization) Number)
--------------------------
</TABLE>
<TABLE>
<S> <C>
6560 Rock Spring Drive Jerome W. Breslow, Esq.
Bethesda, Maryland 20817 Vice President and Secretary
(301) 214-3000 COMSAT Corporation
(Address, including zip code, and telephone number, 6560 Rock Spring Drive
including area code, of Registrant's principal Bethesda, Maryland 20817
executive offices) (301) 214-3000
(Name, address, including zip code, and
telephone number including area code, of agent for
service)
</TABLE>
--------------------------
COPIES TO:
<TABLE>
<S> <C> <C>
William P. O'Neill, Esq. John L. Sullivan, III, Esq. Lynn A. Soukup, Esq.
Crowell & Moring Shaw, Pittman, Potts & Trowbridge Shaw, Pittman, Potts & Trowbridge
1001 Pennsylvania Avenue, N.W. 1501 Farm Credit Drive 2300 N Street, N.W.
Washington, D.C. 20004 McLean, Virginia 22102 Washington, D.C. 20037
(202) 624-2500 (703) 790-7900 (202) 663-8000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement, on the effective date of the merger (the "Merger") of Radiation
Systems, Inc. ("RSi") into a subsidiary of COMSAT Corporation ("COMSAT"), as
described in the Agreement and Plan of Merger, dated as of January 30, 1994 (the
"Merger Agreement"), attached as Exhibit A to the Proxy Statement/Prospectus
forming a part of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G., check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, without par value.... 6,409,210 shares (1) N.A. $139,599,511.40(2) $48,123.97(3)
<FN>
(1) The number of shares of COMSAT Common Stock being registered has been
determined based on the product of (a)(i) 8,621,437, the maximum number of
shares of RSi Common Stock that would be outstanding immediately prior to
the Merger, assuming the exercise of all exercisable RSi stock options,
minus (ii) 404,500, the number of shares of RSi Common Stock held by
COMSAT, which will be cancelled in the Merger, and (b) a Conversion
Fraction (as defined in the Merger Agreement) of .780 shares of COMSAT
Common Stock for each share of RSi Common Stock, which is the highest
Conversion Fraction possible under the Merger Agreement.
(2) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act of 1933, as amended (the
"Securities Act"), and computed pursuant to Rule 457(f)(1) by multiplying
$16.1875, the average of the high and low sale prices of RSi Common Stock
on the NASDAQ National Market System on May 2, 1994, by 8,621,437, the
maximum number of shares of RSi Common Stock computed as described in
clause (a)(i) of Note (1).
(3) Pursuant to Rule 457(b) under the Securities Act and Section 14(g) of the
Securities Exchange Act of 1934, as amended, and Rule 0-11 thereunder, the
total registration fee of $48,123.97 is offset by the filing fee of
$30,498.33 paid on March 11, 1994, in connection with the filing of the
preliminary proxy materials by RSi on that date.
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE SHEET PURSUANT TO ITEM 501(B)
OF REGULATION S-K SHOWING THE LOCATION IN THE PROXY STATEMENT/PROSPECTUS
OF THE INFORMATION REQUIRED BY PART I OF FORM S-4
<TABLE>
<CAPTION>
ITEM OF FORM S-4 LOCATION OR CAPTION IN PROXY STATEMENT/PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus............................. Facing Page of the Registration Statement;
Cross-Reference Sheet; Outside Front Cover of Proxy
Statement/Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................... Available Information; Incorporation of Certain
Documents By Reference; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information.................................... Summary; Selected Historical and Pro Forma Financial
Data; Comparative Per Share Data; Comparative Per
Share Market Data
4. Terms of the Transaction............................. Summary; The Merger; Description of COMSAT Capital
Stock; Comparison of Rights of Shareholders of RSi
and COMSAT
5. Pro Forma Financial Information...................... COMSAT Corporation and Radiation Systems, Inc.
Unaudited Pro Forma Combined Condensed Financial
Statements
6. Material Contacts with the Company Being Acquired.... The Merger -- Background of the Merger; The Merger --
Interests of Certain Persons in the Merger;
Employment Agreements
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to Be Underwriters........ Not Applicable
8. Interests of Named Experts and Counsel............... The Merger -- Opinion of RSi's Financial Advisor
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities....................... Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants.......... Available Information; Incorporation of Certain
Documents by Reference
11. Incorporation of Certain Information by Reference.... Available Information; Incorporation of Certain
Documents by Reference
12. Information with Respect to S-2 or S-3 Registrants... Not Applicable
13. Incorporation of Certain Information by Reference.... Not Applicable
14. Information with Respect to Registrants Other Than
S-3 or S-2 Registrants............................... Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM OF FORM S-4 LOCATION OR CAPTION IN PROXY STATEMENT/PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies............ Available Information; Incorporation of Certain
Documents by Reference; Radiation Systems, Inc.
Consolidated Financial Statements
16. Information with Respect to S-2 or S-3 Companies..... Not Applicable
17. Information with Respect to Companies Other Than S-3
or S-2 Companies..................................... Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Authorizations
are to be Solicited.................................. Outside Front Cover of Proxy Statement/ Prospectus;
Available Information; Incorporation of Certain
Documents by Reference; The Special Meeting;
Ownership of RSi Common Stock; The Merger --
Interests of Certain Persons in the Merger;
Employment Agreements; -- Appraisal Rights;
Information Concerning COMSAT; Information Concerning
RSi; Solicitation of Proxies
19. Information if Proxies, Consents or Authorizations
are not to be Solicited or in an Exchange Offer...... Not Applicable
</TABLE>
<PAGE>
[LOGO]
RADIATION SYSTEMS, INC.
1501 MORAN ROAD
STERLING, VIRGINIA 20166
May 4, 1994
Dear Stockholder:
You are cordially invited to attend the Special Meeting of Stockholders of
Radiation Systems, Inc. ("RSi") to be held at 10:00 a.m. on Friday, June 3, 1994
at Holiday Inn Washington -- Dulles, 1000 Sully Road, Sterling, Virginia 22170.
At the Special Meeting you will be asked to consider and approve the merger
agreement between RSi and COMSAT Corporation ("COMSAT") providing for the merger
of RSi into a subsidiary of COMSAT (the "Merger").
Under the terms of the merger agreement, which was signed on January 30, 1994,
RSi common stock outstanding immediately prior to the effective date of the
Merger will be converted into that fraction (the "Conversion Fraction") of a
share of COMSAT common stock determined by dividing $18.25 by the average
closing price of COMSAT common stock on the New York Stock Exchange Composite
Tape during the 20 trading days ending five trading days prior to the closing
date of the Merger. This Conversion Fraction, however, will not be less than
.638 and will not be greater than .780. See "THE MERGER -- The Merger Agreement"
in the attached Proxy Statement/Prospectus. If the stockholders of RSi approve
the transaction, RSi and COMSAT intend to complete the Merger on the day of the
Special Meeting. Cash will be paid in lieu of fractional shares.
RSi and COMSAT have discussed extensively the strategic benefits of combining
the two companies. Your Board of Directors has received an opinion of investment
bankers that the consideration to be paid to RSi stockholders in the Merger is
fair, from a financial point of view. After consideration of these discussions
and opinion, and the other factors described in the attached Proxy
Statement/Prospectus, the RSi Board believes that the terms of the Merger are
fair to, and that the Merger is in the best interests of, RSi and its
stockholders. See "THE MERGER -- Background of the Merger," "-- Recommendation
of the RSi Board of Directors; RSi's Reasons for the Merger," and "-- Opinion of
RSi's Financial Advisor" in the attached Proxy Statement/Prospectus. RSi
stockholders are not entitled to dissenters' appraisal rights under the Nevada
General Corporation Law. See "THE MERGER -- Appraisal Rights" in the attached
Proxy Statement/Prospectus.
COMSAT is an international communications, information and
entertainment-distribution services company. It provides voice, video and data
services to customers worldwide by fixed and mobile technologies and is the
largest owner and user of the global INTELSAT and Inmarsat communications
satellite networks. COMSAT also furnishes satellite systems integration,
wireless networks and technical consulting, offers on-demand entertainment and
information services to the hospitality industry and owns the NBA Denver
Nuggets. Copies of the COMSAT 1993 Annual Report to Shareholders and COMSAT's
1993 Form 10-K, as amended to supplement information in the Annual Report,
accompany the attached Proxy Statement/Prospectus.
Following the Merger, the operations of RSi will be combined with COMSAT's
existing systems integration division, COMSAT Technology Services ("CTS"), to
form COMSAT RSI, which will pursue opportunities in satellite and other wireless
communications, radar, scientific and related special application markets.
Offering integrated systems and products, COMSAT RSI will target international
and domestic markets that include cellular, PCS, gateway earth stations and VSAT
technology. We believe that combining the core competencies of RSi and CTS will
provide comprehensive solutions to customers with sophisticated wireless
communications needs and create a business that will be better able to
capitalize on the changing needs of our customers around the world.
The attached Proxy Statement/Prospectus describes in greater detail the
transaction to be considered and voted upon. Please give this information your
careful consideration and promptly complete, sign, date, and return the enclosed
proxy.
Sincerely,
Richard E. Thomas
Chairman, President and
Chief Executive Officer
<PAGE>
[LOGO]
RADIATION SYSTEMS, INC.
1501 MORAN ROAD
STERLING, VIRGINIA 20166
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 3, 1994
------------------------
TO THE STOCKHOLDERS OF RADIATION SYSTEMS, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting (the "Special Meeting") of
Stockholders of Radiation Systems, Inc., a Nevada corporation ("RSi"), will be
held at Holiday Inn Washington -- Dulles, 1000 Sully Road, Sterling, Virginia
22170, on Friday June 3, 1994, at 10:00 a.m., local time, for the following
purposes:
1. To consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger, dated as of January 30, 1994 (the "Merger
Agreement"), among RSi, COMSAT Corporation, a District of Columbia
corporation ("COMSAT"), and CTS America, Inc., a Delaware corporation that
is a wholly owned subsidiary of COMSAT ("CTS America"), pursuant to which:
(a) RSi will merge into CTS America, and CTS America will be the surviving
corporation (the "Merger"), and (b) each share of common stock, par value
$1.00 per share, of RSi (the "RSi Common Stock") issued and outstanding
immediately prior to the effective date of the Merger, other than shares
held by RSi, COMSAT or a subsidiary of RSi or of COMSAT, shall be converted
into that fraction (the "Conversion Fraction") of a fully paid and
non-assessable share of the common stock, without par value, of COMSAT
("COMSAT Common Stock") determined by dividing $18.25 by the average closing
price of the COMSAT Common Stock on the New York Stock Exchange Composite
Tape during the 20 trading days ending five trading days prior to the
closing date of the Merger; PROVIDED, that the Conversion Fraction shall not
be less than .638 and shall not be greater than .780, and that cash shall be
paid in lieu of fractional shares.
2. To transact such other business as may properly come before the
Special Meeting or any adjournments thereof.
The stock transfer books of RSi will not be closed, but only stockholders of
record at the close of business on April 4, 1994 will be entitled to notice of
and to vote at such meeting or any adjournments thereof.
By order of the Board of Directors
Anita M. Stutzman
SECRETARY
May 4, 1994
The affirmative vote by the holders of a majority of the outstanding shares
of RSi Common Stock is necessary for the approval of the Merger Agreement and
the transactions contemplated thereby. It is important that your shares be
represented at the Special Meeting. We hope you will attend, but whether or not
you intend to be present in person, please complete, sign, date and return the
enclosed proxy promptly. A stamped reply envelope is enclosed for that purpose.
PLEASE DO NOT SEND IN YOUR RSI STOCK CERTIFICATES AT THIS TIME. IF THE
MERGER IS CONSUMMATED, YOU WILL RECEIVE TRANSMITTAL INSTRUCTIONS FOR THE
SURRENDER AND EXCHANGE OF YOUR RSI STOCK CERTIFICATES FROM THE EXCHANGE AGENT
AFTER THE SPECIAL MEETING, AS DESCRIBED IN THE ATTACHED PROXY
STATEMENT/PROSPECTUS UNDER THE HEADING "THE MERGER -- EXCHANGE OF STOCK
CERTIFICATES."
<PAGE>
PROXY STATEMENT PROSPECTUS
[LOGO] [LOGO]
1501 MORAN ROAD 6560 ROCK SPRING DRIVE
STERLING, VIRGINIA 20166 BETHESDA, MARYLAND 20817
This Proxy Statement of Radiation Systems, Inc. and Prospectus of COMSAT
Corporation (the "Proxy Statement/Prospectus") relates to the proposed merger
(the "Merger") of Radiation Systems, Inc., a Nevada corporation ("RSi"), with
and into CTS America, Inc., a Delaware corporation ("CTS America") that is a
wholly owned subsidiary of COMSAT Corporation, a District of Columbia
corporation ("COMSAT"), pursuant to an Agreement and Plan of Merger, dated as of
January 30, 1994 (the "Merger Agreement"), among RSi, COMSAT and CTS America. As
a result of the Merger, RSi will merge into CTS America, the separate existence
of RSi will cease, and CTS America will be the surviving corporation. At the
effective date of the Merger, each share of common stock, par value $1.00 per
share, of RSi ("RSi Common Stock") issued and outstanding immediately prior to
the effective date of the Merger, other than shares held by RSi, COMSAT or a
subsidiary of RSi or of COMSAT, shall be converted into that fraction (the
"Conversion Fraction") of a fully paid and non-assessable share of common stock,
without par value, of COMSAT ("COMSAT Common Stock") determined by dividing
$18.25 by the average closing price (the "Average Price") of COMSAT Common Stock
on the New York Stock Exchange Composite Tape during the 20 trading days ending
five trading days prior to the closing date of the Merger; PROVIDED, that the
Conversion Fraction shall not be less than .638 and shall not be greater than
.780, and that cash shall be paid in lieu of fractional shares. On May 2, 1994
(the most recent practicable date prior to mailing this Proxy Statement/
Prospectus), the closing sale price of RSi Common Stock was $16 1/8 and the
closing sale price of COMSAT Common Stock was $21 3/8. If the Average Price were
equal to the closing sale price of COMSAT Common Stock on May 2, 1994, the
Conversion Fraction would be the maximum of .780 and the value RSi stockholders
would receive in COMSAT Common Stock for each share of RSi Common Stock would be
$16.67. See "COMPARATIVE MARKET PRICE DATA."
RSi is soliciting proxies from stockholders for use at the Special Meeting
of Stockholders scheduled to be held on June 3, 1994 (the "Special Meeting"), to
consider and vote upon the approval and adoption of the Merger Agreement and the
transactions contemplated thereby.
This Proxy Statement/Prospectus constitutes both the proxy statement of RSi
relating to the solicitation of proxies by its Board of Directors for use at the
Special Meeting, and the prospectus of COMSAT with respect to the issuance of up
to 6,409,210 shares of COMSAT Common Stock to be issued pursuant to the Merger
Agreement. This Proxy Statement/Prospectus and the enclosed proxy are first
being sent to stockholders of RSi on or about May 4, 1994.
------------------------
THE SECURITIES TO WHICH THIS PROXY STATEMENT/PROSPECTUS RELATES HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Proxy Statement/Prospectus is May 3, 1994.
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROXY STATEMENT/PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS SHOULD NOT BE RELIED UPON. THIS PROXY STATEMENT/PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE
SECURITIES OFFERED BY THIS PROXY STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A
PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION OF AN OFFER OR PROXY SOLICITATION IN
SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR
ANY DISTRIBUTION OF SECURITIES PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE INFORMATION SET FORTH OR INCORPORATED HEREIN BY REFERENCE OR IN
THE AFFAIRS OF COMSAT OR RSI SINCE THE DATE OF THIS PROXY STATEMENT/PROSPECTUS.
ALL INFORMATION REGARDING COMSAT IN THIS PROXY STATEMENT/PROSPECTUS HAS BEEN
SUPPLIED BY COMSAT, AND ALL INFORMATION REGARDING RSI HAS BEEN SUPPLIED BY RSI.
AVAILABLE INFORMATION
COMSAT and RSi are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, are required to file reports, proxy statements and other
information with the Securities and Exchange Commission (the "SEC"). Copies of
such reports, proxy statements and other information can be inspected and copied
at the public reference facilities maintained by the SEC at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the following
Regional Offices of the SEC: Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661; and 7 World Trade Center, New York, New York 10048. Copies of
such material can be obtained at prescribed rates from the Public Reference
Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549. COMSAT
Common Stock is listed and traded on the New York Stock Exchange (the "NYSE"),
the Chicago Stock Exchange (the "CSE") and the Pacific Stock Exchange (the
"PSE"). Reports, proxy statements and other information concerning COMSAT may be
inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005,
the CSE, 440 South LaSalle Street, Chicago, Illinois 60605, and the PSE, 301
Pine Street, San Francisco, California 94104.
COMSAT has filed with the SEC a registration statement on Form S-4 (together
with any amendments thereto, the "Registration Statement") under the Securities
Act of 1933, as amended (the "Securities Act"), with respect to the shares of
COMSAT Common Stock to be issued pursuant to the Merger Agreement. This Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement, certain portions of which have been omitted pursuant to
the rules and regulations of the SEC. Such additional information may be
obtained from the SEC's principal office in Washington, D.C.
ii
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Proxy Statement/Prospectus incorporates certain documents by reference
which are not presented herein or delivered herewith. These documents are
available upon request from, in the case of COMSAT, Shareholder Services, COMSAT
Corporation, 6560 Rock Spring Drive, Bethesda, Maryland 20817, telephone number
(301) 214-3200, and in the case of RSi, Corporate Secretary, Radiation Systems,
Inc., 1501 Moran Road, Sterling, Virginia 20166, telephone number (703)
450-5680. In order to ensure timely delivery of these documents, any request
should be made by May 26, 1994.
COMSAT and RSi hereby undertake to provide without charge to each person,
including any beneficial owner of RSi Common Stock, to whom a copy of this Proxy
Statement/Prospectus has been delivered, upon the written or oral request of any
such person, a copy of any and all of the documents referred to below which have
been or may be incorporated herein by reference, other than exhibits to such
documents, unless such exhibits are specifically incorporated herein by
reference. Requests for such documents should be directed to the person
indicated in the immediately preceding paragraph with respect to the applicable
corporation.
The following documents, which have been filed with the SEC pursuant to the
Exchange Act, are hereby incorporated herein by reference.
(a) COMSAT's Annual Report on Form 10-K for the year ended December 31,
1993 (including Amendment No. 1 thereto filed with the SEC on April 29,
1994);
(b) COMSAT's Current Reports on Form 8-K filed with the SEC on February
1, 1994, March 7, 1994, March 11, 1994 and April 26, 1994;
(c) RSi's Annual Report on Form 10-K for the fiscal year ended June 30,
1993 (including Amendments No. 1, No. 2 and No. 3 thereto filed with the SEC
on March 11, 1994, March 14, 1994, and April 18, 1994, respectively);
(d) RSi's Quarterly Reports on Form 10-Q for the fiscal quarter ended
September 30, 1993 (including Amendment No. 1 thereto filed with the SEC on
March 11, 1994) and the fiscal quarter ended December 31, 1993; and
(e) RSi's Current Reports on Form 8-K filed with the SEC on March 7,
1994 (including Amendment No. 1 thereto filed with the SEC on March 11,
1994) and April 28, 1994.
All documents filed by COMSAT or RSi pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date hereof and prior to the date of the
Special Meeting shall be deemed to be incorporated herein by reference and to be
a part hereof from the date of filing of such documents. All information
appearing in this Proxy Statement/Prospectus or in any document incorporated
herein by reference is not necessarily complete and is qualified in its entirety
by the information and financial statements (including notes thereto) appearing
in the documents incorporated herein by reference and should be read together
with such information and documents.
Any statements contained in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this Proxy Statement/Prospectus to the extent that a statement
contained herein or in any other subsequently filed document that is deemed to
be incorporated herein by reference modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement/Prospectus.
iii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION.................................................... ii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.......................... iii
SUMMARY.................................................................. v
SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA............... ix
COMPARATIVE PER SHARE DATA............................................... xii
COMPARATIVE PER SHARE MARKET DATA........................................ xiii
THE SPECIAL MEETING...................................................... 1
Purpose of the Meeting................................................. 1
Date, Time and Place; Record Date...................................... 1
Voting Rights.......................................................... 2
OWNERSHIP OF RSi COMMON STOCK............................................ 3
THE MERGER............................................................... 5
General Description of the Merger...................................... 5
Background of the Merger............................................... 5
Recommendation of the RSi Board of Directors; RSi's Reasons for the
Merger................................................................ 10
COMSAT's Reasons for the Merger........................................ 11
Opinion of RSi's Financial Advisor..................................... 12
Shareholder Litigation................................................. 16
Interests of Certain Persons in the Merger; Employment Agreements...... 17
The Merger Agreement................................................... 20
Representations and Warranties....................................... 20
Certain Covenants.................................................... 20
No Solicitation of Other Transactions................................ 21
Conditions to the Merger............................................. 21
Stock Options; Employee Benefits..................................... 22
Termination.......................................................... 22
Expenses and Termination Fee......................................... 22
Amendment and Waiver................................................. 23
Closing; Effective Date................................................ 23
Exchange of Stock Certificates......................................... 23
No Fractional Shares................................................... 24
The Stock Option Agreement............................................. 24
Delisting and Deregistration of RSi Common Stock After the Merger...... 25
Resales of COMSAT Common Stock Issued in the Merger; Affiliates........ 25
NYSE Listing of COMSAT Common Stock.................................... 26
Regulatory Matters..................................................... 26
Certain Federal Income Tax Consequences of the Merger.................. 26
Accounting Treatment................................................... 28
Appraisal Rights....................................................... 28
Operations After the Merger............................................ 28
INFORMATION CONCERNING COMSAT............................................ 28
INFORMATION CONCERNING RSi............................................... 29
COMSAT CORPORATION AND RADIATION SYSTEMS, INC. UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS................................. 33
COMPARATIVE MARKET PRICE DATA............................................ 40
DESCRIPTION OF COMSAT CAPITAL STOCK...................................... 41
COMPARISON OF RIGHTS OF SHAREHOLDERS OF RSi AND COMSAT................... 46
LEGAL MATTERS............................................................ 55
EXPERTS.................................................................. 55
SOLICITATION OF PROXIES.................................................. 55
RSi TRANSFER AGENT....................................................... 56
RADIATION SYSTEMS, INC. CONSOLIDATED FINANCIAL STATEMENTS................ F-1
Exhibit A -- Agreement and Plan of Merger................................ A-1
Exhibit B -- Stock Option Agreement...................................... B-1
Exhibit C -- Opinion of Alex. Brown & Sons Incorporated.................. C-1
</TABLE>
iv
<PAGE>
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS PROXY STATEMENT/PROSPECTUS. REFERENCE IS MADE TO, AND THIS SUMMARY IS
QUALIFIED IN ITS ENTIRETY BY, THE DETAILED INFORMATION APPEARING ELSEWHERE IN
THIS PROXY STATEMENT/PROSPECTUS OR INCORPORATED HEREIN BY REFERENCE. CAPITALIZED
TERMS USED AND NOT OTHERWISE DEFINED IN THIS SUMMARY HAVE THE MEANINGS GIVEN
THEM ELSEWHERE HEREIN. STOCKHOLDERS ARE URGED TO READ CAREFULLY THIS PROXY
STATEMENT/PROSPECTUS IN ITS ENTIRETY.
THE MERGER
This Proxy Statement/Prospectus relates to the proposed merger (the
"Merger") of Radiation Systems, Inc. ("RSi") into CTS America, Inc., which is a
wholly owned subsidiary of COMSAT Corporation ("COMSAT"), pursuant to an
Agreement and Plan of Merger dated as of January 30, 1994 (the "Merger
Agreement"). On the Effective Date (as defined under "-- Effective Date") of the
Merger, each share of common stock, par value $1.00 per share, of RSi ("RSi
Common Stock") issued and outstanding immediately prior to the Effective Date,
other than shares held by RSi, COMSAT or a subsidiary of RSi or of COMSAT, will
be converted into that fraction (the "Conversion Fraction") of a share of common
stock, without par value, of COMSAT ("COMSAT Common Stock") determined by
dividing $18.25 by the average closing price of COMSAT Common Stock on the New
York Stock Exchange (the "NYSE") Composite Tape during the 20 trading days
ending five trading days prior to the date of the closing of the transactions
contemplated by the Merger Agreement (the "Closing"); PROVIDED, that the
Conversion Fraction shall not be less than .638 and shall not be greater than
.780. See "THE MERGER -- General Description of the Merger" and "COMPARATIVE
MARKET PRICE DATA." No certificates representing fractional shares of COMSAT
Common Stock will be issued in the Merger. See "THE MERGER -- No Fractional
Shares." The full text of the Merger Agreement is attached as Exhibit A to this
Proxy Statement/Prospectus and should be read carefully in its entirety.
THE COMPANIES
COMSAT. COMSAT, which was incorporated in 1963, is an international
communications, information and entertainment distribution services company. It
provides voice, video and data services and is the largest owner and user of the
global INTELSAT and Inmarsat communications satellite networks. COMSAT also
provides satellite systems integration, wireless networks and technical
consulting, offers on-demand entertainment and information services to the
hospitality industry, and owns the NBA Denver Nuggets. COMSAT was established
pursuant to the Communications Satellite Act of 1962 (the "Satellite Act") and
certain of its activities are subject to oversight and regulation by the Federal
Communications Commission (the "FCC"). COMSAT has approximately 1,640 employees.
COMSAT's principal executive offices are located at 6560 Rock Spring Drive,
Bethesda, Maryland 20817, telephone number (301) 214-3000.
RSI. RSi, which was incorporated in 1960, designs, manufactures and
integrates systems, subsystems and components for advanced microwave
communications, radar and related applications, from the largest international
gateway earth stations for satellite transmission of voice, data and video, to
electronically scanning phased array antennas for the North Warning System, to
the high power switch for the Patriot missile. RSi has a solid base of expertise
in meeting the demanding requirements of the U.S. Government for special use
antennas and related subsystems in air traffic control, intelligence and
scientific applications, as well as for military uses such as radar,
line-of-sight radio-relay and troposcatter communications. RSi is also a leading
commercial supplier of microwave antennas for worldwide cellular markets,
satellite downlink terminals for distance learning and business networks, sector
antennas for Europe's digital personal and mobile communications markets, and
base station antennas for U.S. and European trials of wireless local area
networks (LANs). RSi has approximately 1,000 employees. RSi's principal
executive offices are located at 1501 Moran Road, Sterling, Virginia 20166,
telephone number (703) 450-5680.
THE SPECIAL MEETING
At the special meeting of stockholders of RSi and any adjournment or
postponement thereof (the "Special Meeting"), the stockholders of RSi will be
asked to consider and vote upon the proposal to approve and adopt the Merger
Agreement and the transactions contemplated thereby. The Special Meeting is
v
<PAGE>
scheduled to be held at 10:00 a.m., local time, on Friday, June 3, 1994, at
Holiday Inn Washington -- Dulles, 1000 Sully Road, Sterling, Virginia 22170. The
RSi Board of Directors (the "RSi Board") has fixed the close of business on
April 4, 1994 as the record date (the "Record Date") for the determination of
holders of RSi Common Stock entitled to notice of and to vote at the Special
Meeting. See "THE SPECIAL MEETING."
RECOMMENDATION OF THE RSI BOARD OF DIRECTORS
The RSi Board believes that the terms of the Merger are fair to, and in the
best interests of, RSi and its stockholders. ACCORDINGLY, THE RSI BOARD
UNANIMOUSLY HAS APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, AND UNANIMOUSLY RECOMMENDS THAT RSI STOCKHOLDERS VOTE "FOR" APPROVAL
AND ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
In making this recommendation, the RSi Board considered a number of factors,
which are described in detail under the heading "THE MERGER -- Recommendation of
the RSi Board of Directors; RSi's Reasons for the Merger."
OPINION OF RSI'S FINANCIAL ADVISOR
Alex. Brown & Sons Incorporated ("Alex. Brown"), RSi's financial advisor,
delivered to the RSi Board its written opinion, dated January 30, 1994, to the
effect that, as of such date, and based upon and subject to certain matters as
stated therein, the consideration to be received by the holders of RSi Common
Stock in the Merger is fair to such holders from a financial point of view. The
full text of the opinion of Alex. Brown, which sets forth the assumptions made,
general procedures followed and matters considered, is attached as Exhibit C to
this Proxy Statement/Prospectus and should be read carefully in its entirety.
See "THE MERGER -- Background of the Merger," "-- Recommendation of the RSi
Board of Directors; RSi's Reasons for the Merger" and "-- Opinion of RSi's
Financial Advisor." On May 1, 1994, at a meeting of the RSi Board, Alex. Brown
confirmed to the RSi Board that, based upon the information reviewed by Alex.
Brown as described under "THE MERGER -- Background of the Merger," Alex. Brown
knew of no reason to change its opinion that the consideration to be received by
RSi stockholders in the Merger was fair, from a financial point of view. See
"THE MERGER -- Background of the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendations of the RSi Board with respect to the
Merger Agreement and the transactions contemplated thereby, stockholders should
be aware that certain members of RSi management and the RSi Board have certain
interests in the Merger that are in addition to the interests of stockholders of
RSi generally. See "THE MERGER -- Interests of Certain Persons in the Merger;
Employment Agreements" and "-- The Merger Agreement -- STOCK OPTIONS; EMPLOYEE
BENEFITS."
REQUIRED VOTE; SHARE OWNERSHIP OF MANAGEMENT, THE RSI EMPLOYEE STOCK OWNERSHIP
PLAN AND COMSAT
The affirmative vote of the holders of a majority of the outstanding shares
of RSi Common Stock is required to approve and adopt the Merger Agreement and
the transactions contemplated thereby. If a RSi stockholder returns a signed
proxy card, but does not indicate how his or her shares are to be voted, the
shares represented by the proxy card will be voted "FOR" approval and adoption
of the Merger Agreement and the transactions contemplated thereby.
As of the Record Date, directors and executive officers of RSi and their
affiliates owned 3.32% of the shares of RSi Common Stock outstanding and
entitled to vote at the Special Meeting, including 32,808 shares held in the
executive officers' accounts in the RSi Employee Stock Ownership Plan (the
"ESOP"). As of the Record Date, the ESOP owned 10.63% of the shares of RSi
Common Stock outstanding and entitled to vote at the Special Meeting, of which
407,799 shares (4.92% of the shares of RSi Common Stock outstanding and entitled
to vote at the Special Meeting) have been allocated to participants and
beneficiaries and 473,273 shares (5.71% of the shares of RSi Common Stock
outstanding and entitled to vote at the Special Meeting) are unallocated. The
ESOP provides that each participant or beneficiary shall direct the trustees of
the ESOP as to the manner in which shares allocated to such participant or
beneficiary are to be voted. The ESOP does not contain a provision instructing
the trustees of the ESOP as to the voting of allocated shares for which the
trustees have not received directions from the applicable participant or
beneficiary. The trustees will vote such shares in a manner consistent with the
voting of the allocated shares
vi
<PAGE>
for which directions have been received unless, in the trustees' opinion, such
action would be inconsistent with their fiduciary duties to the ESOP or
otherwise inconsistent with applicable regulations. The ESOP provides that the
trustees of the ESOP shall vote all unallocated shares in a manner consistent
with the voting of the allocated shares unless, in the trustees' opinion, such
action would be inconsistent with their fiduciary duties to the ESOP or
otherwise inconsistent with applicable regulations. The trustees of the ESOP are
Mark D. Funston and Anita M. Stutzman, officers of RSi, and George Reed, all of
whom are employees of RSi.
To be effective, directions to the trustees of the ESOP must be received by
Wachovia Bank of North Carolina, N.A. at Wachovia Corporate Trust, 301 North
Church, Second Floor, Winston-Salem, North Carolina 27102, Attention: Stock
Transfer, by the close of business (5:00 p.m. E.D.T) on June 2, 1994. A
participant or beneficiary in the ESOP who is otherwise an RSi stockholder
should (i) complete and return directions to the ESOP trustees with respect to
RSi Common Stock held by the ESOP that is allocated to such participant or
beneficiary and (ii) complete and return the enclosed proxy with respect to such
other RSi Common Stock.
As of the Record Date, COMSAT owned 404,500 shares (approximately 4.9%) of
RSi Common Stock outstanding and entitled to vote at the Special Meeting.
No vote of the shareholders of COMSAT is required to approve or adopt the
Merger Agreement or the transactions contemplated thereby or to authorize the
issuance of COMSAT Common Stock in the Merger.
CONDITIONS TO THE MERGER
In addition to the approval and adoption of the Merger Agreement and the
transactions contemplated thereby by the RSi stockholders at the Special
Meeting, the obligations of the parties to consummate the Merger are subject to
the satisfaction or waiver of certain conditions specified in the Merger
Agreement, including, among others, the expiration of the applicable waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"); the truth and correctness of the other party's
representations and warranties; there being in effect no order enjoining the
Merger; and receipt by COMSAT and RSi of an opinion of Deloitte & Touche that
the Merger will be accounted for as a pooling of interests. COMSAT and RSi made
the required filings under the HSR Act on February 14, 1994, and the waiting
period expired on March 16, 1994. The obligation of COMSAT to consummate the
Merger is subject to the satisfaction or waiver of certain additional
conditions, including, among others, that no audit, investigation or due
diligence review by COMSAT with respect to RSi's representations and warranties
shall have revealed liabilities of RSi not previously disclosed which exceed
$7.56 million; that RSi's aggregate contract backlog in specified categories
shall be at least $118.5 million on the date of the Closing; that from June 30,
1993 to the Closing there shall not have occurred certain events or changes in
specified matters relating to RSi's business or financial condition which
exceed, with respect to certain of such events or changes, $4.28 million in the
aggregate; and that there shall not be any action or proceeding challenging the
Merger or otherwise seeking to prohibit its consummation. The obligation of RSi
to consummate the Merger also is subject to the satisfaction or waiver of
certain additional conditions, including that the shares of COMSAT Common Stock
to be issued to RSi stockholders in the Merger be approved for listing on the
NYSE. In addition, the Merger Agreement may be terminated in certain events. See
"THE MERGER -- The Merger Agreement -- CONDITIONS TO THE MERGER" and "--
TERMINATION."
EFFECTIVE DATE
The Merger Agreement provides that after all the conditions in the Merger
Agreement have been satisfied or waived, the Merger will become effective at
5:00 p.m., local time in Nevada, on the later to occur of the day when the
Certificate of Merger required under Delaware law is filed with the Delaware
Secretary of State or the day when the Articles of Merger required under Nevada
law are filed with the Nevada Secretary of State (the "Effective Date"). Such
filings will be made simultaneously with or as soon as practical after the
Closing, which RSi and COMSAT anticipate will occur on the day of the Special
Meeting. See "THE MERGER -- Closing; Effective Date."
vii
<PAGE>
TERMINATION FEE AND EXPENSE REIMBURSEMENT
The Merger Agreement provides that if RSi at any time prior to December 31,
1994 is acquired by, merges or effectuates a business combination with, or sells
substantially all of its assets to any person or entity not controlled by
COMSAT, or agrees to do any of the foregoing, RSi will be required to pay COMSAT
$5 million, plus an expense reimbursement of up to $2.5 million. If the Merger
Agreement is terminated by the breach of one of the parties, the breaching party
will be required to pay to the non-breaching party, as its exclusive remedy, the
actual costs and expenses of the non-breaching party, not to exceed $2.5
million. See "THE MERGER --The Merger Agreement -- EXPENSES AND TERMINATION
FEE."
THE STOCK OPTION AGREEMENT
In connection with and as a condition to COMSAT's willingness to enter into
the Merger Agreement, COMSAT and RSi entered into a Stock Option Agreement (the
"Stock Option Agreement") pursuant to which RSi granted to COMSAT an option to
purchase 1,242,778 shares of RSi Common Stock, which represents the number of
shares equal to 15% of the shares of RSi Common Stock outstanding on January 30,
1994, the date of the Stock Option Agreement, at an exercise price of $18.25 per
share, on the terms described under "THE MERGER -- The Stock Option Agreement."
The full text of the Stock Option Agreement is attached as Exhibit B to this
Proxy Statement/Prospectus and should be read carefully in its entirety.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
It is anticipated that the Merger will constitute a reorganization within
the meanings of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue
Code of 1986, as amended. See "THE MERGER -- Certain Federal Income Tax
Consequences" for a discussion of certain federal income tax consequences of the
Merger.
ACCOUNTING TREATMENT
COMSAT and RSi believe that the Merger will qualify as a pooling of
interests for accounting and financial reporting purposes. It is a condition to
the obligation of the parties to consummate the Merger that COMSAT and RSi
receive a letter from Deloitte & Touche, independent public accountants for both
COMSAT and RSi, to that effect. See "THE MERGER -- The Merger Agreement --
CONDITIONS TO THE MERGER" and "-- Accounting Treatment."
APPRAISAL RIGHTS
Holders of RSi Common Stock are not entitled to dissenters' appraisal rights
under the Nevada General Corporation Law in connection with the Merger because
the RSi Common Stock is listed for quotation on the NASDAQ National Market
System (the "NASDAQ/NMS") and the shares of COMSAT Common Stock to be issued in
the Merger will be listed on the NYSE. See "THE MERGER -- Appraisal Rights."
COMPARISON OF RIGHTS OF SHAREHOLDERS OF RSI AND COMSAT UNDER APPLICABLE LAWS
The rights of stockholders of RSi currently are governed by applicable
Nevada law, including the Nevada General Corporation Law (the "Nevada Law"), the
Restated Articles of Incorporation of RSi, as amended (the "RSi Articles"), and
the RSi By-Laws, as amended (the "RSi By-Laws"). On the Effective Date, the
stockholders of RSi will become shareholders of COMSAT, a District of Columbia
corporation, and their rights as shareholders of COMSAT will be governed by the
Satellite Act and, to the extent that it is not inconsistent with the Satellite
Act, by applicable District of Columbia law, including the District of Columbia
Business Corporation Act (the "D.C. Act"), and by the COMSAT Articles of
Incorporation, as amended (the "COMSAT Articles"), and the COMSAT By-Laws, as
amended (the "COMSAT By-Laws").
There are numerous important differences between the rights of stockholders
of RSi under the Nevada Law, the RSi Articles and the RSi By-Laws and the rights
of shareholders of COMSAT under the Satellite Act, the D.C. Act, the COMSAT
Articles and the COMSAT By-Laws, including, among other things, with respect to
COMSAT, the requirements of having three Presidentially appointed directors on
the COMSAT Board of Directors, the requirement of FCC approval with respect to
certain financing activities, restrictions on the issuance, ownership, voting
and transfer of COMSAT capital stock, and special provisions relating to
communications common carriers. See "DESCRIPTION OF COMSAT CAPITAL STOCK" and
"COMPARISON OF RIGHTS OF SHAREHOLDERS OF RSi AND COMSAT."
viii
<PAGE>
SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA
The following tables present selected historical financial data of COMSAT
and RSi and selected pro forma combined financial data after giving effect to
the Merger under the pooling of interests method of accounting. COMSAT's and
RSi's selected historical financial data as of the end of and for each of their
respective last five fiscal years have been derived from audited financial
statements. RSi's selected historical financial data as of the end of or for the
first six months of its fiscal years ending June 30, 1994 and 1993 have been
derived from unaudited financial statements and, in the opinion of RSi's
management, include all adjustments, consisting of only normal recurring
adjustments, necessary for a fair presentation of the results of operations for
such interim period.
The selected pro forma financial data have been derived from or prepared
consistently with the unaudited pro forma combined condensed financial
statements included herein. The pro forma data are presented for illustrative
purposes only and are not necessarily indicative of the financial position or
operating results that would have occurred or that will occur upon consummation
of the Merger. The following selected financial data should be read in
conjunction with such historical and pro forma combined financial statements and
notes thereto incorporated by reference or included herein. See "INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE," "COMSAT CORPORATION AND RADIATION SYSTEMS,
INC. UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS" and "RADIATION
SYSTEMS, INC. CONSOLIDATED FINANCIAL STATEMENTS."
ix
<PAGE>
COMSAT CORPORATION
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1993 1992(2) 1991 1990(2) 1989
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.................................................... $ 640,390 $ 563,615 $ 522,850 $ 456,806 $ 411,524
Operating Income (Loss)..................................... 138,098 88,505 127,473 (12,551) 86,093
Income (Loss) Before Cumulative Effect of Changes in
Accounting Principles...................................... 74,044 42,924 71,424 (16,349) 62,464
Income (Loss) Per Share Before Cumulative Effect of Changes
in Accounting Principles (1):
Primary................................................... $ 1.82 $ 1.09 $ 1.88 ($ 0.44) $ 1.67
Fully Diluted............................................. $ 1.82 $ 1.09 $ 1.80 ($ 0.44) $ 1.50
<CAPTION>
DECEMBER 31,
----------------------------------------------------------
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total Assets................................................ $1,652,515 $1,542,843 $1,369,546 $1,209,565 $1,261,110
Long-Term Debt.............................................. 402,402 486,383 382,764 375,181 367,617
Stockholders' Equity........................................ 679,352 621,132 584,986 558,064 595,138
<FN>
- ------------------------------
(1) Per share amounts have been adjusted for a two-for-one stock split in June
1993.
(2) Operating results are net of restructuring charges of $38,961,000 in 1992
and $97,576,000 in 1990.
</TABLE>
RADIATION SYSTEMS, INC.
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
------------------ ----------------------------------------------
1993 1992 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues (1)........................................ $ 53,862 $ 61,753 $121,786 $128,442 $115,519 $85,230 $54,914
Operating Income.................................... 5,541 7,715 15,656 16,755 13,558 9,021 4,738
Income Before Cumulative Effect of Changes in
Accounting Principles.............................. 3,315 4,820 10,240 10,585 8,369 5,644 3,317
Income Per Share Before Cumulative Effect of Changes
in Accounting Principles (2)....................... $ 0.40 $ 0.58 $ 1.23 $ 1.27 $ 1.01 $ 0.69 $ 0.42
<CAPTION>
DECEMBER 31, JUNE 30,
------------------ ----------------------------------------------
1993 1992 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total Assets........................................ $126,532 $113,631 $123,375 $113,572 $ 99,473 $95,936 $75,520
Long-Term Debt...................................... 8,148 10,421 9,467 9,845 6,509 8,881 6,543
Stockholders' Equity................................ 89,186 81,160 85,599 79,037 66,270 57,449 52,107
<FN>
- ------------------------------
(1) Includes business interruption insurance proceeds of $2,996,000 in fiscal
year 1993, $1,306,000 in fiscal year 1992, $827,000 in the six months
ended December 31, 1993 and $802,000 in the six months ended December 31,
1992.
(2) Per share amounts have been adjusted for a three-for-two stock split in
fiscal year 1992.
</TABLE>
x
<PAGE>
COMSAT CORPORATION AND RADIATION SYSTEMS, INC.
SELECTED PRO FORMA COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
PRO FORMA COMBINED INCOME STATEMENT DATA:
Revenues.......................................... $754,285 $688,093 $651,211
Operating Income.................................. 151,580 104,982 142,712
Income Before Cumulative Effect of Changes in
Accounting Principles............................ 82,469 53,292 81,014
Income Per Share Before Cumulative Effect of
Changes in Accounting Principles, Assuming
Conversion Fraction of:
Minimum Fraction of .638 Primary............... $ 1.80 $ 1.19 $ 1.87
Fully Diluted........... $ 1.79 $ 1.19 $ 1.80
Average Fraction of .709 Primary.............. $ 1.77 $ 1.18 $ 1.84
Fully Diluted........... $ 1.77 $ 1.17 $ 1.78
Maximum Fraction of .780 Primary............... $ 1.75 $ 1.16 $ 1.82
Fully Diluted.......... $ 1.75 $ 1.16 $ 1.75
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1993
-----------------
<S> <C>
PRO FORMA COMBINED BALANCE SHEET DATA:
Total Assets................................................ $ 1,773,949
Long-Term Debt.............................................. 410,550
Stockholders' Equity........................................ 758,440
<FN>
- ------------------------
1. COMSAT operates and reports on a December 31 calendar year basis. RSi
operates and reports on a June 30 fiscal year basis. The pro forma combined
income statement data combines the income statement of COMSAT for the years
ended December 31, 1993, 1992 and 1991 with the income statement of RSi for
the years ended December 31, 1993, 1992 and 1991, respectively. The
calendar year income statements for RSi were derived by adding the income
statements for the third and fourth quarters of each fiscal year with the
first and second quarters of the subsequent fiscal year. The pro forma
combined balance sheet data combines the balance sheet of COMSAT as of
December 31, 1993 with the balance sheet of RSi as of December 31, 1993.
2. The pro forma combined financial data includes $5,000,000 for the estimated
transaction costs of the Merger but does not include the nonrecurring costs
and expenses associated with integrating the operations of the combined
companies. The costs of integrating operations are expected to result in
significant, nonrecurring charges to the combined companies' results of
operations after consummation of the Merger; however, the actual amount of
such charges cannot be determined at this time.
Pursuant to the rules and regulations of the SEC, the pro forma combined
condensed statements of income exclude the cumulative effects of accounting
changes.
</TABLE>
xi
<PAGE>
COMPARATIVE PER SHARE DATA
The following table presents COMSAT's and RSi's historical per share data
and the unaudited pro forma combined per share data after giving effect to the
Merger under the pooling of interests method of accounting. The pro forma data
are presented for illustrative purposes only and are not necessarily indicative
of the financial position or operating results that would have occurred or that
will occur upon consummation of the Merger. The information presented below
should be read in conjunction with the historical and pro forma combined
financial statements and notes thereto incorporated by reference or included
herein. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," "COMSAT
CORPORATION AND RADIATION SYSTEMS, INC. UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS" and "RADIATION SYSTEMS, INC. CONSOLIDATED FINANCIAL
STATEMENTS."
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL (3) EQUIVALENT
--------------- PRO FORMA FOR ONE SHARE
COMSAT RSI COMBINED (4) OF RSI (4)
------ ------ ------------ -------------
<S> <C> <C> <C> <C>
Primary income per share before cumulative effect of changes in
accounting principles, assuming Conversion Fraction of (1):
Minimum Fraction of .638
Year ended December 31,
1993............................................................ $1.82 $ 1.01 $ 1.80 $ 1.15
1992............................................................ 1.09 (2) 1.24 1.19 0.76
1991............................................................ 1.88 1.15 1.87 1.19
Average Fraction of .709
Year ended December 31,
1993............................................................ $1.82 $ 1.01 $ 1.77 $ 1.25
1992............................................................ 1.09 (2) 1.24 1.18 0.84
1991............................................................ 1.88 1.15 1.84 1.30
Maximum Fraction of .780
Year ended December 31,
1993............................................................ $1.82 $ 1.01 $ 1.75 $ 1.37
1992............................................................ 1.09 (2) 1.24 1.16 0.90
1991............................................................ 1.88 1.15 1.82 1.42
Cash dividends declared per share (1), (5):
Minimum Fraction of .638
Year ended December 31,
1993............................................................ $0.74 $ 0.10 $ 0.74 $ 0.47
1992............................................................ 0.70 0.09 0.70 0.45
1991............................................................ 0.67 0.07 0.67 0.43
Average Fraction of .709
Year ended December 31,
1993............................................................ $0.74 $ 0.10 $ 0.74 $ 0.52
1992............................................................ 0.70 0.09 0.70 0.50
1991............................................................ 0.67 0.07 0.67 0.48
Maximum Fraction of .780
Year ended December 31,
1993............................................................ $0.74 $ 0.10 $ 0.74 $ 0.58
1992............................................................ 0.70 0.09 0.70 0.55
1991............................................................ 0.67 0.07 0.67 0.52
Book value per share (1):
December 31,1993
Minimum Fraction of .638.......................................... $16.89 $10.76 $ 16.76 $ 10.69
Average Fraction of .709.......................................... 16.89 10.76 16.55 11.73
Maximum Fraction of .780.......................................... 16.89 10.76 16.36 12.76
<FN>
- ------------------------------
(1) COMSAT operates and reports on a December 31 calendar year basis. RSi
operates and reports on a June 30 fiscal year basis. The pro forma
combined primary income per share and cash dividends declared per share
information combines the data of COMSAT for the years ended December 31,
1993, 1992 and 1991 with the data of RSi for the years ended December 31,
1993, 1992 and 1991, respectively. The calendar year data for RSi were
derived by adding RSi's information for the third and fourth quarters of
each fiscal year with the first and second quarters of the subsequent
fiscal year. The pro forma combined book value per share data combines the
balance sheet of COMSAT as of December 31, 1993 with the balance sheet of
RSi as of December 31, 1993.
</TABLE>
xii
<PAGE>
<TABLE>
<S> <C>
(2) In 1992, COMSAT recorded a restructuring charge of $38,961,000. Absent
this charge, COMSAT's earnings per share were $1.69 for 1992.
(3) Per share amounts for COMSAT have been adjusted for a two-for-one split in
1993. Per share amounts for RSi have been adjusted for a three-for-two
stock split in 1991.
(4) The pro forma combined financial information has been prepared based on
the pooling of interests method of accounting assuming that .638, .709 and
.780 of a share of COMSAT Common Stock are issued for each share of RSi
Common Stock. These numbers represent the minimum, average and maximum
possible values, respectively, for the Conversion Fraction. See "THE
MERGER -- General Description of the Merger".
(5) The pro forma combined cash dividends declared per share reflect COMSAT's
cash dividends declared in the periods presented.
</TABLE>
COMPARATIVE PER SHARE MARKET DATA
COMSAT Common Stock is listed and primarily traded on the NYSE. RSi Common
Stock is listed and traded on the NASDAQ/NMS.
<TABLE>
<CAPTION>
PRO FORMA
RSI MERGER VALUE OF COMSAT EQUIVALENT
COMMON STOCK ONE SHARE OF COMMON STOCK FOR ONE SHARE
DATES (HISTORICAL) (1) RSI COMMON STOCK (2) (HISTORICAL) (1) OF RSI (3)
- ------------------------------------------------ ---------------- -------------------- ---------------- --------------
<S> <C> <C> <C> <C>
January 28, 1994................................ $ 13 1/2 $ 18.25 $ 26 7/8 .679
May 2, 1994..................................... $ 16 3/8 $ 16.67 $ 21 3/8 .780
<FN>
- ------------------------
(1) The historical values of RSi Common Stock and COMSAT Common Stock
represent the closing sale prices on (a) January 28, 1994, the trading day
immediately prior to the public announcement of the Merger, and (b) May 2,
1994, the last practicable date prior to mailing of this Proxy Statement/
Prospectus.
(2) The Merger Agreement provides that each share of RSi Common Stock will be
converted into that fraction of a share of COMSAT Common Stock determined
by dividing $18.25 by the average closing price of the COMSAT Common Stock
on the NYSE Composite Tape during the 20 trading days ending five trading
days prior to the date of the Closing (the "Average Price"); PROVIDED,
that the Conversion Fraction shall not be less than .638 and shall not be
greater than .780. If the Average Price were equal to the closing sale
price of COMSAT Common Stock on January 28, 1994 ($26 7/8), the Conversion
Fraction would be .679 and the "Merger Value of One Share of RSi Common
Stock" would be $18.25. If the Average Price were equal to the closing
sale price of COMSAT Common Stock on May 2, 1994 ($21 3/8), the Conversion
Fraction would be the maximum Conversion Fraction of .780 and the "Merger
Value of One Share of RSi Common Stock" would be $16.67. THE AVERAGE PRICE
WILL BE DETERMINED, AND THE CONVERSION FRACTION FIXED, FIVE TRADING DAYS
PRIOR TO THE DATE OF THE CLOSING, WHICH RSI AND COMSAT ANTICIPATE WILL
OCCUR ON THE DAY OF THE SPECIAL MEETING. RSI STOCKHOLDERS ARE URGED TO
OBTAIN CURRENT MARKET QUOTATIONS FOR THE COMSAT COMMON STOCK AND THE RSI
COMMON STOCK BEFORE DECIDING HOW TO VOTE.
(3) The "Pro Forma Equivalent For One Share of RSi" indicates the fraction of
a share of COMSAT Common Stock (which, under the Merger Agreement, shall
not be less than .638 and shall not be greater than .780) which would be
received upon the conversion of a share of RSi Common Stock in the Merger
if the Average Price were equal to the historical per share price of
COMSAT Common Stock on the date specified. The actual Average Price may be
higher or lower than that shown. See also "COMPARATIVE MARKET PRICE DATA."
</TABLE>
xiii
<PAGE>
<TABLE>
<S> <C>
PROXY STATEMENT PROSPECTUS
[LOGO] [LOGO]
</TABLE>
This Proxy Statement/Prospectus (the "Proxy Statement/Prospectus") is
provided to the stockholders of Radiation Systems, Inc., a Nevada corporation
("RSi"), in connection with the special meeting of stockholders of RSi (the
"Special Meeting") and any adjournments or postponements thereof. The Special
Meeting will be held on the date, at the time, and in the location, and will be
held to consider the matter, set forth under "THE SPECIAL MEETING." The Board of
Directors of RSi (the "RSi Board") is soliciting proxies hereby for use at the
Special Meeting. A form of proxy is being provided to the stockholders of RSi
with this Proxy Statement/Prospectus. Information with respect to the execution
and the revocation of proxies is provided under "THE SPECIAL MEETING."
In addition, this Proxy Statement/Prospectus serves as the prospectus of
COMSAT Corporation, a District of Columbia corporation ("COMSAT"), under the
Securities Act of 1933, as amended (the "Securities Act"), for the issuance of
the shares of common stock, without par value, of COMSAT ("COMSAT Common Stock")
into which shares of common stock, par value $1.00 per share, of RSi ("RSi
Common Stock") will be converted upon consummation of the Merger (as defined
below).
THE SPECIAL MEETING
PURPOSE OF THE MEETING
At the Special Meeting and any adjournment or postponement thereof, the
holders of RSi Common Stock will be asked to consider and vote upon a proposal
to approve and adopt the Agreement and Plan of Merger (the "Merger Agreement"),
dated as of January 30, 1994, among RSi, COMSAT and CTS America, Inc., a
Delaware corporation that is a wholly owned subsidiary of COMSAT ("CTS
America"), pursuant to which, among other things, (a) RSi will merge with and
into CTS America and CTS America will be the surviving corporation (the
"Merger"), and (b) each share of RSi Common Stock issued and outstanding
immediately prior to the effective date of the Merger, other than shares held by
RSi, COMSAT or a subsidiary of RSi or of COMSAT, shall be converted into that
fraction (the "Conversion Fraction") of a fully paid and non-assessable share of
COMSAT Common Stock, rounded to the nearest thousandth, determined by dividing
$18.25 by the average closing price (the "Average Price") of the COMSAT Common
Stock on the New York Stock Exchange (the "NYSE") Composite Tape during the 20
trading days ending five trading days prior to the date of the closing of the
transactions contemplated by the Merger Agreement (the "Closing"); PROVIDED,
that the Conversion Fraction shall not be less than .638 and shall not be
greater than .780, and that cash shall be paid in lieu of fractional shares. If
the Average Price is between $23.40 and $28.60, the Conversion Fraction will be
between .780 and .638. If the Average Price is $23.40 or less, the Conversion
Fraction will be fixed at .780. If the Average Price is $28.60 or greater, the
Conversion Fraction will be fixed at .638. THE AVERAGE PRICE WILL BE DETERMINED,
AND THE CONVERSION FRACTION WILL BE FIXED, FIVE TRADING DAYS PRIOR TO THE DATE
OF THE CLOSING, WHICH RSI AND COMSAT ANTICIPATE WILL OCCUR ON THE DAY OF THE
SPECIAL MEETING. RSI STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS
FOR THE COMSAT COMMON STOCK AND RSI COMMON STOCK BEFORE DECIDING HOW TO VOTE.
See also "COMPARATIVE MARKET PRICE DATA."
THE RSI BOARD UNANIMOUSLY HAS APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, AND UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS OF RSI VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY. SEE "THE MERGER -- RECOMMENDATION OF THE
RSI BOARD OF DIRECTORS; RSI'S REASONS FOR THE MERGER."
DATE, TIME AND PLACE; RECORD DATE
The Special Meeting is scheduled to be held at 10:00 a.m., local time, on
Friday, June 3, 1994 at Holiday Inn Washington -- Dulles, 1000 Sully Road,
Sterling, Virginia 22170. The RSi Board has fixed the close of
<PAGE>
business on April 4, 1994 as the record date (the "Record Date") for the
determination of holders of RSi Common Stock entitled to notice of and to vote
at the Special Meeting. On the Record Date, there were 8,285,187 shares of RSi
Common Stock issued and outstanding.
VOTING RIGHTS
The affirmative vote of the holders of at least a majority of the
outstanding shares of RSi Common Stock is required under the Nevada General
Corporation Law (the "Nevada Law") and the Restated Articles of Incorporation of
RSi, as amended (the "RSi Articles"), to approve and adopt the Merger Agreement
and the transactions contemplated thereby. Holders of record of RSi Common Stock
on the Record Date are entitled to one vote per share on the proposal to be
presented to stockholders at the Special Meeting. The presence, either in person
or by proxy, of the holders of 40% of the outstanding shares of RSi Common Stock
entitled to vote at the Special Meeting is necessary to constitute a quorum at
the Special Meeting.
If a stockholder attends the Special Meeting, he or she may vote by ballot.
However, many of RSi's stockholders may be unable to attend the Special Meeting.
Therefore, the RSi Board is soliciting proxies so that each holder of RSi Common
Stock on the Record Date has the opportunity to vote on the proposal to be
considered at the Special Meeting. When a proxy card is returned properly signed
and dated, the shares represented thereby will be voted in accordance with the
instructions on the proxy card. If a stockholder does not return a signed proxy
card, his or her shares will not be voted and, thus, will have the effect of a
vote against the Merger Agreement and the transactions contemplated thereby.
Each stockholder is urged to mark the box on the proxy card to indicate how his
or her shares are to be voted. If a stockholder returns a signed proxy card but
does not indicate how his or her shares are to be voted, the shares represented
by the proxy card will be voted "FOR" approval and adoption of the Merger
Agreement and the transactions contemplated thereby. If a shareholder returns a
signed proxy card but marks the box indicating an abstention, his or her shares
will be considered present at the Special Meeting, but because the shares have
not been voted "FOR" approval of the Merger Agreement and the transactions
contemplated thereby, the abstention will have the effect of a vote against the
proposal. Persons whose shares are held in "street name" by a broker and who
wish to attend the Special Meeting must obtain a letter of identification from
the broker and bring it to the Special Meeting. In order to vote personally
shares held in street name, such persons must obtain a proxy from the broker.
Under the rules of the NYSE, brokers who hold shares of RSi Common Stock in
street name for customers may not vote such shares with respect to approval and
adoption of the Merger Agreement and the transactions contemplated thereby
without specific voting instructions from such customers. Shares for which a
broker withholds authority to vote (broker non-votes) will not be considered
present at the Special Meeting with respect to the proposal to approve and adopt
the Merger Agreement and the transactions contemplated thereby, and such broker
non-votes will have the effect of votes against the proposal. The proxy card
also confers discretionary authority on the individuals appointed by the RSi
Board and named on the proxy card to vote shares represented thereby on any
other matter that is properly presented for action at the Special Meeting.
Any stockholder who executes and returns a proxy card may revoke such proxy
at any time before it is voted by (i) notifying in writing the Corporate
Secretary of RSi at 1501 Moran Road, Sterling, Virginia 20166, (ii) granting a
subsequent proxy, or (iii) appearing in person and voting at the Special
Meeting. Attendance at the Special Meeting will not in and of itself constitute
revocation of a proxy.
Each participant and beneficiary in the RSi Employee Stock Ownership Plan
(the "ESOP") will receive a form to be used to instruct the trustees of the ESOP
how to vote the RSi Common Stock held by the ESOP that is allocated to such
participant or beneficiary. The ESOP provides that each participant or
beneficiary shall direct the trustees of the ESOP as to the manner in which
shares allocated to such participant or beneficiary are to be voted. The ESOP
provides that the trustees will vote such shares as instructed. The ESOP does
not contain a provision instructing the trustees of the ESOP as to the voting of
allocated shares for which the trustees have not received directions from the
applicable participant or beneficiary. The trustees will vote such shares in a
manner consistent with the voting of the allocated shares for which directions
have been received unless, in the trustees' opinion, such action would be
inconsistent with their
2
<PAGE>
fiduciary duties to the ESOP or otherwise inconsistent with applicable
regulations. The ESOP also provides that the trustees of the ESOP shall vote all
unallocated shares in a manner consistent with the voting of the allocated
shares unless, in the trustees' opinion, such action would be inconsistent with
their fiduciary duties to the ESOP or otherwise inconsistent with applicable
regulations. The trustees of the ESOP are Mark D. Funston and Anita Stutzman,
officers of RSi, and George Reed, all of whom are employees of RSi. See "THE
MERGER -- Interests of Certain Persons in the Merger; Employment Agreements."
The directions of participants and beneficiaries regarding the voting of the
shares allocated to them will not be disclosed to COMSAT, RSi or the trustees of
the ESOP, and will be tabulated by Wachovia Bank of North Carolina, N.A., the
transfer agent of the RSi Common Stock (the "Transfer Agent"). See "RSi TRANSFER
AGENT."
To be effective, directions to the trustees of the ESOP must be received by
the Transfer Agent at Wachovia Corporate Trust, 301 North Church, Second Floor,
Winston-Salem, North Carolina 27102, Attention: Stock Transfer, by the close of
business (5:00 p.m. EDT) on June 2, 1994. Directions to the trustees received
after the close of business on June 2, 1994, or received at a different address,
will not be effective. A participant or beneficiary in the ESOP who is otherwise
an RSi stockholder should (i) complete and return directions to the ESOP
trustees with respect to RSi Common Stock held by the ESOP that is allocated to
such participant or beneficiary and (ii) complete and return the enclosed proxy
with respect to such other RSi Common Stock.
No vote of the shareholders of COMSAT is required to approve or adopt the
Merger Agreement or the transactions contemplated thereby or to authorize the
issuance of COMSAT Common Stock in the Merger.
OWNERSHIP OF RSI COMMON STOCK
As of the Record Date, RSi's directors, executive officers and their
affiliates as a group owned 3.32% of the shares of RSi Common Stock outstanding
and entitled to vote at the Special Meeting, including 32,808 shares held in the
executive officers' accounts in the ESOP. As of the Record Date, the ESOP owned
10.63% of the shares of RSi Common Stock outstanding and entitled to vote at the
Special Meeting, of which 407,799 shares (4.92% of the shares of RSi Common
Stock outstanding and entitled to vote at the Special Meeting) have been
allocated to participants and beneficiaries and 473,273 shares (5.71% of the
shares of RSi Common Stock outstanding and entitled to vote at the Special
Meeting) are unallocated. The trustees of the ESOP are Mark D. Funston and Anita
M. Stutzman, officers of RSi, and George Reed, all of whom are employees of RSi.
See "THE SPECIAL MEETING -- Voting Rights."
As of the Record Date, COMSAT held 404,500 shares of RSi Common Stock,
representing approximately 4.9% of the votes entitled to be cast by holders of
RSi Common Stock at the Special Meeting.
Since the date as of which information was presented in the proxy statement
for RSi's 1993 annual meeting of stockholders, there have been changes in the
beneficial ownership of certain beneficial owners of RSi Common Stock.
The only persons known to RSi to be beneficial owners of more than 5% of the
RSi Common Stock as of the Record Date are as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
- ------------------------------------------------------------------------- -------------------- ----------
<S> <C> <C>
Trustees of the Radiation Systems, Inc................................... 473,273(1) 5.71%
Employee Stock Ownership Plan
1501 Moran Road
Sterling, VA 20166
<FN>
- ------------------------
(1) The trustees shall vote such shares, and such of the 407,799 allocated
shares for which no direction has been received, in a manner which is
proportionate with the voting of such of the 407,799 shares which have
been allocated to participants and beneficiaries for which voting
direction has been received,
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
unless, in the trustees' opinion, such action would be inconsistent with
their fiduciary duties to the ESOP or otherwise inconsistent with
applicable regulations. See "THE SPECIAL MEETING -- Voting Rights."
</TABLE>
The following table sets forth the beneficial ownership of RSi Common Stock
as of the Record Date by all RSi directors, by each of the named RSi executive
officers and by all directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT & NATURE OF
BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP(1)(2) CLASS
- ---------------------------------------------------------------------------- ------------------------ -------------
<S> <C> <C>
DIRECTORS
Calhoun J. Killeen.......................................................... 18,250 *
Lee M. Paschall............................................................. 30,687 *
Irvin G. Ray................................................................ 23,450 *
John D. Sanders............................................................. 23,325 *
EXECUTIVE OFFICERS
Richard E. Thomas (3)....................................................... 161,960(4) 1.9%
Junius H. Arnold, Jr........................................................ 16,045(4) *
Mark D. Funston............................................................. 28,731(4) *
R. Doss McComas............................................................. 28,682(4) *
Marvin D. Shoemake.......................................................... 32,007(4) *
All directors and executive officers as a group (16 persons)................ 453,617(4) 5.36%
<FN>
- ------------------------
* Less than 1%.
(1) Includes shares that may be acquired within 60 days of the Record Date
upon exercise of outstanding options as follows: Mr. Killeen, 18,250
shares; Mr. Paschall, 10,000 shares; Mr. Ray, 20,000 shares; Mr. Sanders,
20,000 shares; Mr. Funston, 20,000 shares; Mr. McComas, 20,000 shares; Mr.
Shoemake, 10,000 shares; and all directors and executive officers as a
group, 178,250 shares. Does not include shares subject to outstanding
options containing change-in-control acceleration provisions that have
been waived by the holders thereof as follows: Mr. Funston, 20,000 shares;
Mr. McComas, 20,000 shares; Mr. Shoemake, 20,000 shares; and all directors
and executive officers as a group, 90,000 shares. See "THE MERGER --
Interests of Certain Persons in the Merger; Employment Agreements."
(2) Mr. Paschall has sole voting and investment power for 19,187 shares; Mr.
Sanders, for 3,325 shares; Mr. Funston, for 6,450 shares; Mr. Shoemake,
for 19,184 shares; Mr. McComas, for 1,901 shares; and Mr. Thomas, for
22,500 shares. Mr. Paschall has shared investment power by virtue of his
wife's ownership and will of 1,500 shares. Mr. Ray has shared voting and
investment power with respect to 3,450 shares; Mr. Arnold, by trust,
12,875 shares; Mr. McComas, 4,500 shares; and Mr. Thomas, 133,810 shares.
Mr. Thomas disclaims beneficial ownership of an additional 7,099 shares
owned by his brother and adult children.
(3) Mr. Thomas is also a director of RSi.
(4) The shares of RSI Common Stock held in the executive officers' ESOP
accounts are included as follows: Mr. Thomas, 5,650 shares; Mr. Arnold,
3,170 shares; Mr. Funston, 2,281 shares; Mr. McComas, 2,281 shares; Mr.
Shoemake, 2,823 shares; and all directors and executive officers as a
group, 32,808 shares.
</TABLE>
4
<PAGE>
THE MERGER
THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN ASPECTS OF THE MERGER. THIS
SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE MERGER AGREEMENT, WHICH IS ATTACHED TO THIS PROXY
STATEMENT/PROSPECTUS AS EXHIBIT A AND IS INCORPORATED HEREIN BY REFERENCE.
GENERAL DESCRIPTION OF THE MERGER
On the Effective Date (as defined below under "-- Closing; Effective Date"),
RSi will be merged with and into CTS America, and RSi will cease to exist as a
separate corporation. CTS America will be the surviving corporation in the
Merger and will continue as a wholly owned subsidiary of COMSAT.
On the Effective Date, each share of RSi Common Stock then outstanding will
be converted into that fraction of a fully paid and non-assessable share of
COMSAT Common Stock equal to the Conversion Fraction, which shall not be less
than .638 nor greater than .780, except that all shares of RSi Common Stock
owned by RSi, COMSAT or any subsidiaries of either of them will be cancelled
pursuant to the Merger Agreement. No fractional shares of COMSAT Common Stock
will be issued in the Merger, and holders of RSi Common Stock whose shares are
converted in the Merger will be entitled to a cash payment in lieu of fractional
shares of COMSAT Common Stock as described under "-- No Fractional Shares."
A description of the relative rights, privileges and preferences of the
COMSAT capital stock, including certain differences between the rights of
holders of COMSAT Common Stock and RSi Common Stock, is set forth under
"DESCRIPTION OF COMSAT CAPITAL STOCK" and "COMPARISON OF RIGHTS OF SHAREHOLDERS
OF RSi AND COMSAT."
BACKGROUND OF THE MERGER
In 1991, in connection with RSi's strategy of developing a full systems
integration capability and expanding into international markets, Richard E.
Thomas, the Chairman of the Board, President and Chief Executive Officer of RSi,
indicated to COMSAT that RSi would be interested in acquiring COMSAT's systems
integration business, COMSAT Technology Services ("CTS"). On several occasions
in 1991 and 1992, Mr. Thomas and Bruce L. Crockett, COMSAT's President,
discussed the businesses of RSi and CTS and the possibility that in the future
COMSAT might be interested in pursuing business transactions with RSi. Over the
course of these discussions, Mr. Thomas and Mr. Crockett considered the possible
acquisition of CTS by RSi, the possible acquisition of RSi by COMSAT and teaming
or subcontracting arrangements between RSi and COMSAT. In addition, in April
1992, C. Thomas Faulders, III, Vice President and Chief Financial Officer of
COMSAT, met with Mr. Thomas to learn more about RSi's business and operations.
Further, Mr. Crockett arranged to give Mr. Thomas information regarding CTS's
business and operations.
Mr. Thomas from time to time advised the RSi Board of his discussions with
Mr. Crockett in 1991 and 1992 and the possibility that at some time in the
future COMSAT might be interested in a business combination with RSi. The
specific structure or terms of a transaction, however, were not discussed during
this period.
In March 1993, Mr. Crockett indicated to Mr. Thomas that Mr. Crockett was
now prepared to talk further regarding a possible acquisition of RSi by COMSAT
if Mr. Thomas were interested in such a transaction with COMSAT and if Mr.
Thomas would be willing to commit to heading up a combination of RSi and CTS.
Mr. Thomas and Mr. Crockett then discussed COMSAT's interest in such an
acquisition and Mr. Thomas's continued interest in acquiring CTS, with a focus
on the operations and potential earnings of the combined businesses of RSi and
CTS and the potential ability of Mr. Thomas and RSi management to reduce
overhead and other costs and increase the profitability of CTS. However, no
specific terms of a transaction were discussed and no formal proposal was made.
Mr. Thomas advised the RSi Board of his continuing discussions with Mr. Crockett
and the RSi Board authorized Mr. Thomas to continue these discussions with Mr.
Crockett, although the authorization did not include authority to negotiate a
specific business transaction between RSi and COMSAT. Mr. Thomas and Mr.
Crockett continued their discussions with a meeting in early June 1993 and
another meeting in late July 1993. Mr. Thomas and Mr. Crockett met
5
<PAGE>
again in mid-September 1993 and Mr. Thomas expressed an interest in having Mr.
Crockett join the RSi Board. Mr. Crockett subsequently informed Mr. Thomas that
he would decline to be considered for a seat on the RSi Board.
Beginning in late June 1993, COMSAT began to acquire shares of RSi Common
Stock through open market purchases. By mid-November 1993, COMSAT had acquired
404,500 shares (approximately 4.9%) of RSi Common Stock, at an average cost per
share of $12.60, and Mr. Crockett informed Mr. Thomas of COMSAT's acquisition of
RSi Common Stock. The Board of Directors of COMSAT (the "COMSAT Board") was
advised of the discussions between Mr. Crockett and Mr. Thomas at the COMSAT
Board meeting on November 19, 1993, and authorized Mr. Crockett to discuss an
acquisition of RSi by COMSAT with Mr. Thomas.
In early December 1993, Mr. Crockett and Mr. Thomas traveled together to
China and Hong Kong to meet with various Chinese officials and to consider
possible business opportunities in the Far East for their respective companies.
During this trip Mr. Crockett and Mr. Thomas briefly discussed a possible
acquisition of RSi by COMSAT; however, no specific terms of a possible business
combination between COMSAT and RSi were negotiated and Mr. Crockett indicated to
Mr. Thomas that they should have further discussions on their return. Mr.
Crockett and Mr. Thomas continued to talk during December 1993, but no specific
terms for a business combination were discussed or negotiated and no specific
proposal was made.
On January 3, 1994, Mr. Faulders met with Mr. Thomas to inform him that
COMSAT had prepared an internal evaluation of RSi that valued RSi at a range
between $15 and $20 a share, but no proposal was made by Mr. Faulders or Mr.
Thomas. On January 6, 1994, Mr. Crockett met with Mr. Thomas and informed him
that COMSAT wished to acquire RSi, subject to COMSAT Board approval. Mr.
Crockett told Mr. Thomas that COMSAT would want Mr. Thomas to head up a division
of COMSAT that would combine the operations of RSi and CTS, and that Mr. Thomas
was to bring his management approach to the newly combined division. During the
meeting they discussed the possible consideration COMSAT might be willing to pay
for RSi, and tentatively agreed that COMSAT would consider an offer as high as
$20 a share for RSi Common Stock, depending upon the terms of the transaction.
Mr. Thomas and Mr. Crockett agreed that they would consult further with their
respective Boards of Directors concerning COMSAT's desire to acquire RSi.
On January 7, 1994, Mr. Thomas met informally with John D. Sanders and Lee
M. Paschall, directors of RSi, Mark D. Funston, Vice President and Chief
Financial Officer of RSi, and Anita M. Stutzman, Corporate Secretary of RSi, and
on January 10, 1994 Mr. Thomas met informally with Calhoun J. Killeen, Mr.
Paschall and Mr. Sanders, directors of RSi, Mr. Funston and legal advisors of
RSi. At the January 7 and 10, 1994 meetings, Mr. Thomas and the directors and
officers of RSi present at the meetings reviewed the discussions between Mr.
Thomas and Mr. Crockett regarding the possible acquisition of RSi by COMSAT,
including the discussions between Mr. Thomas and Mr. Crockett on January 6, 1994
regarding the consideration that COMSAT would consider paying to RSi
stockholders in the transaction, and determined that it was appropriate to
convene a meeting of the RSi Board to consider the possible business combination
and, if a decision were made by the RSi Board to pursue such combination, to
retain a financial advisor for RSi. Mr. Thomas indicated to the members of the
RSi Board that he would pursue $20 in value of COMSAT Common Stock for each
share of RSi Common Stock. Mr. Thomas consulted by telephone with Irvin G. Ray,
a director of RSi, and with Mr. Killeen regarding the matters discussed at the
January 7, 1994 meeting, and with Mr. Ray regarding the matters discussed at the
January 10, 1994 meeting.
On January 11, 1994, Mr. Faulders presented to Mr. Thomas and Mr. Funston
certain terms and conditions of a proposed combination, including an exchange of
2/3 of a share of COMSAT Common Stock for each share of RSi Common Stock in a
transaction to be structured as a tax-free reorganization, a stock option to
COMSAT to acquire 19.99% of the RSi Common Stock at $20 per share if RSi were
acquired by or entered into an agreement to be acquired by a party other than
COMSAT, a termination fee of $5 million plus actual expenses of up to $5 million
payable to COMSAT by RSi if the combination did not occur due to RSi
effectuating or agreeing to effectuate a combination with another party, a
requirement that Mr. Thomas execute a three-year employment agreement with
COMSAT to ensure that his services would be available to
6
<PAGE>
the combined entity and a prohibition on RSi's solicitation, discussion or
negotiation of acquisition or other business combination proposals from any
other person. Mr. Faulders explained that the 2/3 ratio would provide a value of
$20 per share to RSi stockholders if COMSAT Common Stock were trading at $30 per
share, but that the actual value of the consideration to RSi stockholders would
vary depending upon the actual COMSAT stock price. During Mr. Faulders'
presentation, Mr. Thomas and Mr. Funston presented an alternative proposal of an
exchange of $20 in value of COMSAT Common Stock for each share of RSi Common
Stock, but no less than .67 shares and no more than .75 shares of COMSAT Common
Stock for each share of RSi Common Stock.
At a meeting on January 14, 1994, the RSi Board reviewed the COMSAT proposal
and the alternative proposal made by Mr. Thomas and Mr. Funston to Mr. Faulders
on January 11, 1994, determined that evaluation of the proposals was appropriate
and authorized Mr. Thomas to engage Alex. Brown & Sons Incorporated ("Alex.
Brown") to act as financial advisor to RSi for the proposed transaction. On
January 15, 1994, RSi retained Alex. Brown as its financial advisor, and the RSi
directors, Mr. Funston and R. Doss McComas, Vice President, Strategic Planning
and International Marketing of RSi, met with Alex. Brown to discuss the proposed
transaction. On January 16, 1994, RSi and COMSAT entered into a confidentiality
agreement and began to exchange due diligence information.
During the week of January 17, 1994, Mr. Thomas, Mr. Funston and Mr.
McComas, as the principal representatives of RSi, and Alex. Brown, as financial
advisor to RSi, and Mr. Crockett and Mr. Faulders, as the principal
representatives of COMSAT, and Goldman, Sachs & Co. ("Goldman, Sachs"), as
financial advisor to COMSAT, and the respective legal advisors to RSi and
COMSAT, began to discuss in greater detail the possible terms of the proposed
transaction. These possible terms included the COMSAT proposal of a fixed
exchange ratio of 2/3 of a share of COMSAT Common Stock for each share of RSi
Common Stock, and RSi's proposal of an exchange of $20 in value of COMSAT Common
Stock for each share of RSi Common Stock, as well as other proposed provisions
of the Merger Agreement, including the right of the RSi Board to consider and
respond to unsolicited proposals from other persons for the acquisition of or
other business combination with RSi, the terms of the option to purchase RSi
Common Stock that COMSAT required in connection with the proposed transaction,
and the terms of other related documents, with the intent of agreeing upon terms
to be presented to the Board of Directors of each of RSi and COMSAT for
evaluation and approval. Further, Mr. Crockett and Mr. Thomas met on the evening
of January 19, 1994 to discuss the matters under negotiation. The principal
representatives of RSi and COMSAT, and their respective financial advisors and
legal advisors, also met on several occasions to gather and exchange information
regarding the management, business, operations, financial condition and
prospects of each of the companies. As part of this exchange of information, RSi
made available to COMSAT and Goldman, Sachs the preliminary financial results of
its quarter ended December 31, 1993, which results were publicly announced on
January 31, 1994. The members of the RSi Board were kept informally advised of
the discussions of the proposed terms of the transaction during this period. The
COMSAT Board received a presentation from COMSAT's management, legal counsel and
Goldman, Sachs regarding the proposed transaction and the status of the
negotiations and due diligence on RSi on the evening of January 20, 1994.
During the period from January 17 to January 30, 1994, Mr. Crockett, Mr.
Faulders and Steven F. Bell, Vice President, Human Resources and Organization
Development of COMSAT, and Mr. Thomas, Mr. Funston and Marvin Shoemake, a Group
Vice President of RSi, and their respective legal advisors, discussed COMSAT's
requirement that Mr. Thomas be obligated to remain employed by the combined
business for a period of at least three years, COMSAT's desire to retain certain
key members of RSi management, and the terms under which Mr. Thomas and such key
employees would be retained by COMSAT. Mr. Thomas, Mr. Funston and Mr. Shoemake
proposed to retain substantially all of the terms of the employment agreements
between RSi and Mr. Thomas and such key employees, but COMSAT required that such
agreements be modified extensively. For a description of the employment
agreements with RSi and the employment agreements with COMSAT, see "-- Interests
of Certain Persons in the Merger; Employment Agreements." Mr. Thomas, Mr.
Funston and Mr. Shoemake also discussed with COMSAT employment and benefits
related issues for all RSi employees. See "-- Interests of Certain Persons in
the Merger; Employment Agreements" and "-- The Merger Agreement -- STOCK
OPTIONS; EMPLOYEE BENEFITS."
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On January 24, 1994, Mr. Crockett and Mr. Faulders met with Mr. Thomas and
Mr. Funston in the morning to review the status of the negotiations. During this
meeting they tentatively agreed, subject to further consultation with their
respective financial advisors and Boards of Directors, to an exchange ratio of
2/3 of a share of COMSAT Common Stock for each share of RSi Common Stock in the
Merger, a termination fee of $5 million plus actual expenses of up to $2.5
million, a provision permitting RSi, subject to certain terms and conditions, to
respond to and negotiate with other persons that made an unsolicited offer for
an acquisition or other business combination with RSi and a stock option for
COMSAT that would give COMSAT the right to purchase 15% of RSi Common Stock at a
price to be based on the exchange ratio. On the same day of this meeting, the
trading price for COMSAT Common Stock declined following news reports of solar
interference causing the in-orbit failure of two Telesat Canada satellites and
of the launch failure of two European satellites. Throughout the week of January
24, 1994, Mr. Thomas informed the members of the RSi Board of the negotiations
occurring between COMSAT and RSi and their respective advisors.
On January 26, 1994, Mr. Crockett made a presentation to the RSi Board
regarding COMSAT's business and operations, COMSAT's philosophy regarding the
management of companies that it acquired, the synergies between the businesses
of RSi and COMSAT and Mr. Crockett's belief that the decline in the market price
of COMSAT Common Stock earlier that week was attributable to the aforementioned
news reports. Mr. Crockett noted that the satellite and launch failures did not
pertain to COMSAT's assets. Mr. Crockett then left and the RSi Board considered
the proposed ratio of 2/3 of a share of COMSAT Common Stock to be exchanged for
each share of RSi Common Stock in the Merger and other proposed terms of the
transaction. Alex. Brown presented to the RSi Board a description of the
information that Alex. Brown had compiled and developed in order to prepare its
opinion to the RSi Board regarding the fairness, from a financial point of view,
of the consideration to be paid to the RSi stockholders in the proposed
transaction. In light of the decrease in the market price of COMSAT Common Stock
earlier that week, the RSi Board instructed Mr. Thomas and Alex. Brown to seek
an exchange ratio based upon $18.75 in market value of COMSAT Common Stock with
terms that would give RSi stockholders some protection from further declines in
the price of COMSAT Common Stock. From January 26 to January 28, 1994, the
principal representatives of COMSAT and RSi and their respective financial
advisors negotiated an exchange ratio based upon $18.25 in market value of
COMSAT Common Stock (based on the average closing price of the COMSAT Common
Stock on the NYSE Composite Tape during the 20 trading days ending five trading
days prior to the date of the Closing) for each share of RSi Common Stock with a
provision that no less than .638 shares of COMSAT Common Stock and no more than
.780 shares of COMSAT Common Stock would be exchanged for each share of RSi
Common Stock. The principal representatives of COMSAT and RSi and their
respective legal advisors also negotiated the provisions of the Merger Agreement
and of the stock option agreement (the "Stock Option Agreement") by which COMSAT
would be granted an option to acquire up to 15% of the outstanding RSi Common
Stock at $18.25 per share.
On January 29, 1994, the COMSAT Board met to consider the Merger Agreement,
the Stock Option Agreement and the transactions contemplated thereby and, based
upon the advice of COMSAT's management, Goldman, Sachs and legal counsel,
approved them unanimously.
On January 30, 1994, the RSi Board met to consider the Merger Agreement, the
Stock Option Agreement and the transactions contemplated thereby.
Representatives of Alex. Brown were present at the meeting and presented oral
and written reports regarding Alex. Brown's financial analysis of RSi and COMSAT
and its opinion as to the fairness, from a financial point of view, of the
consideration to be received by RSi's stockholders in the proposed transaction.
See "-- Opinion of RSi's Financial Advisor" for a summary of the written and
oral presentations made by Alex. Brown to the RSi Board. The RSi Board and Mr.
Funston, Mr. McComas and Mr. Shoemake, who were present at the meeting, asked
questions of Alex. Brown during the presentation, including whether any of the
information regarding the proposed transaction reviewed by Alex. Brown in
preparing its analysis was outside the ranges of transactions or companies
viewed as comparable by Alex. Brown. In response to this question, Alex. Brown
noted that based upon the RSi stock price on the trading day four weeks prior to
the January 30, 1994 meeting, the premium to RSi's stock price was 19.7%, which
was outside the range for other transactions Alex. Brown had reviewed, although
the premium to RSi's stock price on the trading day immediately prior to the
January 30, 1994
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meeting was 35.2%, which was within the range for such transactions. Alex. Brown
also noted that the price/ earnings multiple for the COMSAT Common Stock was at
the low end of the range of companies that Alex. Brown viewed as comparable to
COMSAT. Other questions included the mechanics of the operation of the upper and
lower limits on the ratio for the exchange of COMSAT Common Stock for RSi Common
Stock in the Merger and whether a valuation of RSi based upon possible break-up
values would be appropriate given the nature of RSi's business. In response to
the latter question, Alex. Brown stated that a break-up analysis was not
appropriate given the structure of RSi's business. At the conclusion of its
presentation and the questions, Alex. Brown advised the RSi Board that in Alex.
Brown's opinion the consideration to be paid to RSi stockholders in the Merger
was fair, from a financial point of view. The RSi Board considered the
information presented in the Alex. Brown analysis and Alex. Brown's opinion that
the consideration to be received by RSi's stockholders in the proposed
transaction was fair, from a financial point of view. The members of the RSi
Board also considered the factors described under "-- Recommendation of the RSi
Board of Directors; RSi's Reasons for the Merger." The RSi Board unanimously
approved the Merger Agreement, the Stock Option Agreement and the transactions
contemplated thereby, and directed that the Merger Agreement be submitted to
RSi's stockholders for their approval with the RSi Board's unanimous
recommendation that the RSi stockholders approve the Merger Agreement. COMSAT
was notified of such approval by the RSi Board, and the Merger Agreement, the
Stock Option Agreement and other related agreements were executed by COMSAT and
RSi on January 30, 1994. On January 31, 1994, COMSAT and RSi issued a joint
press release stating that they had entered into a definitive agreement for
COMSAT to acquire RSi. On January 28, 1994, the trading day immediately prior to
the public announcement of the Merger, the closing sale price of RSi Common
Stock was $13.50. See "COMPARATIVE PER SHARE MARKET DATA" for a comparison of
the consideration to be received pursuant to the Merger by holders of RSi Common
Stock if the Merger had been consummated on January 28, 1994 and on May 2, 1994
(the most recent practicable date).
During the week of April 11, 1994, RSi disclosed to COMSAT and its financial
advisor the preliminary financial results of RSi's quarter ended March 31, 1994.
RSi announced those results to the public on April 26, 1994. See "INFORMATION
CONCERNING RSi -- Recent Developments."
On April 23, 1994, the RSi Board met with Alex. Brown and RSi's legal
advisors to review the recent market performance of COMSAT Common Stock and RSi
Common Stock, and COMSAT's recently announced financial results for the quarter
ended March 31, 1994. See "INFORMATION CONCERNING COMSAT -- Recent
Developments." The RSi Board also received a report from Mr. Funston on the RSi
financial results for the quarter ended March 31, 1994. See "INFORMATION
CONCERNING RSi -- Recent Developments."
On May 1, 1994, the RSi Board met with Alex. Brown and RSi's legal advisors
to review the recent market performance of COMSAT Common Stock and RSi Common
Stock. The RSi Board discussed the value of the consideration to be received by
RSi stockholders in the Merger based on the current level of the trading price
of the COMSAT Common Stock. The members of the RSi Board noted further that
based on the closing price of COMSAT Common Stock on the NYSE Composite Tape of
$21.25 per share on April 29, 1994, and assuming the Conversion Fraction were
the maximum of .780, the value the RSi stockholders would receive in COMSAT
Common Stock for each share of RSi Common Stock would be $16.58. Although Alex.
Brown did not reperform the analysis it conducted in January, Alex. Brown
advised the RSi Board that Alex. Brown had reviewed the current market price of
the COMSAT Common Stock and of the RSi Common Stock, the earnings releases for
COMSAT and RSi for the quarter ended March 31, 1994, trends in the stock market
generally and in the trading price of the stocks of companies that Alex. Brown
viewed as comparable to COMSAT and to RSi, and the value of the consideration to
be paid to the RSi stockholders in the Merger. Alex. Brown then confirmed to the
RSi Board that, based on a review of the foregoing information, Alex. Brown knew
of no reason to change its opinion that the consideration to be received by RSi
stockholders in the Merger was fair, from a financial point of view. The members
of the RSi Board noted that they continued to view the business combination with
COMSAT as a means of furthering RSi's strategy of developing a full systems
integration capability and expanding into international markets. The RSi Board
reconfirmed its previous determination that the terms of the Merger are fair to,
and in the best interests of,
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RSi and the stockholders of RSi. The RSi Board then reaffirmed its
recommendation that RSi stockholders vote for the approval and adoption of the
Merger Agreement and the transactions contemplated thereby, and authorized the
mailing of the Proxy Statement/Prospectus to RSi stockholders.
RECOMMENDATION OF THE RSI BOARD OF DIRECTORS; RSI'S REASONS FOR THE MERGER
The RSi Board believes that the terms of the Merger are fair to, and in the
best interests of, RSi and its stockholders. The RSi Board believes that the
procedures it employed in evaluating and approving the proposed transaction, and
determining to approve the Merger and to recommend the transaction to RSi
stockholders, including (i) seeking advice and information from its financial
advisor, Alex. Brown, (ii) seeking advice and information from its legal
advisors, (iii) monitoring the negotiations of the Merger and related
transactions with COMSAT by RSi management and its advisors, and (iv) evaluating
the information reasonably available to it were fair to RSi and the RSi
stockholders. The RSi Board also considered the employment and compensation
arrangements existing between RSi and its key officers and those negotiated
between COMSAT and RSi management described under "-- Interests of Certain
Persons in the Merger; Employment Agreements." The RSi Board unanimously has
approved the Merger Agreement and the transactions contemplated thereby and
unanimously recommends that the holders of RSi Common Stock vote FOR approval
and adoption of the Merger Agreement and the transactions contemplated thereby.
In 1989, RSi management focused on the need to pursue its strategy to
broaden RSi's business beyond its traditional core businesses. The strategy
included developing a full systems integration capability (including internal
capacity to manufacture additional components) to supplement RSi's expertise in
manufacturing high-quality antenna subsystems and feed systems for satellite
communications, entering into the international satellite and wireless
communications products business and diversifying into sales to the U.S.
government of commercial off-the-shelf satellite communications systems. To
further this strategy, RSi hired additional experienced systems integration
engineers and placed international marketing experts under contract with a newly
formed RSi international marketing operation. In 1991, in response to
uncertainties regarding future levels of U.S. government defense budgets and
other possible reductions by customers in the traditional core businesses for
RSi's products and services and increasing competition in RSi's product lines,
RSi's management decided to accelerate the implementation of this strategy. In
1991, RSi acquired CSA Limited, a U.K.-based manufacturer and marketer of
antennas, masts and related products, and PG Technologies, a U.K.-based
designer, manufacturer and marketer of optical-electronic measuring devices for
grinding machines, in order to provide visibility for RSi in the European and
other international markets. In 1993, RSi acquired Anghel Laboratories, which
designs, manufactures and markets microwave integrated subsystems and
specialized components (including a converter for use in satellite
communications systems).
After the discussions late in 1993 and early in 1994 between Mr. Thomas and
Mr. Crockett and members of RSi's and COMSAT's senior managements regarding a
possible business combination of RSi and COMSAT (see "-- Background of the
Merger"), the RSi Board re-evaluated RSi's progress in implementing its strategy
and evaluated whether RSi should continue to pursue its strategy independently
or should pursue a business combination with COMSAT to further its strategy and
in order to maximize stockholder values. When the discussions between Mr.
Crockett and Mr. Thomas resulted in a proposal from COMSAT that COMSAT acquire
RSi in a merger transaction in which RSi stockholders would receive COMSAT
Common Stock in exchange for their RSi Common Stock, the RSi Board further
determined that the proposed acquisition of RSi by COMSAT represented an
opportunity for RSi stockholders that should be evaluated.
In evaluating the COMSAT proposal, and in making its decision to enter into
and to recommend approval of the Merger Agreement and the transactions
contemplated thereby, the RSi Board considered the presentations made to the RSi
Board by Alex. Brown and the opinion of Alex. Brown that the consideration to be
received by RSi stockholders in the Merger was fair from a financial point of
view. See
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"-- Opinion of RSi's Financial Advisor" for a summary of the written and oral
presentations made by Alex. Brown to the RSi Board. Members of the RSi Board
also considered a number of other factors, including but not limited to the
following:
1. The future outlook for the business of RSi and the risks and costs
involved in realizing future growth and profitability if RSi remained an
independent entity, including uncertainties regarding future levels of U.S.
government defense budgets and the expenditures of financial and management
resources that would be required to expand RSi's business into international
markets.
2. COMSAT's size, international scope and sophisticated systems
integration experience and technical expertise would further RSi's strategy
of becoming a vertically structured international systems integration
competitor.
3. COMSAT's contacts and name recognition in the international systems
integration business would help alleviate the difficulties that RSi had
experienced in winning international contracts due to its lack of name
recognition among international customers.
4. The combination of RSi and COMSAT would provide greater potential
value, in the long term, for RSi's stockholders than RSi's remaining
independent.
5. RSI's stockholders would receive a significant premium over the
recent market price of the RSi Common Stock, and the terms of the Merger
Agreement would provide some protection against a decrease in the market
price of COMSAT Common Stock prior to the Effective Date of the Merger.
6. The information available to the RSi Board regarding the financial
condition, results of operations, earnings, dividends, assets, management
and business of each of the companies, on a historical and a prospective
basis, and current industry, economic and market conditions.
7. The historical market price per share of COMSAT Common Stock, the
historical market price per share of RSi Common Stock, the ratio at which
the RSi Common Stock would be exchanged for COMSAT Common Stock in the
Merger and the premium that this would represent, and the greater liquidity
of the COMSAT Common Stock.
8. By combining with COMSAT, RSi would have easier access to greater
financial resources for domestic and international expansion.
In addition, the RSi Board took into account all the terms and conditions of
the Merger Agreement and the Stock Option Agreement, taken as a whole. In view
of the variety of factors considered in connection with its evaluation of the
Merger, the RSi Board did not quantify or otherwise assign relative weights to
the individual factors considered in reaching its determinations.
THE RSI BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF RSI VOTE "FOR" THE
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY.
COMSAT'S REASONS FOR THE MERGER
The COMSAT Board believes that the Merger is in the best interests of COMSAT
and COMSAT's shareholders. Following the consummation of the Merger, COMSAT
intends to combine RSi with COMSAT's existing systems integration business,
COMSAT Technology Services ("CTS"). CTS is currently primarily an engineering
operation, and purchases all of its hardware from third party vendors, thus
increasing its cost and rendering it frequently unable to compete on price with
vertically integrated firms. COMSAT also has concluded that CTS lacks the
critical mass of business needed to spread the costs of maintaining technical
excellence over enough projects to remain price competitive. COMSAT believes
that combining CTS with RSi will allow COMSAT to reduce its cost of obtaining
hardware and improve both its systems engineering and its products through the
coordination and technical feedback created by having the systems engineers of
CTS and RSi and the hardware developers and manufacturers of RSi working
together, supported by the scientists of COMSAT Laboratories. In addition,
COMSAT believes that the combination of COMSAT's strong international reputation
for technical expertise and RSi's full line of hardware products, management
skills and low-cost manufacturing operations will create an entity that will be
an effective U.S. competitor in the international satellite communications
business.
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OPINION OF RSI'S FINANCIAL ADVISOR
In connection with the Merger, RSi retained Alex. Brown on January 15, 1994,
to act as RSi's financial advisor and to render its opinion as to the fairness,
from a financial point of view, of the consideration to be received pursuant to
the Merger by holders of RSi Common Stock (the "Consideration"). At the January
30, 1994 meeting of the RSi Board, at which the Merger Agreement and the
transactions contemplated thereby were approved by the RSi Board, Alex. Brown
rendered to the RSi Board its oral opinion regarding the fairness, from a
financial point of view, of the Consideration and delivered to the RSi Board a
written opinion, dated January 30, 1994, confirming the oral opinion.
The full text of Alex. Brown's written opinion dated January 30, 1994, which
includes the assumptions made, general procedures followed and matters
considered by Alex. Brown, is attached hereto as Exhibit C. Such written opinion
does not differ in any material respect from the opinion presented orally by
Alex. Brown to the RSi Board. STOCKHOLDERS SHOULD READ CAREFULLY THE ATTACHED
ALEX. BROWN WRITTEN OPINION AND THE DISCUSSION SET FORTH HEREIN FOR THE SCOPE
AND LIMITATIONS OF ALEX. BROWN'S REVIEW. ALEX. BROWN'S OPINION IS DIRECTED ONLY
TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE CONSIDERATION PAYABLE TO
STOCKHOLDERS OF RSI UNDER THE MERGER AGREEMENT AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY RSI STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT
THE SPECIAL MEETING.
In connection with its opinion, Alex. Brown reviewed certain publicly
available financial information concerning RSi and COMSAT. Alex. Brown held
discussions with members of the senior managements of RSi and of COMSAT
regarding the businesses and prospects of each company. In addition, Alex. Brown
(i) reviewed the historical reported prices and trading activity for the common
stock of RSi and of COMSAT, (ii) compared certain financial information for both
RSi and COMSAT with similar information for certain comparable companies whose
securities are publicly traded, (iii) compared certain stock market information
and valuations for both RSi and COMSAT with similar information for comparable
companies whose securities are publicly traded, (iv) reviewed the financial
terms of certain recent business combinations which Alex. Brown deemed
comparable to the Merger in whole or in part, (v) reviewed the terms of the
Merger Agreement and the Stock Option Agreement and certain related documents,
and (vi) performed such other studies and analyses and considered such other
factors as Alex. Brown deemed appropriate.
As discussed in its opinion, Alex. Brown did not independently verify the
information reviewed by it, and, for the purposes of its opinion, assumed and
relied upon the accuracy and completeness thereof. With respect to information
relating to the prospects of RSi and COMSAT, Alex. Brown assumed that such
information reflected the best currently available judgments and estimates of
the managements of RSi and of COMSAT as to the likely future financial
performance of their respective companies, and that such judgments and estimates
(and the assumptions and bases therefor) were reasonable. Alex. Brown did not
make nor was it provided with an independent evaluation or appraisal of the
assets of RSi or of COMSAT. Alex. Brown's opinion is based on market, economic
and other considerations as they existed and could be evaluated as of the date
of its written opinion.
In delivering its opinion to the RSi Board, Alex. Brown prepared and
delivered certain written materials. Such written materials contained various
valuation analyses as well as other information regarding RSi, COMSAT and other
comparative data and analyses Alex. Brown deemed relevant to its opinion. The
RSi internal estimates used by Alex. Brown in connection with its analyses of
the transaction and in rendering its written and oral opinions, and included in
the written materials prepared by Alex. Brown for the RSi Board, were based upon
the assumption that an accrual of recoveries for business interruption insurance
for tornado damage sustained at RSi's Largo, Florida facility in October 1992 in
the amount of $800,000 would be included in RSi's revenues, and therefore in its
operating income and, after the effect of taxes, its net income, for the quarter
ended December 31, 1993. Subsequent to the preparation of Alex. Brown's analyses
and the written materials for the RSi Board, RSi concluded that such an accrual
was not appropriate for that quarter. As a result, the information referred to
below that was based upon or includes such RSi internal estimates is presented
solely to describe the analyses performed by Alex. Brown and provided by Alex.
Brown to the RSi Board.
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Because the business interruption insurance proceeds were not accrued in the
quarter ended December 31, 1993, the information in the RSi internal estimates
for the quarter ended December 31, 1993 and the six-month period ended December
31, 1993 differs from RSi's publicly reported results for such periods and
therefore should not be relied upon for any purpose other than evaluating Alex.
Brown's analyses. The effect of the absence of such accrual on Alex. Brown's
analyses was discussed at the January 30, 1994 meeting of the RSi Board, and
Alex. Brown advised the RSi Board at the meeting that the absence of an accrual
for or the deferral of recognition of such business interruption insurance was
not deemed to be material by Alex. Brown and did not affect Alex. Brown's
ability to issue its opinion as to the fairness, from a financial point of view,
of the Consideration.
The following is a summary of Alex. Brown's written materials and oral
comments delivered to the RSi Board on January 30, 1994 concerning the proposed
Merger:
RSI HISTORICAL AND PROJECTED INCOME STATEMENTS. In reviewing RSi's
historical income statements, Alex. Brown noted that during the fiscal year
ended June 30, 1993, RSi experienced a decline in revenues, operating income and
net income of 4.2%, 6.6% and 3.3%, respectively, from the prior fiscal year. RSi
management had provided to Alex. Brown RSi's internal estimates for its results
of operations for the balance of fiscal year 1994 and for fiscal year 1995.
Based on RSi's internal estimates for the six months ended December 31, 1993,
RSi experienced a decline in revenues and net income of 14.3% and 11.8% compared
to the same period in 1992. Alex. Brown noted that for the fiscal year ending
June 30, 1994, RSi expected a growth in revenues of 3.3% compared to the prior
fiscal year, but expected further declines in operating income and net income
for the period when compared with the prior fiscal year of 6.2% and 9.4%,
respectively.
As a result of the recent and expected decline in its earnings, RSi
estimated a decline in earnings per share of approximately 8.9% for fiscal year
1994 compared to fiscal year 1993. Alex. Brown noted that RSi's internal
earnings per share estimates for the fiscal years ending June 30, 1994 and June
30, 1995 were below the earnings estimates for RSi as published by the
Institutional Brokers Estimating System ("IBES"). These IBES estimates are based
on earnings estimates by Merrill Lynch Pierce Fenner & Smith, which was the only
broker that provided earnings estimates on RSi for publication in IBES as of the
date of the Merger Agreement. Alex. Brown noted that disclosure to the market of
the December 1993 earnings results, and financial performance consistent with
the RSi internal estimate for the balance of fiscal year 1994 and for fiscal
year 1995, could have a negative effect on the trading price of RSi Common Stock
over such periods. Alex. Brown noted in this respect that the Consideration
represented a premium to RSi's Common Stock price as of the date of the Merger
Agreement of 35.2%.
STOCK PRICE ANALYSIS. Alex. Brown reviewed and analyzed the performance of
the per share market prices and trading volume of RSi Common Stock and COMSAT
Common Stock over the period from January 29, 1993 through January 27, 1994 (the
"Comparison Period") both separately and in relation to each other. Alex. Brown
also compared the daily closing prices of the common stocks of RSi and COMSAT
with the Standard & Poor's industrial average for 500 stocks (the "Standard &
Poor's 500 Index"), the NASDAQ Index and a composite index of certain other
publicly traded telecommunications companies that Alex. Brown deemed to be
substantially comparable to RSi and COMSAT (respectively, the "RSi Comparable
Companies" and the "COMSAT Comparable Companies") during the Comparison Period.
Alex. Brown noted that for substantially all of the Comparison Period the
RSi Common Stock had not performed as well as the Standard & Poor's 500 Index,
the NASDAQ Index or the index of RSi Comparable Companies. Alex. Brown commented
that this performance could be attributed in part to RSi's slowing growth in
revenues, operating income and earnings per share as well as its actual decline
for the most recently reported twelve months in revenues, operating income and
earnings per share. Alex. Brown noted that in view of RSi's December 1993
quarterly financial results that had not then been made publicly available, and
the projected financial performance for the balance of fiscal year 1994 and for
fiscal year 1995, RSi's stock price may continue to perform at levels below the
three indices discussed above. Conversely, for substantially all of the
Comparison Period, COMSAT Common Stock performed as well as or better than the
Standard & Poor's 500 Index, the NASDAQ Index and the index of COMSAT Comparable
Companies.
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Alex. Brown noted that over the most recent five-year period, COMSAT Common
Stock has generally performed as well as or better than the Standard & Poor's
500 Index, the NASDAQ Index and the index of COMSAT Comparable Companies.
Alex. Brown commented that the trading volume of COMSAT Common Stock was
substantially greater than that of RSi Common Stock and, therefore, ownership of
COMSAT Common Stock would provide greater liquidity. Additionally, the dividend
yield of 2.8% paid on COMSAT Common Stock was greater than the dividend yield of
0.8% for RSi Common Stock. Alex. Brown commented that the recent performance of
RSi Common Stock when compared with the three indices described above, the
recent and long-term performance of COMSAT Common Stock at levels at or above
the three indices described above and the greater dividend yield to holders of
COMSAT Common Stock were all factors to be considered by the RSi Board in
evaluating the Consideration. Lastly, Alex. Brown commented that the
Consideration represented a premium to RSi's Common Stock price as of the date
of the Merger Agreement of 35.2%. Further, Alex. Brown noted that the price of
$18.25 of COMSAT Common Stock for each share of RSi Common Stock is at a level
at which RSi's Common Stock has not traded since February 1989, except for a
brief three-week period in January and February 1992 when RSi's revenues and
earnings were growing at a substantially faster rate.
ANALYSIS OF CERTAIN OTHER PUBLICLY TRADED COMPANIES. Alex. Brown compared
certain financial information relating to RSi to corresponding data and ratios
from the RSi Comparable Companies. Such information included, among other
things, (i) equity market valuation ("Equity Market Value"), (ii) market value
adjusted for debt and cash ("Adjusted Market Value"), (iii) growth rates, (iv)
operating performance, (v) ratios of Adjusted Market Value to revenues and
operating income, each for the latest twelve-month period ("Trailing Twelve
Months") as derived from publicly available information; (vi) ratios of Equity
Market Value per share to earnings per share for the Trailing Twelve Months as
derived from publicly available information and to estimated earnings per share
for calendar years 1993 and 1994 as reported by the IBES; and (vii) book value.
Alex. Brown noted that, on a Trailing Twelve Months basis, the range of
multiples of Adjusted Market Value to revenues of the RSi Comparable Companies
is 0.3 to 1.8 with a mean of 1.1. RSi's multiple based on the value of the
Consideration is 1.3 and, therefore, is within this range. Alex. Brown noted
that, on a Trailing Twelve Months basis for each of the RSi Comparable
Companies, the range of multiples of Equity Market Value to earnings per share
of the RSi Comparable Companies is 11.3 to 47.9 with a mean of 23.2. RSi's
multiple based on the value of the Consideration is 15.0 and, therefore, is
within this range. Alex. Brown noted that the RSi Comparable Companies trade at
a range of multiples of Equity Market Value to estimated earnings per share for
calendar years 1993 and 1994 of 11.3 to 34.9 and 4.7 to 24.2, respectively, with
means of 20.0 and 16.5, respectively. RSi's multiples for the same periods based
on the value of the Consideration are 15.7 and 14.5 and, therefore, are within
the respective ranges. Alex. Brown noted that while RSi's Trailing Twelve Month
and projected calendar years 1993 and 1994 earnings multiples were relatively
low in the range of RSi Comparable Companies, the recent decline in RSi's
earnings and the projected continued earnings decline through fiscal year 1994
justified the multiples being below the mean of RSi Comparable Companies. Alex.
Brown also noted that the range of multiples of Equity Market Value to book
value of the RSi Comparable Companies at September 30, 1993 is 0.6 to 3.6 with a
mean of 2.1. RSi's multiple as of September 30, 1993 based on the value of the
Consideration is 1.7 and, therefore, is within this range.
ANALYSIS OF SELECTED COMPARABLE TRANSACTIONS. Alex. Brown reviewed the
financial terms of 22 selected acquisitions in the telecommunications industry
considered by Alex. Brown to be transactions comparable to the Merger. Of these
22, six were mergers or acquisitions of public companies. Alex. Brown noted that
the 22 transactions were effected at a range of multiples of "Adjusted Purchase
Price" (purchase price per share times the number of shares outstanding ("Equity
Purchase Price") plus long-term debt less cash and cash equivalents of the
acquired entity) to revenues of 0.1 to 6.7 with a mean of 1.5. The multiple of
Adjusted Purchase Price to revenues for the Merger is 1.3 and, therefore, is
within this range. These transactions also were effected at a range of multiples
of Adjusted Purchase Price to operating income of 6.1 to 32.5 with a mean of
11.7. The multiple of Adjusted Purchase Price to operating income for the Merger
is 10.7 and,
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therefore, is within this range. The 22 transactions also were effected at a
range of multiples of Equity Purchase Price to net income of 10.1 to 41.1 with a
mean of 22.1. The multiple of Equity Purchase Price to net income for the Merger
is 15.7 and, therefore, is within this range.
Additionally, the six transactions involving public companies were effected
at a range of premiums to the target's share price on the trading day prior to
announcement of the transaction of -5.5% to 42.4% with a mean of 19.0%. The
premium to RSi's share price on the trading day prior to announcement of the
Merger is 35.2% and, therefore, is within the range. The six transactions
involving public companies were effected at a range of premiums to the target's
share price four weeks prior to announcement of 25.4% to 100.0% with a mean of
44.4%. The premium to RSi's share price four weeks prior to announcement of the
Merger is 19.7% and, therefore, is outside of this range. Alex. Brown commented,
however, that the Consideration provided a significant premium to the RSi stock
price four weeks prior to announcement of the Merger, and the premium to the RSi
stock on the trading day prior to the announcement of the Merger was a more
accurate measure of the premium to market for the Merger.
Alex. Brown also reviewed seven transactions involving public companies in
the technology-related industry that were treated as a pooling of interests for
accounting purposes. These transactions were effected at a range of premiums to
the target's share price on the trading day prior to announcement of the
transaction of -5.5% to 57.4% with a mean of 37.3%. The premium to RSi's share
price on the trading day prior to announcement of the Merger is 35.2% and,
therefore, is within this range. Additionally, these transactions were effected
at a range of premiums to the target's average share price for the 30 days prior
to announcement of the transaction of 26.9% to 70.8% with a mean of 51.0%. The
premium to RSi's average share price for the 30 days prior to announcement of
the Merger is 26.5% and, therefore, is slightly outside this range. Alex. Brown
commented, however, that the Merger Consideration provided a significant premium
to the average price of RSi stock for the 30 days prior to announcement of the
Merger, and the premium to RSi stock on the trading day prior to announcement
was a more accurate measure of the premium to market for the Merger.
PRO FORMA CONTRIBUTION ANALYSIS. Alex. Brown analyzed the pro forma
contribution of RSi to the projected operating income and net income of the
combined entity for COMSAT's fiscal years ended December 31, 1993 through
December 31, 1995, and compared these percentages to the percent of the
outstanding stock of the combined entity that RSi stockholders would receive
upon consummation of the Merger when effected at a range of trading prices of
COMSAT Common Stock. Depending on the Conversion Fraction, upon consummation of
the Merger, RSi stockholders would receive COMSAT Common Stock equal to 11.6% to
13.8% of the outstanding common stock of the combined entity. With respect to
COMSAT's fiscal year ended December 31, 1993, it was estimated that RSi would
have contributed approximately 9.2% of the combined entity's operating income
and 11.2% of its net income. In addition, RSi would have contributed
approximately 11.3% of the combined entity's book value at December 31, 1993.
Since RSi stockholders would receive 11.6% to 13.8% of the outstanding stock of
the combined entity in the Merger, Alex. Brown commented that the RSi
stockholders' share of the combined entity would be commensurate with RSi's
contribution to the combined entity's results of operations and book value.
COMSAT HISTORICAL INCOME STATEMENTS. In reviewing COMSAT's historical
income statements, Alex. Brown noted that COMSAT experienced growth in revenues
in each fiscal year over the period from the fiscal year ended December 31, 1988
through the fiscal year ended December 31, 1992. Alex. Brown noted that although
COMSAT experienced declines in operating income and net income for the fiscal
years ended December 31, 1990 and December 31, 1992, such declines were due to
restructuring charges during those periods. For the nine months ended September
30, 1993, COMSAT experienced a growth in revenues, operating income and net
income of approximately 16.2%, 15.6% and 10.5%, respectively, over the
comparable period in the prior year when restructuring charges are excluded from
such prior period. COMSAT management provided Alex. Brown with internal
estimates as part of Alex. Brown's due diligence, including the information that
COMSAT's earnings per share for calendar year 1993 were estimated to be within
the range of estimates published by IBES of $1.79 to $1.95.
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The above summary of the written materials submitted and oral presentations
made by Alex. Brown does not purport to be a complete description of its
presentation to the RSi Board, nor does this summary purport to be a complete
description of the analyses performed by Alex. Brown in arriving at its opinion.
The preparation of a fairness opinion involves a determination as to the most
appropriate and relevant methods of financial analysis and the application of
these methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to partial analysis or summary description. Alex. Brown
believes that its analyses and the summary set forth above must be considered as
a whole and that selecting only portions of its analyses, without considering
all factors, or only portions of the above summary, without considering all
factors and analyses, could create an incomplete view of the process underlying
the analyses set forth in the written materials submitted by Alex. Brown and in
the opinion. The analyses performed by Alex. Brown are not necessarily
indicative of actual values or future results, which may be significantly more
or less favorable than those suggested by such analyses. Additionally, analyses
relating to the value of a business do not purport to be appraisals or to
reflect the prices at which the business may actually be sold. Furthermore,
Alex. Brown expresses no opinion as to the prices at which the COMSAT Common
Stock to be received by RSi stockholders in the Merger may trade, or the
liquidity of such stock, at any future time.
REASONS FOR SELECTION OF ALEX. BROWN. RSi selected Alex. Brown as its
financial advisor on the basis of Alex. Brown's experience and expertise in
transactions similar to the Merger, familiarity with the technology and
telecommunications industries and commitment to make specific senior personnel
available for the transaction, and following discussions by RSi with another
investment banker. Alex. Brown is a nationally recognized investment bank that
is regularly involved in the valuation of businesses and their securities in
connection with mergers and acquisitions.
ALEX. BROWN COMPENSATION. Pursuant to a letter agreement dated January 15,
1994 (the "Engagement Letter"), RSi engaged Alex. Brown to provide investment
banking advice and services to RSi in connection with RSi's review and analysis
of a potential business combination with COMSAT. See "-- Background of the
Merger." RSi agreed to pay Alex. Brown a retainer fee of $25,000 upon execution
of the Engagement Letter and a fee of $300,000 at the time of delivery of Alex.
Brown's opinion as to the fairness, from a financial point of view, of the
consideration payable to RSi's stockholders in the Merger. In addition, the
Engagement Letter provides that upon consummation of the Merger, RSi will pay
Alex. Brown an additional fee of $675,000, for a total of $1,000,000 in fees.
RSi has also agreed to reimburse Alex. Brown for reasonable out-of-pocket
expenses, including fees and disbursements of counsel, incurred by Alex. Brown
in carrying out its duties under the Engagement Letter, and to indemnify Alex.
Brown for certain liabilities in connection with its engagement.
SHAREHOLDER LITIGATION
In early February 1994, two purported class action lawsuits on behalf of RSi
stockholders were filed in Clark County state court in Nevada (the "Nevada
Lawsuits"). The Nevada Lawsuits seek injunctive relief, including enjoining the
Merger and the transactions contemplated by the Merger Agreement and the Stock
Option Agreement, and damages. The complaints in the Nevada Lawsuits name RSi,
the members of the RSi Board, and COMSAT as defendants. The complaints allege,
among other things, that the RSi Board breached its fiduciary duty to RSi
stockholders in approving the Merger Agreement and Stock Option Agreement and in
recommending the Merger to the RSi stockholders, and in failing to seek an
auction for RSi, and that the consideration to be paid in the Merger is unfair
and inadequate. RSi, the members of the RSi Board and COMSAT intend to contest
the Nevada Lawsuits vigorously. A condition to COMSAT's obligation to consummate
the Merger is the absence of any lawsuit challenging the Merger. Given the
status of the Nevada Lawsuits as of the date hereof, it is COMSAT's present
intention to waive this condition with respect to the Nevada Lawsuits. Neither
COMSAT nor RSi will be obligated to consummate the Merger under the Merger
Agreement if a judicial order enjoining the Merger is in effect. See "-- The
Merger Agreement -- CONDITIONS TO THE MERGER."
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INTERESTS OF CERTAIN PERSONS IN THE MERGER; EMPLOYMENT AGREEMENTS
In considering the recommendation of the RSi Board with respect to the
Merger Agreement and the transactions contemplated thereby, RSi stockholders
should be aware that certain members of RSi's management and the RSi Board have
certain interests in the Merger that are in addition to the interests of
stockholders of RSi generally. The RSi Board was aware of these interests and
considered them in evaluating whether to approve and recommend to the RSi
stockholders the Merger Agreement and the transactions contemplated thereby.
Following the Effective Date, COMSAT's existing systems integration
division, CTS, will be combined with the business of RSi to form COMSAT RSI
("COMSAT RSI"). Following the Effective Date, Richard E. Thomas, currently the
Chairman, Chief Executive Officer and President of RSi, will become President of
COMSAT RSI and an officer of COMSAT, and Mark D. Funston, R. Doss McComas,
Marvin D. Shoemake, Anita M. Stutzman and William A. Thomas, who are currently
officers of RSi (the "Five Officers"), each will become a Vice President of
COMSAT RSI.
Richard E. Thomas and each of the Five Officers currently have written
employment agreements with RSi (the "RSi Employment Agreements"). Mr. Thomas's
RSi Employment Agreement originated in 1982 and provided for a continuing
five-year term. Mr. Thomas's RSi Employment Agreement was amended and restated
in 1987. The 1987 RSi Employment Agreement with Mr. Thomas provided that Mr.
Thomas could retire to the post of "Chairman Emeritus" at any time after
attaining age 60, upon six months' written notice to RSi. As "Chairman
Emeritus," Mr. Thomas was to receive his full salary for 12 months, followed by
50% of his salary for 48 months. The 1987 RSi Employment Agreement also provided
for a termination allowance equal to 58 months' salary if RSi terminated Mr.
Thomas's employment for any reason other than incapacity. This amount was to be
paid in a lump sum if Mr. Thomas's employment was terminated in the event of a
hostile change in control. On August 27, 1992, the RSi Board agreed to extend
the retirement benefit period for Mr. Thomas by an additional five years at 50%
of full salary.
Mr. Thomas's RSi Employment Agreement was modified on November 20, 1993. The
1993 RSi Employment Agreement provides for a three-year term to end on November
20, 1996. The 1993 RSi Employment Agreement incorporates the extended retirement
benefits approved on August 27, 1992 and provides for a termination allowance
for 120 months, with the first 60 months at full salary and the second 60 months
at 50% of salary. The 1993 RSi Employment Agreement provides that this amount
would be paid in a lump sum in the event of a change of control, even if Mr.
Thomas did not terminate his employment.
The RSi Employment Agreements with the Five Officers provide for continuing
one-year terms. Prior to November 20, 1993, the RSi Employment Agreements with
the Five Officers each provided for a termination allowance for the Five
Officers equal to 10 months' salary if their employment was terminated by RSi
for a reason other than the employee's incapacity to perform his or her duties
or RSi's decision to wind up its business. The RSi Employment Agreements with
the Five Officers were amended on November 20, 1993 to increase the termination
allowance to 22 months' salary and to provide among other things that (i) upon a
change in control of RSi all outstanding stock options held by such persons
would become immediately exercisable 60 days before the effective date of the
change in control and (ii) if the employee voluntarily terminated employment
with RSi within one year following a change in control or was involuntarily
terminated by RSi within two years following a change in control, the
termination allowance would be paid in a lump sum.
The RSi Employment Agreements with Richard E. Thomas and each of the Five
Officers will terminate, and be superseded by employment agreements with COMSAT,
as described below, as of the Effective Date. The Five Officers have agreed to
waive the change-in-control provisions of the RSi Employment Agreements
described above. The change-in-control provisions of the RSi Employment
Agreements of Mr. Thomas and the Five Officers will not become effective.
COMSAT has entered into employment agreements with Richard E. Thomas and the
Five Officers which will become effective on the Effective Date. Pursuant to
COMSAT's agreement with Mr. Thomas, which RSi was required to use its best
efforts to cause Mr. Thomas to execute as a condition to COMSAT's
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obligation to consummate the Merger, Mr. Thomas will become President of COMSAT
RSI and is guaranteed employment for three years unless COMSAT (i) substantially
reduces his responsibilities, in which case he can leave voluntarily upon 60
days' notice, or (ii) determines he should be removed for cause. "Cause" is
defined in the agreement to mean (i) a continued and deliberate failure by Mr.
Thomas to perform his duties in a manner substantially consistent with the
manner prescribed by the COMSAT Board or the President of COMSAT (other than any
such failure resulting from physical or mental illness), which failure continues
for 10 days following receipt of written notice thereof from the COMSAT Board or
COMSAT's President, (ii) serious misconduct that is materially and demonstrably
injurious to COMSAT or its reputation, (iii) a conviction of a felony involving
a crime of moral turpitude, or (iv) disability or death. If Mr. Thomas
terminates the agreement voluntarily upon a reduction of his responsibilities as
described above, he must be paid in a lump sum (i) his then current base salary
through the remainder of the employment period and (ii) an amount equal to his
last bonus under COMSAT's Annual Incentive Plan multiplied by the number of
January months remaining in the employment period. The agreement provides that
Mr. Thomas will receive a minimum annual salary of $315,000 (which is his
current salary with RSi), subject to annual review for merit-based increases,
and guarantees him a minimum bonus of $100,000 in January 1995. Thereafter, Mr.
Thomas will be eligible to receive bonuses based upon his satisfactory
performance of goals to be agreed to in writing by him and the President of
COMSAT. The Agreement also provides that Mr. Thomas, like other COMSAT executive
officers, may defer up to 25% of his base salary and up to 100% of his bonus
under the COMSAT Directors and Executives Deferred Compensation Plan. The
agreement provides further that Mr. Thomas shall be entitled to receive
retention bonuses so long as he remains employed by COMSAT on the date such
bonuses are payable, as follows: (i) 90 days after the Effective Date, a
retention bonus of $50,000; (ii) on the first anniversary of the Effective Date,
a retention bonus of $50,000; (iii) on the second anniversary of the Effective
Date, a retention bonus of $50,000; and (iv) on the third anniversary of the
Effective Date, a retention bonus of $100,000.
The agreement with Richard E. Thomas also provides for Mr. Thomas to receive
fringe benefits generally made available by COMSAT to its senior management
group, such as participation in the COMSAT Split Dollar Insurance Plan (which
will provide Mr. Thomas an initial death benefit of $945,000, to be increased
5.5% annually each January during the employment period under the agreement),
the COMSAT 1990 Key Employee Stock Plan (the "COMSAT Option Plan"), the COMSAT
Employee Stock Purchase Plan, the COMSAT Dividend Reinvestment Plan and
financial counseling and planning services. In addition, Mr. Thomas shall be
entitled to immediate participation in COMSAT's Insurance and Retirement Plan
for Executives (the "COMSAT SERP"), and shall be deemed fully vested in such
plan on the Effective Date. Upon Mr. Thomas's retirement from COMSAT, the COMSAT
SERP will provide Mr. Thomas with an annuity for life equal to 60% of his
average annual compensation (salary and compensation under the Annual Incentive
Plan) during the 48 consecutive months (or shorter period of employment, as
applicable) of highest compensation, offset by certain other pension and
retirement benefits. Further, Mr. Thomas shall be provided with a car for
business and personal use consistent with his auto benefit previously provided
by RSi, and, in the event of termination, COMSAT has agreed to transfer title of
the car to Mr. Thomas at COMSAT's expense. The agreement provides further that
Mr. Thomas shall be granted options to purchase 80,000 shares of COMSAT Common
Stock and 18,500 Restricted Stock Awards under the COMSAT Option Plan.
Consistent with the terms of options and Restricted Stock Awards awarded to
other COMSAT employees under the COMSAT Option Plan, such options shall vest 25%
one year after the Effective Date, 25% two years after the Effective Date and
50% three years after the Effective Date and shall expire 10 years after the
Effective Date, and such Restricted Stock Awards will contain vesting provisions
based on objective performance standards adopted by the COMSAT Board and to be
approved by the COMSAT shareholders.
Under their employment agreements, each of the Five Officers are guaranteed
employment for three years unless COMSAT (i) should substantially reduce his or
her responsibilities as a Vice President of COMSAT RSI in which case he or she
can leave voluntarily upon 60 days' notice to COMSAT, or (ii) determines he or
she should be removed for "cause," which is defined in the same way as in Mr.
Thomas's agreement. If the former occurs, each of the agreements provide that
the Officer must be paid in a lump sum his or her then current base salary for
one year. Each of the Five Officers will receive a base salary equal to his or
her RSi salary plus $10,000 in lieu of certain reimbursement allowances
previously
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provided to such officers by RSi. The agreements provide that, consistent with
COMSAT's general practice for persons in similar positions, each of the Five
Officers shall be eligible to receive annual bonuses under the COMSAT Annual
Incentive Plan based upon performance and shall be entitled to participate in
COMSAT RSI's group life insurance plan, the COMSAT Option Plan, the COMSAT
Employee Stock Purchase Plan and the COMSAT Dividend Reinvestment Plan. The
agreements provide further that COMSAT RSI will pay the "employee's portion" of
each of the Five Officers' life, health and disability insurance coverage during
the term of their employment under the employment agreements. All of the
agreements other than Ms. Stutzman's also provide for retention bonuses as
follows: (i) 90 days after the Effective Date, a retention bonus of $25,000;
(ii) on the first anniversary of the Effective Date, a retention bonus of
$27,000; (iii) on the second anniversary of the Effective Date, a retention
bonus of $29,000; and (iv) on the third anniversary of the Effective Date, a
retention bonus of $31,500. Ms. Stutzman's agreement provides for retention
bonuses as follows: (i) 90 days after the Effective Date, a retention bonus of
$16,000; (ii) on the first anniversary of the Effective Date, a retention bonus
of $17,300; (iii) on the second anniversary of the Effective Date, a retention
bonus of $18,600; and (iv) on the third anniversary of the Effective Date, a
retention bonus of $20,200.
The agreements with each of the Five Officers other than Ms. Stutzman
further provide that each of such persons shall be granted options to purchase
7,000 shares of COMSAT Common Stock and 5,000 Restricted Stock Awards under the
COMSAT Option Plan. Ms. Stutzman's agreement provides that she shall receive
options to purchase 4,500 shares of COMSAT Common Stock and 3,200 Restricted
Stock Awards under the COMSAT Option Plan. Consistent with the terms of options
and Restricted Stock Awards awarded to other COMSAT employees under the COMSAT
Option Plan, such options shall vest 25% one year after the Effective Date, 25%
two years after the Effective Date and 50% three years after the Effective Date
and shall expire 10 years after the Effective Date, and such Restricted Stock
Awards will contain vesting provisions based on objective performance standards
adopted by the COMSAT Board and to be approved by the COMSAT shareholders.
Consistent with the treatment of all unexpired options to purchase RSi
Common Stock, RSi stock options held by the Five Officers will be assumed by
COMSAT on the Effective Date and converted into options to purchase COMSAT
Common Stock based on the Conversion Fraction. Richard E. Thomas holds no RSi
stock options. See "-- The Merger Agreement -- STOCK OPTIONS; EMPLOYEE
BENEFITS."
Concurrently with entering into the Merger Agreement, COMSAT agreed to enter
into a contract with each director of RSi (other than Richard E. Thomas and, for
the reason described below, Calhoun J. Killeen) to provide the benefits
specified in the "Board of Directors Retirement/Service Compensation" program of
RSi or the present value of such benefits determined using an interest rate not
to exceed eight percent per year. Under the RSi "Board of Directors
Retirement/Service Compensation" program, RSi directors who leave or retire from
the RSi Board in good standing may, with the approval of the RSi Board, become
directors emeritus and receive consulting payments. The payments constitute
between 25% and 80% of the annual retainer fees paid to RSi directors and are
paid for a period of three to five years following the director's retirement.
The payment schedule and term depend upon the director's time in service, with a
minimum of five years' service required as a condition of receipt of any
benefit. Under the terms of the program, Lee M. Paschall would be entitled to
annual payments of $14,400 for five years, John D. Sanders to annual payments of
$9,900 for five years, and Irvin G. Ray to annual payments of $9,000 for four
years. Mr. Killeen would not be entitled to any benefits because he does not
meet the minimum years of service requirement of the program.
Also concurrently with entering into the Merger Agreement, COMSAT agreed, if
the Merger is consummated, to indemnify, or cause CTS America to indemnify, to
the fullest extent provided in the RSi Articles and RSi By-Laws, the persons who
are, at any time from and including the date of the Merger Agreement through and
including the Effective Date, the directors and officers of RSi and the trustees
of the ESOP. In addition, COMSAT agreed that if the Merger is consummated and
there is then or thereafter instituted or pending any action or proceeding
challenging the Merger, or otherwise seeking to restrain or prohibit
consummation of the transactions contemplated by the Merger Agreement or seeking
to impose any material limitations on any provision of the Merger Agreement,
then, in addition to the indemnification
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described above, COMSAT will promptly advance expenses to such persons to the
fullest extent permitted by Nevada law as if such mandatory advancement were
provided for in the RSi Articles, except that COMSAT shall not require an
undertaking to repay such expenses as a condition to advancement. COMSAT also
agreed, if the Merger is consummated, to indemnify, or cause CTS America to
indemnify, to the fullest extent permitted by law, the trustees of the ESOP, and
to extend the coverage of COMSAT's fiduciary liability insurance to the trustees
of the ESOP. The trustees of the ESOP are Mark D. Funston and Anita M. Stutzman,
officers of RSi, and George Reed, all of whom are employees of RSi. See "THE
SPECIAL MEETING --Voting Rights."
THE MERGER AGREEMENT
THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN PROVISIONS OF THE MERGER
AGREEMENT. THIS SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT, WHICH IS ATTACHED TO THIS PROXY
STATEMENT/PROSPECTUS AS EXHIBIT A AND IS INCORPORATED HEREIN BY REFERENCE.
The Merger Agreement provides that, on the Effective Date, each outstanding
share of RSi Common Stock, other than shares owned by RSi, COMSAT or a
subsidiary of RSi or of COMSAT, will be converted into that fraction of a fully
paid and non-assessable share of COMSAT Common Stock equal to the Conversion
Fraction (the fraction determined by dividing $18.25 by the average closing
price of the COMSAT Common Stock on the NYSE Composite Tape during the 20
trading days ending five trading days prior to the date of the Closing;
PROVIDED, that the Conversion Fraction shall not be less than .638 and shall not
be greater than .780).
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
representations and warranties relating to, among other things, (i) each of
COMSAT's and RSi's and certain of their respective subsidiaries' organization
and similar corporate matters, (ii) each of COMSAT's and RSi's capital
structure, (iii) for each of COMSAT and RSi, the authorization, execution,
delivery and performance of the Merger Agreement and related matters, (iv) for
each of COMSAT and RSi, the absence of conflicts with articles of incorporation
or bylaws, or violations of any agreements or court or administrative orders,
where such violations would have a material adverse effect on COMSAT's or RSi's
business, respectively, or as to which required consents or waivers have not
been obtained prior to the Closing, (v) the provision to the other party of the
documents and reports filed by each of COMSAT and RSi with the SEC and the
accuracy of the information contained therein, (vi) the accuracy of specified
information provided by COMSAT and by RSi with respect to the Registration
Statement on Form S-4 filed by COMSAT in connection with the shares of COMSAT
Common Stock to be issued pursuant to the Merger Agreement and this Proxy
Statement/ Prospectus, (vii) the absence, since June 30, 1993, of certain events
or changes relating to RSi's business or financial condition; (viii) the absence
of material undisclosed liabilities of RSi, (ix) that certain specified
forecasts and projections made by RSi were based upon reasonable grounds and
disclosed in good faith, (x) certain matters relating to property owned, leased
or used by RSi, (xi) certain matters relating to RSi's contract backlog, (xii)
certain matters relating to RSi's ownership of and right to use intellectual
property, (xiii)certain matters relating to RSi's material contracts, (xiv) RSi
employee membership in labor unions or employee involvement in any union
organizational activity, (xv) compliance by RSi with labor laws and with the
Employee Retirement Income Security Act ("ERISA"), (xvi) certain matters
relating to litigation against RSi, (xvii) maintenance of insurance by RSi,
(xviii) compliance by RSi with applicable laws and the holding of necessary
permits and licenses, (xix) compliance by RSi with laws and regulations relating
to government contracts, (xx) the adequacy of RSi's reserves for product
warranties, (xxi) compliance by RSi with environmental laws and regulations,
(xxii) certain matters relating to RSi's tax returns and tax liabilities, and
(xxiii) that the shares of COMSAT Common Stock to be issued pursuant to or in
the transactions contemplated by the Merger Agreement will be validly issued,
fully paid and nonassessable.
CERTAIN COVENANTS. Pursuant to the Merger Agreement, RSi has agreed that,
among other things, it will (i) provide COMSAT with a list of persons who may be
deemed "affiliates" of RSi and will use its best efforts to cause each
"affiliate" to deliver a specified agreement to COMSAT (see "-- Resales of
COMSAT Common Stock Issued in the Merger; Affiliates"), (ii) operate its
business only in the normal course and consistent with past practice, (iii) use
all reasonable efforts to preserve intact its business organization and
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goodwill, (iv) use all reasonable efforts to keep available the services of its
key officers and employees, (v) use all reasonable efforts to maintain its
relationships with significant customers, suppliers and distributors, (vi) not
amend its Articles of Incorporation or By-Laws, (vii) other than pursuant to
outstanding options or other commitments, not sell any securities, (viii) not
declare any dividends with respect to its capital stock other than its regular
semi-annual cash dividends not to exceed $0.05 per share, (ix) not make any
acquisitions or dispositions other than in the ordinary course of business, (x)
not guarantee employment to or commit to retain any employee after the date of
the Closing, (xi) not accelerate the vesting of any options to purchase RSi
Common Stock, and (xii) except as limited by applicable law, provide COMSAT full
access to its properties, books, contracts and records.
COMSAT and RSi each have agreed (i) to use all reasonable efforts to obtain
all consents or authorizations required in connection with the consummation of
the Merger, (ii) to use all reasonable efforts to resolve favorably any action,
suit, proceeding or investigation which has been instituted or which a
governmental agency shall have indicated its intention to institute which could
lead to an order making the Merger unlawful, (iii) not to take any action that
would cause the Merger not to qualify as a reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended, and (iv) not to
take any action that could result in the Merger not being accounted for by the
pooling of interests method for financial reporting purposes.
NO SOLICITATION OF OTHER TRANSACTIONS. The Merger Agreement provides that
RSi will not, and will not permit any of its officers, directors, agents or
affiliates to, directly or indirectly (i) solicit, encourage, initiate or
participate in any negotiations or discussions with respect to any offer or
proposal to acquire all or substantially all of its business and properties or
capital stock, whether by merger, purchase of assets, tender offer or otherwise
(an "Acquisition Proposal"), or (ii) disclose any information not customarily
disclosed to any person concerning its business and properties, afford to any
person or entity access to its properties, books or records or otherwise assist
or encourage any person or entity in connection with an Acquisition Proposal,
unless in the case of either clause (i) and or clause (ii) RSi shall have
received a firm written offer relating to such transaction, not conditioned upon
financing, from a reputable buyer, which offer, in the written opinion of Alex.
Brown, appears to be on terms financially superior to those offered by the
transactions contemplated by the Merger Agreement and which, in the written
opinion of legal counsel to RSi reasonably acceptable to COMSAT, the RSi Board
is legally obligated to consider by principles of fiduciary duty to the RSi
stockholders under the Nevada Law.
CONDITIONS TO THE MERGER. The respective obligations of COMSAT and RSi to
consummate the Merger are subject to a number of conditions, including among
others, (i) approval of the Merger Agreement by the stockholders of RSi, (ii)
all waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), having been terminated or expired, (iii) each
party having obtained all necessary consents, approvals, waivers, permits,
licenses or authorizations, including any required by regulations of the U.S.
Department of Defense, (iv) the other party having performed and complied in all
material respects with all agreements, covenants, obligations and conditions
required by the Merger Agreement, (v) the truth and correctness of the other
party's representations and warranties, (vi) receipt of an opinion from Deloitte
& Touche that the Merger will be accounted for as a pooling of interests for
financial reporting purposes, (vii) the absence of an order enjoining or
restraining the transactions contemplated by the Merger Agreement, and (viii)
receipt by each party of opinions of counsel to the other party. COMSAT and RSi
made the required filings under the HSR Act on February 14, 1994, and the
waiting period expired on March 16, 1994.
In addition to the conditions set forth above, the obligation of COMSAT to
effect the Merger is subject to certain other conditions, including that (i) no
audit, investigation or due diligence review by COMSAT or its representatives of
RSi with respect to RSi's representations and warranties shall have revealed
liabilities of RSi not previously disclosed as of the date of the Merger
Agreement (whether then existing or arising after such date) which exceed $7.56
million, (ii) RSi's aggregate contract backlog in specified categories be at
least $118.5 million on the date of the Closing, (iii) from June 30, 1993 to the
Closing there not have occurred certain events or changes in specified matters
relating to RSi's business or financial condition which exceed, with respect to
certain of such events or changes, $4.28 million in the aggregate, (iv) there
not be any action
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or proceeding challenging the Merger or the issuance of the COMSAT Common Stock
in connection therewith, or otherwise seeking to restrain or prohibit
consummation of the transactions contemplated in the Merger Agreement or seeking
to impose any material limitations on any provision of the Merger Agreement, (v)
RSi shall have used its best efforts to cause, on or prior to the date of the
Closing, Richard E. Thomas to enter into an employment agreement with COMSAT
(such agreement was entered into on January 30, 1994), and (vi) COMSAT shall
have received a letter, dated not more than two days prior to the Effective
Date, from Deloitte & Touche, independent auditors of RSi, as to certain matters
relating to RSi's financial statements. Given the status of the Nevada Lawsuits
as of the date hereof, it is COMSAT's present intention to waive the condition
regarding actions or proceedings challenging the Merger with respect to the
Nevada Lawsuits. See "-- Shareholder Litigation."
In addition to the conditions set forth above, the obligation of RSi to
effect the Merger is subject to certain other conditions, including that the
shares of COMSAT Common Stock to be issued in the Merger shall have been
approved for listing on the NYSE upon official notice of issuance.
STOCK OPTIONS; EMPLOYEE BENEFITS. On the Effective Date, each outstanding
option to acquire shares of RSi Common Stock (the "RSi Stock Options"), whether
or not then exercisable, will be assumed by COMSAT and converted into an option
(the "Substitute Option") to acquire that number of shares of COMSAT Common
Stock equal to the Conversion Fraction multiplied by the number of shares of RSi
Common Stock subject to such RSi Stock Option (at a per share exercise price
adjusted to reflect the Conversion Fraction and rounded up to the nearest cent),
provided that such number of shares shall be rounded down to the nearest whole
number of shares. Other than adjustments for the number of shares for which an
option is exercisable and the exercise price, the Substitute Options will have
the same duration and terms as the original RSi Stock Options. Pursuant to the
Merger Agreement, COMSAT has agreed where permitted under the terms of the
COMSAT 1990 Key Employee Stock Plan (the "COMSAT Option Plan"), to cause the
Substitute Options to be governed by the terms of the COMSAT Option Plan and to
be included in the registration statement for the COMSAT Option Plan under the
Securities Act. For those Substitute Options that are not included in the COMSAT
Option Plan, COMSAT has agreed to register under the Securities Act the shares
of COMSAT Common Stock issuable in connection with the exercise of such
Substitute Options following the Merger. As of January 30, 1994, there were
outstanding RSi Stock Options to purchase an aggregate of 514,750 shares of RSi
Common Stock.
Concurrently with entering into the Merger Agreement, COMSAT agreed to (i)
assume the sponsorship of the ESOP; (ii) make contributions to the ESOP in an
amount sufficient to amortize the existing ESOP loans in accordance with their
terms or, in COMSAT's discretion, more rapidly; (iii) limit participation in the
ESOP to persons who are employed by CTS America, the surviving corporation in
the Merger; and (iv) indemnify the ESOP trustees and all other fiduciaries of
any plans maintained by RSi prior to the Merger. COMSAT also has agreed to
maintain the group health coverage, group life coverage and group disability
coverage as provided to RSi employees prior to the Merger for at least one year
after the Effective Date, and to provide continuation coverage under COBRA to
any persons who were entitled to such coverage from RSi immediately prior to the
Merger.
TERMINATION. The Merger Agreement may be terminated at any time prior to
the date of the Closing, whether before or after approval by the stockholders of
RSi, (i) by either COMSAT or RSi upon written notice if a material breach or
default shall be made by the other party with respect to performance of any of
the other party's covenants or representation and warranties and such breach or
default cannot be cured or is not waived prior to the Closing, (ii) by mutual
written consent of COMSAT and RSi, or (iii) by either COMSAT or RSi, if their
respective conditions to consummation of the Merger have not been satisfied or
waived by December 31, 1994 or such later date as COMSAT and RSi may agree,
PROVIDED, that such right to terminate shall not be available to a party whose
failure to fulfill an obligation or perform a covenant has been the cause of or
resulted in the failure of any of the conditions to consummation of the Merger
of the other party by such date.
EXPENSES AND TERMINATION FEE. Except as set forth below, the Merger
Agreement provides that in the event the Merger is not consummated each party
shall be responsible for its own costs, fees and expenses. If
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the termination is caused by the breach of COMSAT or RSi, the breaching party
shall pay to the non-breaching party, as the non-breaching party's exclusive
remedy, the actual costs and expenses of the non-breaching party, not to exceed
$2.5 million. If the Merger Agreement is terminated for any reason and RSi at
any time prior to December 31, 1994 is acquired by, merges or effects a business
combination with, or sells substantially all of its assets to any person or
entity not controlled by COMSAT, or agrees to do any of the foregoing, the
Merger Agreement provides that RSi shall immediately upon such action or
agreement pay to COMSAT $5 million, plus all of COMSAT's costs, fees and
expenses incurred in connection with the Merger Agreement not to exceed $2.5
million.
AMENDMENT AND WAIVER. COMSAT and RSi may waive any of their respective
conditions to effecting the transactions contemplated by the Merger Agreement,
provided that any waiver of a condition shall not constitute a waiver of any
other conditions not so waived. To the extent that at the Closing RSi delivers
to COMSAT a written notice specifying the failure of any conditions to
consummation of the Merger or the breach by RSi of any of its representations
and warranties, and COMSAT proceeds with the Closing, COMSAT shall be deemed to
have waived for all purposes any rights or remedies it may have against RSi or,
except in the case of fraud or gross negligence, any of its directors, officers
or employees by reason of the failure of any such conditions or the breach of
any such representations or warranties to the extent described in such notice.
Following the Closing, no claims for breach of any representations, warranties
or agreements shall be brought against any director or officer and certain
employees of RSi if and to the extent such person did not have actual knowledge
or had no reason to know (in light of circumstantial evidence made available to
them on or prior to the Closing) of the facts material to such breach of any
representation, warranty or agreement.
No interpretation, modification, termination or waiver of any portion of the
Merger Agreement shall be binding upon a party unless it is in writing and
executed by the other parties to the Merger Agreement. No modification, waiver,
termination, rescission, discharge or cancellation of any right or claim under
the Merger Agreement will affect the right of any party to the Merger Agreement
to enforce any other claim or right thereunder.
CLOSING; EFFECTIVE DATE
The Closing will take place on the day of approval of the Merger Agreement
at the Special Meeting or on the first business day following the date on which
the last of the conditions set forth in the Merger Agreement is satisfied or
waived, or at such other time as COMSAT and RSi agree. COMSAT and RSi anticipate
that the Closing will take place on the day of the Special Meeting. The Merger
Agreement provides that the Merger will become effective at 5:00 p.m., local
time in Nevada, upon the later to occur of the filing of the Articles of Merger
with the Secretary of State of Nevada as required by the Nevada Law or the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware as required by Delaware law or at such time as is provided in the
Articles of Merger or the Certificate of Merger (the "Effective Date"). Such
filings will be made as soon as practicable after the Closing.
EXCHANGE OF STOCK CERTIFICATES
Promptly after the Effective Date, The Bank of New York, which has been
designated by COMSAT as the exchange agent (the "Exchange Agent"), will mail a
letter of transmittal (the "Letter of Transmittal") to each holder of record of
a certificate or certificates which immediately prior to the Effective Date
represented issued and outstanding shares of RSi Common Stock (the
"Certificates"). The Letter of Transmittal will contain instructions for use in
surrendering the Certificates in exchange for certificates representing shares
of COMSAT Common Stock. The Letter of Transmittal also will contain provisions
designed to ensure that the issuance of shares of COMSAT Common Stock in
connection with the Merger will be in compliance with the applicable provisions
of the Communications Satellite Act of 1962, as amended (the "Satellite Act"),
and the Articles of Incorporation of COMSAT, as amended (the "COMSAT Articles").
See "DESCRIPTION OF COMSAT CAPITAL STOCK." RSI STOCKHOLDERS SHOULD NOT SUBMIT
THEIR CERTIFICATES FOR EXCHANGE UNLESS AND UNTIL THEY HAVE RECEIVED THE LETTER
OF TRANSMITTAL FROM THE EXCHANGE AGENT.
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Upon surrender of a Certificate for exchange to the Exchange Agent, together
with the duly executed Letter of Transmittal, the holder of such Certificate
will be entitled to receive in exchange therefor a certificate or certificates
representing the number of shares of COMSAT Common Stock that such holder is
entitled to receive pursuant to the Merger Agreement, plus cash in lieu of
fractional shares of COMSAT Common Stock. All Certificates so surrendered will
be cancelled.
If any certificate representing shares of COMSAT Common Stock is to be
issued in a name other than that in which the surrendered Certificate is
registered, the Certificate so surrendered must be properly endorsed (or
accompanied by an appropriate instrument of transfer) and otherwise must be in
proper form for transfer, and the person requesting such exchange must pay the
Exchange Agent any transfer or other taxes required by law, or establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
payable. After the Effective Date, there will be no transfers of shares of RSi
Common Stock which were outstanding immediately prior to the Effective Date. If,
after the Effective Date, Certificates representing such shares are presented
for transfer to the Exchange Agent or RSi, they will be cancelled and exchanged
for certificates representing shares of COMSAT Common Stock pursuant to the
terms of the Merger Agreement.
Each share of COMSAT Common Stock for which RSi Common Stock is exchanged in
the Merger will be deemed to have been issued on the Effective Date.
Accordingly, RSi stockholders who receive COMSAT Common Stock in the Merger will
be entitled to receive any dividends or other distributions which may be payable
to holders of record of such stock as of dates following the Effective Date.
COMSAT will not be required to pay dividends or other distributions with respect
to any shares of such COMSAT Common Stock, however, until the Certificates
formerly representing shares of RSi Common Stock have been surrendered. Accrued
dividends and other distributions will be paid without interest upon such
surrender.
NO FRACTIONAL SHARES
No certificates or scrip representing fractional shares of COMSAT Common
Stock will be issued in the Merger. In lieu of fractional shares, the Exchange
Agent will pay to any holder who would be entitled to a fractional share of
COMSAT Common Stock, upon surrender of such holder's Certificates together with
a duly executed Letter of Transmittal, an amount of cash (without interest)
equal to the product of such fractional interest multiplied by the closing price
of a whole share of COMSAT Common Stock on the NYSE on the last full trading day
prior to the Effective Date.
THE STOCK OPTION AGREEMENT
THE FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS OF THE STOCK OPTION
AGREEMENT. THIS SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE STOCK OPTION AGREEMENT. THE FULL TEXT OF THE STOCK
OPTION AGREEMENT IS ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS AS EXHIBIT B AND
IS INCORPORATED HEREIN BY REFERENCE.
In connection with and as a condition to COMSAT's willingness to enter into
the Merger Agreement, RSi and COMSAT entered into the Stock Option Agreement.
Under the Stock Option Agreement, RSi granted to COMSAT an irrevocable option
(the "COMSAT Option") to purchase 1,242,778 shares of RSi Common Stock, which
represents the number of shares equal to 15% of the shares of RSi Common Stock
outstanding on January 30, 1994, the date of the Stock Option Agreement, at a
price per share of $18.25 (the "COMSAT Option Exercise Price").
Pursuant to the Stock Option Agreement, if COMSAT or CTS America is not then
in material breach of its obligations under the Merger Agreement, COMSAT may
exercise the COMSAT Option, in whole or in part, at any time, if any
corporation, partnership, person, other entity or group (collectively, a
"Person"), other than COMSAT or any of its subsidiaries, (i) acquires beneficial
ownership of at least 15 percent of the outstanding shares of RSi Common Stock,
(ii) enters into an agreement with RSi or any of its material subsidiaries to
merge or consolidate with RSi or any of its subsidiaries, or to purchase all or
substantially all of the assets of RSi (or effects any such merger,
consolidation or purchase) and the Merger Agreement is
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terminated, or (iii) has commenced or commences a tender or exchange offer for
at least 15 percent of the outstanding shares of RSi Common Stock that is not
opposed by RSi and RSi is no longer supporting the Merger Agreement and the
transactions contemplated thereby.
In the event that the COMSAT Option becomes exercisable as described in the
preceding paragraph, COMSAT may elect to receive cash, in lieu of exercising the
COMSAT Option, in an amount equal to the "COMSAT Option Value." The COMSAT
Option Value is equal to the product of (x) the excess, if any, of (a) the
highest price per share paid or proposed to be paid in connection with any
transaction specified in clause (i) , (ii) or (iii) of the preceding paragraph
or in clause (ii) of the following paragraph (a "Transaction") for any shares of
RSi Common Stock, or the greatest aggregate consideration paid or proposed to be
paid in connection with any Transaction for the purchase of assets of RSi,
divided by the number of shares of RSi Common Stock then outstanding, as the
case may be, over (b) the COMSAT Option Exercise Price, multiplied by (y) the
total number of shares still subject to the COMSAT Option. Such payment shall be
made by delivery of immediately available funds to COMSAT and shall extinguish
all other rights of COMSAT under the Stock Option Agreement.
Under the Stock Option Agreement, COMSAT is entitled to receive a cash
payment equal to the COMSAT Option Value if (i) prior to the date which is 30
days after the termination of the Merger Agreement (the "Termination Date") any
Person, other than COMSAT or any of its affiliates, shall publicly announce or
communicate to RSi a proposal (a) to merge or consolidate with RSi or any of its
subsidiaries, or to purchase all or substantially all of the assets of or
otherwise to acquire RSi, or (b) to make any tender or exchange offer for shares
of RSi Common Stock, and (ii) within one year after the Termination Date such
Person or a related Person (a) acquires at least 15 percent of the outstanding
shares of RSi Common Stock, (b) enters into an agreement with RSi or any of its
subsidiaries to merge or consolidate with RSi or any of its subsidiaries or to
purchase all or substantially all of the assets of RSi (or effects any such
merger, consolidation or purchase) or (c) commences a tender or exchange offer
for at least 15 percent of the outstanding shares of RSi Common Stock that is
supported by RSi.
The COMSAT Option is not assignable or transferable, other than to a wholly
owned subsidiary of COMSAT. Within three years of the first exercise of the
COMSAT Option, RSi shall, upon the reasonable request of COMSAT, prepare and
file with the SEC a registration statement for the offer and sale or other
disposition of the shares of RSi Common Stock acquired by or issuable to COMSAT
upon exercise of the COMSAT Option. RSi will use its best efforts to list such
shares of RSi Common Stock on the NASDAQ/ NMS or other market which is the
principal trading market for the RSi Common Stock.
COMSAT's right to exercise the COMSAT Option, as well as all its other
rights under the Stock Option Agreement, terminates 30 days after the
termination of the Merger Agreement. See "-- The Merger Agreement --
TERMINATION."
The Stock Option Agreement does not require RSi stockholder approval. If the
RSi stockholders do not approve the Merger Agreement and the transactions
contemplated thereby, the Stock Option Agreement will continue to be a binding
obligation of RSi until the termination of the Stock Option Agreement as
described above.
DELISTING AND DEREGISTRATION OF RSI COMMON STOCK AFTER THE MERGER
If the Merger is consummated, RSi Common Stock will be delisted from the
NASDAQ/NMS and will be deregistered under the Exchange Act.
RESALES OF COMSAT COMMON STOCK ISSUED IN THE MERGER; AFFILIATES
The shares of COMSAT Common Stock to be issued in the Merger will have been
registered under the Securities Act. Such shares will be freely transferable
under the Securities Act, except for shares issued to any person who may be
deemed to be an affiliate (as such term is defined for purposes of Rule 145
under the Securities Act, an "Affiliate") of COMSAT or RSi at the time of the
Special Meeting. Affiliates may not sell their shares of COMSAT Common Stock
acquired in connection with the Merger except pursuant to (i) an effective
registration statement under the Securities Act covering such shares, (ii)
paragraph (d) of Rule 145 in the case of persons who were Affiliates of RSi at
the time of the Special Meeting, or (iii) any other applicable exemption under
the Securities Act (such as Rule 144 under the Securities Act in the case of
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persons who are or become Affiliates of COMSAT). Persons who may be deemed
Affiliates of COMSAT or RSi generally include individuals or entities that
control, are controlled by, or are under common control with COMSAT or RSi and
may include certain officers and directors of COMSAT or RSi.
SEC guidelines indicate further that the "pooling of interests" method of
accounting generally will not be challenged on the basis of sales of shares by
Affiliates of the acquiring or acquired company if the Affiliates do not dispose
of more than a minimal number of the shares of the acquiring or acquired company
that the Affiliates own, or shares of a corporation they receive in connection
with the merger, during the period beginning 30 days before the merger and
ending when financial results covering at least 30 days of post-merger
operations of the combined enterprise have been published. RSi has agreed to use
its best efforts to obtain written agreements ("Affiliate Agreements") at least
30 days in advance of the Special Meeting from persons identified by RSi as
Affiliates of RSi, containing appropriate representations and covenants intended
to ensure compliance with the Securities Act and to preserve the ability to
account for the Merger as a "pooling of interests."
NYSE LISTING OF COMSAT COMMON STOCK
The Merger Agreement provides that COMSAT shall use its best efforts to
obtain, prior to the Effective Date, approval for the listing on the NYSE, upon
official notice of issuance, of the shares of COMSAT Common Stock to be issued
in connection with the Merger. Such listing approval is a condition to RSi's
obligation to consummate the Merger.
REGULATORY MATTERS
FEDERAL COMMUNICATIONS COMMISSION. COMSAT was established pursuant to the
Satellite Act. Under the Satellite Act, the financing activities of COMSAT,
including COMSAT's ability to issue debt and equity securities, are subject to
oversight and regulation by the Federal Communications Commission (the "FCC").
COMSAT currently is subject to an FCC-approved capitalization plan (the
"Capitalization Plan") which sets forth the parameters for COMSAT's capital
structure. Pursuant to the Capitalization Plan, COMSAT is permitted to issue
equity securities, including the shares of COMSAT Common Stock to be issued
pursuant to, and in the transactions contemplated by, the Merger Agreement, upon
two days' notice to the FCC so long as COMSAT is in compliance with such
parameters. See "DESCRIPTION OF COMSAT CAPITAL STOCK -- Other." COMSAT is
currently in compliance with such parameters and filed the required notice with
the FCC on February 10, 1994. RSi holds FCC licenses, transfer of ownership of
which requires FCC approval. It is a condition to COMSAT's obligation to
consummate the Merger that RSi obtain all consents, permits and licenses which,
if not obtained prior to the date of the Closing, would have a material adverse
effect on the ability to conduct the business of RSi following the Closing. RSi
filed the required applications for transfer of the licenses with the FCC on
March 25, 1994.
ANTITRUST. Pursuant to the HSR Act, and the rules promulgated thereunder,
COMSAT and RSi each provided the required notifications with respect to the
Merger to the Federal Trade Commission and the Antitrust Division of the U.S.
Department of Justice on February 14, 1994. The waiting period under the HSR Act
with respect to the Merger expired on March 16, 1994.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a general discussion of the principal United States federal
income tax consequences of the Merger. This discussion is based on laws,
regulations, rulings and decisions in effect as of the date of this Proxy
Statement/Prospectus, all of which are subject to change, retroactively or
prospectively, or possibly differing interpretations. Moreover, no rulings will
be obtained from the Internal Revenue Service (the "IRS") regarding the federal
income tax consequences of the Merger or any other matters, and neither the
opinion of counsel (referred to below) nor this discussion is binding upon
either the IRS or the courts. Further, this discussion does not purport to deal
with the federal income tax consequences applicable to all categories of
investors, some of which may be subject to special rules, or with state, local
or foreign law. Thus, RSi stockholders receiving COMSAT Common Stock in the
Merger are urged to consult their own tax advisors as to the particular tax
consequences to them of the Merger under federal, state, local, foreign or other
applicable law.
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Shaw, Pittman, Potts & Trowbridge, counsel to RSi, has rendered an opinion
to RSi and COMSAT to the effect that, among other things, the Merger will
constitute a reorganization within the meaning of Sections 368(a)(1)(A) and
368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the "Code").
Assuming that the Merger constitutes such a reorganization:
1. No gain or loss will be recognized by RSi, COMSAT or CTS America as
a result of the Merger;
2. No gain or loss will be recognized by any RSi stockholder on the
exchange by such stockholder of its RSi Common Stock for COMSAT Common
Stock;
3. Each RSi stockholder will take a basis for federal income tax
purposes in the COMSAT Common Stock it receives as a result of the Merger
equal to such stockholder's basis in its RSi Common Stock surrendered
therefor (reduced by any amount allocable to a fractional share interest for
which cash is received);
4. Each RSi stockholder will have a holding period for federal income
tax purposes with respect to the COMSAT Common Stock it receives as a result
of the Merger that includes such stockholder's holding period with respect
to the RSi Common Stock surrendered therefor, provided that such stockholder
held its shares of RSi Common Stock as capital assets immediately prior to
the Effective Date; and
5. Each RSi stockholder receiving cash in lieu of a fractional share
interest generally should be treated as if such stockholder actually
received such fractional share interest and such interest was subsequently
redeemed by COMSAT. This redemption generally should result in either (i)
capital gain or loss measured by the difference between the amount of cash
received and the portion of the stockholder's basis in its RSi Common Stock
allocable to the fractional share of COMSAT Common Stock deemed redeemed, or
(ii) a dividend in an amount equal to the amount of cash received,
depending, among other things, on the stockholder's percentage ownership of
COMSAT, including ownership by attribution.
The foregoing, including the opinion of Shaw, Pittman, Potts & Trowbridge,
is conditioned upon the accuracy, as of the date hereof and as of the Effective
Date, of certain assumptions including, but not limited to: (i) the fair market
value of the COMSAT Common Stock received by each RSi stockholder will be
approximately equal to the fair market value of the RSi Common Stock exchanged
therefor; (ii) CTS America will acquire at least 90 percent of the fair market
value of the net assets and at least 70 percent of the fair market value of the
gross assets held by RSi immediately prior to the Merger (treating RSi assets
used to pay its reorganization expenses or to redeem RSi Common Stock during the
past 36 months as assets held by RSi immediately prior to the Merger); (iii)
COMSAT has no plan or intention to sell and CTS America has no plan or intention
to issue CTS America stock if the effect of such sale or issuance would be to
reduce COMSAT's ownership of CTS America stock to an amount that is less than
the amount required for COMSAT to be deemed to be in control of CTS America for
purposes of Section 368(a)(2)(D) of the Code; (iv) COMSAT has no plan or
intention to reacquire any of the shares of COMSAT Common Stock issued as a
result of the Merger; (v) COMSAT has no plan or intention to liquidate CTS
America, to merge CTS America with and into another corporation, to sell or
otherwise dispose of the stock of CTS America, or to cause CTS America to sell
or otherwise dispose of any of the assets acquired in the Merger, except for
sales or dispositions in the ordinary course of business or transfers described
in Section 368(a)(2)(C) of the Code; (vi) COMSAT, CTS America, RSi, and the RSi
stockholders will pay their respective expenses, if any, incurred in connection
with the Merger, except that RSi and CTS America may pay or assume those
expenses of RSi that are solely and directly related to the Merger; (vii) after
the Merger, CTS America will continue RSi's historic business or use a
significant portion of RSi's assets in a business; (viii) the liabilities of RSi
assumed by CTS America and the liabilities to which the transferred assets of
CTS America are subject were incurred by RSi in the ordinary course of its
business; (ix) there is no intercorporate indebtedness existing between COMSAT
and RSi or between CTS America and RSI that was issued, acquired, or will be
settled at a discount; (x) the fair market value of the assets of RSi
transferred to CTS America will equal or exceed the sum of liabilities assumed
by CTS America, plus the amount of liabilities, if any, to which the transferred
assets are subject; (xi) as of the Effective Date, the value of the COMSAT
Common Stock
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received by RSi stockholders as a result of the Merger was greater than 50% of
the value of all the RSi Common Stock outstanding immediately prior to the
Effective Date (treating fractional share interests for which cash is received,
and stock redeemed within the past 36 months, as outstanding RSi Common Stock);
and (xii) the stockholders of RSi who own five percent or more of the RSi Common
Stock (and, to the best of the knowledge of the management of RSi, the remaining
stockholders of RSi) have no plan or intention to sell, exchange or otherwise
dispose of a number of shares of COMSAT Common Stock received in the Merger that
would reduce the RSi stockholders' ownership of COMSAT Common Stock to a number
of shares having a value as of the Effective Date of less than 50 percent of the
value of all the formerly outstanding RSi Common Stock immediately prior to the
Effective Date (treating fractional share interests for which cash is received,
and stock redeemed within the past 36 months, as outstanding RSi Common Stock).
ACCOUNTING TREATMENT
COMSAT and RSi believe that the Merger will qualify as a "pooling of
interests" for accounting and financial reporting purposes . The pooling of
interests method is intended to present as a single interest two or more common
shareholder interests which were previously independent. The pooling of
interests method assumes that the combining companies have been merged from
inception. Consequently, the historical financial statements for periods prior
to the consummation of the combination are restated as though the companies had
been combined. The restated financial statements are adjusted to conform the
accounting policies of the separate companies. See "COMSAT CORPORATION AND
RADIATION SYSTEMS, INC. UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
STATEMENTS."
It is a condition to the obligations of the parties to consummate the Merger
that each of them receive a letter from Deloitte & Touche, independent public
accountants for both COMSAT and RSi, dated the date of the Closing, to the
effect that the Merger will qualify as a pooling of interests. See "-- The
Merger Agreement -- CONDITIONS TO THE MERGER."
APPRAISAL RIGHTS
The Nevada Law does not provide a right of dissent or appraisal to holders
of shares of any class which, at the record date fixed for the meeting of
stockholders at which a plan of merger is to be voted on, is designated as a
national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. ("NASDAQ/NMS Security") unless
the holders of the class of shares are required under the plan of merger to
accept for such shares anything except cash, shares, or shares and cash in lieu
of fractional shares of the surviving corporation or any other corporation
which, at the effective date of the plan of merger, are listed on a national
securities exchange. As of the Record Date, the RSi Common Stock is a NASDAQ/NMS
Security and it is anticipated that, as of the Effective Date, the COMSAT Common
Stock will continue to be listed on the NYSE, which is a national securities
exchange. Accordingly, holders of RSi Common Stock will not be entitled to
dissent and obtain payment for their shares of RSi Common Stock under the Nevada
Law.
OPERATIONS AFTER THE MERGER
On the Effective Date, RSi will be merged into CTS America, and CTS America,
as the surviving corporation in the Merger, will continue as a wholly owned
subsidiary of COMSAT. COMSAT's existing systems integration division, CTS, will
be combined with CTS America to form COMSAT RSI. Richard E. Thomas, the
Chairman, President and Chief Executive Officer of RSi, will become President of
COMSAT RSI and an officer of COMSAT, and certain other officers of RSi will
become Vice Presidents of COMSAT RSI. See "-- Interests of Certain Persons in
the Merger; Employment Agreements."
INFORMATION CONCERNING COMSAT
GENERAL
COMSAT, which was incorporated in 1963, is an international communications,
information and entertainment distribution services company. It provides voice,
video and data services and is the largest owner and user of the global INTELSAT
and Inmarsat communications satellite networks. COMSAT also
28
<PAGE>
provides satellite systems integration, wireless networks and technical
consulting; offers on-demand entertainment and information services to the
hospitality industry; and owns the NBA Denver Nuggets. COMSAT was established
pursuant to the Satellite Act and certain of its activities are subject to
oversight and regulation by the FCC. COMSAT has approximately 1,640 employees.
COMSAT's principal executive offices are located at 6560 Rock Spring Drive,
Bethesda, Maryland 20817, telephone number (301) 214-3000.
COMSAT has paid a regular quarterly dividend to its shareholders for the
past 94 consecutive quarters. COMSAT's current regular quarterly dividend is
$0.185 per share. See "COMPARATIVE MARKET PRICE DATA."
Additional information concerning COMSAT is contained in COMSAT's Annual
Report on Form 10-K for the year ended December 31, 1993 filed on March 31, 1994
(including Amendment No. 1 thereto filed on April 29, 1994) and its Current
Reports on Form 8-K filed with the SEC on February 1, 1994, March 7, 1994, March
11, 1994 and April 26, 1994. See "AVAILABLE INFORMATION" and "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE."
RECENT DEVELOPMENTS
On April 15, 1994, COMSAT reported revenues for the quarter ended March 31,
1994 of $169.5 million compared to $166.3 million for the comparable quarter of
1993. Net income for the quarter was $18.3 million or $0.45 per share, compared
to $19.6 million or $0.48 per share for the comparable quarter of 1993. However,
net income for the first quarter of 1994 was unchanged from the comparable
quarter of 1993 after excluding $1.3 million or $0.03 per share in 1993
resulting from the cumulative effect of an accounting change for income taxes.
INFORMATION CONCERNING RSI
GENERAL
RSi, which was incorporated in 1960, designs, manufactures, and integrates
systems, subsystems and components for advanced microwave communications, radar
and related applications, from the largest international gateway earth stations
for satellite transmission of voice, data and video, to electronically-scanning
phased array antennas for the North Warning System, to the high power switch for
the Patriot missile. RSi has a solid base of expertise in meeting the demanding
requirements of the U.S. Government for special use antennas and related
subsystems in air traffic control, intelligence and scientific applications, as
well as for military uses such as radar, line-of-site radio-relay and
troposcatter communications. RSi is also a leading commercial supplier of
microwave antennas for worldwide cellular markets, satellite downlink terminals
for distance learning and business networks, sector antennas for Europe's
digital personal and mobile communications markets, and base station antennas
for U.S. and European trials of wireless local area networks (LANs). RSi has
approximately 1,000 employees. RSi's principal executive offices are located at
1501 Moran Road, Sterling, Virginia 20166, telephone number (703) 450-5680.
Additional information concerning RSi is contained in RSi's Annual Report on
Form 10-K for the fiscal year ended June 30, 1993 (including Amendments No. 1,
No. 2 and No. 3 thereto), its Quarterly Reports on Form 10-Q for the quarter
ended September 30, 1993 (including Amendment No. 1 thereto) and the quarter
ended December 31, 1993 and its Current Reports on Form 8-K filed with the SEC
on March 7, 1994 (including Amendment No. 1 thereto) and April 28, 1994. See
"AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion does not reflect any changes to RSi's financial
condition, operations, liquidity, cash flow or capital resources relating to the
Merger.
OVERVIEW
RSi believes its military and commercial program diversity and core products
and technologies in the areas of communications, surveillance, and radar make it
more resistant than others to the changing U.S. defense marketplace. However,
recognizing the potential uncertainty concerning the size of the U.S. defense
29
<PAGE>
budget and the maturing in fiscal year 1994 of several of its contracts for
military radar and troposcatter antennas, which could adversely affect a
significant portion of RSi's business, RSi intends to continue its strategic
initiatives and actively pursue diversification into the international satellite
and wireless communications markets as well as the U.S. Government market for
commercial off-the-shelf satellite communications systems.
RESULTS OF OPERATIONS
FISCAL YEARS ENDED JUNE 30, 1993, 1992 AND 1991. The following table
presents an analysis of sales for the years indicated (in millions):
<TABLE>
<CAPTION>
1993 1992 1991
---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Satellite Communications............................ $ 23.2 19% $ 34.4 27% $ 50.5 44%
Tactical Military................................... 13.2 11 13.3 11 6.0 5
Wireless............................................ 17.3 15 14.0 11 12.5 11
Scientific/Special.................................. 31.2 26 26.8 21 7.5 6
Radar/Navigation Aids............................... 33.9 29 38.6 30 39.0 34
--------- --- --------- --- --------- ---
$ 118.8 100% $ 127.1 100% $ 115.5 100%
--------- --- --------- --- --------- ---
--------- --- --------- --- --------- ---
</TABLE>
Sales for 1993 declined by $8.3 million or 7% from 1992. This decline was
due primarily to the completion in June 1992 of the Channel One contract
(satellite communications), which represented sales of $16.2 million in 1992,
and to tornado damage in October 1992 at RSi's manufacturing facility in
Florida, which affected production and was responsible for a sales decline of
approximately $7.2 million over the year (radar/navigation aids). To a lesser
extent, sales for 1993 declined from 1992 due to a weakened British pound which
impacted reported sales from RSi's foreign operations. The sales decline between
1992 and 1993 was offset, however, by strong international sales growth,
especially in wireless markets, as sales to foreign users increased by 31% to
$28 million, by a $5 million increase in domestic sales of turnkey satellite
systems (satellite communications), and by an increase of approximately $4.4
million in scientific/special applications sales to non-DOD U.S. Government
customers.
See Note 1 to RSi's audited financial statements included in "RADIATION
SYSTEMS, INC. CONSOLIDATED FINANCIAL STATEMENTS" for a discussion of certain
business interruption insurance claims. Business interruption insurance income
amounted to $2,996,000 in 1993 and $1,306,000 in 1992.
Sales for 1992 increased by $11.6 million or 10% from 1991. This increase
was due primarily to increased sales for scientific/special applications of
$19.3 million over the year, of which approximately $12.8 million was due to the
Green Bank Telescope contract awarded in December 1990. Sales for 1992 also
increased over August 1991 due to increased sales of tactical military products,
including sales from one of the U.K. companies acquired by RSi in August 1991,
and to sales of satellite communications antennas primarily in developing
nations. These increases, however, were offset by a $20.6 million decline in
sales of small satellite communications antennas for the Channel One program.
Gross margins as a percent of sales increased to 26.7% in 1993 from 26.6% in
1992, primarily due to favorable changes in the sales mix. Operating margins as
a percent of sales held constant at 13.2% in 1993 and 1992, as the favorable
effects of the increased business interruption insurance and the slightly higher
gross margins in 1993 were offset by the effect of increased general and
administrative expenses as a percent of sales in 1993, as compared with 1992.
General and administrative expenses rose 4% in 1993 primarily due to the
mid-year acquisition of Anghel Laboratories. To a lesser extent, higher research
and development and international marketing costs contributed to this increase.
Excluding Anghel Laboratories, general and administrative expenses declined 1%,
primarily due to selected cost reduction actions and the weakened British pound,
offset by the cost increases referred to above.
30
<PAGE>
Earnings before income taxes declined by 8% in 1993 from 1992, primarily as
a result of the reduced sales discussed above, and to a lesser extent, higher
interest costs. The amount of earnings before income taxes for 1993 were not
materially impacted by the tornado damage in Florida as accrued business
interruption insurance offset the loss of estimated earnings recognizable under
normal operating conditions.
Earnings before income taxes in 1992 increased by 25% over 1991 due largely
to an improvement in the gross margin rate to 26.6% in 1992 from 22.5% in 1991,
resulting from a more favorable sales mix. To a lesser extent, earnings of $1.3
million associated with the U.K. subsidiaries acquired in August 1991 also
contributed to the increase. Operating margins also increased to 13.2% in 1992
from 11.7% in 1991, principally as a result of the improved gross margin rate
and business interruption insurance in 1992, offset partially by the effect of
higher general and administrative expenses as a percent of sales in 1992, as
compared with 1991. The increase in general and administrative expenses was
substantially associated with the acquisition of the U.K. companies. Adjusting
for the acquisition, general and administrative expenses rose 7.3% in 1992,
primarily from research programs in the satellite communications area and higher
payroll and related costs.
Excluding the effect of a favorable adjustment of $310,000 associated with
completion of a long-term radiotelescope contract (on which taxes had been
deferred for several years at 46%), the effective tax rate declined to 36.3% in
1993 from 37.4% in 1992. The decline in the rate reflected tax benefits on
higher foreign sales and the favorable mix of state taxable income.
The effective tax rate decreased to 37.4% in 1992 from 38.1% in 1991,
primarily as a result of lower tax rates on foreign earnings, reduced effective
state income tax rates, and slightly higher Federal tax benefits on increased
exports.
Earnings per share declined by $.04 in 1993 from 1992 predominantly as a
result of the decline in net earnings between years.
Earnings per share increased by $.26 to $1.27 in 1992 from $1.01 in 1991.
This reflects the increased net earnings ($.27) reduced by the effect of higher
weighted average shares outstanding ($.01).
THREE AND SIX MONTHS ENDED DECEMBER 31, 1993. Sales for the quarter ended
December 31, 1993, declined by $1.4 million or 5% as compared with the
comparable quarter of the preceding fiscal year, primarily as a result of the
maturing of certain U.S. defense-related contracts and delays in the award of
certain commercial satellite antenna contracts, partially offset by sales of
microwave communication products associated with the Anghel Laboratories
division acquired in January 1993, and by increased pedestal sales from RSi's
Florida unit as it continues its return to full production in the wake of the
tornado damage in October 1992. While pedestal sales showed improvement in the
second quarter, they did not reach the levels planned had the storm not
occurred.
Sales for the first half of fiscal year 1994 declined by $7.9 million or 13%
as compared with the same period a year ago, primarily for the reasons stated
above as well as lower sales for scientific applications, and depreciation of
the British pound which impacted sales from RSi's U.K.-based operations. This
decline was partially offset by sales associated with the new Anghel
Laboratories division.
Earnings before income taxes for the second quarter declined by 42% as
compared with the second quarter for the previous fiscal year due largely to the
delay in the settlement of RSi's business interruption insurance claim and the
reduction in sales referred to above. Excluding the effect of accrued business
interruption insurance associated with the tornado damage in Florida, operating
margins in the second quarter declined to 8.3%, as compared with 10.1% in the
same quarter a year ago, primarily due to accrued losses associated with two
contracts for large antennas.
Earnings before income taxes for the first half of fiscal year 1994 declined
by 31% as compared with the same period a year ago principally for the same
reasons mentioned above. Higher interest costs also contributed to the decline
in this period. Excluding the effect of accrued business interruption insurance,
operating margins in the first half of fiscal year 1994 declined to 8.9%, as
compared with 11.3% in the same
31
<PAGE>
period a year ago, primarily due to accrued losses associated with two contracts
for large antennas, changes in the sales mix, and the fact that RSi's Florida
unit had the comparative benefit of operating under normal conditions in the
first quarter of the prior fiscal year.
Interest expense, net of investment income, increased by $68,000 and
$226,000 for the three and six month periods ended December 31, 1993,
respectively, as compared with the same periods a year ago, due to the higher
average short-term borrowings outstanding and to a reduction in short-term
investments.
RSi's effective tax rates were 38.3% and 37.6% for the three and six month
periods ended December 31, 1993, as compared with 38.0% and 37.5%, respectively,
for the same periods a year ago. The differences in rates primarily reflect
changes in the mix of state taxable income.
RSi implemented SFAS 109 (accounting for income taxes) in the quarter ended
September 30, 1993, which resulted in a favorable $377,000 ($.05 per share)
one-time adjustment to earnings.
Earnings per share before the cumulative effect adjustment declined by $.11
and $.18 for the three and six month periods ended December 31, 1993,
respectively, as compared with the same periods in the previous fiscal year, due
predominantly to the lower net earnings.
In the quarter ended December 31, 1993, RSi received notice that a military
radar equipment subcontract valued at $6.2 million had been terminated for
convenience by the U.S. Government. At December 31, 1993, RSi had a backlog of
$133.1 million, of which approximately $38.2 million is unfunded. Included in
the unfunded backlog is an $18 million subcontract (subject to final
negotiations) for a satellite earth station project in Kuwait. The Company was
notified by its Kuwait-based prime contractor in December 1993 that the prime
contractor had been selected by the Kuwait Ministry of Communications for the
project.
As a result of longer than expected delays in the potential award of certain
commercial satellite antenna contracts, RSi's results for the three and six
month periods ended December 31, 1993, were lower than planned. Although RSi is
aggressively pursuing expansion into the international systems market, in the
short term, RSi's recent entry into this market and the size, the intensity of
the competition and the uncertainties faced in negotiating complex multi-million
dollar agreements with foreign governments or their licensed telecommunications
operators may affect the revenues and earnings derived from such market.
Consequently, management is continuing to seek market share growth and to
maintain strong expense controls to ensure profitable performance in its
traditional core markets.
IMPACT OF INFLATION
Management believes that, due to the nature of RSi's products and contracts,
the cumulative effects of inflation do not have a material impact on
profitability.
CASH FLOW, LIQUIDITY, AND CAPITAL RESOURCES
RSi continues to maintain a good liquidity position. At December 31, 1993,
RSi's cash and short-term investment balances totaled $8.7 million and working
capital totaled $69.7 million (current ratio of 3.7:1). At June 30, 1993, RSi's
cash and short-term investment balances were approximately $8 million,
representing a decrease of $4.3 million from the level a year ago. Cash flows
were favorably impacted in the first half of fiscal year 1994 as a result of a
$5.5 million insurance receipt, which included $2.83 million for RSi's business
interruption insurance claim through September 30, 1993, and $2.67 million for
partial settlement of its property claim. RSi used the insurance proceeds to
retire the $3 million short-term bank note payable which was outstanding at June
30, 1993, and to acquire for $1.8 million additional manufacturing and storage
capacity in Virginia, near its corporate headquarters. Excluding the effect of
the business interruption insurance receipt, cash flows from operations in the
first half of fiscal year 1994 were lower than in the same period a year ago
primarily as a result of the decline in sales in the first half of fiscal year
1994 and the increase in unbilled costs and accrued profits resulting from the
progress payment terms of certain contracts for that period. Cash flows from
operations in fiscal year 1993 were lower than in fiscal year 1992 primarily as
a result of the decline in sales between such years and the increase in unbilled
costs and accrued profits resulting from the progress payment terms of certain
contracts for that period.
32
<PAGE>
The increase in accounts receivable and inventories between June 30, 1993
and June 30, 1992 is principally due to the effect of the Anghel Laboratories
acquisition. See Note 8 to RSi's audited financial statements included in
"RADIATION SYSTEMS, INC. CONSOLIDATED FINANCIAL STATEMENTS."
RSi increased its bank line of credit facility from $10 million to $13
million in the quarter ended December 31, 1993, of which $7.1 million was
utilized at December 31, 1993 (including $3.1 million of outstanding letters of
credit). The increased facility is believed necessary to compensate for RSi's
reduction in U.S. Government contracts in the short-term and the projected
increase in commercial business. See Note 4 to RSi's audited financial
statements included in "RADIATION SYSTEMS, INC. CONSOLIDATED FINANCIAL
STATEMENTS" for additional information regarding RSi's credit facilities at June
30, 1993.
RSi is not aware of any demands or commitments that are likely to have an
adverse effect on RSi's liquidity position, and RSi believes that internally
generated funds and other available funding sources are adequate to meet RSi's
requirements.
RECENT DEVELOPMENTS
On April 26, 1994, RSi reported revenues for the quarter ended March 31,
1994 of $31.0 million compared to $28.4 million for the comparable quarter of
fiscal year 1993. Net income was $1.9 million or $0.22 per share, a decline of
25% from net income of $2.5 million or $0.30 per share for the comparable
quarter of fiscal year 1993. For the nine months ended March 31, 1994, net
income was $5.6 million or $0.67 per share on revenues of $84.8 million,
compared to net income of $7.3 million or $0.88 per share on revenues of $90.2
million for the comparable period in the prior fiscal year.
COMSAT CORPORATION AND RADIATION SYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
give effect to the Merger under the pooling of interests method of accounting.
The unaudited pro forma combined condensed balance sheet gives effect to the
Merger as if it had been consummated as of December 31, 1993. The unaudited pro
forma combined condensed income statements for each of the years ended December
31, 1993, 1992 and 1991 give effect to the Merger as if it had occurred at the
beginning of the earliest period presented. The pro forma data are presented for
illustrative purposes only and are not necessarily indicative of the financial
position or operating results that would have occurred or that will occur upon
consummation of the Merger. These pro forma statements have been prepared from
the historical consolidated financial statements of COMSAT and RSi and should be
read in conjunction with such historical financial statements and the related
notes incorporated by reference or included herein. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE" and "RADIATION SYSTEMS, INC. CONSOLIDATED
FINANCIAL STATEMENTS."
33
<PAGE>
COMSAT CORPORATION AND RADIATION SYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
DECEMBER 31, 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
COMSAT RSI ADJUSTMENTS COMBINED
------------ ---------- ----------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents............................. $ 8,794 $ 7,436 $ $ 16,230
Receivables........................................... 143,347 66,835 210,182
Other................................................. 26,341 21,629 47,970
------------ ---------- ----------------- -------------
Total Current Assets.................................. 178,482 95,900 -- 274,382
------------ ---------- ----------------- -------------
Property and Equipment, net............................. 1,308,167 24,265 1,332,432
Goodwill and Franchise Rights........................... 71,862 5,179 77,041
Other Assets............................................ 94,004 1,188 (5,098)(2c) 90,094
------------ ---------- ----------------- -------------
Total Assets.......................................... $ 1,652,515 $ 126,532 $ (5,098) $ 1,773,949
------------ ---------- ----------------- -------------
------------ ---------- ----------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current Maturities of Long-Term Obligations........... $ 74,904 $ 2,011 $ $ 76,915
Current Notes Payable................................. 43,233 4,000 47,233
Accounts Payable and Accrued Liabilities.............. 97,329 19,247 5,000 (1a 121,576
Due to Related Parties................................ 56,601 -- 56,601
Other Current Liabilities............................. 5,773 976 6,749
------------ ---------- ----------------- -------------
Total Current Liabilities............................. 277,840 26,234 5,000 309,074
------------ ---------- ----------------- -------------
Long-Term Debt.......................................... 402,402 8,148 410,550
Deferred Income Taxes and Investment Tax Credits........ 102,141 1,478 103,619
Accrued Postretirement Benefit Costs.................... 50,014 -- 50,014
Other Long-Term Liabilities............................. 119,393 1,486 120,879
Minority Interest....................................... 21,373 -- 21,373
Stockholders' Equity:
Common Stock.......................................... 281,371 8,757 13,216 (2c,d 303,344
Other Paid-In Capital................................. -- 21,378 (21,378)(2c,d) --
Retained Earnings..................................... 421,833 66,257 (5,000)(1a) 483,090
Treasury Stock........................................ (13,311) (3,064) 3,064 (2d (13,311)
Other................................................. (10,541) (4,142) -- (14,683)
------------ ---------- ----------------- -------------
Total Stockholders' Equity............................ 679,352 89,186 (10,098) 758,440
------------ ---------- ----------------- -------------
Total Liabilities and Stockholders' Equity............ $ 1,652,515 $ 126,532 $ (5,098) $ 1,773,949
------------ ---------- ----------------- -------------
------------ ---------- ----------------- -------------
</TABLE>
See the accompanying notes to these unaudited pro forma combined condensed
financial statements.
34
<PAGE>
COMSAT CORPORATION AND RADIATION SYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
-----------------------------
PRO FORMA
COMSAT RSI COMBINED
-------- -------- ---------
<S> <C> <C> <C>
Revenues......................................................... $640,390 $113,895 $754,285
-------- -------- ---------
Operating Expenses:
Cost of Services............................................... 328,727 94,746 423,473
Depreciation and Amortization.................................. 138,359 3,752 142,111
Research and Development....................................... 13,387 1,915 15,302
General and Administrative..................................... 21,819 -- 21,819
-------- -------- ---------
Total Operating Expenses..................................... 502,292 100,413 602,705
-------- -------- ---------
Operating Income................................................. 138,098 13,482 151,580
Other Income (Expense), net...................................... 9,307 458 9,765
Interest Expense, net of amount capitalized...................... (22,920) (764) (23,684)
-------- -------- ---------
Income Before Taxes and Cumulative Effect of Accounting Change... 124,485 13,176 137,661
Income Tax Expense............................................... (50,441) (4,751) (55,192)
-------- -------- ---------
Income Before Cumulative Effect of Accounting Change............. $ 74,044 $ 8,425 $ 82,469
-------- -------- ---------
-------- -------- ---------
Earnings Per Share Before Cumulative Effect of Accounting Change:
Primary...................................................... $ 1.82 $ 1.01 $ 1.77 (2b)
-------- -------- ---------
-------- -------- ---------
Fully Diluted................................................ $ 1.82 $ -- $ 1.77 (2b)
-------- -------- ---------
-------- -------- ---------
Average Shares Outstanding:
Primary...................................................... 40,708 8,320 46,513
Fully Diluted................................................ 40,770 8,320 46,575
</TABLE>
Note: Pro forma combined earnings per share above assume a Conversion Fraction
of .709, which is the average of the minimum and maximum possible values of the
Conversion Fraction. The pro forma combined primary and fully diluted earnings
per share assuming the minimum Conversion Fraction of .638 are $1.80 and $1.79,
respectively, and the average shares outstanding are 45,932,000 and 45,994,000
respectively. The pro forma combined primary and fully diluted earnings per
share assuming the maximum Conversion Fraction of .780 is $1.75 for both, and
the average shares outstanding are 47,095,000 and 47,157,000 respectively.
See the accompanying notes to these unaudited pro forma combined condensed
financial statements.
35
<PAGE>
COMSAT CORPORATION AND RADIATION SYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1992
-----------------------------
PRO FORMA
COMSAT RSI COMBINED
-------- -------- ---------
<S> <C> <C> <C>
Revenues......................................................... $563,615 $124,478 $688,093
-------- -------- ---------
Operating Expenses:
Cost of Services............................................... 272,351 102,748 375,099
Depreciation and Amortization.................................. 127,337 3,423 130,760
Research and Development....................................... 15,293 1,830 17,123
General and Administrative..................................... 21,168 -- 21,168
Provision for Restructuring.................................... 38,961 -- 38,961
-------- -------- ---------
Total Operating Expenses..................................... 475,110 108,001 583,111
-------- -------- ---------
Operating Income................................................. 88,505 16,477 104,982
Other Income (Expense), net...................................... 3,949 643 4,592
Interest Expense, net of amount capitalized...................... (25,691) (620) (26,311)
-------- -------- ---------
Income Before Taxes.............................................. 66,763 16,500 83,263
Income Tax Expense............................................... (23,839) (6,132) (29,971)
-------- -------- ---------
Net Income....................................................... $ 42,924 $ 10,368 $ 53,292
-------- -------- ---------
-------- -------- ---------
Earnings Per Share:
Primary...................................................... $ 1.09 $ 1.24 $ 1.18 (2b)
-------- -------- ---------
-------- -------- ---------
Fully Diluted................................................ $ 1.09 $ -- $ 1.17 (2b)
-------- -------- ---------
-------- -------- ---------
Average Shares Outstanding:
Primary...................................................... 39,347 8,370 45,281
Fully Diluted................................................ 40,763 8,370 46,697
</TABLE>
Note: Pro forma combined earnings per share above assume a Conversion Fraction
of .709, which is the average of the minimum and maximum possible values of the
Conversion Fraction. The pro forma combined primary and fully diluted earnings
per share assuming the minimum Conversion Fraction of .638 is $1.19 for both,
and the average shares outstanding are 44,687,000 and 46,103,000 respectively.
The pro forma combined primary and fully diluted earnings per share assuming the
maximum Conversion Fraction of .780 is $1.16 for both, and the average shares
outstanding are 45,875,000 and 47,291,000 respectively.
See the accompanying notes to these unaudited pro forma combined condensed
financial statements.
36
<PAGE>
COMSAT CORPORATION AND RADIATION SYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1991
-----------------------------
PRO FORMA
COMSAT RSI COMBINED
-------- -------- ---------
<S> <C> <C> <C>
Revenues......................................................... $522,850 $128,361 $651,211
-------- -------- ---------
Operating Expenses:
Cost of Services............................................... 245,187 108,946 354,133
Depreciation and Amortization.................................. 110,260 3,058 113,318
Research and Development....................................... 17,548 1,118 18,666
General and Administrative..................................... 22,382 -- 22,382
-------- -------- ---------
Total Operating Expenses..................................... 395,377 113,122 508,499
-------- -------- ---------
Operating Income................................................. 127,473 15,239 142,712
Other Income (Expense), net...................................... (4,766) 551 (4,215)
Interest Expense, net of amount capitalized...................... (19,634) (297) (19,931)
-------- -------- ---------
Income Before Taxes and Cumulative Effect of Accounting Change... 103,073 15,493 118,566
Income Tax Expense............................................... (31,649) (5,903) (37,552)
-------- -------- ---------
Income Before Cumulative Effect of Accounting Change............. $ 71,424 $ 9,590 $ 81,014
-------- -------- ---------
-------- -------- ---------
Earnings Per Share Before Cumulative Effect of Accounting Change:
Primary...................................................... $ 1.88 $ 1.15 $ 1.84 (2b)
-------- -------- ---------
-------- -------- ---------
Fully Diluted................................................ $ 1.80 $ -- $ 1.78 (2b)
-------- -------- ---------
-------- -------- ---------
Average Shares Outstanding:
Primary...................................................... 38,069 8,317 43,965
Fully Diluted................................................ 42,767 8,317 48,663
</TABLE>
Note: Pro forma combined earnings per share above assume a Conversion Fraction
of .709, which is the average of the minimum and maximum possible values of the
Conversion Fraction. The pro forma combined primary and fully diluted earnings
per share assuming the minimum Conversion Fraction of .638 are $1.87 and $1.80,
respectively, and the average shares outstanding are 43,375,000 and 48,073,000
respectively. The pro forma combined primary and fully diluted earnings per
share assuming the maximum Conversion Fraction of .780 are $1.82 and $1.75,
respectively, and the average shares outstanding are 44,556,000 and 49,254,000
respectively.
See the accompanying notes to these unaudited pro forma combined condensed
financial statements.
37
<PAGE>
COMSAT CORPORATION AND RADIATION SYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
(a) The accompanying unaudited pro forma combined condensed financial
statements are presented for illustrative purposes only and do not give effect
to any synergies which are expected to occur due to the combination of COMSAT's
and RSi's operations. The pro forma combined condensed balance sheet includes
estimated transaction costs of the Merger of approximately $5,000,000.
Transaction costs include legal, investment banking, accounting and other
related expenses which may not be currently tax deductible. Therefore, no tax
effect has been assumed for these items. All of these costs are expected to be
charged against income of the combined company upon closing the Merger.
Accordingly, the effects of these costs have not been reflected in the pro forma
combined condensed income statements. The pro forma combined condensed financial
statements exclude the nonrecurring costs and expenses associated with
integrating the operations of the combined companies. The costs of integrating
operations are expected to result in significant, nonrecurring charges to the
combined companies' results of operations after consummation of the Merger;
however, the actual amount of such charges cannot be determined at this time.
Pursuant to the rules and regulations of the SEC, the pro forma combined
condensed statements of income exclude the cumulative effects of accounting
changes.
(b) COMSAT operates and reports on a December 31 calendar year basis. RSi
operates and reports on a June 30 fiscal year basis. The pro forma combined
income statement data combines the income statements of COMSAT for the years
ended December 31, 1993, 1992 and 1991 with the income statements of RSi for the
years ended December 31, 1993, 1992 and 1991, respectively. The calendar year
income statements for RSi were derived by adding the income statements for the
third and fourth quarters of each fiscal year with the first and second quarters
of the subsequent fiscal year. The pro forma combined balance sheet data
combines the balance sheet of COMSAT as of December 31, 1993 with the balance
sheet of RSi as of December 31, 1993.
2. PRO FORMA ADJUSTMENTS
(a) Under the Merger Agreement between COMSAT and RSi, each share of RSi
Common Stock will be exchanged for no less than .638 and no more than .780 share
of COMSAT Common Stock.
(b) Primary earnings per share were computed using the combined average
shares outstanding during each period, adjusted for outstanding stock options
and restricted stock units. Fully diluted earnings per share for 1991 and 1992
assume the conversion of COMSAT's convertible debentures, which were redeemed in
March 1992.
(c) As of December 31, 1993, COMSAT owned 404,500 shares of RSi Common Stock
with a total cost to COMSAT of $5,098,000. The pro forma combined balance sheet
includes an adjustment to reflect the retirement of these shares upon
consummation of the Merger.
(d) The pro forma combined balance sheet as of December 31, 1993 reflects
the issuance of COMSAT Common Stock in exchange for all outstanding shares of
RSi Common Stock (excluding those shares held by COMSAT). Assuming the average
Conversion Fraction of .709, 5,587,000 shares of COMSAT Common Stock would be
issued for all outstanding shares of RSi Common Stock; assuming the minimum
Conversion Fraction of .638, 5,028,000 shares of COMSAT Common Stock would be
issued for all outstanding shares of RSi Common Stock; and assuming the maximum
Conversion Fraction of .780, 6,147,000 shares would be issued for all
outstanding shares of RSi Common Stock. The pro forma combined equity account
balances remain the same regardless of the Conversion Fraction.
(e) There are no significant intercompany revenues and no significant
adjustments required to be made to the historical financial statements of COMSAT
and RSi to arrive at the pro forma combined balance
38
<PAGE>
COMSAT CORPORATION AND RADIATION SYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
2. PRO FORMA ADJUSTMENTS (CONTINUED)
sheet and pro forma combined income statements for the pooling of interests
except for the pro forma adjustments to the balance sheet indicated in note 2(c)
above. Certain reclassifications have been made to make classifications for
similar items consistent between companies on a pro forma combined basis.
3. NOTES TO HISTORICAL FINANCIALS
(a) COMSAT's operating results include a restructuring charge of $38,961,000
in 1992.
(b) RSi's revenues include business interruption insurance proceeds of
$3,021,000 in 1993, $1,572,000 in 1992 and $536,000 in 1991.
(c) Per share amounts have been adjusted for a two-for-one split of COMSAT's
stock in 1993 and a three-for-two split of RSi's stock in 1991.
39
<PAGE>
COMPARATIVE MARKET PRICE DATA
The COMSAT Common Stock is listed on the NYSE, the Chicago Stock Exchange
and the Pacific Stock Exchange. The RSi Common Stock is listed on the
NASDAQ/NMS.
The table below sets forth, for the calendar quarters indicated, the
reported high and low sale prices of the COMSAT Common Stock on the NYSE
Composite Tape, and of the RSi Common Stock on the NASDAQ/NMS, in each case
based on published financial sources, and the dividends declared on each share
of COMSAT Common Stock and RSi Common Stock.
<TABLE>
<CAPTION>
COMSAT
COMMON STOCK* RSI COMMON STOCK
------------------------ ------------------------
HIGH LOW DIVIDEND HIGH LOW DIVIDEND
------ ------ -------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
CALENDAR YEAR 1992
First Quarter................................. 21 1/2 17 1/8 .175 19 3/4 16 .035
Second Quarter................................ 21 1/4 18 3/4 .175 17 1/2 10 1/2 --
Third Quarter................................. 21 5/8 19 5/8 .175 15 9 3/8 .05
Fourth Quarter................................ 24 1/2 19 7/8 .175 13 3/4 10 3/4 --
CALENDAR YEAR 1993
First Quarter................................. 27 7/8 23 3/4 .185 15 1/2 12 1/4 .05
Second Quarter................................ 31 5/8 27 1/4 .185 13 3/4 10 3/4 --
Third Quarter................................. 31 7/8 26 3/4 .185 17 1/4 11 1/2 .05
Fourth Quarter................................ 35 1/4 27 1/2 .185 16 1/4 13 1/4 --
CALENDAR YEAR 1994
First Quarter................................. 30 24 7/8 .185 18 1/8 13 1/4 .05
Second Quarter (through May 2, 1994).......... 26 1/2 21 1/8 .185 17 3/4 16 1/8 --
<FN>
- ------------------------
*COMSAT's data reflect the two-for-one stock split which occurred in June 1993.
</TABLE>
The Conversion Fraction will increase or decrease depending on the average
closing price of COMSAT Common Stock on the NYSE Composite Tape during the 20
trading days ending five trading days prior to the date of the Closing (the
"Average Price"). In addition, because the Merger Agreement provides that the
Conversion Fraction shall not be less than .638 and shall not be greater than
.780, if market fluctuations would otherwise have resulted in a Conversion
Fraction outside such range, the value of the shares of COMSAT Common Stock that
holders of RSi Common Stock will receive in the Merger could be more or less
than the value of the COMSAT Common Stock such holders would receive absent any
limitation on the range of the Conversion Fraction. If the Average Price is
between $23.40 and $28.60, the Conversion Fraction will be between .780 and
.638. If the Average Price is $23.40 or less, the Conversion Fraction will be
fixed at .780. If the Average Price is $28.60 or greater, the Conversion
Fraction will be fixed at .638. THE AVERAGE PRICE WILL BE DETERMINED, AND THE
CONVERSION FRACTION WILL BE FIXED, FIVE TRADING DAYS PRIOR TO THE DATE OF THE
CLOSING, WHICH RSI AND COMSAT ANTICIPATE WILL OCCUR ON THE DAY OF THE SPECIAL
MEETING. RSI STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE
COMSAT COMMON STOCK AND THE RSI COMMON STOCK BEFORE DECIDING HOW TO VOTE.
On January 28, 1994, the trading day immediately prior to the public
announcement of the Merger, the closing price of a share of COMSAT Common Stock
on the NYSE Composite Tape was $26 7/8, and the closing price of a share of RSi
Common Stock on the NASDAQ/NMS was $13 1/2. If the Average Price on that date
had been equal to the closing price of the COMSAT Common Stock on that date, the
Conversion Fraction on that date would have been .679.
On May 2, 1994, the last practicable date prior to the mailing of this Proxy
Statement/Prospectus, the closing price of a share of COMSAT Common Stock on the
NYSE Composite Tape was $21 3/8, and the closing price of a share of RSi Common
Stock on the NASDAQ/NMS was $16 1/8. If the Average Price on that date had been
equal to the closing price of the COMSAT Common Stock on that date, the
Conversion Fraction on that date would have been .780.
40
<PAGE>
DESCRIPTION OF COMSAT CAPITAL STOCK
The following is a brief description of the capital stock of COMSAT as
provided for in the COMSAT Articles and the Satellite Act. This description does
not purport to be complete and is qualified in its entirety by reference to the
full text of the COMSAT Articles and the relevant provisions of the Satellite
Act, each of which is an exhibit to the Registration Statement of which this
Proxy Statement/Prospectus is a part.
The Satellite Act and the COMSAT Articles create a number of restrictions on
the rights of holders of COMSAT capital stock. The limitations contained in the
COMSAT Articles and the Satellite Act are relevant in the context of the Merger
because they may restrict the ability of COMSAT to issue shares of COMSAT Common
Stock to certain persons in connection with the Merger, and may limit the rights
of certain shareholders to own, transfer and vote shares of COMSAT Common Stock.
The COMSAT Articles currently authorize the issuance of 105,000,000 shares
of capital stock, including 5,000,000 shares of preferred stock, without par
value ("COMSAT Preferred Stock"), and 100,000,000 shares of common stock,
without par value. As of March 31, 1994, 40,363,294 shares of COMSAT Common
Stock were outstanding. As of that date, no shares of COMSAT Preferred Stock
were issued or outstanding.
GENERAL
The Satellite Act and the COMSAT Articles impose three major restrictions on
the ownership, transfer and voting of shares of COMSAT capital stock. Since
holders of RSi Common Stock will become holders of COMSAT Common Stock after the
Effective Date, these restrictions will apply to their ownership, transfer and
voting of such shares. Accordingly, the following summary and description should
be read carefully.
COMMON CARRIERS. The Satellite Act provides that only those Common
Carriers (as defined below) which are specifically authorized or which
are members of a class of carriers authorized by the FCC to own COMSAT
Common Stock ("Authorized Carriers") may own shares of COMSAT capital
stock, and at no time shall Authorized Carriers own in the aggregate
more than 50 percent of the capital stock of COMSAT. See "-- Provisions
Pertaining to Common Carriers." The Satellite Act provides further that
Common Carriers as a group are entitled to elect directors separately
from the other shareholders when Common Carriers own or hold more than
eight percent of the capital stock. The number of directors that Common
Carriers are entitled to elect is specified by formula in the Satellite
Act. See "-- Voting Rights; Election of Directors." Common Carriers
currently own or hold less than eight percent of the capital stock. The
COMSAT Articles designate shares of COMSAT Common Stock held by persons
other than Common Carriers as Series I shares and shares of Common Stock
held by Common Carriers as Series II shares. See "-- Common Stock."
ALIEN PERSONS. The Satellite Act provides that Alien Persons (as
defined below) may not own or hold more than 20 percent of the aggregate
number of outstanding shares of COMSAT capital stock held by persons
other than Common Carriers. See "-- Restrictions of Ownership and
Transfer of Shares."
HOLDINGS BY ANY PERSON, SYNDICATE OR AFFILIATED GROUP. The
Satellite Act provides that no person, syndicate or affiliated group of
such persons (other than a Common Carrier) may own or hold more than 10
percent of the aggregate number of outstanding shares of COMSAT capital
stock. Pursuant to authority contained in the COMSAT Articles, the
COMSAT Board may determine by resolution that such percentage may be
less than 10 percent. The COMSAT Board has determined that the ownership
limitation shall be 10 percent, but that no person, syndicate or
affiliated group of such persons (other than a Common Carrier) may vote
shares held in excess of five percent of the aggregate number of
outstanding shares of COMSAT capital stock. See "-- Restrictions on
Ownership and Transfer of Shares" and "-- Voting Rights; Election of
Directors."
41
<PAGE>
COMMON STOCK
All shares of COMSAT Common Stock are designated by the COMSAT Articles as
either Series I or Series II shares depending upon the character of the holder
of such shares. Shares of COMSAT Common Stock issued or transferred to persons
other than Common Carriers are designated Series I shares ("Series I shares").
"Common Carrier" means (i) any person (other than COMSAT) engaged within the
United States as a common carrier for hire, in interstate or foreign
communications by wire or radio or in interstate or foreign radio transmission
of energy, including a person so engaged through physical connections, or
connections by radio, or by wire and radio, with the facilities of another
carrier; or (ii) any person which owns or controls, directly or indirectly, or
is under direct or indirect common control with, any such person. A person
engaged in radio broadcasting is not, insofar as so engaged, deemed to be a
Common Carrier. Shares of COMSAT Common Stock issued or transferred to
Authorized Carriers are designated Series II shares ("Series II shares"). Except
as described below, the rights of a holder of Series I shares and the rights of
a holder of Series II shares are the same. Accordingly, subject to the rights of
the holders of COMSAT Preferred Stock, if any, all holders of COMSAT Common
Stock are entitled to receive such dividends as may be declared by the COMSAT
Board out of funds legally available therefor. Upon any liquidation,
dissolution, or winding up of COMSAT, subject to the rights of the holders of
COMSAT Preferred Stock, if any, all holders of shares of COMSAT Common Stock are
entitled to receive, pro rata, the assets of COMSAT available for distribution.
No conversion rights, preemptive rights or redemption rights are applicable to
shares of COMSAT Common Stock.
The total number of Series I shares and Series II shares outstanding as of
March 31, 1994 was 40,342,406 shares and 20,888 shares, respectively. Series II
shares constituted less than 0.1 percent of the outstanding shares as of such
date.
PREFERRED STOCK
The COMSAT Articles provide that the COMSAT Preferred Stock, if issued, (i)
shall have voting rights equivalent to the Series I shares, (ii) may only be
held by persons who are not Common Carriers or subsidiaries or affiliates of
Common Carriers or are not trustees or directors of Common Carriers or
subsidiaries or affiliates of Common Carriers, (iii) shall be aggregated with
the Series I shares in determining compliance with the restrictions on foreign
ownership, (iv) shall be aggregated with shares of COMSAT Common Stock in
determining the number of outstanding shares and compliance with the restriction
on the amount of COMSAT's capital stock that may be held by non-Common Carriers,
(v) if entitled to dividends, shall be entitled to cumulative dividends, (vi)
shall have no preemptive rights, and (vii) with respect to shares of any series
of COMSAT Preferred Stock, may, if so determined by the Board of Directors, be
convertible into shares of another class of COMSAT capital stock or another
series of COMSAT Preferred Stock.
No dividends may be declared or paid on any COMSAT Common Stock nor, except
in limited cases, may any COMSAT Common Stock be purchased or redeemed by
COMSAT, unless all dividends on all series of COMSAT Preferred Stock shall have
been paid or declared and a sum sufficient for the payment thereof set aside. In
the event of any liquidation, dissolution or winding up of COMSAT, before any
payment is made to holders of COMSAT Common Stock, the holders of COMSAT
Preferred Stock shall be entitled to be paid in full their liquidation
preference as fixed in the resolutions of the COMSAT Board issuing such stock,
together with accrued dividends.
The COMSAT Articles provide that the COMSAT Board shall have the authority
to fix the relative rights and preferences of the shares of any series of COMSAT
Preferred Stock generally as follows: (i) the serial designation of such series,
(ii) the number of shares included in such series, (iii) the dividend rate of
the series, (iv) the date from which dividends shall be cumulative, (v) the
liquidation preference of the series, (vi) the provisions relating to the
redemption of shares of the series, (vii) the obligations to create a sinking
fund to purchase or redeem shares, (viii) the conversion privileges of such
shares into any other class of COMSAT capital stock or any other series of
COMSAT Preferred Stock, and (ix) any other relative rights or preferences not
inconsistent with the COMSAT Articles or applicable law.
42
<PAGE>
RESTRICTIONS ON OWNERSHIP AND TRANSFER OF SHARES
As indicated above, the ownership and transfer of shares of COMSAT Common
Stock and COMSAT Preferred Stock are subject to a number of limitations,
including the following: (i) not more than 20 percent of the aggregate number of
outstanding shares of COMSAT Common Stock (held by persons other than Common
Carriers) and of COMSAT Preferred Stock may be held by Alien Persons (as defined
below), and (ii) not more than 10 percent of the aggregate number of outstanding
shares of COMSAT Common Stock and of COMSAT Preferred Stock may be held by any
person, syndicate or affiliated group of persons (other than a Common Carrier).
Subject to these limitations (as more fully described below), a holder of shares
of COMSAT Common Stock or COMSAT Preferred Stock may at any time transfer, sell
or otherwise dispose of such shares to any person to whom shares of either
series of COMSAT Common Stock or of COMSAT Preferred Stock, respectively, may be
issued, and, upon surrender of the share certificate for transfer, the
transferee will receive a certificate, representing the same number of shares as
the surrendered certificate, for shares of the appropriate class or series.
For purposes of the limitation described above, "Alien Person" means a
person who is, as to the United States:
(a) an alien or the representative of any alien;
(b) a foreign government or the representative thereof;
(c) a corporation organized under the laws of any foreign government;
(d) a corporation of which any officer or director is an alien or of which
more than one-fifth of the capital stock is owned of record or voted by aliens
or their representatives or by a foreign government or representative thereof or
by any corporation organized under the laws of a foreign country; or
(e) any corporation directly or indirectly controlled by any other
corporation of which any officer or more than one-fourth of the directors are
aliens, or of which more than one-fourth of the capital stock is owned of record
or voted by aliens, their representatives, or by a foreign government or
representative thereof, or by any corporation organized under the laws of a
foreign country.
The Satellite Act provides that the maximum aggregate percentage of COMSAT
Common Stock and COMSAT Preferred Stock that may be held by any person or
syndicate or affiliated group of persons (other than a Common Carrier) shall not
exceed 10 percent; the COMSAT Articles provide that such percentage shall be
determined from time to time by the COMSAT Board (but, in any event, shall not
be greater than 10 percent). Pursuant to authority contained in the Satellite
Act and the COMSAT Articles, the COMSAT Board has determined by resolution that
the aggregate number of shares of COMSAT Common Stock and COMSAT Preferred Stock
owned or held by any person or syndicate or affiliated group of such persons
(other than a Common Carrier) may not at any time exceed 10 percent of the total
number of outstanding shares of COMSAT capital stock, but that no person,
syndicate or affiliated group of such persons (other than a Common Carrier) may
vote shares held in excess of five percent of the aggregate number of
outstanding shares of COMSAT capital stock. Notice of a determination by the
COMSAT Board changing the maximum percentage must be mailed to each holder of
record of COMSAT capital stock not less than 10 days before the effective date
of such determination. Any reduction from the maximum will not apply to the
ownership of shares acquired before the effective date of any such
determination.
Certain other limitations apply to the ownership and holding of shares by,
and the transfer of shares by and to, Common Carriers. See "-- Provisions
Pertaining to Common Carriers."
The COMSAT Board is authorized to establish procedures with respect to the
issuance or transfer of shares of COMSAT capital stock to enforce the
limitations referred to above. Procedures established by the COMSAT Board
require that, in connection with each issuance or transfer of shares on the book
of COMSAT, the transferee complete an application for transfer of the shares.
Such application calls for information about the transferee's citizenship status
and relationship with Common Carriers. The COMSAT Board may deem certain
transferees automatically to have a particular status, such as Series I domestic
or Series I foreign, without requiring the completion of an application with
respect to each transfer.
43
<PAGE>
Neither the Satellite Act nor the COMSAT Articles define the respective
rights of the seller and purchaser of shares of COMSAT capital stock where,
because of the restrictions on the ownership and transfer of such shares, the
purchaser is not entitled to have the shares transferred to him or her on the
books of COMSAT. The respective rights of the seller and purchaser in such a
case would be determined under the law applicable to such sale. The COMSAT
Articles provide, however, that nothing in the provisions thereof limiting the
ownership and transfer of shares of COMSAT capital stock shall be deemed to
affect the right of the purchaser in such a case to transfer his or her interest
in the shares to any person who, under the provisions of the Satellite Act and
the COMSAT Articles, lawfully may acquire such interest.
At the close of business on March 31, 1994, to COMSAT's knowledge, based on
information provided by COMSAT's registrar and transfer agent, approximately 0.3
percent of the outstanding Series I shares were owned by or for the account of
Alien Persons. Based on the number of Series I shares outstanding on March 31,
1994, the alien ownership limitation would allow a maximum of 8,068,481 shares
of COMSAT Common Stock to be owned by Alien Persons (9,350,323 shares of COMSAT
Common Stock on a pro forma basis after giving effect to the issuance of up to
6,409,210 shares in connection with the Merger, assuming that no such shares are
issued to Alien Persons in the Merger).
PROVISIONS PERTAINING TO COMMON CARRIERS
Shares of COMSAT Common Stock held by Authorized Carriers are designated
Series II shares. Except for an Authorized Carrier, shares of COMSAT capital
stock may not be owned or held, directly or indirectly, by any Common Carrier,
or by a subsidiary or affiliate of any Common Carrier, nor may COMSAT capital
stock be owned or held by a trustee, director, or officer of any of the
foregoing, unless (a) such person is serving at the request of COMSAT or one of
its subsidiaries as a trustee, director, or officer of a Common Carrier, or of a
subsidiary or affiliate of such a carrier, in which COMSAT or its subsidiary
owns stock or is a creditor or (b)(i) such person individually is not a Common
Carrier; (ii) such shares are owned by such person free from any direct or
indirect control of a Common Carrier or of a subsidiary or affiliated company of
a Common Carrier; and (iii) such person is authorized by the FCC to serve
concurrently as a trustee or director of such Common Carrier or of such
subsidiary or affiliated company of a Common Carrier and as a director of
COMSAT. The aggregate number of shares of COMSAT Common Stock owned or held,
directly or indirectly, by Authorized Carriers may not at any time exceed 50
percent of the total number of shares of COMSAT capital stock issued and
outstanding. No Authorized Carrier or affiliated group of such carriers may sell
or transfer to persons other than Authorized Carriers shares of COMSAT Common
Stock totalling, in any consecutive 12-month period, more than two percent of
the greatest number of Series II shares issued and outstanding at any time
during such period, except pursuant to a general public offering or in
conformity with regulations adopted by the COMSAT Board to encourage the widest
distribution of shares of COMSAT Common Stock to the American public. The FCC is
authorized, upon application by any Authorized Carrier and after notice and
hearing, to compel any other Authorized Carrier which owns shares of COMSAT
capital stock to transfer to the applicant, for fair and reasonable
consideration, such number of shares as the FCC determines will advance the
public interest and the purposes of the Satellite Act. Common Carriers may not
own or hold COMSAT Preferred Stock.
VOTING RIGHTS; ELECTION OF DIRECTORS
If COMSAT Preferred Stock is issued, except in the election of directors,
the holders thereof will be entitled to one vote per share on each matter
submitted to a vote at a meeting of shareholders. In the election of directors,
shares of COMSAT Preferred Stock would be treated in the same manner as Series I
shares, as described below.
Except for the election of directors, each share of COMSAT Common Stock is
entitled to one vote on each matter submitted to a vote at a meeting of
shareholders. In certain cases, the D.C. Act would require a proposition to
receive the approval of the holders of the COMSAT Common Stock and the COMSAT
Preferred Stock voting separately. Such cases include certain amendments to the
COMSAT Articles, mergers or consolidations, and the sale of all or substantially
all of the assets of COMSAT. In such cases, the holders of COMSAT Preferred
Stock could prevent such matters from being approved, even if approved by the
holders of COMSAT Common Stock.
44
<PAGE>
The Satellite Act provides that the COMSAT Board shall consist of 15
directors, of whom three shall be appointed by the President of the United
States with the advice and consent of the United States Senate, and the
remaining 12 shall be elected by the shareholders. Six of such directors are to
be elected by holders of Series I shares and six by holder of Series II shares.
However, the Satellite Act provides that if, as of the record date for an annual
meeting of shareholders, the number of Series II shares held by Authorized
Carriers is less than 45 percent of the total number of shares of capital stock
outstanding, the number of directors holders of Series II shares are entitled to
elect will decrease and the number of directors holders of Series I shares are
entitled to elect ("Series I directors") will increase in accordance with the
following table:
<TABLE>
<CAPTION>
WHEN PROPORTION OF
SHARES OF ISSUED THE NUMBER OF AND THE NUMBER OF DIRECTORS
AND OUTSTANDING DIRECTORS WHICH WHICH HOLDERS OF SERIES I
COMSAT CAPITAL STOCK HOLDERS OF SHARES AND
THAT IS OWNED BY SERIES II SHARES COMSAT PREFERRED STOCK
AUTHORIZED CARRIERS BUT NOT ARE ENTITLED TO ARE ENTITLED TO
IS LESS THAN: LESS THAN: ELECT SHALL BE: ELECT SHALL BE:
- -------------------------- -------------- --------------------- -----------------------------
<S> <C> <C> <C>
45 % 40% 5 7
40 % 35% 4 8
35 % 25% 3 9
25 % 15% 2 10
15 % 8% 1 11
8 % -- 0 12
</TABLE>
When Authorized Carriers own less than eight percent of the shares of COMSAT
Common Stock (as is currently the case), all shareholders vote together for
directors, and all directors are considered Series I directors. The Satellite
Act makes no provision for adjustment of Series I and Series II directorships
when, between annual meetings, a change in the relative holdings of Series I
shares and Series II shares of COMSAT Common Stock and shares of COMSAT
Preferred Stock may occur.
In voting for directors, the Satellite Act provides that each COMSAT
shareholder shall have cumulative voting rights. Under cumulative voting, the
holder may cast a number of votes equal to the number of shares held multiplied
by the total number of directors to be elected and may cast all of such votes
for a single candidate or may distribute such votes among any number of
candidates to be elected. The Satellite Act restricts the voting power of Common
Carriers by preventing any one such carrier from electing more than three
directors and all Common Carriers in the aggregate from electing more than six
directors, unless, as is currently the case, all Common Carriers together own
less than eight percent of all outstanding shares of COMSAT capital stock. In
such event, all Common Carriers vote together with the other shareholders for
the Series I directors.
No share may be voted on any matter at a meeting of shareholders if, at the
time of such meeting, the share is owned or held in violation of the Satellite
Act or any regulation promulgated thereunder or in violation of the COMSAT
Articles or any determination made by the COMSAT Board thereunder. The COMSAT
Board has determined, pursuant to authority granted in the COMSAT Articles, that
no person, syndicate or affiliated group of such persons (other than a Common
Carrier) may vote shares held in excess of five percent of the aggregate number
of outstanding shares of COMSAT capital stock. COMSAT may, in accordance with
resolutions adopted by the COMSAT Board require that a holder of shares furnish
appropriate information in this connection when voting such shares.
All of the above provisions will apply to shares of COMSAT Common Stock to
be issued in connection with the Merger.
OTHER
Under the provisions of the Satellite Act, COMSAT is authorized to issue, in
addition to shares of COMSAT Common Stock and COMSAT Preferred Stock, non-voting
securities, bonds, debentures and other certificates of indebtedness as it may
determine. The Satellite Act requires FCC approval to issue shares of COMSAT
capital stock, as well as for any borrowing of funds by COMSAT or any assumption
by it of any obligation in respect of the securities of any other person. COMSAT
is currently subject to an FCC-
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approved Capitalization Plan which includes parameters requiring that COMSAT
maintain (i) a long-term debt to total capitalization ratio of not greater than
45%, (ii) an interest coverage ratio of 2.3 to 1, and (iii) not more than $200
million in short-term borrowings. Pursuant to the Capitalization Plan, COMSAT is
permitted to issue equity securities, including the shares of COMSAT Common
Stock to be issued pursuant to, and in the transactions contemplated by, the
Merger Agreement, upon two days' notice to the FCC so long as COMSAT is in
compliance with such parameters. See "THE MERGER -- Regulatory Matters."
The transfer agent, registrar and dividend disbursing agent for the COMSAT
Common Stock is The Bank of New York.
For a description of certain other provisions contained in the COMSAT
Articles and the COMSAT By-Laws, see "COMPARISON OF RIGHTS OF SHAREHOLDERS OF
RSi AND COMSAT."
COMPARISON OF RIGHTS OF SHAREHOLDERS
OF RSI AND COMSAT
If the Merger is consummated, stockholders of RSi, a Nevada corporation,
will become shareholders of COMSAT, a District of Columbia ("D.C.") corporation,
and the rights of such shareholders will be governed by applicable Federal law,
including the Satellite Act and, to the extent not inconsistent therewith,
applicable D.C. law, including the D.C. Act, the COMSAT Articles and the COMSAT
By-Laws. Although it is not practical to present a comparison of all the
differences between the rights of stockholders of RSi under the Nevada Law, the
RSi Articles and the RSi By-Laws and the rights of shareholders of COMSAT under
the Satellite Act, the D.C. Act, the COMSAT Articles and the COMSAT By-Laws, the
following is a summary of certain important differences which may significantly
affect the rights of RSi stockholders.
GENERAL
COMSAT was incorporated in 1963 under the D.C. Act, as authorized by the
Satellite Act. Although COMSAT is a private (non-government) corporation, the
Satellite Act includes a number of provisions applicable to the conduct of
COMSAT's business and affairs. Some of these provisions govern corporate matters
that are not ordinarily subject to U.S. Government supervision or control. For
instance, under the Satellite Act, three of the 15 directors of COMSAT are
appointed by the President of the United States with the advice and consent of
the United States Senate; the issuance of any shares of capital stock, the
borrowing of money or the assumption of obligations in respect of securities of
any other person by COMSAT must be found by the FCC to be in the public
interest; and certain limitations are placed on the classes of persons that may
hold shares of COMSAT capital stock and on the number of shares a person or
class of persons may hold, as described under "DESCRIPTION OF COMSAT CAPITAL
STOCK." In addition, from time to time amendments to the Satellite Act are
proposed which, if enacted, could change the operations and business of COMSAT.
COMSAT is not an agency of the U.S. Government. The U.S. Government has not
invested funds in COMSAT or guaranteed funds invested in COMSAT, nor has it
guaranteed the payment of dividends by, or the profitability of, COMSAT.
AUTHORIZED CAPITAL STOCK
Under the COMSAT Articles, COMSAT currently has authority to issue
105,000,000 shares of capital stock. Of that number, 5,000,000 shares are
preferred stock, without par value, and 100,000,000 shares are common stock,
without par value. For a further description of COMSAT's capital stock,
including certain restrictions with respect to the issuance, holding, transfer
and voting thereof, see "DESCRIPTION OF COMSAT CAPITAL STOCK."
Under the RSi Articles, RSi currently has authority to issue 25,000,000
shares of common stock, par value $1.00 per share.
PREFERRED STOCK
Under the COMSAT Articles, the COMSAT Board has the authority to issue
preferred stock and to fix the relative rights and preferences of the shares of
any series of COMSAT Preferred Stock generally as
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follows: (i) the serial designation of such series, (ii) the number of shares
included in such series, (iii) the dividend rate of the series, (iv) the date
from which dividends shall be cumulative, (v) the liquidation preference of the
series, (vi) the provisions relating to the redemption of shares of the series,
(vii) the obligations to create a sinking fund to purchase or redeem shares,
(viii) the conversion privileges of such shares into any other class of COMSAT
capital stock or any other series of COMSAT Preferred Stock, and (ix) any other
relative rights or preferences not inconsistent with the COMSAT Articles or
applicable law. See "DESCRIPTION OF COMSAT CAPITAL STOCK -- Preferred Stock."
Under the RSi Articles, the RSi Board is not authorized to issue preferred
stock.
VOTING RIGHTS
Under the D.C. Act, unless otherwise provided by a corporation's articles of
incorporation, each outstanding share is entitled to one vote on matters
submitted to a shareholders' meeting. A corporation may not vote shares it holds
of its own stock, and such shares may not be counted in determining the total
number of outstanding shares. A corporation, however, may vote shares of its own
stock that it holds in a fiduciary capacity and must count those shares in
determining the total number of outstanding shares at any given time.
Each share of COMSAT Common Stock and COMSAT Preferred Stock is entitled to
one vote on matters submitted for vote at shareholder meetings, except in regard
to election of directors and where the rights of the preferred and common
shareholders or the holders of Series I shares and Series II shares may vary.
See "-- Directors" and "DESCRIPTION OF COMSAT CAPITAL STOCK -- Voting Rights;
Election of Directors."
The Satellite Act requires that the COMSAT Articles provide for cumulative
voting by shareholders in the election of directors, thereby permitting a
shareholder to give one candidate as many votes as the number of directors to be
elected, multiplied by the number of shares held by the voting shareholder, or
to distribute such votes among any number of nominees up to the number for which
such shareholder is eligible to vote. The provisions for cumulative voting are
subject to the restrictions described under "-- Directors."
Pursuant to authority granted in the COMSAT Articles, the COMSAT Board has
determined that no person, syndicate or affiliated group of such persons (other
than a Common Carrier) may vote shares held in excess of five percent of the
aggregate number of outstanding shares of COMSAT capital stock. See "DESCRIPTION
OF COMSAT CAPITAL STOCK."
Under the Nevada Law, unless otherwise provided in the articles of
incorporation or in the resolution providing for the issuance of stock,
stockholders are entitled to one vote per share at all stockholder meetings. RSi
stockholders are entitled to one vote per share on matters submitted to
stockholders except in regard to election of directors as described below under
"-- Directors."
The Nevada Law provides for cumulative voting only when permitted by a
corporation's articles of incorporation. The RSi Articles provide for cumulative
voting.
SHAREHOLDER ACTION BY WRITTEN CONSENT
Under the D.C. Act, shareholders may take any action (otherwise required to
be taken at a meeting) without a meeting if all shareholders entitled to vote on
the subject matter at issue consent in writing to the action.
Under the Nevada Law, unless a corporation's articles of incorporation or
by-laws provide otherwise, any action otherwise required to be taken at a
stockholders' meeting may be taken without a meeting if holders of outstanding
stock with at least a majority of the voting power, or such other proportion as
may be required for such an action at a meeting, consent in writing to the
action. The RSi By-laws provide similarly, except that elections of directors of
RSi may not be made by written consent.
CALLING SPECIAL MEETINGS OF SHAREHOLDERS
The D.C. Act allows the president or secretary of a corporation, the board
of directors, the holders of not less than one-fifth of all outstanding shares
entitled to vote, or any other officers or persons provided for
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in the articles of incorporation or by-laws to call special meetings of
shareholders. The D.C. Act requires that the purpose or purposes for which the
meeting is called be stated in the notice with respect to a special meeting.
The COMSAT By-Laws provide that the Chairman of the Board, the Vice
Chairman, if there is one, the President, the Secretary or any three directors
who sign a request may call a special shareholders' meeting. In addition, the
COMSAT By-Laws allow the holders of not less than one-fifth of all outstanding
shares of COMSAT capital stock entitled to vote to call a special meeting.
The Nevada Law has no provision relating to who may call special meetings of
stockholders. The Nevada Law requires that the purpose or purposes for which the
meeting is called be stated in the notice with respect to a special meeting. The
RSi By-Laws provide that special meetings may be called by the President, by the
Board, or by the holders of a majority of all the outstanding shares entitled to
vote. The request must state the purpose or purposes of the proposed meeting.
DISTRIBUTIONS TO SHAREHOLDERS
Under the D.C. Act, a board of directors may declare dividends on
outstanding shares in cash, property or a corporation's own shares unless the
corporation is insolvent, its net assets are less than its stated capital, or if
payment of the dividends would render the corporation insolvent or reduce net
assets below stated capital or if such declaration or payment is contrary to any
restrictions contained in the articles of incorporation. The COMSAT Articles
currently establish a class of Preferred Stock that has priority in the payment
of dividends over the COMSAT Common Stock. No shares of COMSAT Preferred Stock
are currently issued or outstanding.
The Nevada Law permits a board of directors to pay dividends unless such
payment would render the corporation unable to pay its debts as they become due
in the usual course of business, or, except as specifically allowed in the
articles of incorporation, the corporation's total assets would be less than the
sum of its total liabilities plus the amount needed, if the corporation were to
be dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of stockholders whose preferential rights are superior to those
receiving the distribution. The RSi Articles have not established a class of
preferred stock. The RSi By-Laws provide that the RSi Board may declare
dividends on its outstanding shares in cash, property or its own shares.
SHAREHOLDER APPROVAL OF EXTRAORDINARY TRANSACTIONS
The D.C. Act requires a board of directors to submit a plan for merger,
consolidation or sale of substantially all assets to a vote of shareholders at a
special or annual meeting. The board must deliver a written or printed notice to
shareholders at least 20 days before such a meeting and must include with the
notice a copy or summary of the plan. Unless the articles of incorporation
provide otherwise, approval of such a plan by a D.C. corporation requires a
two-thirds affirmative vote of holders of outstanding shares of the corporation.
If a corporation has classes of stock, two-thirds of each class must approve the
plan for it to take effect. However, in no event may the required shareholder
vote be reduced to less than a majority of outstanding shares. The COMSAT
Articles do not provide for a reduced shareholder vote. The D.C. Act's
requirements regarding shareholder approval of mergers apply only to D.C.
corporations. The D.C. Act states that a corporation organized under the laws of
another jurisdiction merging with a D.C. corporation must comply with applicable
provisions of the law of the state under which it is organized. The D.C. Act
does not provide for share exchanges.
The Nevada Law requires a board of directors to adopt a plan of merger or
exchange of shares and recommend the plan of merger or exchange to the
stockholders (unless because of a conflict of interest or other special
circumstance it determines that it should not make a recommendation). Unless the
articles of incorporation or the board of directors, acting pursuant to their
ability to condition submission of the proposed merger or exchange on any basis,
require a greater vote or a class vote by stockholders, the plan of merger or
exchange must be approved by a majority of the voting power unless stockholders
of a class of shares are entitled to vote thereon as a class. If stockholders of
a class of shares are so entitled, the plan must be approved by a majority of
all votes entitled to be cast on the plan by each class and representing a
majority
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of all votes entitled to be voted. Separate voting by a class is required: (i)
on a merger, if the plan contains a provision that, if contained in a proposed
amendment to articles of incorporation, would entitle particular stockholders to
vote as a class on the proposed amendment, and (ii) on a plan of exchange, by
each class or series of shares included in the exchange, with each class or
series constituting a separate voting class. The Nevada Law requires the
surviving or acquiring corporation in a merger or exchange to file articles of
merger or exchange with the Nevada secretary of state. A merger is permitted if
the law of the state or country in which the foreign corporation is incorporated
allows such a merger and the foreign corporation complies with that law. An
exchange of shares is permitted if the corporation whose shares are being
acquired is a Nevada corporation even though the law of the state or country in
which the acquiring corporation is incorporated does not permit the exchange.
Notice of the stockholders' meeting to consider the proposal must be mailed at
least 10 days but not more than 60 days prior to the meeting date. Further, the
Nevada law provides that a corporation may, by action taken at any meeting of
the board of directors of the corporation, and approved by the affirmative vote
of a majority of its stockholders, sell, lease or exchange all of its property
and assets, unless such corporation's articles of incorporation require that a
larger proportion of stockholders approve such transaction.
DISSENTERS' RIGHTS
Under the D.C. Act, shareholders of a corporation which is a party to a
merger or consolidation may dissent from a merger or consolidation and be paid
the fair value of their shares. To receive such payments, dissenters must
fulfill certain statutory requirements and meet certain deadlines for filing the
dissent. If the shareholders and the surviving or new corporation do not agree
upon the value of the shares in question, the dissenters may petition a court to
determine the fair value.
The Nevada Law gives appraisal rights to dissenting stockholders only for
certain statutory mergers or consolidations, including mergers for which
stockholder approval is required and the stockholder is entitled to vote, or
exchanges in which the corporation's shares will be acquired and the stockholder
is entitled to vote. A corporation must notify each stockholder entitled to
appraisal rights that they are available, and include in the notice a copy of
the Nevada Law provisions granting such rights. Unless the articles of
incorporation of the corporation issuing the shares provide otherwise, or under
other limited circumstances, the Nevada Law does not provide a stockholder with
appraisal rights with respect to any merger in which the shares held by such
stockholder were, at the record date for the stockholder meeting to act upon the
merger, either listed on a national securities exchange, designated a national
market security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. ("NASD") or held by at least 2,000 stockholders of
record, if the stockholder will receive shares of stock of a corporation which,
at the effective date of the merger, is listed on a national securities
exchange, designated as a national market security on an interdealer quotation
system by the NASD, or held of record by at least 2,000 stockholders. The RSi
Articles and By-laws do not provide for such appraisal rights. The RSi Common
Stock was, on the Record Date, designated as a national market security on an
interdealer quotation system by the NASD and held by at least 2,000 stockholders
of record. The COMSAT Common Stock was, on the date hereof, and it is
anticipated that it will be, on the Effective Date, listed on the NYSE, a
national securities exchange. See "THE MERGER -- Appraisal Rights."
CHARTER AND BY-LAW AMENDMENTS
The D.C. Act allows corporations to amend their articles of incorporation as
often as and in whatever fashion desired. The amended articles, however, may
contain only provisions that would be legal in original articles at the time of
amendment. Unless the articles of incorporation provide otherwise, amendments to
articles of incorporation approved by a board of directors must be approved by
the affirmative vote of the holders of two-thirds of the outstanding shares
entitled to vote to take effect. If amendments affect certain issues, including
the number of shares and certain shareholders' rights, then the amendments must
receive approval of two-thirds of each class of shares entitled to vote. The
D.C. Act provides that in no event may the required shareholder vote be reduced
to less than the affirmative vote of the holders of a majority of the
outstanding shares entitled to vote. However, the Satellite Act, the provisions
of which supersede the D.C. Act, requires a vote of two-thirds of the
outstanding shares of COMSAT capital stock to amend the COMSAT Articles.
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The D.C. Act vests power to amend by-laws in the directors unless the
articles of incorporation reserve that power to the shareholders. The COMSAT
Articles empower the COMSAT Board to amend the COMSAT By-Laws.
The COMSAT Articles and the COMSAT By-Laws require COMSAT to provide the
COMSAT Board, the Attorney General of the United States, the Chairman of the FCC
and such other persons as the President of the United States may designate from
time to time with 10 days' notice of any meeting called to consider a proposal
to amend the COMSAT Articles, and with five days' notice of any meeting called
to consider a proposal to amend the COMSAT By-Laws.
The Nevada Law allows corporations to amend the articles of incorporation as
desired, as long as the articles as amended contain only provisions that would
be legal in original articles at the time of amendment. Amendments to articles
of incorporation approved by a board of directors must be approved by the
affirmative vote of the holders of shares representing a majority of the voting
power of the corporation. If amendments affect certain issues, including changes
or alterations in preferences or shareholders' rights, then the amendments must
be approved by the affirmative vote of the holders of shares representing a
majority of the voting power of each affected series or class.
The Nevada Law empowers the board of directors to make the by-laws of the
corporation, subject to the by-laws, if any, adopted by the stockholders. The
RSi By-Laws confer the power to amend the By-Laws on the stockholders and the
board of directors.
DIRECTORS
The Satellite Act and the COMSAT Articles provide that the COMSAT Board
shall consist of 15 persons who must be citizens of the United States. Three
members are appointed by the President of the United States, with the advice and
consent of the United States Senate, for three-year terms. Twelve members are
elected annually by the shareholders. Holders of COMSAT Preferred Stock and
Series I shares and holders of Series II shares, respectively, are entitled to
elect a number of directors that varies with the proportion of shares of stock
held in each class and series, as described in detail under "DESCRIPTION OF
COMSAT CAPITAL STOCK."
No holder of COMSAT Series II shares or trustee for such holder may vote,
either directly or indirectly, through subsidiaries or affiliated companies,
nominees, or persons subject to the holder or trustee's direction or control,
for more than three candidates for the Board.
The COMSAT By-Laws state that eight directors are necessary to constitute a
quorum for the transaction of business. The COMSAT Articles provide that quorum
requirements may be relaxed if the President of the United States or his
delegate determines that circumstances of national emergency would not allow a
prompt meeting of the number of directors otherwise required to transact
business. The COMSAT By-Laws state that, during a national emergency, a majority
of the surviving members of the Board who can attend a meeting constitutes a
quorum.
Under the Nevada Law, a corporation's board of directors must consist of one
or more members, with the number fixed by the by-laws or the articles of
incorporation. Under the RSi Articles, the RSi Board must consist of not less
than five directors. Subject to this limitation, the RSi Board may at any time
by the affirmative vote of a majority of directors then in office increase or
decrease the actual number of directors. A majority of the directors constitute
a quorum for transacting business.
Under the D.C. Act, a corporation's board of directors may appoint
committees of the board, consisting only of directors. A committee designated as
an executive committee, consisting of two or more directors, may, to the extent
provided in the corporation's by-laws or in the resolution establishing such
committee, exercise all of the authority of the board of directors in the
management of the business and affairs of the corporation. The COMSAT Board has
established several committees, but does not have an executive committee.
The Nevada Law provides that a corporation's board of directors may
designate one or more committees which, to the extent provided in the
corporation's by-laws or in the resolution establishing such
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committee, may exercise the powers of the board of directors in the management
of the business and affairs of the corporation. Each committee must include at
least one director but, unless the corporation's articles of incorporation or
by-laws provide otherwise, the board of directors may appoint natural persons
who are not directors to serve on committees. The RSi Board has established
several committees, but does not have an executive committee. The RSi Board has
not appointed any persons who are not directors to serve on committees.
VACANCIES AMONG DIRECTORSHIPS
Under the D.C. Act, any vacancy on a board of directors occurring for any
reason other than as a result of an increase in the number of directors may be
filled by the affirmative vote of a majority of the remaining directors, even in
cases where the number of remaining directors is less than a quorum, unless the
articles of incorporation provide otherwise.
Under the COMSAT Articles, any vacancy among the presidential appointees to
the Board may be filled by the President, with the advice and consent of the
United States Senate. Any vacancy among the Series I directors may be filled by
a majority vote of the Series I directors still serving, even if such directors
constitute less than a quorum. Any vacancy existing among the Series II
directors may be filled by a majority vote of Series II directors still serving,
even if such directors constitute less than a quorum. No such vote for a Series
II director is valid if cast for a candidate who, if elected, would afford any
Common Carrier direction or control -- either directly or indirectly -- of more
than three directors.
Under the Nevada Law, all vacancies, including those caused by an increase
in the number of directors, may be filled by a majority of the remaining
directors, even in cases where the number of remaining directors is less than a
quorum, unless the articles of incorporation provide otherwise. The RSi Articles
contain no provisions regarding this matter and, under the RSi By-Laws, if any
vacancy occurs among the directors, or if the number of directors is increased,
the directors in office, even if less than a quorum, may fill the vacancies or
newly created directorships by majority vote.
REMOVAL OF DIRECTORS
None of the D.C. Act, the COMSAT Articles or the COMSAT By-Laws expressly
provides for removal of directors.
Under the Nevada Law, holders of not less than two-thirds of the voting
power of the issued and outstanding stock entitled to vote for a board of
directors may remove, with or without cause, any director or the entire board of
directors of a corporation; provided, however, that (i) in the case of
corporations with cumulative voting, no director may be removed except upon the
vote of stockholders owning sufficient shares to have prevented his election in
the first instance, (ii) the articles of incorporation may require the vote of a
larger percentage of stock entitled to vote, and (iii) whenever the holders of
any class or series of shares are entitled to elect directors, unless otherwise
provided in the articles of incorporation, removal requires only the affirmative
vote of two-thirds or more of the holders of that class or series. As noted
above, the RSi Articles provide for cumulative voting. The RSi Articles do not
contain any special provisions relating to the removal of directors and provide
for only one class of stock.
INDEMNIFICATION
The D.C. Act empowers corporations to indemnify directors, officers, or
former directors or officers, or any persons who may have served at the
corporation's request as directors or officers of another corporation in which
the indemnifying corporation owns shares of capital stock or of which it is a
creditor. Corporations may indemnify such persons against expenses actually and
necessarily incurred in connection with defending any action, suit or proceeding
in which they are made parties because of their position with the corporation.
The D.C. Act further provides that corporate by-laws, agreements or shareholder
vote may give more extensive protection than the D.C. Act specifies to such
persons. However, the corporation may not indemnify any person otherwise
eligible for indemnity who is adjudged liable for negligence or misconduct in
performance of duty.
The COMSAT Articles provide for mandatory indemnification of directors and
officers of COMSAT and its subsidiaries to the extent permitted by the laws of
D.C. The COMSAT Articles provide further that
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expenses incurred by such persons shall be paid by COMSAT in advance of the
final disposition of an action, subject to receipt by COMSAT of an undertaking
from such person to repay all such amounts if it is ultimately determined he was
not entitled to such payment. The COMSAT Articles provide for similar
indemnification for employees of COMSAT and its subsidiaries in the sole
discretion of the COMSAT Board.
Under the Nevada Law, a corporation may indemnify any person who was or is a
party or is threatened to be made a party to an action by reason of the person's
service as a director, officer, employee or agent of the corporation or service,
at the corporation's request, as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise.
Under the Nevada Law, a corporation may indemnify such persons against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
that are actually and reasonably incurred by that person in connection with such
action. The Nevada Law provides, however, that such person must have acted in
good faith and in a manner that was reasonably believed to be in (or not opposed
to) the corporation's best interests. In respect of any criminal action or
proceeding, an indemnified person must have had no reasonable cause to believe
such conduct to be unlawful. Additionally, the Nevada Law permits no
indemnification in any action by or in the right of the corporation where such
person has been adjudged liable to the corporation, unless, and only to the
extent that, a court determines that such person reasonably is entitled to
indemnity in spite of the liability adjudication. The Nevada Law also provides
that the articles of incorporation or the by-laws of a corporation, or an
agreement made by a corporation, may provide that the corporation must pay the
expenses of officers and directors incurred in defending a civil or criminal
action, suit or proceeding as such expenses are incurred, and in advance of
final disposition, upon the receipt of an undertaking to repay the amount if it
is ultimately determined by a court of competent jurisdiction that such person
is not entitled to indemnification.
The RSi By-Laws provide for mandatory indemnification of directors,
officers, employees, and agents to the extent permitted by the laws of the State
of Nevada. The RSi By-Laws further provide that RSi may pay expenses incurred by
such indemnified persons in advance of final disposition of the action without
receipt of an undertaking.
TRANSACTIONS INVOLVING OFFICERS AND DIRECTORS
The D.C. Act provides that a corporation may not lend money to its officers
or directors. Directors who vote for or assent to the making of such a loan are
jointly and severally liable to the corporation for the amount loaned until it
is repaid.
Under the COMSAT Articles, directors are prohibited from participating in
the negotiation of any contract between COMSAT and any entity in which such
director has a substantial financial interest or of which such director is a
director, officer, trustee or employee. Such director must notify the COMSAT
Board of his or her interest in a contract prior to any meeting which the
director plans not to attend, if the interested director knows that the contract
is proposed for action at such meeting. If the director attends the meeting at
which the contract, or any contract between COMSAT and the director
individually, is acted upon, the director much advise the COMSAT Board of his or
her interest and abstain from participating in any discussion or vote on such
contract. The COMSAT Articles provide that a director shall be liable for any
damages incurred by COMSAT as a result of his or her contravention of these
provisions if such contravention results in COMSAT entering into a contract
which is unfair to COMSAT.
Under the Nevada Law, a corporation has the power to contract and transact
business with its directors and officers, or entities in which a director or
officer is a director or officer or is financially interested, provided that (i)
the financial interest or common directorship or office is disclosed or known to
the board of directors (and noted in the minutes) or the stockholders, and the
board of directors or the stockholders, as the case may be, approves such
transaction in good faith by a majority of the disinterested directors or the
disinterested stockholders, (ii) the financial interest or common directorship
or office is not disclosed or known by the director or officer at the time such
transaction is brought before the board of directors for action, or (iii) the
contract or transaction is fair to the corporation at the time it is authorized
or approved.
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LIABILITY OF DIRECTORS
The D.C. Act imposes joint and several liability on directors who vote or
assent to any distribution of the corporation's assets to shareholders, if such
distribution (i) is contrary to the provisions of the D.C. Act or the articles
of incorporation, (ii) renders the corporation insolvent or reduces its net
assets below its stated capital, or (iii) occurs during liquidation and adequate
provision is not made for the corporation's debts, obligations, and liabilities.
In the first two instances, a director is not liable if he relied and acted in
good faith upon a balance sheet and profit-and-loss statement of the corporation
which the president or officer of the corporation having charge of its accounts
represented to be accurate or which was certified by or otherwise represented in
a written report of an independent public or certified public accountant to
fairly reflect the corporation's financial condition. The D.C. Act also imposes
joint and several liability on directors who vote for or assent to the making of
a loan to an officer or director until the loan is repaid. A director who is
present at a meeting of the board of directors is presumed to have assented to
action taken on a corporate matter unless the director's dissent is entered in
the meeting's minutes or the director files a written dissent. A director
adjudged liable may seek contribution from other directors and, in some
instances, shareholders who knowingly accepted or received such dividends.
The Nevada Law imposes joint and several liability on directors who make
distributions to stockholders in willful or grossly negligent violation of the
Nevada Law. A director may be held liable unless the director, if present at the
meeting at which such action was agreed upon, entered his dissent upon the
minutes of the meeting, or if not present at the meeting, entered his dissent
upon learning of such action. A director may avoid liability with respect to a
distribution to shareholders if the director relied in good faith upon the
corporation's books of account prepared by any of its officers as to the
corporation's assets, liabilities, net profits, or other facts pertaining to the
existence and amount of money from which distributions may properly be declared.
The RSi Articles provide that a director will not be personally liable for
damages for breach of fiduciary duty, except with respect to acts or omissions
involving intentional misconduct, fraud, a knowing violation of the law, or the
payment of distributions to stockholders in willful or grossly negligent
violation of the Nevada Law.
LIQUIDATION RIGHTS
The COMSAT Articles authorize the issuance of up to 5,000,000 shares of
preferred stock, in addition to 100,000,000 shares of common stock. If issued,
holders of the preferred stock may be entitled, if so designated by the
directors, to certain priorities of distribution upon the liquidation of COMSAT.
As of the date hereof, COMSAT has not issued, and it is anticipated that on the
Effective Date COMSAT will not have issued, any shares of preferred stock.
Absent any outstanding shares of preferred stock, the D.C. Act provides that in
the event of a liquidation of a corporation, the shareholders are entitled to
share ratably in the assets of the corporation remaining after proper provision
is made for unpaid liabilities.
RSi's capital structure consists of a single class of common stock. Under
the Nevada Law, in the event of liquidation of a corporation, the stockholders
are entitled to share ratably in the assets of the corporation remaining after
proper provision is made for unpaid liabilities.
DISSOLUTION
Under the D.C. Act, voluntary dissolution of a corporation requires adoption
of a resolution by the Board of Directors and the affirmative vote of the
holders of at least two-thirds of the outstanding shares entitled to vote,
unless the articles of incorporation provide for a reduced vote, which may not
be less than a majority of the outstanding shares. The COMSAT Articles do not
provide for a reduced shareholder vote.
The Nevada Law provides that voluntary dissolution requires adoption of a
resolution by a majority of the board of directors and an affirmative vote of a
majority of the outstanding shares entitled to vote on the resolution.
53
<PAGE>
SHAREHOLDER INSPECTION OF BOOKS AND RECORDS
Under the D.C. Act, as modified by the Satellite Act, any shareholder or
shareholders of record or any holder of a voting trust certificate has the right
to examine, in person or by agent or attorney, the record of shareholders, at
any reasonable time, for any proper purpose, and to make extracts from the
record. In addition, under the D.C. Act, any shareholder or shareholders who
hold at least five percent of all outstanding shares may submit a written
request to any officer, director, or registered agent of the corporation for a
statement of the corporation's affairs. In response to such a request, the
president or a vice president or the treasurer or an assistant treasurer of the
corporation must make a sworn statement of the assets and liabilities of a
particular account, and this statement must be on file at the corporation's
registered office within 30 days after presentation of the request. The D.C. Act
establishes a $50.00 penalty for any corporation which refuses to allow any
shareholder to examine the records. However, the D.C. Act provides that a
corporation may defend against such a penalty if the shareholder has within two
years sold, offered for sale, or aided and abetted another person in acquiring
any list of shareholders of any corporation, or if such shareholder has
improperly used any information obtained through a prior examination of the
records of any corporation.
The Nevada Law provides that any person who has been a stockholder of record
for at least six months, or any person holding at least five percent of all
outstanding shares, or a person authorized in writing by the holders of at least
five percent of all outstanding shares, is entitled upon at least five days'
written demand to inspect, in person or by agent or attorney, during normal
business hours, the stock ledger or duplicate stock ledger and to make extracts
from the ledger. For purposes of this provision, holders of voting trust
certificates representing shares of a corporation must be regarded as
shareholders. The Nevada Law establishes a $25.00 per day penalty if the
corporation neglects or refuses to keep the stock ledger open for inspection.
However, the corporation may deny a stockholder or other person the right to
examine records if the stockholder or person refuses to furnish the corporation
with an affidavit stating that the inspection is not desired for a purpose in
the interest of a business or object other than the corporation's business and
that he has never sold, offered for sale, or aided or abetted another person in
acquiring a record of stockholders of any corporation for an interest of a
business or object other than the corporation's business.
COMBINATIONS WITH INTERESTED SHAREHOLDERS
The D.C. Act and the Satellite Act do not contain provisions relating to
combinations with interested shareholders. However, the Satellite Act provides
certain limitations on the ownership of COMSAT capital stock. See "DESCRIPTION
OF COMSAT CAPITAL STOCK."
The Nevada Law places several limitations upon a corporation's ability to
engage in a combination with an "interested stockholder," which is defined as a
beneficial owner of 10 percent or more of the voting power of the outstanding
voting shares of the corporation, or an affiliate or associate of the
corporation which at any time within three years prior to the date in question
was the beneficial owner of 10 percent or more of the voting power of the then
outstanding shares. For three years after an interested stockholder acquires the
shares of a corporation that cause such person to become an interested
stockholder, the corporation may not engage in any combination with the
interested stockholder unless either the board of directors approved the
combination before the interested stockholder acquired the shares or the board
approved the interested stockholder's purchase of shares before the purchase.
After the expiration of three years after the date an interested stockholder
acquires the shares that cause such person to become an interested stockholder,
a corporation may only engage in a combination with an interested stockholder if
(i) the combination meets all of the requirements of the corporation's articles
of incorporation, and either (a) the combination would have been permitted
during the three years after the interested stockholder acquired such shares or
(b) a majority of the outstanding voting power, not beneficially owned by the
interested stockholder or any of the interested stockholder's affiliates or
associates, approve the combination at a meeting called for that purpose no
earlier than three years after the interested stockholder acquired such shares,
or (ii) if the combination meets certain other statutory requirements, relating
to, among other things, the consideration offered to the corporation's other
stockholders in such combination. The Nevada Law provides that the requirements
with respect to combinations with interested stockholders do not apply to any
combination if (i) the original articles of incorporation contain a provision
expressly electing not to have these requirements govern,
54
<PAGE>
(ii) the corporation amended its by-laws within 30 days after October 1, 1991
and expressly elected not to have the requirements govern, or (iii) the
corporation amends its articles of incorporation expressly electing not to be
governed by the requirements and the amendment is approved by the affirmative
vote of a majority of the outstanding voting power, excluding the voting shares
of the interested stockholder and its affiliates and associates. The RSi
Articles and the RSi By-Laws do not contain provisions electing not be to
governed by the Nevada Law requirements.
CONTROL SHARE ACQUISITIONS
The D.C. Act does not have a control share acquisition provision. However,
the Satellite Act provides certain limitations on the ownership of COMSAT
capital stock. See "DESCRIPTION OF COMSAT CAPITAL STOCK."
The Nevada Law contains control share acquisition provisions which apply to
any acquisition of a controlling interest in certain corporations. In order for
such provisions to apply to a corporation, it must have 200 or more
stockholders, at least 100 of whom are stockholders of record and residents of
Nevada. As RSi currently has fewer than 100 stockholders of record who are
residents of Nevada, such control share acquisition provisions currently do not
apply to it.
LEGAL MATTERS
The validity of the shares of COMSAT Common Stock to be issued in the Merger
is being passed upon by Crowell & Moring, Washington, D.C., counsel to COMSAT.
Shaw, Pittman, Potts & Trowbridge, a partnership including professional
corporations, Washington, D.C., counsel to RSi, will issue a legal opinion
concerning certain federal income tax consequences of the Merger.
EXPERTS
The consolidated financial statements of COMSAT incorporated by reference in
this Proxy Statement/ Prospectus by reference to COMSAT's Annual Report on Form
10-K for the year ended December 31, 1993 (as amended by Amendment No. 1
thereto) have been so incorporated in reliance on the report of Deloitte &
Touche, independent public accountants, given on the authority of such firm as
experts in accounting and auditing.
The consolidated financial statements of RSi included and incorporated by
reference in this Proxy Statement/Prospectus by reference to RSi's Annual Report
on Form 10-K for the fiscal year ended June 30, 1993 (as amended by Amendments
No. 1, No. 2, and No. 3 thereto) have been so included and incorporated by
reference in reliance on the report of Deloitte & Touche, independent public
accountants, given on the authority of such firm as experts in accounting and
auditing. A representative of Deloitte & Touche is expected to be present at the
Special Meeting and will have an opportunity to make a statement, if he or she
desires, and to respond to appropriate questions.
SOLICITATION OF PROXIES
COMSAT and RSi will share equally the expenses in connection with the
printing and mailing of this Proxy Statement/Prospectus. The costs of
solicitation of proxies will be borne by RSi. RSi will reimburse brokers,
fiduciaries, custodians and other nominees for reasonable out-of-pocket expenses
incurred in sending this Proxy Statement/Prospectus and other proxy materials
to, and obtaining instructions relating to such materials from, beneficial
owners of RSi stock. RSi stockholder proxies may be solicited by directors,
officers or regular employees of RSi and of COMSAT in person, by letter or by
telephone or telegram. In addition, RSi has retained Morrow & Co., Inc. to
assist in the solicitation of proxies. It is estimated that the fees of Morrow &
Co., Inc. for services to RSi will not exceed $4,000, plus expenses.
55
<PAGE>
RSI TRANSFER AGENT
RSi has engaged Wachovia Bank of North Carolina, N.A. as the new Transfer
Agent with respect to RSi Common Stock. The address of the Transfer Agent is
Corporate Trust Department, P.O. Box 3001, Winston-Salem, North Carolina 27102,
and the telephone number is (800) 633-4236. RSi stockholders should contact the
Transfer Agent to transfer RSi Common Stock or replace lost stock certificates
representing RSi Common Stock prior to the Effective Date.
RSI STOCKHOLDERS SHOULD NOT SUBMIT THEIR CERTIFICATES FOR EXCHANGE TO THE
TRANSFER AGENT. See "THE MERGER -- Exchange of Stock Certificates."
BY ORDER OF THE BOARD OF DIRECTORS
OF RADIATION SYSTEMS, INC.
Anita M. Stutzman
Secretary
56
<PAGE>
RADIATION SYSTEMS, INC. CONSOLIDATED FINANCIAL STATEMENTS
INDEX
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Independent Auditors' Report............................................................................... F-2
Consolidated Statements of Earnings for the years ended June 30, 1993, 1992 and 1991 (Audited)............. F-3
Consolidated Statements of Financial Position as at June 30, 1993 and 1992 (Audited)....................... F-4
Consolidated Statements of Cash Flows for the years ended June 30, 1993, 1992 and 1991 (Audited)........... F-6
Consolidated Statements of Stockholders' Equity for the years ended June 30, 1993, 1992 and 1991
(Audited)................................................................................................. F-7
Notes to Consolidated Financial Statements (Audited)....................................................... F-8
Quarterly Financial Information (Unaudited)................................................................ F-15
Condensed Consolidated Balance Sheet as at December 31, 1993 (Unaudited)................................... F-16
Consolidated Statements of Earnings for the three months and six months ended December 31, 1993
(Unaudited)............................................................................................... F-18
Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 1993 (Unaudited)..... F-19
Notes to Condensed Consolidated Financial Statements (Unaudited)........................................... F-20
</TABLE>
F-1
<PAGE>
RADIATION SYSTEMS, INC.
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Radiation Systems, Inc.
Sterling, Virginia
We have audited the accompanying consolidated statements of financial
position of Radiation Systems, Inc. and subsidiaries as of June 30, 1993 and
1992, and the related consolidated statements of earnings, stockholders' equity
and cash flows for each of the three years in the period ended June 30, 1993.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Radiation Systems, Inc. and subsidiaries as of June 30, 1993 and 1992, and the
results of their operations and their cash flows for each of the three years in
the period ended June 30, 1993 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE
Washington, D.C.
August 20, 1993
F-2
<PAGE>
RADIATION SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
----------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Revenues
Sales........................................... $118,790 $127,136 $115,519
Business interruption insurance income.......... 2,996 1,306
-------- -------- --------
121,786 128,442 115,519
-------- -------- --------
Costs and Expenses
Cost of sales................................... 87,015 93,335 89,499
General and administrative expenses............. 19,115 18,352 12,462
Interest expense (income), net.................. 80 (164) 32
-------- -------- --------
106,210 111,523 101,993
-------- -------- --------
Earnings before Income Taxes...................... 15,576 16,919 13,526
Provision for Income Taxes........................ 5,336 6,334 5,157
-------- -------- --------
Net Earnings...................................... $ 10,240 $ 10,585 $ 8,369
-------- -------- --------
-------- -------- --------
Earnings Per Share................................ $ 1.23 $ 1.27 $ 1.01
-------- -------- --------
-------- -------- --------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
RADIATION SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30
----------------------
1993 1992
---------- ----------
<S> <C> <C>
Assets
Current Assets
Cash and equivalents.................................................................... $ 6,211 $ 9,683
Short-term investments.................................................................. 1,746 2,590
Accounts receivable, less allowance for doubtful accounts of $814 in 1993
and $839 in 1992....................................................................... 20,312 18,345
Unbilled costs and accrued profits, less customer progress payments
of $52,672 in 1993 and $58,337 in 1992................................................. 45,229 36,263
Inventories............................................................................. 17,444 15,256
Other current assets.................................................................... 2,333 999
---------- ----------
93,275 83,136
---------- ----------
Intangible Assets, less accumulated amortization of $2,352 in 1993
and $1,947 in 1992....................................................................... 6,312 4,828
---------- ----------
Other Assets.............................................................................. 654 1,378
---------- ----------
Property, Plant and Equipment, at cost
Land.................................................................................... 1,958 1,953
Buildings............................................................................... 13,323 13,192
Test range.............................................................................. 2,480 2,145
Machinery and equipment................................................................. 24,888 22,617
Leasehold improvements.................................................................. 347 152
---------- ----------
42,996 40,059
Less accumulated depreciation............................................................. (19,862) (15,829)
---------- ----------
23,134 24,230
---------- ----------
$ 123,375 $ 113,572
---------- ----------
---------- ----------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
RADIATION SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (CONT.)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30
----------------------
1993 1992
---------- ----------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities
Note payable to bank.................................................................... $ 3,000 $
Current portion of long-term debt....................................................... 1,230 817
Current portion of guaranteed ESOP debt................................................. 748 720
Accounts payable........................................................................ 8,556 9,872
Accrued salaries, benefits and related expenses......................................... 3,505 3,328
Customer advances....................................................................... 2,090 1,171
Income taxes payable.................................................................... 3,027 882
Deferred income taxes................................................................... 738 2,566
Other current liabilities............................................................... 2,378 2,039
---------- ----------
25,272 21,395
Long-Term Debt, less current portion...................................................... 7,196 6,826
Other noncurrent liabilities.............................................................. 1,545 1,664
Deferred Income Taxes..................................................................... 1,492 1,631
Guaranteed ESOP Debt, less current portion................................................ 2,271 3,019
---------- ----------
37,776 34,535
---------- ----------
Commitments and Contingencies
Stockholders' Equity
Common stock; $1 par value; 25,000,000 shares authorized; 8,756,619 shares issued in
1993 and 8,742,369 shares issued in 1992............................................... 8,757 8,742
Other paid-in capital................................................................... 21,378 21,297
Retained earnings....................................................................... 62,979 53,537
Foreign currency translation adjustment................................................. (1,432) 1,394
Treasury stock, at cost, 471,432 shares in 1993 and 391,432 shares in 1992.............. (3,064) (2,194)
Debt guarantee for ESOP................................................................. (3,019) (3,739)
---------- ----------
85,599 79,037
---------- ----------
$ 123,375 $ 113,572
---------- ----------
---------- ----------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
RADIATION SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
---------------------------------
1993 1992 1991
--------- ---------- ----------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net Earnings...................................................................... $ 10,240 $ 10,585 $ 8,369
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation and amortization................................................... 3,634 3,369 2,500
Deferred income taxes........................................................... (2,239) (275) (592)
Unrealized investment (income).................................................. (24) (11)
Change in assets and liabilities:
Decrease (increase) in assets:
Accounts receivable......................................................... (1,114) 5,041 2,723
Unbilled costs and accrued profits.......................................... (8,356) (9,385) 1,904
Inventories................................................................. (1,425) 396 4,889
Other assets................................................................ (870) (645) 517
Increase (decrease) in liabilities:
Accounts payable............................................................ (1,460) (1,855) 1,635
Accrued salaries, benefits and related expenses............................. 35 690 371
Customer advances........................................................... 919 911 (123)
Income taxes................................................................ 2,524 (641) (25)
Other liabilities........................................................... (77) (2,282) 1,346
--------- ---------- ----------
Net cash provided by operating activities................................... 1,811 5,885 23,503
--------- ---------- ----------
Cash Flows from Investing Activities
Sale of short-term investments.................................................... 844 613 71
Capital expenditures.............................................................. (2,036) (3,341) (5,197)
Acquisitions, net of cash acquired................................................ (4,345) (8,887)
--------- ---------- ----------
Net cash used by investing activities....................................... (5,537) (11,615) (5,126)
--------- ---------- ----------
Cash Flows from Financing Activities
Short-term borrowings............................................................. 3,925 11,160
Payments of short-term borrowings................................................. (925) (18,060)
Proceeds from long-term debt...................................................... 2,000 6,065
Payment of long-term debt......................................................... (2,130) (2,974) (456)
Proceeds from stock option exercises.............................................. 96 350 652
Dividends paid.................................................................... (837) (570) (550)
Purchase of treasury stock........................................................ (870) (283)
Sale of treasury stock to ESOP.................................................... 93
--------- ---------- ----------
Net cash provided (used) by financing activities............................ 1,259 2,871 (7,444)
--------- ---------- ----------
Effect of Exchange Rate Changes on Cash and Equivalents............................. (1,005) 338
--------- ---------- ----------
Net Increase (Decrease) in Cash and Equivalents..................................... (3,472) (2,521) 10,933
Cash and Equivalents, beginning of year............................................. 9,683 12,204 1,271
--------- ---------- ----------
Cash and Equivalents, end of year................................................... $ 6,211 $ 9,683 $ 12,204
--------- ---------- ----------
--------- ---------- ----------
Supplemental Cash Flow Information:
Income taxes paid................................................................. $ 5,095 $ 6,331 $ 5,812
Interest paid..................................................................... $ 646 $ 525 $ 511
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
RADIATION SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOREIGN
OTHER CURRENCY DEBT
COMMON PAID-IN RETAINED TRANSLATION TREASURY GUARANTEE
STOCK CAPITAL EARNINGS ADJUSTMENT STOCK FOR ESOP
----------- --------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, July 1, 1990........................ $ 5,726 $ 22,963 $ 35,703 $ (2,004) $ (4,939)
Exercise of stock options.................. 64 588
Purchase of treasury stock (30,000
shares)................................... (283)
Sale of treasury stock to ESOP (10,000
shares)................................... 93 (93)
ESOP debt payments......................... 633
Net earnings............................... 8,369
Cash dividends declared ($.10 per share)... (550)
----------- --------- --------- ----------- --------- -----------
Balance, June 30, 1991....................... 5,790 23,551 43,522 (2,194) (4,399)
Tax benefit from stock option
transactions.............................. 348
Exercise of stock options.................. 38 312
ESOP debt payments......................... 660
Three-for-two stock split.................. 2,914 (2,914)
Net earnings............................... 10,585
Cash dividends declared ($.07 per share)... (570)
Foreign currency translation adjustment.... 1,394
----------- --------- --------- ----------- --------- -----------
Balance, June 30, 1992....................... 8,742 21,297 53,537 1,394 (2,194) (3,739)
Exercise of stock options.................. 15 81
Purchase of treasury stock (80,000
shares)................................... (870)
ESOP debt payments......................... 720
Net earnings............................... 10,240
Cash dividends declared ($.10 per share)... (837)
Tax benefit associated with dividends on
unallocated ESOP shares................... 39
Foreign currency translation adjustment.... (2,826)
----------- --------- --------- ----------- --------- -----------
Balance, June 30, 1993....................... $ 8,757 $ 21,378 $ 62,979 $ (1,432) $ (3,064) $ (3,019)
----------- --------- --------- ----------- --------- -----------
----------- --------- --------- ----------- --------- -----------
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
RADIATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include
the accounts of Radiation Systems, Inc., and its wholly owned subsidiaries (the
Company). All significant intercompany accounts and transactions have been
eliminated.
REVENUE RECOGNITION. Sales and profits on long-term fixed price contracts
are recognized under the percentage of completion method. Under this method,
sales and profits are recognized based upon the relationship of costs incurred
to estimated total contract costs. Sales and profits on other fixed-price
contracts are recognized based upon shipment of products. Immediate recognition
is provided for all anticipated losses on contracts.
UNBILLED COSTS AND ACCRUED PROFITS. Unbilled amounts represent accumulated
costs and accrued profits, principally on U.S. Government contracts, which will
be billed at future dates in accordance with contract terms and delivery
schedules. Substantially all of these amounts are expected to be collected
within one year.
INTANGIBLE ASSETS. Intangible assets include the excess of cost over fair
value of net assets acquired and certain other costs which are amortized over
5-20 years.
PROPERTY, PLANT AND EQUIPMENT. Depreciation is provided over the estimated
useful lives of the assets using the straight-line method.
RESEARCH AND DEVELOPMENT. Company-sponsored research and development
expenditures are charged to expense as incurred ($1,990,000 in 1993, $1,670,000
in 1992, and $566,000 in 1991).
EARNINGS PER SHARE. The computation is based on the weighted average number
of common shares and common equivalent shares outstanding each year (8,356,000
in 1993, 8,365,000 in 1992, and 8,256,000 in 1991).
CASH EQUIVALENTS. Cash equivalents represent highly-liquid investments with
original maturities of three months or less.
SHORT-TERM INVESTMENTS. At June 30, 1993, short-term investments consisted
of preferred stocks with guaranteed put values valued at cost, which
approximates market, of $1,746,000.
FOREIGN CURRENCY TRANSLATION. The functional currency for the Company's
U.K. operations is the pound sterling. The Company translates the assets and
liabilities of its U.K. subsidiaries at the exchange rate in effect at the end
of the reporting period. Revenues and expenses are translated using the average
exchange rate for the applicable period. The cumulative effect of foreign
currency translations is reported as a separate component of stockholders'
equity in the consolidated statements of financial position.
INSURANCE SETTLEMENTS. On October 3, 1992, the Company sustained tornado
damage at its Largo, Florida, facility. Included in other current assets at June
30, 1993, is $1,647,000 which represents accrued business interruption insurance
and deferred restoration costs, net of insurance payments received. The Company
is in the process of negotiating a final insurance settlement for its claim
which it believes will offset the costs incurred and to be incurred associated
with the tornado damage. Business interruption insurance included in revenues
for the year ended June 30, 1993, amounted to $2,996,000. Business interruption
insurance included in revenues for the year ended June 30, 1992, amounted to
$1,306,000, and represents final business interruption insurance proceeds
relating to a fire which occurred in a plant of one of the Company's U.K.
subsidiaries.
RECLASSIFICATIONS. Certain reclassifications have been made to prior years'
balances to conform to the classifications used in the current year. In fiscal
year 1992, a reclassification of $1,306,000 was made to reflect separately the
amount of business interruption insurance income which had previously been
included in cost of sales on the consolidated statements of earnings.
F-8
<PAGE>
RADIATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. INVENTORIES
Inventories, stated at the lower of cost (first-in, first-out) or market,
consist of the following at June 30 (in thousands):
<TABLE>
<CAPTION>
1993 1992
--------- ---------
<S> <C> <C>
Finished goods.................................................................... $ 4,226 $ 3,193
Work in progress.................................................................. 7,607 7,352
Raw materials..................................................................... 5,611 4,711
--------- ---------
$ 17,444 $ 15,256
--------- ---------
--------- ---------
</TABLE>
3. INDUSTRY SEGMENT, GEOGRAPHIC, AND MAJOR CUSTOMER INFORMATION
The Company operates predominantly in a single industry segment as a
manufacturer and integrator of microwave antennas and related products for
worldwide communications markets. As discussed in Note 8,
F-9
<PAGE>
RADIATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. INDUSTRY SEGMENT, GEOGRAPHIC, AND MAJOR CUSTOMER INFORMATION (CONTINUED)
the Company acquired two operating divisions located in the United Kingdom in
1992. Prior to 1992, all Company operations were located in the United States.
Sales by major customer, exports, and financial data by major geographic area
are as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- -------
<S> <C> <C> <C>
Major Customers
U.S. Government (prime and subcontract)
Department of Defense.......................... $ 35,850 $ 40,912 $24,592
Other.......................................... 38,044 37,552 24,169
-------- -------- -------
$ 73,894 $ 78,464 $48,761
-------- -------- -------
-------- -------- -------
Domestic customer................................ $ $ 16,181 $36,756
-------- -------- -------
-------- -------- -------
Exports from the U.S............................... $ 18,673 $ 16,159 $11,981
-------- -------- -------
-------- -------- -------
Major Geographic Area
Sales
United States
Customers.................................... $103,980 $116,255
Intercompany................................. 451 79
-------- --------
104,431 116,334
-------- --------
England
Customers.................................... 14,810 10,881
Intercompany................................. 659 807
-------- --------
15,469 11,688
Eliminations..................................... (1,110) (886)
-------- --------
Consolidated..................................... $118,790 $127,136
-------- --------
-------- --------
Operating Income
United States.................................. $ 14,521 $ 15,503
England........................................ 1,135 1,252
-------- --------
15,656 16,755
Interest Expense, net............................ (80) 164
-------- --------
Earnings before Income Taxes..................... $ 15,576 $ 16,919
-------- --------
-------- --------
Identifiable Assets
United States.................................. $106,956 $ 90,514
England........................................ 8,462 10,785
Corporate...................................... 7,957 12,273
-------- --------
$123,375 $113,572
-------- --------
-------- --------
</TABLE>
Intercompany sales represent transfers to affiliates between geographic
areas at amounts which approximate manufacturing cost plus a normal profit
margin. As discussed in Note 1, operating income includes business interruption
insurance income of $2,996,000 in 1993 (U.S.) and $1,306,000 in 1992 (England).
Corporate assets include cash and short-term investments.
4. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
The Company has a bank credit agreement which provides for short-term
borrowings and letters of credit of up to $10,000,000 at an interest rate equal
to the prime rate or the London Interbank Offered Rate (LIBOR) plus 1%, at the
Company's option. Subsequent to June 30, 1993, the commitment fee of 1/4
F-10
<PAGE>
RADIATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. SHORT-TERM BORROWINGS AND LONG-TERM DEBT (CONTINUED)
percent on the unused portion of the line was waived. At June 30, 1993, the
Company had a $3,000,000 short-term note payable outstanding under a prior
agreement at the 30-day LIBOR plus 1.5% (4.73% at year-end). Outstanding letters
of credit applied against the line of credit were $2,670,000 and $499,000 at
June 30, 1993 and 1992, respectively. The maximum amount of short-term
borrowings outstanding during 1993 was $3,525,000 for which the weighted average
interest rate was 4.7%. Interest expense was $680,000 in 1993, $447,000 in 1992,
and $484,000 in 1991.
Long-term debt consists of the following at June 30 (in thousands):
<TABLE>
<CAPTION>
1993 1992
------- ------
<S> <C> <C>
Industrial revenue bond; secured by real property and certain
equipment; 7% interest; payable monthly through 1999.......... $ 805 $ 920
Industrial revenue bond; secured by real property and certain
equipment; 7% interest payable semi-annually; principal
payable annually in 1995 through 2004......................... 3,065 3,065
Note payable to bank, unsecured; interest adjusted quarterly at
the lower of the prime rate or 91 day LIBOR plus 1.5% (4.7% at
June 30, 1993); payable quarterly through 1997................ 4,000 3,000
Capital lease obligation secured by equipment, net of 11.59%
imputed interest of $142,000 in 1993 and $213,000 in 1992;
payable monthly through 1997.................................. 556 658
------- ------
8,426 7,643
Less current maturities........................................ (1,230) (817)
------- ------
$ 7,196 $6,826
------- ------
------- ------
</TABLE>
Maturities of long-term debt for the next five years are as follows:
$1,230,000 in 1994, $1,549,000 in 1995, $1,564,000 in 1996, $1,588,000 in 1997,
$420,000 in 1998, and $2,075,000 thereafter.
The Company's bank credit and industrial revenue bond agreements require it
to maintain minimum amounts of working capital, stockholders' equity, and other
financial requirements. At June 30, 1993, the Company was in compliance with all
such requirements. The properties securing the industrial revenue bonds had a
net book value of $5,418,000 at June 30, 1993.
5. INCOME TAXES
The provision for income taxes is comprised as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Current
Federal................................................................. $ 6,229 $ 5,053 $ 4,803
State................................................................... 749 881 946
Foreign................................................................. 558 544
Deferred
Federal................................................................. (2,056) (177) (531)
State................................................................... (118) 5 (61)
Foreign................................................................. (65) (103)
Other..................................................................... 39 131
--------- --------- ---------
$ 5,336 $ 6,334 $ 5,157
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-11
<PAGE>
RADIATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES (CONTINUED)
The deferred portions of the provisions for income taxes, which result from
timing differences of revenues and expenses for tax and financial reporting
purposes, are comprised as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Income (recognized) under long-term contracts............................... $ (2,228) $ (599) $ (560)
Accruals currently (not) deductible......................................... (143) 202 (201)
Amortization of deferred gain on sale/leaseback previously recognized....... 44 90
Tax depreciation in excess of (below) book depreciation..................... (5) (14) 113
Other....................................................................... 93 46 56
--------- --------- ---------
$ (2,239) $ (275) $ (592)
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company's effective tax rate varies from the statutory federal rate as a
result of the following factors:
<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Statutory federal rate..................................................... 34.2% 34.0% 34.0%
State income taxes net of federal tax benefit.............................. 2.7 3.5 4.3
Benefit from decrease in statutory rate on closed contract................. (2.0)
FSC benefit................................................................ (.8) (.6) (.5)
Goodwill amortization...................................................... .8 .7 .5
Other...................................................................... (.6) (.2) (.2)
--- --- ---
Effective tax rate......................................................... 34.3% 37.4% 38.1%
--- --- ---
--- --- ---
</TABLE>
No provision has been made for income and withholding taxes at June 30,
1993, which would be payable should undistributed foreign earnings of $810,000
be distributed as dividends, as the Company intends to continue to reinvest such
earnings in its foreign operations.
The Financial Accounting Standards Board has issued Statement No. 109
regarding accounting for income taxes which requires the use of the liability
method of accounting for income taxes and is required to be adopted in fiscal
1994. The Company expects that adoption of this statement in the first quarter
of 1994 will not have a material effect on its consolidated financial position.
6. STOCKHOLDERS' EQUITY
STOCK SPLIT
In November 1991, the Company effected a three-for-two stock split in the
form of a 50% stock dividend on its common stock. All share and per share
amounts have been restated to reflect the stock split.
STOCK OPTIONS
In 1992, the Company's stockholders approved two incentive stock option
plans, a Key Employees Plan authorizing 450,000 options and a Directors Plan
authorizing 120,000 options. The plans, which terminate in August 2001, permit
the grant of options for terms of up to five years and at prices not less than
the fair value at the time of grant. Options granted under the plans expire at
varying dates through January 1998. At June 30, 1993, the Key Employees and
Directors Plans had 66,000 and 60,000 options, respectively, available to grant.
In 1983, the Company adopted an Incentive Stock Option Plan and authorized
315,000 shares, of which all have been granted and expire at varying dates
through November 1995. In addition, there are 8,250 non-qualified stock options
outstanding and currently exercisable which expire in November 1995.
F-12
<PAGE>
RADIATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' EQUITY (CONTINUED)
A summary of stock option activity is as follows:
<TABLE>
<CAPTION>
OPTION EXERCISE
SHARES PRICE RANGE
--------- ---------------
<S> <C> <C>
Outstanding at July 1, 1990................................................. 165,000 $5.58-$6.92
Granted..................................................................... 11,250 $6.83
Exercised................................................................... (96,750) $5.58-$6.92
--------- ---------------
Outstanding at June 30, 1991................................................ 79,500 $6.00-$6.83
Granted..................................................................... 380,500 $15.00-$18.00
Exercised................................................................... (57,000) $6.00-$6.83
--------- ---------------
Outstanding at June 30, 1992................................................ 403,000 $6.75-$18.00
Granted..................................................................... 125,000 $13.50
Exercised................................................................... (14,250) $6.75
Cancelled................................................................... (12,500) $15.00
--------- ---------------
Outstanding at June 30, 1993................................................ 501,250 $6.83-$18.00
--------- ---------------
--------- ---------------
Exercisable at June 30, 1993................................................ 188,250 $6.83-$15.00
--------- ---------------
--------- ---------------
</TABLE>
7. RETIREMENT PLANS
The Company has an Employee Stock Ownership Plan (ESOP), as defined in
Section 497(e)(7) of the Internal Revenue Code, established to acquire shares of
the Company's common stock for the benefit of all eligible employees. Since
inception of the plan in October 1988, the Company has sold 915,000 shares of
treasury stock to the ESOP at market values ranging from $6 to $7.83 per share.
The ESOP financed the purchases with bank notes payable, guaranteed by the
Company, which are due as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992
--------- ---------
<S> <C> <C>
Note payable, 8.75% interest, payable quarterly through October 1996................. $ 2,377 $ 2,923
Note payable, 10.95% interest, payable quarterly through July 1997................... 642 793
Note payable, 11.35% interest, retired in December 1992.............................. 23
--------- ---------
3,019 3,739
Less current maturities.............................................................. (748) (720)
--------- ---------
$ 2,271 $ 3,019
--------- ---------
--------- ---------
</TABLE>
The Company makes periodic contributions to the ESOP at least sufficient to
make the principal and interest payments as they are due. Contributions to the
ESOP charged to expense totaled $982,000 in 1993, $1,039,000 in 1992, and
$1,030,000 in 1991. For financial statement purposes, the ESOP's notes payable
are reflected as Company debt and the corresponding Company guarantees are
recorded as a separate reduction of stockholders' equity. Both the Company debt
and the guarantees are reduced equally by loan principal repayments. Maturities
of the ESOP debt over the next five years are as follows: $748,000 in 1994,
$803,000 in 1995, $862,000 in 1996, $568,000 in 1997, and $38,000 in 1998.
One of the Company's U.K. subsidiaries has a defined benefit pension plan.
At the most recent actuarial valuation date, September 3, 1992, the market value
of the pension plan's net assets was L5,098,000, which exceeded the actuarially
computed value of benefits by L1,793,000 (or $2,672,000 using the exchange rate
of 1.49 at June 30, 1993). Foreign pension expense was $117,000 in 1993 and
$127,000 in 1992.
F-13
<PAGE>
RADIATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. ACQUISITIONS
In January 1993, the Company acquired Anghel Laboratories, Inc. (Anghel) for
$3.1 million in cash plus incentives which allow for payments totaling up to an
additional $3.3 million over six years contingent upon Anghel meeting specific
financial objectives over the period. The acquisition is accounted for as a
purchase and, accordingly, Anghel's results of operations are included with the
Company's consolidated results of operations for the period beginning January 1,
1993. Anghel designs, manufactures and markets a specialized line of
microwave-based products, including satellite frequency converters, signal
control and frequency source components, and integrated assemblies used in
communications, navigation, radar and missile guidance systems.
In November 1992, the Company acquired certain contract rights, property and
other intangibles associated with U.S. Government tactical air navigation
(TACAN) antenna contracts for $1.3 million (including $1.2 million paid in
1993), and agreed to pay royalties associated with future TACAN contract awards
over a five-year period.
In August 1991, the Company acquired CSA Limited (CSA) and PG Technology
Limited (PGT) in the United Kingdom, for $8.9 million in cash, net of cash
acquired. CSA manufactures antennas, masts and related products for worldwide
communications markets. PGT manufactures proprietary optical/electronic
measuring systems and performs precision machining for customers worldwide. The
acquisition is accounted for as a purchase. Summarized below are the unaudited
consolidated results of operations for 1991 on a pro forma basis as if CSA and
PGT had been acquired on July 1, 1990 (in thousands, except per share amount):
<TABLE>
<CAPTION>
1991
----------
<S> <C>
Revenues.................................................................................... $ 130,972
Net Earnings................................................................................ $ 8,173
Earnings Per Share.......................................................................... $ .99
Average Shares Outstanding.................................................................. 8,256
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
The Company has commitments under long-term noncancellable operating leases
requiring future payments as follows: $1,144,000 in 1994, $1,095,000 in 1995,
$657,000 in 1996, $347,000 in 1997, $346,000 in 1998, and $161,000 in 1999.
Lease expenses were $1,370,000 in 1993, $1,263,000 in 1992, and $320,000 in
1991.
As a U.S. Government contractor, the Company is subject to routine audit and
investigation by various agencies which oversee contract performance. Management
believes that potential claims from such investigations will not have a material
adverse effect on the consolidated financial statements.
The Company is involved in various other litigation through the normal
course of business which management believes will have no material adverse
effect on the consolidated financial statements.
F-14
<PAGE>
RADIATION SYSTEMS, INC.
UNAUDITED QUARTERLY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Fiscal 1993
Sales............................................................... $ 32,459 $ 28,492 $ 27,457 $ 30,382
Operating costs and expenses........................................ 28,419 25,619 24,827 27,265
Earnings before taxes............................................... 4,084 3,629 3,452 4,411
Net earnings........................................................ 2,569 2,251 2,504 2,916
Earnings per share.................................................. .31 .27 .30 .35
Fiscal 1992
Sales............................................................... $ 33,656 $ 31,525 $ 31,799 $ 30,156
Operating costs and expenses........................................ 29,993 27,731 28,240 25,723
Earnings before taxes............................................... 4,035 4,097 4,107 4,680
Net earnings........................................................ 2,411 2,626 2,589 2,959
Earnings per share.................................................. .29 .31 .31 .36
</TABLE>
EARNINGS BEFORE TAXES FOR FISCAL 1993 INCLUDES BUSINESS INTERRUPTION
INSURANCE INCOME OF $802,000, $941,000, AND $1,253,000 IN THE SECOND, THIRD, AND
FOURTH QUARTERS, RESPECTIVELY. EARNINGS BEFORE TAXES FOR FISCAL 1992 INCLUDES
BUSINESS INTERRUPTION INSURANCE INCOME OF $340,000, $196,000, $552,000, AND
$218,000 IN THE FIRST, SECOND, THIRD, AND FOURTH QUARTERS, RESPECTIVELY (SEE
NOTE 1).
F-15
<PAGE>
RADIATION SYSTEMS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1993 1993
------------ ----------
<S> <C> <C>
Assets
Current assets
Cash and equivalents................................................................. $ 7,436 $ 6,211
Short-term investments............................................................... 1,286 1,746
Accounts receivable.................................................................. 17,623 20,312
Unbilled costs and accrued profits on contracts in progress, less customer progress
payments of $42,616 at December 31, 1993, and $52,672 at June 30, 1993............. 49,212 45,229
Inventories
Work-in-progress and finished goods................................................ 13,051 11,833
Raw materials...................................................................... 6,277 5,611
Other current assets................................................................. 1,015 2,333
------------ ----------
95,900 93,275
------------ ----------
Intangibles and other assets......................................................... 6,367 6,966
------------ ----------
Property, plant and equipment, at cost............................................... 45,799 42,996
Less accumulated depreciation........................................................ (21,534) (19,862)
------------ ----------
24,265 23,134
------------ ----------
Total Assets........................................................................... $ 126,532 $ 123,375
------------ ----------
------------ ----------
</TABLE>
See notes to condensed consolidated financial statements.
F-16
<PAGE>
RADIATION SYSTEMS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (CONT.)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1993 1993
------------ ----------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities
Note payable to bank................................................................. $ 4,000 $ 3,000
Current portion of long-term debt.................................................... 1,236 1,230
Current portion of guaranteed ESOP debt.............................................. 775 748
Accounts payable..................................................................... 7,292 8,556
Income taxes payable................................................................. 976 3,027
Deferred income taxes................................................................ 436 738
Other current liabilities............................................................ 11,519 7,973
------------ ----------
26,234 25,272
Long-term debt, less current portion................................................... 6,272 7,196
Other non-current liabilities.......................................................... 1,486 1,545
Deferred income taxes.................................................................. 1,478 1,492
Guaranteed ESOP debt, less current portion............................................. 1,876 2,271
------------ ----------
37,346 37,776
------------ ----------
Stockholders' Equity
Common stock - $1 par value; 25,000,000 shares authorized;
8,756,619 shares issued............................................................. 8,757 8,757
Other paid-in capital................................................................ 21,378 21,378
Retained earnings.................................................................... 66,257 62,979
Foreign currency translation adjustment.............................................. (1,491) (1,432)
Treasury stock, 471,432 shares at cost............................................... (3,064) (3,064)
Debt guarantee for ESOP.............................................................. (2,651) (3,019)
------------ ----------
89,186 85,599
------------ ----------
Total Liabilities and Stockholders' Equity............................................. $ 126,532 $ 123,375
------------ ----------
------------ ----------
</TABLE>
F-17
<PAGE>
RADIATION SYSTEMS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31 JUNE 30
-------------------- -------------------- ----------
1993 1992 1993 1992 1993
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Revenues
Sales................................................... $ 27,061 $ 28,492 $ 53,035 $ 60,951 $ 118,790
Business interruption insurance......................... 802 827 802 2,996
--------- --------- --------- --------- ----------
27,061 29,294 53,862 61,753 121,786
--------- --------- --------- --------- ----------
Costs and expenses
Cost of sales, including general and administrative
expenses............................................... 24,832 25,619 48,321 54,038 106,130
Interest expense, net................................... 114 46 228 2 80
--------- --------- --------- --------- ----------
24,946 25,665 48,549 54,040 106,210
--------- --------- --------- --------- ----------
Earnings before income taxes.............................. 2,115 3,629 5,313 7,713 15,576
Provision for income taxes................................ 811 1,378 1,998 2,893 5,336
--------- --------- --------- --------- ----------
Earnings before cumulative effect......................... 1,304 2,251 3,315 4,820 10,240
Cumulative effect on prior years' earnings of a change in
accounting for income taxes.............................. 377
--------- --------- --------- --------- ----------
Net earnings.............................................. $ 1,304 $ 2,251 $ 3,692 $ 4,820 $ 10,240
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
Earnings per share:
Earnings before cumulative effect....................... $ .16 $ .27 $ .40 $ .58 $ 1.23
Cumulative effect on prior years' earnings of a change
in accounting for income taxes......................... .05
--------- --------- --------- --------- ----------
$ .16 $ .27 $ .45 $ .58 $ 1.23
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
</TABLE>
See notes to condensed consolidated financial statements.
F-18
<PAGE>
RADIATION SYSTEMS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31
--------------------
1993 1992
--------- ---------
<S> <C> <C>
Cash Flows from Operating Activities......................................................... $ 1,621 $ (203)
--------- ---------
Cash Flows from Investing Activities
Capital expenditures....................................................................... (2,822) (547)
Property insurance claim receipts.......................................................... 2,670 1,500
Property insurance claim costs incurred.................................................... (362) (1,733)
Sale of short-term investments............................................................. 460 173
Acquisition of TACAN product line.......................................................... (1,205)
--------- ---------
(54) (1,812)
--------- ---------
Cash Flows from Financing Activities
Short-term borrowings...................................................................... 4,000
Payment of short-term borrowings........................................................... (3,000)
Payment of long-term debt.................................................................. (918) (612)
Dividends paid............................................................................. (414) (418)
Proceeds from long-term debt............................................................... 2,000
Proceeds from stock option exercises....................................................... 96
--------- ---------
(332) 1,066
--------- ---------
Effect of Exchange Rate Changes on Cash and Equivalents...................................... (10) (814)
--------- ---------
Net Increase in Cash and Equivalents......................................................... $ 1,225 $ (1,763)
--------- ---------
--------- ---------
</TABLE>
See notes to condensed consolidated financial statements.
F-19
<PAGE>
RADIATION SYSTEMS, INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The condensed consolidated financial statements included herein have been
prepared by Radiation Systems, Inc. (together with its subsidiaries, unless the
context otherwise requires, referred to herein as the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. These
condensed consolidated financial statements should be read in conjunction with
the audited consolidated financial statements and notes thereto included in the
Company's Form 10-K for the year ended June 30, 1993.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to a fair presentation of the results for
interim periods have been made. The results of operations for the interim
periods ended December 31, 1993, are not necessarily indicative of the results
to be expected for the full year.
Certain reclassifications have been made to prior periods' balances to
conform to the classifications used in the current interim periods. As a
supplementary disclosure, the Company has presented a Consolidated Statement of
Earnings for the year ended June 30, 1993, in order to more clearly reflect the
impact of the tornado damage in October 1992 (see Note 4) on the Company's
operating results for all periods presented.
2. SUBSEQUENT EVENT -- PROPOSED MERGER WITH COMSAT
On January 30, 1994, the Company entered into a merger agreement whereby
COMSAT Corporation ("COMSAT") will acquire all of the Company's common stock.
Under the merger agreement, the Company will be merged with and into a wholly
owned subsidiary of COMSAT and each share of the Company's common stock (other
than stock owned by the Company or by COMSAT or its subsidiaries) will be
exchanged for $18.25 in COMSAT common stock, based on the average closing price
of COMSAT stock during 20 trading days ending five trading days before the
closing of the transaction. However, in no event would a share of the Company's
common stock be exchanged for less than 0.638 or more than 0.780 shares of
COMSAT common stock.
The merger is subject to the approval of the Company's shareholders, receipt
of all required government approvals and compliance with other customary
conditions. COMSAT currently owns 4.9 percent of the Company's stock. The
Company may be required to pay COMSAT up to $7.5 million if the transaction is
not completed under certain circumstances. The Company has also granted COMSAT,
as part of this transaction, an irrevocable option that can be exercised under
certain circumstances to purchase up to an additional 15 percent of the
Company's common stock, at an exercise price of $18.25 per share. It is also a
condition to the merger that it be treated as a pooling of interests by COMSAT
for accounting purposes. The Company's shareholders are expected to vote on the
merger during the second quarter of calendar year 1994.
3. CUMULATIVE EFFECT ADJUSTMENT
The Company implemented Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS 109"), in the quarter ended September 30,
1993, which changed the method of accounting for income taxes from the deferred
method to the liability method. Under the liability method, deferred tax assets
and liabilities are recognized based on the temporary differences between the
carrying amounts of assets and liabilities for financial statement and income
tax purposes using currently enacted tax rates. The implementation of SFAS 109
resulted in a favorable $377,000 ($.05 per share) cumulative effect adjustment
to earnings in the quarter ended September 30, 1993.
F-20
<PAGE>
RADIATION SYSTEMS, INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INSURANCE SETTLEMENT STATUS
On October 3, 1992, the Company sustained tornado damage to plant, equipment
and inventory at its Largo, Florida, antenna pedestal manufacturing facility.
PROPERTY CLAIM
Included in other current liabilities at December 31, 1993, is $2,657,000 of
property insurance claim receipts, net of restoration and replacement costs
incurred associated with the tornado damage. The Company is in the process of
negotiating a final insurance settlement for its property claim which it
believes will offset future costs to be incurred associated with the tornado
damage.
BUSINESS INTERRUPTION CLAIM
For its business interruption claim, the Company has previously received
$827,000 and $2,996,000 which have been included in total revenues for the
quarter ended September 30, 1993, and the year ended June 30, 1993 (including
$802,000 in the quarter ended December 31, 1992), respectively. The Company has
submitted a business interruption insurance claim for the quarter ended December
31, 1993, and believes it will reach a settlement of such claim with its
insurance company by the end of the fiscal year ending June 30, 1994.
F-21
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement") made as of January 30, 1994, by
and among COMSAT Corporation, a District of Columbia corporation ("COMSAT"), CTS
America, Inc., a Delaware corporation and a wholly owned subsidiary of COMSAT
("CTS"), and Radiation Systems, Inc., a Nevada corporation ("RSI").
WHEREAS, COMSAT desires to acquire RSI by a merger of RSI with and into CTS,
and RSI desires the same, pursuant and subject to the terms and conditions of
this Agreement;
WHEREAS, the Boards of Directors of each of COMSAT and RSI have determined
that the proposed merger of RSI with and into CTS is in the best interests of
their respective corporations and shareholders;
WHEREAS, COMSAT, CTS and RSI intend that the transactions contemplated by
this Agreement qualify as a reorganization within the meaning of Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code"), and that such
transactions will be accounted for by the pooling of interests method of
accounting for financial reporting purposes; and
WHEREAS, pursuant to such merger, CTS shall be the merging or surviving
corporation (sometimes hereinafter referred to as the "Surviving Corporation")
and RSI shall be the merged or disappearing corporation (sometimes hereinafter
referred to as the "Merged Corporation");
NOW THEREFORE, in consideration of the premises, the mutual benefits to be
derived from this Agreement and the representations, warranties, conditions and
promises hereinafter set forth, the parties hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1 THE MERGER. Upon the Effective Date (as defined in Section 1.2
herein) and subject to and upon the terms of this Agreement, the General
Corporation Law of the State of Delaware ("Delaware Corporation Law") and the
General Corporation Law of the State of Nevada ("Nevada Corporation Law"), RSI
shall be merged with and into CTS, the separate corporate existence of RSI shall
cease, and CTS shall continue as the Surviving Corporation (the "Merger"). CTS
and RSI are hereinafter sometimes referred to jointly as the "Constituent
Corporations."
1.1.1 NEVADA ARTICLES OF MERGER. At the Closing (as defined in Article
II herein), CTS and RSI shall execute and acknowledge Nevada Articles of
Merger in the form of Exhibit A hereto ("Nevada Articles of Merger"),
providing for the Merger pursuant to Section 78.458 of the Nevada
Corporation Law.
1.1.2 DELAWARE CERTIFICATE OF MERGER. At the Closing, CTS and RSI
shall execute and acknowledge a Delaware Certificate of Merger in the form
of Exhibit B hereto ("Delaware Certificate of Merger") providing for the
Merger pursuant to Section 252 of the Delaware Corporation Law.
1.1.3 FILINGS. Immediately upon completion of the Closing, CTS and RSI
shall cause the Merger to be consummated by filing or causing to be filed
the original Delaware Certificate of Merger with the Secretary of the State
of Delaware, by recording or causing to be recorded a second original of the
Delaware Certificate of Merger in the Office of the Recorder of the County
of New Castle of the State of Delaware (being the county in which the
registered office of the Surviving Corporation is located), and by filing or
causing to be filed the original Nevada Articles of Merger with the
Secretary of the State of Nevada, pursuant to Sections 103 and 252 of the
Delaware Corporation Law and Section 78.458 of the Nevada Corporation Law,
respectively.
Section 1.2 EFFECTIVE DATE. The Effective Date of the Merger ("Effective
Date") shall be the later of the day when the Delaware Certificate of Merger is
duly filed with the Secretary of State of the State of
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Delaware or the day when the Nevada Articles of Merger are duly filed with the
Secretary of the State of Nevada as provided in Subsection 1.1.3 herein, the
parties intending the Merger to be deemed as having been consummated at the
close of business upon the Effective Date, which for purposes of this Agreement,
shall be deemed to be 5:00 p.m. local time in Reno, Nevada on the Effective
Date. It is the intent of the parties that the Effective Date be the same day as
the Closing Date (as defined in Article II herein) or, if not practicable, the
earliest practicable day immediately thereafter.
Section 1.3 EFFECT OF THE MERGER. At the close of business on the
Effective Date, the effect of the Merger shall be as provided under all
applicable provisions of the Delaware Corporation Law and the Nevada Corporation
Law. Without limiting the generality of the foregoing, and subject thereto, at
the close of business on the Effective Date any and all assets, rights,
privileges, powers and franchises of the Constituent Corporations, individually
and collectively, shall vest in the Surviving Corporation, and any and all
debts, liabilities, duties and obligations of the Constituent Corporations,
individually and collectively, shall vest in, be deemed to be assumed by and
become debts, liabilities, duties and obligations of the Surviving Corporation.
Section 1.4 THE SURVIVING CORPORATION.
1.4.1 CERTIFICATE. The Certificate of Incorporation of CTS as in
effect upon the Effective Date shall be the Certificate of Incorporation of
the Surviving Corporation, until thereafter amended as provided by law and
such Certificate. A copy of such Certificate is attached hereto as Exhibit
C.
1.4.2 BYLAWS. The Bylaws of CTS as in effect upon the Effective Date
shall be the Bylaws of the Surviving Corporation until thereafter amended as
provided by law, the Certificate of Incorporation of the Surviving
Corporation, and such Bylaws. A copy of such Bylaws is attached hereto as
Exhibit D.
1.4.3 DIRECTORS AND OFFICERS. The directors and officers of CTS upon
the Effective Date will be the initial directors and officers of the
Surviving Corporation. In the event a vacancy shall exist on the Board of
Directors or in any office of CTS upon the Effective Date, such vacancy may
thereafter be filled in the manner provided by law, the Certificate of
Incorporation and the Bylaws of the Surviving Corporation.
1.4.4 SURRENDER. At the Closing, the Merged Corporation shall
surrender its stock registry, minute book and corporate seal to the
Surviving Corporation. At the Effective Date the stock transfer books of RSI
shall be closed, and there shall be no registration of transfers of shares
of capital stock of RSI thereafter.
Section 1.5 ADDITIONAL ACTIONS. If, at any time after the Closing, the
Surviving Corporation shall consider or be advised that any further assignments
or assurances in law or any other acts are necessary or desirable to (a) vest,
perfect or confirm, of record or otherwise, in the Surviving Corporation its
rights, title or interest in, to or under any of the rights, properties or
assets of the Merged Corporation acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger, or (b) otherwise
carry out the purposes of this Agreement and the transactions contemplated
hereby, the Merged Corporation shall be deemed to have granted to the Surviving
Corporation an irrevocable power of attorney to execute and deliver all such
proper deeds, assignments, novations and assurances in law and to do all acts
necessary or proper to vest, perfect or confirm title to and possession of such
rights, properties or assets in the Surviving Corporation and otherwise to carry
out the purposes of this Agreement and the transactions contemplated hereby; and
the proper officers and directors of the Surviving Corporation are fully
authorized in the name of the Merged Corporation or otherwise to take any and
all such actions.
ARTICLE II
CLOSING; CONSIDERATION
Section 2.1 THE CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") shall be held at the offices of Crowell & Moring,
1001 Pennsylvania Avenue, N.W., Washington, D.C. 20004 at 11:00 a.m. immediately
following a special meeting of the RSI shareholders to approve the
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Merger, or otherwise on the first business day after all of the conditions to
the Closing set out in Articles VI and VII herein have been met or waived, or at
such other place and date and time as the parties may designate in writing (the
date and time agreed upon for Closing hereinafter the "Closing Date").
Section 2.2 CONSIDERATION AND CONVERSION OF STOCK. At the close of
business on the Effective Date:
2.2.1 CONVERSION. Each share of RSI common stock, par value $1.00 per
share (the "RSI Stock"), other than shares specified in Subsection 2.2.2,
that is issued and outstanding on the Effective Date shall be converted
without any action on the part of the holder thereof into that fraction of a
share, rounded to the nearest thousandth (the "Conversion Fraction"), of
common stock, without par value, of COMSAT (the "COMSAT Stock") determined
by dividing Eighteen Dollars and twenty-five cents ($18.25) by the average
closing price of a whole share of COMSAT Stock on the New York Stock
Exchange Composite Tape for the twenty (20) Trading Days ending with the
Trading Day which precedes the Closing Date by five (5) Trading Days (a
"Trading Day" being any day on which the New York Stock Exchange is open for
business and on which shares of COMSAT Stock are traded on that Exchange),
provided that the Conversion Fraction shall not be less than .638 and shall
not be greater than .780. The issuance and voting of the COMSAT Stock shall
be subject to any restrictions set forth in the Communications Satellite Act
of 1962, as amended, 47 U.S.C. SectionSection 701 et seq., the COMSAT
Articles of Incorporation, and such actions that have been taken by the
Board of Directors of COMSAT pursuant to authority granted by Section 5.05
of the COMSAT Articles of Incorporation.
2.2.2 CANCELLATION OF CERTAIN SHARES. All shares of RSI Stock which
are (i) held in the treasury of RSI or owned by any subsidiary of RSI on the
Effective Date, or (ii) owned by COMSAT or any subsidiary of COMSAT,
including CTS, on the Effective Date shall be cancelled without payment of
any consideration therefor.
Section 2.3 EXCHANGE OF AND PAYMENT FOR RSI STOCK.
2.3.1 NOTICE. Promptly after the Effective Date COMSAT will cause the
exchange agent selected by COMSAT (the "Exchange Agent") to send to each
holder of record of shares of RSI Stock which shall have been converted into
shares of COMSAT Stock in the Merger an appropriate letter of transmittal
for purposes of surrendering such holder's certificates for such shares for
exchange into certificates of shares of COMSAT Stock as provided in this
Section 2.3.
2.3.2 CERTIFICATES. As soon as practicable after the Effective Date
and after surrender to the Exchange Agent of any certificate which prior to
the Effective Date shall have represented any shares of RSI Stock, subject
to the provisions of Subsection 2.3.4 herein, COMSAT shall cause to be
distributed to the person in whose name such certificate shall have been
registered certificates registered in the name of such person representing
the shares of COMSAT Stock into which any shares previously represented by
the surrendered certificate shall have been converted as of the close of
business on the Effective Date and a check payable to such person
representing the payment of cash in lieu of fractional shares determined in
accordance with Subsection 2.3.5 herein. Until surrendered as contemplated
by the preceding sentence, each certificate which immediately prior to the
Effective Date shall have represented any shares of RSI Stock shall be
deemed at and after the Effective Date to represent only the right to
receive upon such surrender a certificate representing the COMSAT Stock and
the payment as so contemplated.
2.3.3 DIVIDENDS. No dividends or other distributions declared after
the date of this Agreement with respect to shares of COMSAT Stock and
payable to the holders of record thereof on or after the Effective Date
shall be paid to the holder of any unsurrendered certificates which prior to
the Effective Date shall have represented shares of RSI Stock with respect
to which the shares of COMSAT Stock shall have been issued in the Merger
until such certificates shall be surrendered as provided herein, unless
otherwise agreed in writing by COMSAT, but (i) upon such surrender there
shall be paid to the person in whose name the certificates representing such
shares of COMSAT Stock shall be issued the amount of dividends or other
distributions theretofore paid or made with a record date on or after the
Effective Date but prior to surrender with respect to such shares of COMSAT
Stock and the amount of
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any cash payable to such person in lieu of fractional shares pursuant to
Subsection 2.3.5 herein, and (ii) at the appropriate payment date or as soon
as practicable thereafter, there shall be paid or made to such person the
amount of dividends or other distributions with a record date on or after
the Effective Date but prior to surrender and a payment date subsequent to
surrender payable with respect to such shares of COMSAT Stock. No interest
shall be payable with respect to the payment of such dividends or other
distributions or cash in lieu of fractional shares on surrender of
outstanding certificates.
2.3.4 PRIOR TRANSFER. If any cash, dividend, other distribution or
certificate representing shares of COMSAT Stock is to be paid or made to or
issued in a name other than that in which the certificate surrendered in
exchange therefor is registered, it shall be a condition of the payment or
issuance thereof that the certificate so surrendered shall be properly
endorsed and otherwise in proper form for transfer and that the person
requesting such exchange shall pay to the Exchange Agent any transfer or
other taxes required by reason of the issuance of a certificate representing
shares of COMSAT Stock in any name other than that of the registered holder
of the certificate surrendered, or otherwise required, or shall establish to
the satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
2.3.5 CASH IN LIEU OF FRACTIONAL SHARES. Notwithstanding any other
provision of this Agreement, no certificates or scrip representing
fractional shares of COMSAT Stock shall be issued upon the surrender for
exchange of certificates which prior to the Merger shall have represented
any shares of RSI Stock, no dividend or other distribution of COMSAT shall
relate to any fractional share and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a shareholder of
COMSAT. In lieu of any fractional shares, there shall be paid to each holder
of shares of RSI Stock who otherwise would be entitled to receive a
fractional share of COMSAT Stock an amount of cash (without interest)
determined by multiplying such fraction by the closing price of a whole
share of COMSAT Stock on the New York Stock Exchange Composite Tape on the
last full trading day prior to the Effective Date.
2.3.6 FULL SATISFACTION. Subject to COMSAT's obligation to pay or make
previously declared dividends and other distributions which remain unpaid or
unmade, all rights to receive cash, if any, other distributions and shares
of COMSAT Stock into which shares of RSI Stock shall have been converted in
the Merger shall be deemed when paid, made or issued hereunder to have been
paid, made or issued, as the case may be, in full satisfaction of all rights
pertaining to such shares of RSI Stock.
2.3.7 ESCHEAT LAWS. Notwithstanding any provision of this Section 2.3,
neither the Exchange Agent nor any party to this Agreement shall be liable
to a holder of a certificate for RSI Stock for any shares of COMSAT Stock,
dividends or other distributions thereon, or proceeds in lieu of issuance of
any fractional shares thereof, delivered to a public official pursuant to
applicable escheat or unclaimed property laws.
Section 2.4 ADJUSTMENTS. If, between the date of this Agreement and the
Effective Date (inclusive), the outstanding shares of COMSAT Stock or RSI Stock
shall have been changed into a different number of shares or a different class
by reason of any reclassification, recapitalization, reorganization, split-up,
combination, exchange of shares or readjustment, or a stock dividend or other
extraordinary distribution (other than a nonliquidating cash dividend) thereon
shall be declared with a record date within said period, the number of shares of
COMSAT Stock into which shares of RSI Stock are to be converted shall be
correspondingly adjusted after negotiations conducted in good faith and promptly
concluded between the parties, and the Nevada Articles of Merger and the
Delaware Certificate of Merger shall be amended to reflect the same.
Section 2.5 OTHER DELIVERIES. At the Closing, each of COMSAT, CTS and RSI
shall use its best efforts to deliver or cause to be delivered the opinions,
certificates and other documents respectively required to be delivered pursuant
to Articles VI and VII hereunder.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF RSI
RSI hereby represents and warrants to COMSAT and CTS as of the date hereof
and as of the Closing Date as set forth in this Article III. RSI is making all
these representations and warranties on behalf of itself and each RSI Subsidiary
(as defined in Subsection 3.1.2 herein), unless the context otherwise plainly
requires. In determining whether an event, condition or matter would have an
effect on or be material to RSI, RSI shall be deemed to include RSI and the RSI
Subsidiaries, taken as a whole. The "Disclosure Letter" referred to in the
representations and warranties of RSI contained in this Article III refers to a
letter which has heretofore been delivered by RSI to COMSAT and CTS, and which
may be updated periodically and shall be updated immediately prior to the
Closing Date pursuant to Section 5.12. The Disclosure Letter (and any update
thereof) may include more information than is required to be disclosed therein
and such inclusions are not an admission that any matter referred to therein is
material. Whenever a representation and warranty contained in this Article III
is made to the knowledge of RSI, it shall mean all facts and conditions referred
to in or omitted from such representation and warranty, and which are known by,
or which should have been known by (in light of circumstantial evidence made
available to them on or prior to the date on which such representation and
warranty is made), the following individuals: (i) as of the date of this
Agreement, Richard E. Thomas, Mark D. Funston, R. Doss McComas, Marvin D.
Shoemake, William A. Thomas, Harold A. Siegel, and the directors of RSI; and
(ii) as of the Closing Date each of the individuals referred to in clause (i) of
this sentence plus those officers and employees of RSI and the RSI division
presidents and general managers so listed in the Disclosure Letter.
Section 3.1 ORGANIZATION AND STANDING.
3.1.1 ORGANIZATION. RSI is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Nevada.
3.1.2 SUBSIDIARIES. Except for those entities identified in the
Disclosure Letter (hereinafter termed the "RSI Subsidiaries"), RSI has no
subsidiaries or affiliated companies, is not a partner or co-venturer with
any other entity, and does not otherwise directly or indirectly control any
other business entity. Except as identified in the Disclosure Letter, each
RSI Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it was formed, as
indicated in the Disclosure Letter. Except as identified in the Disclosure
Letter, RSI is the sole record and beneficial owner of all of the
outstanding capital stock of each RSI Subsidiary, free and clear of any
liens, pledges, mortgages or encumbrances.
3.1.3 QUALIFICATION. RSI and each RSI Subsidiary is duly qualified or
licensed as a foreign corporation to do business, and is in good standing,
in each jurisdiction where the nature of its activities makes such
qualification or license necessary, except where the failure to be so
qualified or licensed would not have a material adverse effect on the
business, assets or results of operations of RSI. The Disclosure Letter
identifies: (i) each state in which RSI and each RSI Subsidiary is qualified
or licensed to do business as a foreign corporation; and (ii) the name and
address of the registered agent for RSI and each RSI Subsidiary in each such
state.
3.1.4 CORPORATE POWER. RSI and each RSI Subsidiary has all requisite
corporate power (i) to carry on its business as it is now being conducted
and to own and operate the properties and assets it now owns and operates,
and (ii) in the case of RSI, to carry out the provisions of this Agreement
and the transactions contemplated hereby.
3.1.5 CORPORATE DOCUMENTS. True, correct and complete copies of the
Restated Articles of Incorporation of RSI and each RSI Subsidiary and all
amendments thereto, and of the By-laws of RSI and each RSI Subsidiary and
all amendments thereto, have been delivered to COMSAT.
Section 3.2 CAPITALIZATION.
3.2.1 AUTHORIZED AND OUTSTANDING RSI STOCK. The total authorized
capital stock of RSI is 25,000,000 shares of common stock, par value $1.00
per share, of which, as of the date hereof, (i) 8,285,187 shares are issued
and outstanding, (ii) 514,750 shares are subject to issuance upon the
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exercise of outstanding options, and (iii) 471,432 shares are issued and
held in treasury. As of the Closing Date, the total number of issued and
outstanding shares of the capital stock of RSI shall not exceed the sum of
(i) and (ii). There exist no other shares of capital stock of RSI,
securities which are convertible into shares of capital stock of RSI, or any
options, warrants, contracts, commitments or other arrangements which
subject RSI to the issuance of any shares of capital stock upon the exercise
thereof or after the passage of time.
3.2.2 DUE AUTHORIZATION AND ISSUANCE. All issued and outstanding
shares of the capital stock of RSI have been duly authorized and validly
issued and are fully paid and nonassessable.
Section 3.3 AUTHORIZATION.
3.3.1 RSI. RSI has all requisite corporate power and authority to
execute and deliver this Agreement and, subject with respect to consummation
of the Merger to approval of this Agreement by a majority of all votes
entitled to be cast by holders of shares of RSI Stock (the "RSI Vote"), to
perform the transactions contemplated hereby. The execution and delivery of
this Agreement, the performance by RSI of its obligations hereunder and the
consummation of the transactions contemplated hereby have been duly
authorized by RSI's Board of Directors and, except for the RSI Vote, no
other corporate proceedings are necessary to authorize this Agreement and
the transactions contemplated hereby. RSI's Board of Directors has
unanimously (a) determined that the Merger is in the best interests of RSI
and its stockholders, (b) approved all of the transactions contemplated by
this Agreement, including without limitation, the Merger, a Stock Option
Agreement of even date herewith between RSI and COMSAT (the "Stock Option
Agreement"), and (c) voted to recommend this Agreement to RSI stockholders.
As of the date of this Agreement, RSI has received the written opinion of
Alex. Brown & Sons Incorporated ("Alex. Brown"), its financial adviser, that
in the opinion of Alex. Brown the consideration to be received by RSI
stockholders in the Merger is fair, from a financial point of view, to RSI
stockholders. Assuming the valid authorization, execution and delivery of
this Agreement by COMSAT and CTS, this Agreement is a valid and binding
obligation of RSI and is enforceable in accordance with its terms, except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application referring to or affecting enforcement of
creditors' rights, or by general equitable principles.
3.3.2 NO BREACH OR VIOLATION BY RSI. Execution, delivery and
performance of this Agreement by RSI and consummation of the transactions
contemplated hereby will not lead to or cause a violation, breach, or
default or result in the termination of, or accelerate the performance
required by, or result in the creation or imposition of any Encumbrance (as
defined in Section 3.7.1 hereof) on any property or assets of RSI, whether
by notice or lapse of time or both, or otherwise conflict with any term or
provision of the following:
(a) RSI's Restated Articles of Incorporation and By-laws, as amended;
(b) Any note, bond, mortgage, contract, indenture, pledge or
agreement to lease, license or other instrument or obligation to which
RSI or any of the RSI Subsidiaries is a party or is bound: (i) where such
violation, breach, default, termination, acceleration or Encumbrance
would have a material adverse effect on the business, operations or
financial condition of RSI; or (ii) as to which required consents,
amendments or waivers shall not have been obtained by RSI prior to the
Closing for any such violation, breach, default, termination,
acceleration or Encumbrance; or
(c) Any court or administrative order, writ or injunction or process,
or any permit, license, or consent decree to which RSI or any RSI
Subsidiary is a party or is bound: (i) where such violation, breach,
default, termination, acceleration or Encumbrance would have a material
adverse effect on the business, operations or financial condition of RSI;
or (ii) as to which required consents, amendments or waivers shall not
have been obtained by RSI prior to the Closing for any such violation,
breach, default, termination, acceleration or Encumbrance.
Section 3.4 SEC FILINGS. RSI has furnished to COMSAT and CTS a true and
complete copy of (i) each final prospectus and definitive proxy statement filed
by RSI with the Securities and Exchange
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Commission (the "SEC") since June 30, 1989 and (ii) each report on Form 10-K,
8-K or 10-Q (and any amendments thereto) filed by RSI with the SEC since June
30, 1989 (collectively, the "RSI SEC Documents"). Each of the RSI SEC Documents
complied as to form in all material respects with the published rules and
regulations of the SEC with respect thereto and none of the RSI SEC Documents as
of the dates they were filed with the SEC contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading in each case as of the
date when made.
Section 3.5 FINANCIAL STATEMENTS.
3.5.1 SEC FILINGS. Each of the consolidated financial statements
included in the RSI SEC Documents (including any related notes thereto)
complied as to form in all material respects with the published rules and
regulations of the SEC with respect thereto and fairly presents the
earnings, financial position, cash flows and stockholders' equity, as the
case may be, of RSI and its subsidiaries on a consolidated basis as of its
date or for the respective periods set forth therein (subject, in the case
of unaudited statements, to normal recurring year-end audit adjustments and
when read in conjunction with the relevant audited financial statements and
the notes thereto), in each case, in accordance with generally accepted
accounting principles ("GAAP") consistently applied during the periods
involved, except as set forth therein or, in the case of the unaudited
statements, as permitted by Rule 10-01 of Regulation S-X as in effect at the
relevant time.
3.5.2 ABSENCE OF CHANGES. Since June 30, 1993, there has not been:
(a) Any material adverse change in the assets, working capital,
reserves, financial condition, accounting methods or results of
operations of RSI (provided that expenses incurred in connection with the
transactions contemplated hereby shall be excluded in making such
determination);
(b) Any material change in the contingent obligations or liabilities
of RSI by way of guaranty, documentary credit, standby credit,
endorsement, indemnity, warranty or otherwise;
(c) Any waiver or cancellation by RSI of valuable rights or of debts
owed to any of them which, taken as a whole, are material to the business
or financial condition of RSI;
(d) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties or business
of RSI;
(e) Any increase in the rate or terms of compensation payable, or
potentially payable, by RSI to any director, officer or employee, except
increases occurring in the ordinary course of business in accordance with
RSI's customary practices (which shall include normal periodic
performance reviews and related compensation and benefit increases);
(f) Any increase in the rate or terms, or establishment, of any
bonus, insurance, severance, stock option, pension or other employee
benefit plan, payment or arrangement made to, for or with any of the
employees of RSI except increases occurring in the ordinary course of
business in accordance with RSI's customary practices (which shall
include normal periodic performance reviews and related compensation and
benefit increases);
(g) Any loan to, or guarantee or assumption of any loan or obligation
on behalf of, any officer or director of RSI except advances occurring in
the ordinary course of business in accordance with RSI's customary
practices; or
(h) Any declaration, setting aside or payment of any dividend (other
than as permitted by Section 5.7 herein) by RSI (in cash, properties or
securities) or other distribution of assets by RSI in respect of the
shares of its capital stock, or issuance, sale, transfer by RSI, or
commitment to issue, sell or transfer any shares of its capital stock
other than pursuant to the Stock Option Agreement, employee stock
options, director stock options and other agreements or commitments
existing on June 30, 1993, or any redemption, purchase or other
acquisition of any of its securities;
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PROVIDED THAT for purposes of paragraphs (a), (b), (c) and (d) of this
Subsection 3.5.2, a material adverse change or effect shall be deemed to occur
if as a result of the events described in such paragraphs there is a decrease in
the aggregate in the stockholders' equity of RSI as reflected on RSI's
consolidated statement of financial position at June 30, 1993, of five percent
or greater, to the date of this Agreement or the Closing Date, as applicable.
3.5.3 NO UNDISCLOSED LIABILITIES. RSI has no liabilities or
obligations, secured or unsecured (absolute, accrued, or unaccrued,
liquidated or unliquidated, executory, contingent or otherwise and whether
due or to become due), of a nature required to be reflected in a balance
sheet prepared in accordance with GAAP applied on a basis consistent with
prior years, which were not disclosed in the RSI SEC Documents, except for
those liabilities and obligations of RSI incurred since June 30, 1993 in the
ordinary course of business.
Section 3.6 FORECASTS. Notwithstanding any disclaimers to the contrary
(whether oral or in writing) made by or on behalf of RSI, all forward looking
statements made in writing (including but not limited to forecasts and
projections of revenues, income or losses, capital expenditures, or other
financial items, management plans and objectives for future operations,
statements of future economic performance and statements of the assumptions
underlying or relating to any of the foregoing) by RSI in the "Bid and Proposal
Schedule" delivered to COMSAT prior to the date hereof or updated prior to the
Closing Date, or in any Form 10-K or Form 10-Q (and any amendments thereto)
filed with the SEC after June 30, 1992, were made based upon reasonable grounds
(in the case of the "Bid and Proposal Schedule" delivered to COMSAT prior to the
date hereof, taking into account RSI's procedure for assembling the schedule as
described in the Disclosure Letter) and disclosed in good faith.
Section 3.7 PROPERTIES; LEASES; TANGIBLE ASSETS.
3.7.1 TITLE. The Disclosure Letter contains a list of all real
property which RSI purports to own. To RSI's knowledge, RSI has good and
valid title to or, in the case of leased properties, a good and valid
leasehold interest in, all of the assets which it purports to own or lease,
including all assets (real, personal or mixed, tangible or intangible)
reflected in the June 30, 1993 consolidated financial statements of RSI, or
acquired by RSI thereafter, except those assets disposed of in the ordinary
course of business after June 30, 1993 and the title to each such property
and asset of RSI is free and clear of any title defects, objections, liens,
mortgages, security interests, pledges, charges and encumbrances, adverse
claims, equities or other adverse interests of any kind including without
limitation, leases, chattel mortgages, conditional sales contracts,
collateral security arrangements and other title or interest retention
arrangements (collectively the "Encumbrances"), except as follows:
(a) Any lien for taxes or other governmental charges not yet
delinquent, or the validity of which is being contested in good faith by
appropriate proceedings and as to which adequate reserves have been
established by RSI;
(b) Any Encumbrances reflected on the financial statements contained
in the RSI SEC Documents, with such changes in the amount thereof as may
have occurred since June 30, 1993 in the ordinary course of business and
which changes will not materially reduce the aggregate value of the
property and assets held by RSI;
(c) Such other imperfections of title or Encumbrances which, as of
the Closing Date, will not materially reduce the aggregate value of the
property and assets of RSI;
(d) Any progress payment liens arising from progress payments made by
the United States Government or any agency thereof on contracts affecting
the assets of RSI; and
(e) Any Encumbrances or other matters identified in the Disclosure
Letter.
3.7.2 USE RESTRICTIONS. With respect to any real property owned or
leased by RSI, to RSI's knowledge there exists no applicable zoning
ordinance, building code, use or occupancy restriction, or
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any material violation of any such ordinance, code or restriction, or any
condemnation action or proceeding with respect thereto, that materially
detracts from the aggregate value of the real property as reflected in the
June 30, 1993 consolidated statement of financial position of RSI.
3.7.3 CONDITION. To RSI's knowledge, all tangible properties and
assets of RSI that are necessary or useful to the business of RSI are in
good operating condition and repair, ordinary wear and tear excepted, and
are adequate for the uses to which they are put.
3.7.4 LEASES. The Disclosure Letter identifies all leases with a
remaining term of more than one year and aggregate remaining lease payments
due of $100,000 or more to which RSI is a party or is otherwise bound for
the lease of real property or personal property or equipment pursuant to
which RSI leases real or personal property or equipment either as the lessor
or as the lessee. With respect to such leases, to RSI's knowledge there
exist no defaults by RSI, or defaults by a lessor or any third party, or
misrepresentations with respect to such leases made by RSI, any lessor
and/or any third party, that materially and adversely affect in the
aggregate the business, operations or financial condition of RSI.
3.7.5 GOVERNMENT FURNISHED EQUIPMENT. RSI's materials management
systems relating to inventories of equipment and other materials procured or
held by RSI for the performance of any contracts (prime or sub) with the
U.S. Government are adequate and appropriately maintained for the uses to
which they are put or required to be put under the terms of such contracts.
All items of inventory, equipment and other materials procured or held by
RSI for the performance of any contracts (prime or sub) with the U.S.
Government have been maintained in the condition they were when loaned, or
bailed to, or procured by RSI, ordinary wear and tear excepted, or used or
processed for the purposes for which they were intended and if such items of
inventory, equipment and other materials were returned to the U.S.
Government or its designee at any time prior to the Closing Date, there is
no basis for a claim for loss, damage, negligence or reckless disregard of
use or care of such items of inventory, equipment and other materials to be
asserted by the U.S. Government that if successful would have a material
adverse effect on the business, results of operations or financial condition
of RSI.
Section 3.8 BACKLOG.
3.8.1 AMOUNT. The Disclosure Letter sets forth a schedule of the
backlog by contract of RSI (excluding, for purposes of the Disclosure Letter
prior to execution of this Agreement, the backlog by contract of the Mark
Antennas, PG Technologies, and CSA Antenna Systems Division), as of December
31, 1993, for products and services to be provided by RSI, for those
contracts having a value of at least $25,000, including (i) the aggregate
dollar amount of firm and funded backlog, (ii) the aggregate dollar amount
of unfunded backlog (including without limitation unexercised options), and
(iii) the aggregate dollar amount of backlog for which RSI has received
notice of program selection but final contract terms have not been
negotiated. At the Closing Date, the Disclosure Letter shall set forth on a
consistent basis (except that contracts having a value of less than $25,000
may be included) a schedule of the backlog of RSI by contract or, in the
case of the Mark Antenna and PG Technology divisions, by division for
contracts having a value of less than $100,000, which schedule shall show an
aggregate contract backlog for categories (i), (ii), and (iii), above, of at
least $118,500,000. For purposes of this Subsection 3.8.1, where the
contract or applicable law or regulation would prohibit identification of
the customer, the Disclosure Letter will omit such identification.
3.8.2 ORDINARY COURSE. All of the contracts constituting the backlog
of RSI (i) have been entered into in the ordinary course of business, and
(ii) are capable of performance by RSI in accordance with the terms and
conditions of each such contract, without materially and adversely affecting
the financial condition or results of operations of RSI. Since June 30,
1993, RSI has not changed in any material respects its pricing policies,
practices or objectives with respect to return on sales in connection with
its outstanding bids and proposals, when considered in the aggregate.
Section 3.9 ACCOUNTS RECEIVABLE. RSI's accounts receivable, unbilled costs
and accrued profits (less customer progress payments), notes receivable,
contracts in progress, accounts payable and notes payable (collectively, the
"Receivables and Unbilled Costs") as of the Closing Date shall be or were
recorded on its
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books and records in the ordinary course of business in accordance with GAAP
applied on a basis consistent with prior years. Since June 30, 1993, RSI's
consolidated financial statements include reserves with respect to the
Receivables and Unbilled Costs reflected therein against doubtful collection or
billings which in the opinion of RSI, its officers or directors, are adequate.
Section 3.10 INVENTORIES. All inventories of RSI (i) reflected in its June
30, 1993 consolidated statement of financial position, or (ii) to be held as of
the Closing Date, have been or will have been acquired or manufactured, and are
in amounts RSI reasonably believes to be adequate to fill customer orders, in
the ordinary course of business in accordance with RSI's normal inventory
practices. For purposes of preparing its June 30, 1993 and any subsequent
consolidated statement of financial position, the inventories held by RSI were
valued at cost, and as to classes of items inventoried and methods of accounting
and pricing determined in a manner consistent with prior years.
Section 3.11 INTELLECTUAL PROPERTY.
3.11.1 PATENTS AND KNOW-HOW. The Disclosure Letter sets forth a
complete and accurate list of each patent, patent application and docketed
invention, by date and germane case or docket number and country of origin,
and each license or licensing agreement, by date, term and the parties
thereto, for each of the patents, patent applications, inventions,
trade-secrets, rights to know-how, processes, computer programs or use of
technology, held or employed by RSI (each such patent, patent application,
license or licensing agreement listed thereon hereinafter termed the
"Patents and Licenses"). With respect to the Patents and Licenses, and with
respect to all other technology including but not limited to research and
development results, computer programs, processes, trade secrets, know-how,
formulae, chip designs, mask works, inventions and manufacturing,
engineering, quality control, testing, operational, logistical, maintenance
and other technical information and technology held or employed by RSI
("RSI's Technology") and except as set forth in the Disclosure Letter:
(a) RSI owns, free and clear of all liens, pledges or other
encumbrances, all right, title and interest in the Patents and Licenses
and in RSI's Technology, with all rights to make, use, and sell the
property embodied in or described in the Patents and Licenses and in
RSI's Technology and which are material to the business or operations of
RSI. To RSI's knowledge, its use of the Patents and Licenses and RSI's
Technology does not conflict with, infringe upon or violate any patent,
patent license, patent application, mask work, mask work registration, or
any pending application relating thereto, or any trade secret, know-how,
programs or processes of any third person, firm or corporation;
(b) RSI either owns the entire right, title and interest in, to and
under, has an express license to use, or has acquired in connection with
the acquisition of equipment or inventory an implied license to use, any
and all inventions, processes, computer programs, know-how, formulae,
trade secrets, patents, chip designs, mask works, trademarks, trade
names, brand names and copyrights which are material to the business or
operations of RSI.
(c) The U.S. government has no rights with respect to any "technical
data" or "computer software" that are owned by RSI and are material to
the business or operations of RSI.
3.11.2 TRADEMARKS AND COPYRIGHTS. The Disclosure Letter sets forth a
complete and accurate list of each trademark, trade name, and trademark and
trade name registration or application, and copyright registration and
application for copyright registration, by date and germane case or docket
number and country of origin, and each license or licensing agreement, by
date and the parties thereto, for each trademark and copyright license or
licensing agreement, held or employed by RSI (each such trademark,
copyright, application, and license or licensing agreement hereafter termed
the "Trademarks and Licenses"). Except as set forth in the Disclosure
Letter, RSI owns, free and clear of all liens, pledges or other
encumbrances, all right, title and interest in the Trademarks and Licenses
which are material to the business or operations of RSI. To RSI's knowledge,
its use of the Trademarks and Licenses does not
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conflict with, infringe upon or violate any trademark, trade name, trademark
or trade name registration or application, copyright, copyright registration
or application, service mark, brand mark or brand name or any pending
application relating thereto, of any third person, firm or corporation.
Section 3.12 CONTRACTS AND OBLIGATIONS.
3.12.1 IDENTIFICATION. The Disclosure Letter includes an accurate and
complete list as of the date indicated therein of:
(a) All agreements and contracts between RSI and (i) its vendors or
suppliers the termination of which would have a material adverse effect
on the business, operations or financial condition of RSI, and (ii) its
customers (each U.S. government agency deemed to be a separate customer
and where the contract or applicable law or regulation would prohibit
identification of the customer, the Disclosure Letter will omit such
identification) where the backlog for such contract is $25,000 or more;
(b) All loan agreements and other evidences of indebtedness, and all
letters of credit or other documentary credits, having in each case a
total liability of $50,000 or more;
(c) All distributorship, non-employee commission or marketing agent,
representative or franchise agreements providing for the marketing and/or
sale of the products or services of RSI;
(d) All partnership agreements for the organization of limited or
general partnerships in which RSI is a partner, all limited liability
company agreements, and all joint ventures to which RSI is a party;
(e) All agreements or arrangements for the sale of any of the assets
of RSI except in the ordinary course of business;
(f) All employment contracts or consulting contracts reflecting an
RSI commitment of $100,000 or more, or agreements with respect to
severance or similar arrangements; and
(g) To RSI's knowledge, all contracts or agreements with any officer,
director or employee of RSI or any member of their immediate families, or
with any entity under the control of any officer, director or employee of
RSI or any member of their immediate families, whether individually or in
combination with any other such person or persons.
3.12.2 FULL FORCE AND EFFECT. Except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application referring to or affecting enforcement of creditors' rights, and
by general equitable principles, each agreement, contract and obligation
having a total value of $100,000 or more identified in the Disclosure Letter
pursuant to Subsection 3.12.1 is valid and binding on each other party
thereto in accordance with their respective terms.
3.12.3 NO DEFAULT. With respect to each con-tract, agreement and
obligation having a total value of $100,000 or more identified in the
Disclosure Letter pursuant to Subsection 3.12.1, neither RSI nor any other
party thereto is in material breach thereof or material default thereunder,
and to RSI's knowledge, no notice has been received from the other party
thereto of any such material breach or material default (whether by lapse of
time or notice or both).
3.12.4 NO COMMITMENTS. RSI has no commitment or undertaking to retain
after Closing any attorneys, accountants, actuaries, appraisers, investment
bankers, or management consultants.
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Section 3.13 EMPLOYEES; COMPENSATION; LABOR.
3.13.1 EMPLOYEES AND COMPENSATION. Prior to the Closing, RSI will
provide to COMSAT and CTS a list dated within 15 days prior to the Closing
Date of all persons who are employed by RSI, together with their base salary
and bonus paid or payable for the most recent fiscal year, and the date upon
which such compensation was last varied or increased, title, original date
of hire and vacation benefits, and any agreed to current or future benefits
or compensation of such employees. The Disclosure Letter contains a true,
correct and complete list of all employment policies, procedures, manuals,
and other similar rules or regulations of RSI currently in effect regarding
the general conduct, compensation, labor relations and employment and
severance of RSI's employees, copies or descriptions of which have
heretofore been provided to COMSAT and CTS.
3.13.2 CERTAIN LABOR MATTERS. Except as set forth in the Disclosure
Letter:
(a) To RSI's knowledge, none of its division managers or executive
officers has indicated to any director, officer, or manager of RSI his or
her intention to cancel or otherwise terminate his relationship with RSI
or his relationship with CTS if CTS retains such person after Closing;
(b) There is no union representing the interests of any of RSI
employees and, to the knowledge of RSI, there are no RSI employees
seeking or attempting to organize union representation;
(c) There are neither pending nor, to the knowledge of RSI,
threatened any strikes, work stoppages, work disruptions or employment
disruptions by any of the RSI employees that would materially impair
RSI's business, operations or financial condition;
(d) To RSI's knowledge, there are neither pending nor threatened any
suits, actions, administrative proceedings, hearings, arbitrations or
other proceedings between RSI and any of its employees involving a claim
of $50,000 or more;
(e) With respect to its employees, to RSI's knowledge, during the
past five (5) years RSI (i) has complied in all material respects with
all Federal, state and local laws and regulations relating to the
employment of labor, including any provisions thereof relating to wages,
hours, collective bargaining and the payment of social security and
similar taxes, (ii) is not liable for any material arrears of wages or
any taxes or penalties for failure to comply with any of the foregoing,
(iii) has not committed any material unfair labor practices, and (iv) has
complied in all material respects with all applicable provisions of the
Occupational Safety and Health Act of 1970, as amended, and regulations
promulgated pursuant thereto;
(f) To RSI's knowledge, RSI is not required to make any capital or
other expenditures of $100,000 or more to comply with the Americans With
Disabilities Act of 1990, as amended, and the rules and regulations
promulgated thereunder; and
(g) To RSI's knowledge, since June 30, 1993, none of its employees
has filed any complaint relating to RSI's employment of its employees
with any governmental or regulatory authority or brought any action in
law or in equity with respect thereto.
3.13.3 EMPLOYEE BENEFIT PLANS; ERISA.
(a) Prior to Closing and with adequate time for review, RSI will
provide COMSAT an accurate and complete list of each bonus, deferred
compensation, incentive compensation, severance or termination pay
agreement, hospitalization or other fringe, medical, dental, retiree
medical, dental or other welfare benefit plan, stock purchase, stock
option, pension, life or other insurance, profit-sharing or retirement
plan or arrangement, and each other employee benefit plan or arrangement
maintained or contributed to by RSI, whether formal or informal, whether
legally binding or not (the "Plans"), and which either required or are
expected to require expenditures or contributions by RSI in the fiscal
year ended June 30, 1993 or the fiscal year ended June 30, 1994, as
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applicable, of $100,000 or more. Such list will set forth the annual
amount of employer contributions accrued, paid or payable for Employees
of RSI (domestic or foreign) during fiscal 1993 pursuant to each of the
Plans. The amount of employer contributions accrued, paid or payable for
all Employees of RSI (domestic or foreign) during fiscal 1993 pursuant to
the Plans did not exceed $7,000,000. RSI does not have any plan or
commitment, whether formal or informal and whether legally binding or
not, to create any additional Plan or modify or change any existing Plan.
RSI has heretofore delivered or will promptly deliver to COMSAT true and
complete copies of (i) the documents governing all such Plans and their
related trusts, (ii) the most recent actuarial reports or accountants'
reports prepared with respect to each such Plan, (iii) the latest Form
5500 filed with the Internal Revenue Service with respect to each such
Plan, and (iv) the most recent determination letter issued by the
Internal Revenue Service for each such Plan which has received a
determination letter.
(b) RSI does not have and has not in the past five years had a Plan
to which Title IV of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), applies or has applied.
(c) Prior to Closing and with sufficient time for review the
Disclosure Letter will list each Plan in existence since June 30, 1989
that is an "employee benefit plan," as such term is defined in Section
3(3) of ERISA and the rules and regulations promulgated thereunder, which
at any time covered any employee of RSI (each such Plan is hereinafter
referred to as an "ERISA Plan"), and which required contributions or
expenditures by RSI in any given fiscal year since June 30, 1989 of
$100,000 or more, and copies of such Plans will be made available to
COMSAT.
(d) Except as set forth in the Disclosure Letter: (i) No ERISA Plan
is a "multiemployer plan" as that term is defined in Section 3(37) of
ERISA; (ii) to RSI's knowledge neither RSI, any ERISA Plan, any trust
created thereunder, nor any trustee or administrator thereof, has engaged
in a transaction in connection with which RSI, any ERISA Plan, any such
trust, or any trustee or administrator thereof, or any party dealing with
any ERISA Plan or any such trust, could be subject to either a material
civil penalty assessed pursuant to Section 502(i) of ERISA, or a material
tax imposed by Section 4975 of the Code; (iii) full payment has been made
of all amounts which RSI is required to pay under the terms of each ERISA
Plan as a contribution to such ERISA Plan as of the last day of the
fiscal year of each such ERISA Plan ended prior to the date of this
Agreement, and no ERISA Plan nor any trust established thereunder has
incurred any "accumulated funding deficiency" (as defined in Section 302
of ERISA and Section 412 of the Code), whether or not waived, as of the
last day of the most recent fiscal year of each ERISA Plan ended prior to
the date of this Agreement; (iv) as to each ERISA Plan which is intended
to be qualified under Section 401(a) and 501(a) of the Code, to RSI's
knowledge there is no fact, condition or set of circumstances that would
adversely affect the qualified status of any such ERISA Plan; (v) to
RSI's knowledge each Plan has been operated and administered in all
material respects in accordance with its terms and all applicable laws,
including but not limited to ERISA; (vi) there are no pending or, to
RSI's knowledge, threatened or anticipated material claims against any
Plan or any fiduciary thereof, by any employee or beneficiary covered
under any Plan, or otherwise involving any Plan (other than routine
claims for benefits) and there are no pending or, to RSI's knowledge,
threatened or anticipated claims by or on behalf of any Plan; and (vii)
there is no liability or penalty under ERISA or otherwise relating to the
Plans which would have a material adverse effect on RSI's financial
condition.
Section 3.14 LITIGATION.
3.14.1 LITIGATION PENDING OR THREATENED. Except as set forth in the
Disclosure Letter: (i) there are no claims, actions, suits, hearings,
arbitrations, disputes, proceedings (public or private) or governmental
investigations pending or, to the knowledge of RSI, threatened, against RSI,
at law or in equity, before or by any Federal, state, municipal or other
governmental or nongovernmental department, commission, board, bureau,
agency, court or other instrumentality, or by any private person or entity,
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which seek damages, contributions, expenditures or other penalties of
$25,000 or more; (ii) to RSI's knowledge, there is no basis for any action,
suit or proceeding which, if successful, would, individually or in the
aggregate, have a material adverse effect on the assets, results of
operations or financial condition of RSI; and (iii) there are no existing
or, to the knowledge of RSI, threatened, orders, judgments or decrees of any
court or governmental agency to which RSI is subject or which are materially
affecting RSI.
3.14.2 THIS TRANSACTION. Except as set forth in the Disclosure Letter
there are no legal, administrative, arbitration or other proceedings or
governmental investigations pending, or, to the knowledge of RSI threatened,
against RSI which seek to enjoin or rescind the transactions contemplated by
this Agreement or otherwise prevent RSI from complying with the terms and
provisions of this Agreement.
Section 3.15 INSURANCE. The Disclosure Letter sets forth (i) a true and
correct list of all insurance policies of any kind or nature whatsoever
maintained by RSI, indicating the type of coverage, name of insured, the
insurer, the premium, the expiration date of each policy and the amount of
coverage, and (ii) a general description of RSI's self-insurance practices. The
policies of insurance and practices of self-insurance as so described evidence
insurance against all risks of a character and in such amounts as RSI has
determined is prudent and to RSI's knowledge are usually insured against by
similarly situated companies in the same or similar business as RSI, and all of
such insurance policies are in full force and effect and will remain so until at
least thirty (30) days after the Closing Date. RSI will notify COMSAT in writing
within 15 days of the date hereof whether it has any reason to believe that the
policies of insurance currently in effect and held by RSI and all pending
claims, rights or causes of action made or held by RSI under any policies of
insurance will not transfer by operation of law to the Surviving Corporation in
the Merger.
Section 3.16 PERMITS; COMPLIANCE; REPORTS; CLEARANCES.
3.16.1 NECESSARY PERMITS. RSI holds all material approvals,
authorizations, certificates, consents, licenses, orders and permits of all
governmental agencies, whether Federal, state or local, necessary to the
operation of its business, or for its owned and leased real and personal
property in the manner currently operated by RSI, including, without
limitation, all necessary permits and approvals for the discharge of
by-products and waste material into a public waste discharge system, and all
such material approvals, authorizations, certificates, consents, licenses,
orders and permits are in full force and effect.
3.16.2 FCC LICENSES. The Disclosure Letter identifies all licenses
granted by the Federal Communications Commission to RSI. RSI holds all
licenses required by the Communications Act of 1934, as amended, and the
rules and regulations promulgated thereunder, necessary for the operation of
its business as presently conducted.
3.16.3 COMPLIANCE WITH LAW. To RSI's knowledge, the operations of RSI
as presently conducted do not violate in any material respect any Federal
law (including, without limitation, any that relate to health and safety,
individual disabilities, environmental protection and pollution control,
sale and distribution of products and services, anti-competitive practices,
collective bargaining, equal opportunity and improper or corrupt payments)
or any foreign, state, local or other laws, statutes, ordinances,
regulations, or any order, writ, injunction or decree of any court,
commission, board, bureau, agency or instrumentality.
3.16.4 FCPA. RSI is in full compliance with the Foreign Corrupt
Practices Act, as amended, 15 U.S.C. SectionSection 78m, 78dd-1, 78dd-2 and
78ff (the "FCPA"), and no pending contracts, bids or proposals of RSI were
obtained or made in violation of the FCPA.
3.16.5 REPORTS. All material reports, documents and notices (not
relating to Taxes or Tax Returns as defined in Subsection 3.20.2) required
to be filed, maintained or furnished with or to all governmental regulatory
authorities, including, without limitation, all Federal, state and local
governmental authorities have been so filed, maintained or furnished. To
RSI's knowledge all such reports, documents and notices are true and correct
in all material respects as of the dates when legally required to be true
and correct (and all required amendments and updates have been made) and, to
the extent required to be kept in the public inspection files of RSI, are
kept in such files.
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3.16.6 CLEARANCES. To the extent permitted by law, the Disclosure
Letter sets forth all security clearances held by RSI and personal security
clearances held by officers, directors or employees of RSI with respect to
the operation of RSI's business.
Section 3.17 GOVERNMENT CONTRACTS.
3.17.1 GOVERNMENT CONTRACTS COMPLIANCE. RSI is not, and consummation
of this Agreement and the transactions contemplated hereby will not result,
in any material violation, breach or default of any term or provision of (i)
any contract, subcontract or agreement between the United States Government
and RSI or (ii) any bid, proposal or quote submitted to the United States
Government by RSI. RSI is not, and consummation of this Agreement and the
transactions contemplated hereby will not result, in any violation, breach
or default in any material respect of any provision of any Federal order,
statute, rule or regulation governing any contract, subcontract, bid,
proposal, quote, arrangement or transaction of any kind between the United
States Government and RSI. The representations in the two foregoing
sentences of this Subsection 3.17.1 are made after consideration of, but are
not limited to, the following laws, regulations, standards, and agreements
to the extent, if any, they are applicable to or incorporated into
contracts, subcontracts, agreements, bids, proposals or quotes of RSI: (a)
The Truth in Negotiations Act of 1962, as amended; (b) The Service Contract
Act of 1965, as amended; (c) The Contract Disputes Act of 1978, as amended;
(d) The Federal Acquisition Regulations and any applicable agency
supplements thereto, as well as applicable predecessor procurement
regulations; (e) The Cost Accounting Standards; (f) Agreements with the
Defense Contract Audit Agency; (g) Relevant rules and arrangements governing
the allowance of costs charged to overhead and general and administrative
cost pools allocable to government contracts; (h) The Byrd Amendment, Pub.
L. No. 101-121, Section 319 (September 23, 1989); and (i) The Defense
Industrial Security Manual (DOD 5220.22-M), the Defense Industrial Security
Regulation (DOD 5220.22-R) and related security regulations. With respect to
bids or proposals by RSI for contracts covered by P.L. 87-653, all required
"cost or pricing data" provided to the United States Government were
current, accurate, and complete when price negotiations were concluded and
price agreement reached.
3.17.2 INVESTIGATIONS AND CLAIMS. The Disclosure Letter sets forth
descriptions of all audit reports, final decisions, determinations of
noncompliance, claims, consent orders in effect, outstanding Forms 1,
ongoing Government investigations or prosecutions, or internal
investigations conducted by or initiated by RSI and identifies any
corrective action, restitution or disciplinary action initiated or taken by
RSI relating in any sense to the subjects listed below in paragraphs (a)
through (g) of this Subsection 3.17.2. Except as set forth in the Disclosure
Letter, RSI has not engaged in and has not been charged with, received a
claim related to, or been under investigation or conducted or initiated any
internal investigation, or had reason to conduct, initiate or report any
internal investigation or made a voluntary disclosure, with regard to any of
the following, within the past five (5) years: (a) "defective pricing"
within the meaning of P.L. 87-653, as amended; (b) Failure to correct
accounting, inventory, material requirements planning, material management
and accounting systems, government property records, or purchasing system
deficiencies; (c) Mischarging of direct and/or indirect costs in connection
with U.S. Governmental contracts or subcontracts; (d) Delivery to the U.S.
Government or to a U.S. Government prime or subcontractor of material,
components, items or services that do or did not meet specifications or
standards therefor, or delivery to the U.S. Government or to a U.S.
Government prime or subcontractor of foreign-made material, components or
items where domestic-made material, components or items were required; (e)
Improper payments or any payments or activities for obtaining non-public
source selection information; (f) Unallowable costs, including unallowable
direct or indirect costs; (g) Violations of any of the following statutes,
as amended, or the regulations promulgated thereunder: (i) False Statements
Act (18 U.S.C. 1001), (ii) False Claims Act (18 U.S.C. 287), (iii) False
Claims Act (31 U.S.C. 3729), (iv) Bribery, Gratuities and Conflicts of
Interest (18 U.S.C. 201), (v) Anti-Kickback Act (41 U.S.C. 51, 54), (vi)
Anti-Kickback Enforcement Act of 1986 (P.L. 99-634), (vii) Arms Export
Control Act (22 U.S.C. 277 et seq.), (viii) Foreign Corrupt Practices Act
(15 U.S.C. 78 m, 78 dd-1, 78 ff), (ix) Export Administration Act (P.L.
99-64), (x) War and National Defense Act (18 U.S.C. 793), (xi) Racketeer
Influenced and Corrupt Organizations Act (18 U.S.C. 1901-68), (xii)
Conspiracy to Defraud
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the Government (18 U.S.C. 371), (xiii) Program Fraud Civil Remedies Act
(Pub. L. No. 99-509), (xiv) "Revolving Door" Legislation (18 U.S.C. 207, 18
U.S.C. 218, 18 U.S.C. 281 (a)(11), 10 U.S.C. 2397, ET SEQ.) 37 U.S.C. 801,
41 U.S.C. 423, (xv) Defense Production Act (50 U.S.C. App. 2061), (xvi) The
Byrd Amendment, Pub. L. No. 101-121, 319 (September 23, 1989), and (xvii)
U.S. antiboycott laws (the Ribicoff Amendment to the 1976 Tax Reform Act,
and the 1979 Export Administration Act).
3.17.3 NO DEBARMENT OR SUSPENSION. RSI has not been debarred or
suspended or, to RSI's knowledge, informed that it will be subject to any
proceeding contemplating possible debarment or suspension from contracting
with the U.S. Government.
3.17.4 TEST AND INSPECTION RESULTS. All test and inspection results
RSI has provided to any government agency pursuant to any government
contract or subcontract or as a part of the delivery to the U.S. Government
of any article or system designed, engineered or manufactured by RSI were
true, complete and correct except where any inaccuracy or omission does not
or will not have a material adverse effect on the results of operations,
business, assets or financial condition of RSI. RSI has provided all
material test and inspection results to government agencies as required by
law or pursuant to the terms of the applicable government contracts or
subcontracts, or as may have been required by law or government contracts or
subcontracts as a part of the delivery to the government of any article or
system RSI designed, engineered or manufactured.
Section 3.18 PRODUCT WARRANTIES. RSI has provided COMSAT and CTS true,
correct and complete copies of the currently used standard forms and statements
of product warranties and guaranties adopted by RSI with respect to any product
or service provided prior to Closing. RSI reasonably believes that its reserves
for product warranty and other post-sale services reflected on its consolidated
financial statements at and subsequent to June 30, 1993 are adequate.
Section 3.19 ENVIRONMENTAL PROTECTION.
3.19.1 ENVIRONMENTAL PERMITS. Except where the failure to do so would
not have a material adverse effect on its business or operations, RSI has
obtained all permits, licenses and other authorizations which are required
under Federal, state, local and foreign laws relating to pollution or
protection of the environment, including laws relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata) or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes or any regulation, code,
plan, order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder including without limitation the
following statutes, as amended, (i) Resource Conservation and Recovery Act,
42 U.S.C. Section 6901 ("RCRA"); (ii) Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 26 U.S.C. Section 4611; 42 U.S.C.
Section 9601; (iii) Superfund Amendments and Reauthorization Act of 1984
("Superfund"); (iv) Clean Air Act, 42 U.S.C. Section 7401; (v) The Clean
Water Act, 33 U.S.C. Section 1251; (vi) Safe Drinking Water Act, 42 U.S.C.
Section 300f; and (vii) Toxic Substances Control Act, 15 U.S.C. Section 2601
(collectively, the "Environmental Laws"). The Disclosure Letter will set
forth prior to Closing (i) all such permits, licenses and other
authorizations issued under the Environmental Laws obtained by RSI, and (ii)
a description and good faith estimate by RSI of the cost of capital
expenditures (if any) that may be necessary to maintain or qualify for each
such permit, license or other authorization.
3.19.2 NO VIOLATION. RSI is in compliance in all material respects
with all terms and conditions of the required permits, licenses and
authorizations, and RSI also is in compliance in all material respects with
all other limitations, restrictions, conditions, standards, requirements,
schedules and timetables contained or referenced by or in the Environmental
Laws. Any single omission or act of non-compliance shall be deemed to be
"material" under this Subsection 3.19.2 if such omission or act would result
in any liabilities for RSI or the Surviving Corporation equal to or greater
than One Hundred Thousand Dollars ($100,000), and all omissions or acts of
non-compliance shall be deemed to be
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"material" under this Subsection 3.19.2 if the aggregate of all such
omissions or acts would result in any liabilities for RSI or the Surviving
Corporation equal to or greater than Five Hundred Thousand Dollars
($500,000).
3.19.3 CERTAIN MATTERS. Except as set forth in the Disclosure Letter,
no properties or facilities owned or leased by RSI contain any (i)
underground tanks as defined by any Environmental Law except for
fully-inspectable vault tanks, (ii) to RSI's knowledge, any polychlorinated
biphenyls ("PCB") or PCB contaminated electrical equipment except light
ballasts, and (iii) to RSI's knowledge, any friable structural asbestos or
asbestos-containing material.
3.19.4 NO LITIGATION OR PROCEEDINGS. With respect to or affecting RSI,
its business or operations, there is no pending civil or criminal
litigation, notice of violation or administrative proceeding relating in any
way to the Environmental Laws including, but not limited to, notices, demand
letters, claims, litigations or proceedings based upon or relating to any
Environmental Law, where such litigation, notice or claim could result in
any liability to RSI or the Surviving Corporation in excess of Fifty
Thousand Dollars ($50,000).
3.19.5 NO NOTICE. Except as set forth in the Disclosure Letter, RSI
has no knowledge of any threatened or potential civil or criminal
litigation, notice of violation or administrative action relating in any way
to the Environmental Laws and involving RSI, its business or operations.
3.19.6 NO BASIS FOR LIABILITY. To the knowledge of RSI, except as set
forth in the Disclosure Letter, with respect to RSI, its business or
operations, there are no past or present events, conditions, circumstances,
activities, practices, incidents, actions or plans which may interfere with
or prevent continued compliance with the Environmental Laws, or which may
give rise to any common law or legal liability, or otherwise form the basis
of any claim, action, demand, suit, proceeding, hearing, study, or
investigation, based on or related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling, or
the emission, discharge, release or threatened release into the environment,
of any pollutant, contaminant, chemical, or industrial, toxic or hazardous
substance or waste, including, without limitation, any liability arising, or
any claim, action, demand, suit, proceeding, hearing, study or investigation
which may be brought under any Environmental Laws.
3.19.7 NO EXPENDITURES. To the knowledge of RSI, except as set forth
in the Disclosure Letter, with respect to RSI, its business or operations,
there are no past or present conditions, circumstances, activities,
practices, incidents, actions or plans which may interfere with or prevent
continued compliance with the Environmental Laws, which may require RSI to
make any capital or other expenditures to comply with any Environmental Law
existing as of Closing, nor is there any reasonable basis on which any
governmental or regulatory body or agency could take any action that would
require any such capital or other expenditures.
Section 3.20 TAXES.
3.20.1 REPRESENTATION. Except as set forth in the Disclosure Letter,
to RSI's knowledge: (i) the reserves reflected on RSI's June 30, 1993
consolidated statement of financial position are sufficient for the payment
of all unpaid Taxes of RSI whether or not disputed for all periods through
the date thereof or based on any state of facts existing on or prior to June
30, 1993; (ii) there has been no audit by the Internal Revenue Service or
any state, local or foreign tax authority of any Tax Return of RSI resulting
in a proposed, asserted or assessed deficiency, there is no audit that is
not closed, and there are no outstanding agreements or waivers signed or
agreed to by RSI extending the statutory period of limitation applicable to
any Taxes or Tax Return; (iii) there are no outstanding deficiencies or
claims for Taxes asserted or threatened against RSI; (iv) RSI has duly and
timely filed all Tax Returns required to be filed by it (all such returns
being true, correct and complete in all material respects) with the United
States, the United Kingdom, and the states of California, Virginia, Georgia,
Texas, Florida, New Jersey, Illinois and West Virginia; (v) with respect to
Tax Returns not referenced in (iv) above, RSI has duly and timely filed all
Tax Returns required to be filed by it (all such returns being true, correct
and complete in all material respects); (vi) none of the Tax Returns
referred to in clauses (iv) and (v) above contain, and
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RSI has never filed with or provided to the Internal Revenue Service, a
disclosure statement with respect to any member of the RSI Group under
Section 6662 of the Code (or any predecessor statute); (vii) RSI has duly
paid or set aside reserves or otherwise made provisions for the payment of
all Taxes attributable to the periods covered by the Tax Returns referenced
in (iv) and (v) above; (viii) there are no liens with respect to Taxes
(except statutory liens for Taxes not yet due or delinquent) upon any of the
assets of RSI; (ix) all Taxes required to be collected or withheld by RSI
have been duly collected or withheld and timely paid to the appropriate tax
authorities; (x) no payments made or that may, as a result of the Merger, be
made by RSI (expressly excluding any payments made pursuant to agreements
entered into after the Merger or arrangements offered by CTS, COMSAT or any
of their affiliates) will be treated as excess parachute payments within the
meaning of Section 280G of the Code; and (xi) no member of the RSI Group has
applied for a ruling relating to Taxes from any taxing authority or entered
into any closing agreement with any taxing authority which could affect any
member of the RSI Group; PROVIDED, HOWEVER, that with respect to the
representations set forth in (i), (v), (vii) and (ix), above, any failure or
failures on the part of RSI with respect to any such representation will
constitute a breach of such representation only if such failure or failures
would, in the aggregate, have a material adverse effect on the business,
results of operations or financial condition of RSI.
3.20.2 DEFINITIONS. As used herein, "Taxes" and all derivations
thereof means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental, customs, duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, AD VALOREM,
transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto with respect to which any member of the RSI
Group could be held liable. The term "Tax Returns" shall include all
federal, state, local and foreign returns, declarations, statements,
reports, schedules, and information returns required to be filed with any
taxing authority in connection with any Tax or Taxes. The term "RSI Group"
means RSI and every member of an affiliated group (as defined in Section
1504 (without regard to Section 1504(b)) of the Code, provided that for
purposes of this Section 3.20, references to provisions of the Code also
include references to comparable provisions of state, local, or foreign law)
which includes RSI or which has included any RSI subsidiary.
Section 3.21 NO BROKERS. RSI has not paid or become obligated to pay any
fee or commission to any broker, finder, investment banker or other intermediary
in connection with the transactions contemplated by this Agreement, other than
Alex. Brown.
Section 3.22 PROXY STATEMENT; REGISTRATION INFORMATION. The proxy
statement ("Proxy Statement") including any amendments or supplements thereto
with respect to the special meeting of RSI shareholders contemplated by Section
5.1 herein will comply as to form in all material respects with the applicable
provisions of the Securities Exchange Act of 1934, as amended, 15 U.S.C. Section
78, and the rules and regulations promulgated thereunder (the "Exchange Act"),
and the information supplied by RSI for inclusion by COMSAT in the Registration
Statement (as defined in Section 4.4 herein) including any amendments or
supplements thereto with respect to the COMSAT Stock to be issued pursuant to
the Merger, will comply as to form in all material respects with the applicable
provisions of the Securities Act of 1933, as amended, 15 U.S.C. Section 77, and
the rules and regulations promulgated thereunder (the "Securities Act"), and
neither the Proxy Statement nor the information provided by RSI for inclusion in
the Registration Statement will, on the date of filing thereof with the SEC, on
the date of dissemination thereof to holders of RSI Stock or at any time prior
to the special meeting of RSI shareholders contemplated by Section 5.1 herein,
as the case may be, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they are
made, not misleading; PROVIDED, HOWEVER, that the foregoing representation and
warranty shall not include or relate to any information either furnished by
COMSAT for the Proxy Statement or contained in COMSAT's filings with the SEC
(other than the information provided by RSI for inclusion in the Registration
Statement) and which, in either such case, is included, incorporated by
reference or referred to in the Proxy Statement or the Registration Statement.
If at any time prior to the Effective Date any event relating to RSI
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should occur which is required to be described in an amendment of or supplement
to the Registration Statement or the Proxy Statement, RSI shall promptly so
inform COMSAT and will prepare, or cooperate in the preparation of, such
amendment or supplement.
Section 3.23 CERTAIN STOCK OWNERSHIP. RSI does not own any COMSAT Stock or
any options or other arrangements to acquire COMSAT Stock.
Section 3.24 MATERIAL DISCLOSURES. No statement, representation or
warranty made by RSI in this Agreement, in any Exhibit hereto, in the Disclosure
Letter, or in any certificate, written statement, list, schedule or other
document delivered or to be delivered to COMSAT or CTS hereunder, contains any
untrue statement of a material fact, or fails to state a material fact necessary
to make the statements contained herein or therein, in light of the
circumstances in which they are made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COMSAT AND CTS
COMSAT and CTS hereby jointly and severally represent and warrant to RSI, as
of the date hereof, and as of the Closing Date, as follows:
Section 4.1 ORGANIZATION. COMSAT is a corporation duly incorporated,
validly existing and in good standing under the laws of the District of
Columbia. CTS is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware.
Section 4.2 CORPORATE AUTHORIZATION.
4.2.1 AUTHORITY. Each of COMSAT and CTS have all requisite corporate
power and authority to enter into and perform this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery
of this Agreement, the performance by COMSAT and CTS of their respective
obligations hereunder and the consummation of the transactions contemplated
hereby have been duly authorized by COMSAT's and CTS's Boards of Directors
and no other corporate proceedings are necessary to authorize this Agreement
and the transactions contemplated hereby. Assuming the valid authorization,
execution and delivery of this Agreement by RSI, this Agreement is a valid
and binding obligation of COMSAT and CTS, enforceable in accordance with its
terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application referring to
or affecting enforcement of creditor's rights, or by general equitable
principles.
4.2.2 NO BREACH OR VIOLATION. Execution, delivery and performance of
this Agreement by COMSAT and CTS and consummation of the transactions
contemplated hereby will not cause a violation, breach or default or result
in the termination of, or accelerate the performance required by, or result
in the creation or imposition of any Encumbrance on any property or assets
of COMSAT or CTS, whether by notice or lapse of time or both or otherwise
conflict with any term or provision of the following:
(a) Their respective Articles or Certificate of Incorporation and
By-laws, as amended;
(b) Any note, bond, mortgage or indenture to which COMSAT or CTS is a
party or is bound (i) where such violation, breach, default, termination,
acceleration or Encumbrance would have a material adverse effect on the
business, results of operations or financial condition of COMSAT and its
subsidiaries, considered as a whole, or (ii) as to which required
consents, amendments or waivers shall not have been obtained by COMSAT or
CTS prior to the Closing for any such violation, breach, default
termination, acceleration or Encumbrance; or
(c) Any court or administrative order, writ or injunction or process,
or any consent decree to which COMSAT or CTS is a party or is bound (i)
where such violation, breach, default, termination, acceleration or
Encumbrance would have a material adverse effect on the business, results
of operations or financial condition of COMSAT, or (ii) as to which
required consents, amendments or waivers shall not have been obtained by
COMSAT prior to the Closing for any such violation, breach, default,
termination, acceleration or Encumbrance.
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Section 4.3 SEC FILINGS. COMSAT has furnished to RSI a true and complete
copy of (i) each final prospectus and definitive proxy statement filed by COMSAT
with the SEC since December 31, 1992, and each report on Form 10-K, 8-K or 10-Q
(and any amendments thereto) filed by COMSAT with the SEC since December 31,
1992 (collectively, the "COMSAT SEC Documents"). All of the COMSAT SEC Documents
complied as to form in all material respects with the published rules and
regulations of the SEC with respect thereto and none of the COMSAT SEC Documents
as of the dates they were filed with the SEC contained any untrue statements of
a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading in each case as of the
date when made.
Section 4.4 REGISTRATION STATEMENT; PROXY INFORMATION. The Registration
Statement ("Registration Statement") including any amendments or supplements
thereto with respect to the issuance of the COMSAT Stock pursuant to the Merger
contemplated by Section 5.2 herein will comply as to form in all material
respects with the applicable provisions of the Securities Act and the
information supplied by COMSAT for inclusion by RSI in the Proxy Statement
including any amendments or supplements thereto with respect to the special
meeting of RSI shareholders contemplated by Section 5.1 herein will comply as to
form in all material respects with the applicable provisions of the Exchange
Act, and neither the Registration Statement nor the information provided by
COMSAT for inclusion in the Proxy Statement will, on the date of filing thereof
with the SEC, on the date of dissemination thereof to holders of RSI Stock or at
any time prior to the special meeting of RSI shareholders contemplated by
Section 5.1 herein, as the case may be, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they are made, not misleading; PROVIDED, HOWEVER, that the foregoing
representation and warranty shall not include or relate to any information
either furnished by RSI for the Registration Statement or contained in RSI's
filings with the SEC (other than information provided by COMSAT for inclusion in
the Proxy Statement) and which, in either such case, is included, incorporated
by reference or referred to in the Registration Statement or the Proxy
Statement. If at any time prior to the Effective Date any event relating to
COMSAT should occur which is required to be described in an amendment of or
supplement to the Proxy Statement or the Registration Statement, COMSAT shall
promptly so inform RSI and will prepare, or cooperate in the preparation of,
such amendment or supplement.
Section 4.5 CAPITALIZATION. The total authorized capital stock of COMSAT
is 100,000,000 shares of common stock, without par value, and 5,000,000 shares
of preferred stock, without par value, of which, as of December 31, 1993, (a)
40,226,475 shares of common stock were validly issued and outstanding and were
fully paid and nonassessable and free of preemptive rights, (b) 2,521,780 shares
of common stock were subject to issuance upon the exercise of outstanding
options or warrants, and (c) 1,348,003 shares of common stock were issued and
held in treasury. Other than 1,019,350 options and 222,000 restricted stock
awards granted between December 31, 1993 to the date of this Agreement, there
are no other issued and outstanding or issued and not outstanding shares of
capital stock of COMSAT, or any other securities which are convertible into or
exercisable for capital stock of COMSAT.
Section 4.6 COMSAT STOCK. Upon issuance as contemplated by this Agreement
or pursuant to the exercise of options into which the RSI Options were converted
pursuant to Section 5.10 herein, each share of COMSAT Stock shall be validly
issued, fully paid and nonassessable, and free and clear of any liens, pledges,
mortgages or encumbrances.
Section 4.7 NO BROKERS. Neither COMSAT nor CTS has paid or become
obligated to pay any fee or commission to any broker, finder, investment banker
or other intermediary in connection with the transactions contemplated by this
Agreement, other than Goldman, Sachs & Co.
Section 4.8 MATERIAL DISCLOSURES. No statement, representation or warranty
made by COMSAT or CTS in this Agreement, in any Exhibit hereto, or in any
certificate, written statement, list, schedule or other document delivered or to
be delivered to RSI hereunder, contains any untrue statement of a material fact,
or fails to state a material fact necessary to make the statements contained
herein or therein, in light of the circumstances in which they are made, not
misleading.
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ARTICLE V
COVENANTS
Section 5.1 SHAREHOLDER MEETING. RSI will call a special meeting of its
shareholders to be held as promptly as practicable (but no earlier than 30
business days after the date hereof) for the purpose of obtaining shareholder
approval of this Agreement and the Merger. COMSAT will cooperate with RSI in the
preparation and filing with the SEC as promptly as practicable of the Proxy
Statement for such special meeting, and will cooperate in the prompt filing of
such amendments or supplements to the Proxy Statement as may be reasonably
requested by the SEC or its staff in order to comply in all material respects
with the Exchange Act. The Proxy Statement shall include the recommendation of
the Board of Directors of RSI that the RSI shareholders approve this Agreement
and authorize the Merger, unless such recommendation shall have been withdrawn
in the exercise of the fiduciary duties of the RSI Board of Directors to the RSI
shareholders under the Nevada Corporation Law. RSI shall have no obligation to
mail the Proxy Statement to its shareholders until the Registration Statement is
declared effective by the SEC, as contemplated by Section 5.2 herein.
Section 5.2 REGISTRATION STATEMENT. COMSAT will prepare as promptly as
practicable the Registration Statement on Form S-4 for the issuance of the
COMSAT Stock as contemplated hereunder, and RSI will cooperate with COMSAT in
its preparation. Subject to Section 5.13 herein, COMSAT will file the
Registration Statement with the SEC and shall use all reasonable efforts,
including the filing of amendments with respect thereto, to have the
Registration Statement declared effective by the SEC, and to maintain the
effectiveness of the Registration Statement through the Effective Date,
including the filing of any post-effective amendments thereto as may reasonably
be requested by the SEC staff or as otherwise required by the Securities Act.
COMSAT shall also take any action required to be taken under state "Blue Sky" or
securities laws in connection with the offering of the COMSAT Stock to the RSI
shareholders and the issuance of the COMSAT Stock pursuant to the Merger.
Section 5.3 AFFILIATES' LETTERS. As soon as practicable after the date
hereof, RSI shall deliver to COMSAT a list of names and addresses of those
persons who are, to the knowledge of RSI, reasonably anticipated to be at the
time of RSI's special meeting of stockholders convened pursuant to Section 5.1
hereof, "affiliates" of RSI within the meaning of Rule 145 (each such person,
together with the persons identified below, being hereinafter referred to as an
"Affiliate") promulgated under the Securities Act ("Rule 145"). RSI shall use
its best efforts to provide COMSAT such information and documents as COMSAT
shall reasonably request for purposes of reviewing such list. There shall be
added to such list the names and addresses of any other person (within the
meaning of Rule 145) which COMSAT reasonably identifies (by written notice to
RSI within three business days after COMSAT's receipt of such list) as being a
person who may be deemed to be an Affiliate of RSI within the meaning of Rule
145; PROVIDED, HOWEVER, that no such person identified by COMSAT shall be added
to the list of Affiliates of RSI if COMSAT shall receive from RSI, on or before
the Effective Date, an opinion of counsel reasonably satisfactory to COMSAT to
the effect that such person is not an Affiliate. RSI shall use its best efforts
to deliver or cause to be delivered to COMSAT, at least 30 days prior to the
anticipated date of RSI's special meeting, from each of the Affiliates of RSI
identified in the foregoing list (as the same may be supplemented as aforesaid),
a letter dated as of the Effective Date in the form of Exhibit E attached
hereto.
Section 5.4 ACQUISITION PROPOSALS. RSI shall not (nor will it permit any
of its officers, directors, agents or affiliates to) directly or indirectly (i)
solicit, encourage, initiate or participate in any negotiations or discussions
with respect to any offer or proposal to acquire all or substantially all of its
business and properties or capital stock, whether by merger, purchase of assets,
tender offer or otherwise, or (ii) except as contemplated by this Agreement
disclose any information not customarily disclosed to any person concerning its
business and properties, afford to any person or entity access to its
properties, books or records or otherwise assist or encourage any person or
entity in connection with any of the activities referred to in clause (i) above;
UNLESS in the case of either clause (i) or (ii) above, RSI shall have received a
firm written offer relating to such transaction, not conditioned upon financing,
from a reputable buyer, which offer, in the written opinion of Alex. Brown,
RSI's financial advisers, appears to be on terms financially superior to those
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offered by the transactions contemplated by this Agreement and which, in the
written opinion of legal counsel to RSI reasonably acceptable to COMSAT, RSI's
Board of Directors is legally obligated to consider by principles of fiduciary
duty to shareholders under the Nevada Corporation Law.
Section 5.5 HSR ACT FILINGS. COMSAT and RSI shall promptly make their
respective filings, and shall thereafter promptly make any required submissions
or responses to second requests for information, under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, 15 U.S.C. Section 18a (the "HSR
Act"), with respect to the Merger and shall cooperate with each other with
respect to the foregoing.
Section 5.6 CONSENTS. Each of COMSAT and RSI agrees to use all reasonable
efforts expeditiously to (i) obtain all actions, non-actions, consents,
authorizations, orders and approvals from Federal, state, local and other
governmental and regulatory bodies, and from third parties, as may be required
in connection with, and waivers of any violations, breaches, defaults,
accelerations, terminations or Encumbrances that may be caused by, the
consummation of the Merger or the other transactions contemplated by this
Agreement and the Merger, including the facilities clearance requirements of the
Defense Investigative Service of the United States Department of Defense
("DIS"), as set forth in the DIS Industrial Security Regulation (DOD 5220.22-4)
and the DIS Industrial Security Manual (DOD 5220.22-M), as may be amended from
time to time, and (ii) resolve favorably any action, suit, proceeding or
investigation which shall have been instituted or which a governmental agency
shall have indicated its intention to institute which could lead to an order
making the Merger unlawful.
Section 5.7 INTERIM OPERATIONS OF RSI. During the period from the date of
this Agreement through the Effective Date, RSI shall operate its businesses only
in the usual and ordinary course and consistent with past practice and shall use
all reasonable efforts to (i) preserve intact its business organization and
goodwill in all material respects, (ii) keep available the services of its key
officers and employees and (iii) maintain its relationships with significant
customers, suppliers, distributors and others having significant business
relationships with it, and, subject to the provisions of this Agreement, except
as mutually agreed to in writing by COMSAT, RSI shall not (A) amend or otherwise
change its Restated Articles of Incorporation or Bylaws; (B) other than pursuant
to outstanding option or other agreements or commitments existing at June 30,
1993, issue, sell or authorize for issuance or sale, shares of any class of its
securities (including, without limitation, by way of stock split or dividend) or
any subscriptions, options, warrants, rights, convertible securities or other
agreements or commitments of any character obligating it or any of its
subsidiaries to issue such securities, or directly or indirectly redeem,
purchase or otherwise acquire any of its securities; (C) declare, set aside,
make or pay any dividend or other distribution (whether in cash, stock or
property) with respect to its capital stock other than its regular semi-annual
cash dividends, which in each case shall not be greater than the highest
semi-annual cash dividend paid to its shareholders during its fiscal year ended
June 30, 1993; (D) make any acquisitions or any dispositions other than in the
ordinary course of business; (E) guarantee employment to or commit to retain any
Employee after the Closing Date; (F) take any action that would cause the Merger
not to qualify as a reorganization within the meaning of Section 368 of the
Code; or (G) take any action that could result in the Merger not being accounted
for by the pooling of interests method for financial reporting purposes.
Section 5.8 INTERIM OPERATIONS OF COMSAT. Commencing from the date of this
Agreement and through the Effective Date and thereafter, COMSAT shall not (i)
take any action that would cause the Merger not to qualify as a reorganization
within the meaning of Section 368 of the Code, or (ii) take any action that
could result in the Merger not being accounted for by the pooling of interests
method for financial reporting purposes.
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Section 5.9 ACCESS. Subject to reasonable notice and as permitted by law,
RSI shall afford to COMSAT and its accountants, counsel and other agents and
representatives full access during normal business hours throughout the period
prior to the Effective Date to all of its properties, books, contracts,
commitments and records and, during such period, RSI shall furnish promptly to
COMSAT and its representatives (i) a copy of each report, schedule and other
document filed or received by it pursuant to the requirements of Federal or
state securities laws, and (ii) access to all other information concerning its
business, properties and personnel as COMSAT may reasonably request, provided
that no investigation pursuant to this Section 5.9 shall affect or be deemed to
modify any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger. Without limiting the
generality of the foregoing, RSI shall permit COMSAT and its representatives to
conduct a "Phase I" and "Phase II" environmental audit on properties owned or
leased by RSI or any RSI Subsidiary, including the taking of soil samples and
the sinking of monitoring wells at COMSAT's expense, and will cooperate with
COMSAT and its representatives in any environmental investigation it or they
reasonably deem appropriate in the circumstances. RSI shall promptly upon
request provide COMSAT and CTS access to a complete and correct copy of each
written agreement or other instrument, together with all amendments or
clarifications thereto, and a true and complete summary of the terms and
conditions of each oral agreement, identified in the Disclosure Letter pursuant
to Subsection 3.12.1 or relied upon by RSI in compiling and disclosing its
backlog pursuant to Subsection 3.8.1. If access is restricted due to a term in
the agreement or by applicable law or regulation, RSI shall use all reasonable
efforts to secure consent from the other party(ies) to the Agreement to provide
such access prior to Closing with sufficient time for COMSAT and CTS review.
COMSAT will treat the documents and other material and information referred to
in this Section 5.9 which constitute "Confidential Information" as defined in
the Confidentiality Agreement between COMSAT and RSI dated January 16, 1994 (the
"Confidentiality Agreement") as "Confidential Information" in accordance with
the terms of the Confidentiality Agreement. For purposes of this Agreement,
material and information supplied in connection with a "Phase II" environmental
audit shall be treated as "Confidential Information."
Section 5.10 RSI OPTIONS.
5.10.1 NO ACCELERATION. RSI shall not, from the date hereof to the
close of business on the Effective Date, take any action to accelerate or
agree or commit to accelerate the vesting of any options or rights to
acquire RSI Stock (the "RSI Options"); PROVIDED HOWEVER, that any unvested
RSI Options which shall automatically vest on or prior to the Closing Date
in accordance with the terms by which options were granted, and without any
further action on the part of RSI, shall so vest and become exercisable in
accordance with such terms.
5.10.2 CONVERSION TO COMSAT OPTIONS. At the close of business on the
Effective Date, each outstanding RSI Option shall be converted into an
option to acquire that number of shares of COMSAT Stock in an amount and at
an exercise price determined as provided below and otherwise having the same
duration and other terms as the original RSI Option:
(a) The number of shares of COMSAT Stock to be subject to the new
option shall be equal to the product of the number of shares of RSI Stock
subject to the original RSI Option times the Conversion Fraction;
provided that any fractional shares resulting from such multiplication
shall be rounded down to the nearest share; and
(b) The exercise price per share for COMSAT Stock under the new
option shall be equal to the product of the per share exercise price for
RSI Stock under the original RSI Option times the number, rounded to the
nearest thousandth, obtained by dividing one (1) by the Conversion
Fraction; provided that such exercise price shall be rounded up to the
nearest cent.
5.10.3 PLANS AND REGISTRATION. The Board of Directors of COMSAT, or
the appropriate committee thereof, shall, under the terms of the COMSAT 1990
Key Employee Stock Plan, cause the options converted pursuant to Subsection
5.10.2 herein, other than any RSI Option held by directors of RSI, to be
assumed under such plan, and COMSAT shall, if such shares are not otherwise
registered, file a registration statement on Form S-8 (or any successor form
thereto) with respect to the shares of
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COMSAT Stock underlying such options. COMSAT shall, if reasonably required
to permit resale without restrictions other than those contemplated by
Section 5.3, file a registration statement on Form S-8 (or any successor
form thereto) with respect to shares of COMSAT Stock underlying RSI Options
held by directors of RSI.
Section 5.11 NYSE LISTING. COMSAT shall use its best efforts to obtain,
prior to the Effective Date, approval for listing on the New York Stock
Exchange, upon official notice of issuance, of the COMSAT Stock to be issued
pursuant to the Merger.
Section 5.12 DISCLOSURE LETTER. RSI shall deliver to COMSAT an update of
the Disclosure Letter prior to Closing with time sufficient for COMSAT's and
CTS's review.
Section 5.13 INTERIM REVIEW. COMSAT may, in its sole discretion and at its
expense, retain Deloitte & Touche to conduct a review of the consolidated
financial statements of RSI at December 31, 1993. RSI shall cooperate in any
such review and shall use its best efforts to cause such review to be completed
prior to the filing by COMSAT of the Registration Statement with the SEC. COMSAT
shall be under no obligation to file the Registration Statement with the SEC
unless and until such review has been completed.
Section 5.14 CONFIDENTIALITY. RSI will treat all documents and other
material and information furnished to it by COMSAT which constitute
"Confidential Information" as defined in the Confidentiality Agreement as
"Confidential Information" in accordance with the terms of the Confidentiality
Agreement.
Section 5.15 NOTICE. COMSAT agrees to notify RSI promptly upon COMSAT, CTS
or its authorized representatives having received actual knowledge, as part of
COMSAT's due diligence review of RSI, of a material breach of an RSI
representation or warranty made herein, to the extent RSI has not already
disclosed such material breach to COMSAT or the material breach is otherwise
open and notorious.
Section 5.16 ESOP; CERTAIN BENEFITS. Simultaneously with the execution and
delivery of this Agreement, COMSAT is executing and delivering to the Board of
Directors of RSI the letter attached hereto as Exhibit F concerning the RSI
Employee Stock Ownership Plan and certain other benefits for the employees and
directors of RSI.
Section 5.17 FURTHER ASSURANCES. Each of the parties hereto agrees to use
all reasonable efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations expeditiously to consummate and make effective the Merger
and the other transactions contemplated by this Agreement.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF COMSAT AND CTS
Section 6.1 CONDITIONS. The obligations of COMSAT and CTS to consummate
the Merger under this Agreement shall be subject to the fulfillment, to their
reasonable satisfaction, on or prior to the Closing Date, of all of the
following conditions precedent:
6.1.1 DISCLOSURE LETTER. As provided under Section 5.12 herein, the
Disclosure Letter shall have been updated to the date closest as practicable
to the Closing Date and shall have been delivered with time sufficient for
COMSAT's and CTS's review.
6.1.2 ABSENCE OF CHANGES. The representations and warranties contained
in Subsections 3.5.2 and 3.16.4 herein shall be true and correct on the
Closing Date. The Disclosure Letter schedule referred to in the penultimate
sentence in Subsection 3.8.1 shall show at the Closing Date an aggregate
contract backlog for RSI in all categories of at least $118,500,000 as
required by Subsection 3.8.1.
6.1.3 NO ADVERSE FACTS REVEALED. No audit, investigation or due
diligence review by COMSAT or its representatives of RSI with respect to the
representations and warranties contained in Article III, shall have revealed
in the aggregate liabilities of RSI not previously disclosed as of the date
hereof
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(whether then existing or arising after the date hereof) which exceed the
product of five percent (5%) multiplied by (i) $18.25 and (ii) the number of
shares of RSI common stock issued and outstanding on the date of this
Agreement.
6.1.4 HSR ACT WAITING PERIOD. All waiting periods under the HSR Act
with respect to the Merger shall have been terminated or expired.
6.1.5 PERFORMANCE BY RSI. RSI shall have performed and complied in all
material respects with all agreements, covenants, obligations and conditions
required by this Agreement to be performed or complied with by RSI on or
before the Closing Date.
6.1.6 OBTAINING OF DIS CONSENTS AND APPROVALS. RSI shall have obtained
and delivered to COMSAT all necessary consents, approvals or waivers on or
prior to the Closing Date as required pursuant to the DIS Industrial
Security Regulation, DOD 5220.22-R, and the DIS Industrial Security Manual
DOD 5220.22-M (as either may be amended from time to time), for the purpose
of retaining any necessary facilities clearances and/or personnel clearances
as the case may be after the Closing Date.
6.1.7 OBTAINING OF CONSENTS AND APPROVALS. RSI shall have executed and
delivered to COMSAT and CTS, or shall have caused to be executed and
delivered, any consents, waivers, approvals, permits, licenses or
authorizations which, if not obtained on or prior to the Closing Date, would
have a material adverse effect on the Surviving Corporation's ability to
conduct business as conducted by RSI on the Closing Date.
6.1.8 ABSENCE OF LITIGATION. There shall not be in effect any order
enjoining or restraining the transactions contemplated by this Agreement,
and there shall not be instituted or pending any action or proceeding before
any Federal, state or foreign court or governmental agency or other
regulatory or administrative agency or instrumentality challenging the
Merger or the issuance of the COMSAT Stock in connection therewith, or
otherwise seeking to restrain or prohibit consummation of the transactions
contemplated by this Agreement, or seeking to impose any material
limitations on any provision of this Agreement.
6.1.9 AUTHORIZATION OF MERGER. The requisite shareholders of RSI shall
have duly voted their shares approving this Agreement and authorizing the
Merger.
6.1.10 POOLING. COMSAT shall have received an opinion from Deloitte &
Touche, dated the Closing Date, that the Merger as contemplated by this
Agreement will be accounted for as a pooling of interests for financial
reporting purposes.
6.1.11 EMPLOYMENT AGREEMENT. RSI shall have used its best efforts to
cause, on or prior to the Closing Date, Richard E. Thomas to execute and
deliver an Employment Agreement (the "Employment Agreement") in
substantially the form of Exhibit G attached hereto.
6.1.12 RSI OFFICERS' CERTIFICATES. COMSAT and CTS shall have received
certificates, dated the Closing Date, executed on behalf of RSI by
appropriate officers, stating that the representations and warranties set
forth in Article III hereof are true and correct on the Closing Date (unless
specified to be made as of another date, in which case on such specified
date) in all material respects and that the conditions set forth in Sections
6.1.1 through 6.1.9.
6.1.13 COMFORT LETTER. COMSAT and CTS shall have received a letter,
dated as of a date not more than two days prior to the date that the
Registration Statement is declared effective, and shall have received a
subsequent letter, dated as of a date not more than two days prior to the
Effective Date, from Deloitte & Touche, independent auditors of RSI,
addressed to COMSAT and CTS, to the effect that (i) they are independent
accountants within the meaning of the Securities Act and the Exchange Act;
(ii) in their opinion, the financial statements of RSI included in the
Registration Statement comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and the Exchange
Act, (iii) on the basis of limited procedures specified in their letter,
which need not constitute an audit, nothing has come to their attention
which would give them reason to believe that
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(A) since December 31, 1993, to the date of such letter there has been any
increase in the outstanding capital stock or rights, securities, options or
obligations exercisable for or convertible into shares of capital stock, or
in the consolidated indebtedness, of RSI, (B) there has been any change in
specified balance sheet items of RSI since the date of the most recent
financial statements included in the Registration Statement and the Proxy
Statement or (C) since December 31, 1993 to the date of such letter, there
has been any decrease in the net income of RSI as compared with the
corresponding period for the prior year, except with respect to each of
clauses (A), (B) and (C) for any such increase, change or decrease referred
to in or contemplated by the Registration Statement and the Proxy Statement
or specified in such letter.
6.1.14 OPINION OF RSI'S COUNSEL. RSI shall have furnished COMSAT and
CTS with an opinion of Shaw, Pittman, Potts & Trowbridge, special counsel
for RSI, dated the Closing Date, substantially in the form of Exhibit H.
6.1.15 OTHER DOCUMENTS. The execution and delivery to COMSAT and CTS
by RSI of such other certificates, documents and instruments as COMSAT may
reasonably request.
Section 6.2 WAIVER. COMSAT and CTS may, at their sole discretion, waive in
writing fulfillment of any or all of the conditions set forth in Section 6.1 of
this Agreement, provided that such waiver granted by COMSAT and CTS pursuant to
this Section 6.2 shall have no effect upon or as against any of the other
conditions not so waived. To the extent that at the Closing RSI delivers to
COMSAT a written notice specifying in reasonable detail the failure of any of
such conditions or the breach by RSI of any of the representations or warranties
of RSI herein, and nevertheless COMSAT proceeds with the Closing, COMSAT shall
be deemed to have waived for all purposes any rights or remedies it may have
against RSI or, except in the case of fraud or gross negligence, any of its
directors, officers or employees by reason of the failure of any such conditions
or the breach of any such representations or warranties to the extent described
in such notice. Following the Closing, no claims for breach of any
representations, warranties or agreements shall be brought against any director
or officer, or any employee listed in the Disclosure Letter as providing
"knowledge" with respect to RSI's representations and warranties as of the
Closing Date as referenced in clause (ii) of the last sentence in the
introductory paragraph in Article III, if and to the extent such person did not
have actual knowledge or had no reason to know (in light of circumstantial
evidence made available to them on or prior to Closing) of the facts material to
such breach of any representation, warranty or agreement.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF RSI
Section 7.1 CONDITIONS. The obligations of RSI to consummate the Merger
under this Agreement herein shall be subject to the fulfillment, to its
reasonable satisfaction, on or prior to the Closing Date, of all of the
following conditions precedent:
7.1.1 HSR ACT WAITING PERIOD. All waiting periods under the HSR Act
with respect to the Merger shall have been terminated or expired.
7.1.2 PERFORMANCE BY COMSAT AND CTS. Each of COMSAT and CTS shall have
performed and complied in all material respects with all agreements,
covenants, obligations and conditions required by this Agreement to be
performed or complied with by COMSAT and CTS on or before the Closing Date.
7.1.3 OBTAINING OF DIS CONSENTS AND APPROVALS. COMSAT shall have
obtained and delivered to RSI all necessary consents, approvals or waivers
on or prior to the Closing Date as required pursuant to the DIS Industrial
Security Regulation. DOD 5220.22-R, and the DIS Industrial Security Manual
DOD 5220.22-M (as either may be amended from time to time), for the purpose
of retaining any necessary facilities clearances and/or personnel clearances
as the case may be after the Closing Date.
7.1.4 OBTAINING OF CONSENTS AND APPROVALS. COMSAT and CTS shall have
executed and delivered to RSI, or shall have caused to be executed and
delivered, any consents, waivers, approvals,
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permits, licenses or authorizations which, if not obtained on or prior to
the Closing Date, would have a material adverse effect on the Surviving
Corporation's ability to conduct business as conducted by RSI on the Closing
Date.
7.1.5 POOLING. RSI shall have received an opinion from Deloitte &
Touche, dated the Closing Date, that the Merger as contemplated by this
Agreement will be accounted for as a pooling of interests for financial
reporting purposes.
7.1.6 ABSENCE OF LITIGATION. There shall not be in effect any order
enjoining or restraining the transactions contemplated by this Agreement.
7.1.7 REGISTRATION STATEMENT; NYSE LISTING. The Registration Statement
shall have become effective under the Securities Act prior to the first
mailing of the Proxy Statement to shareholders of RSI and the Registration
Statement shall, at the date of the meeting of RSI shareholders called
pursuant to Section 5.1 of this Agreement and at all times thereafter to and
including the Effective Date, have been effective and no stop order
suspending the effectiveness thereof shall have been issued during such
period and not withdrawn and no stop order shall be pending at the Effective
Date. The COMSAT Stock to be issued pursuant to the Merger shall have been
approved for listing on the New York Stock Exchange, upon official notice of
issuance.
7.1.8 AUTHORIZATION OF MERGER. The requisite shareholders of RSI shall
have duly voted their shares approving this Agreement and authorizing the
Merger.
7.1.9 OFFICERS' CERTIFICATES. RSI shall have received certificates,
dated the Closing Date, executed on behalf of COMSAT by appropriate officers
stating that the representations and warranties set forth in Article IV
hereof are true and correct on the Closing Date (unless specified to be made
as of another date, in which case on such specified date) in all material
respects and that the conditions set forth in Sections 7.1.1 through 7.1.8
hereof have been satisfied.
7.1.10 OTHER DOCUMENTS. The execution and delivery to RSI by COMSAT
and CTS of such other certificates, documents and instruments as RSI may
reasonably request.
7.1.11 OPINION OF COMSAT'S COUNSEL. COMSAT shall have furnished RSI
with the opinion of Crowell & Moring, special counsel for COMSAT, dated the
Closing Date, substantially in the form of Exhibit I.
Section 7.2 WAIVER. RSI may, in its sole discretion, waive in writing
fulfillment of any or all of the conditions set forth in Section 7.1 of this
Agreement, provided that such waiver granted pursuant to this Section 7.2 shall
not constitute a waiver by RSI of any other conditions not so waived.
ARTICLE VIII
TERMINATION
Section 8.1 TERMINATION EVENTS. Subject to the provisions of Section 8.2,
this Agreement may, by written notice given at or prior to the Closing (in the
manner provided by Section 9.9 herein) be terminated and abandoned only as
follows:
8.1.1 BREACH. By either COMSAT or RSI upon written notice if a
material default or breach shall be made by the other, with respect to the
due and timely performance of any of the other party's respective covenants
and agreements contained herein, or with respect to the due compliance with
any of the other party's respective representations and warranties contained
in Article III or IV herein, as applicable, and such default cannot be cured
prior to Closing and has not been waived;
8.1.2 MUTUAL CONSENT. By mutual written consent of the parties hereto;
or
8.1.3 FAILURE OF CONDITIONS TO CLOSE. By either COMSAT or RSI, if by
reason of failure of their respective conditions to close contained in
Article VI or VII herein, as applicable, and such conditions have not been
satisfied or waived by December 31, 1994, or such later date as may be
agreed upon by the parties hereto, PROVIDED THAT the right to terminate this
Agreement under this Subsection 8.1.3 shall not
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be available to a party whose failure to fulfill any obligation or perform
any covenant under this Agreement has been the cause of or resulted in the
failure of any of the conditions to close of the other party hereto by such
date.
Section 8.2 EFFECT OF TERMINATION. In the event this Agreement is
terminated pursuant to Section 8.1 herein, all further rights and
obligations of the parties hereunder shall terminate, PROVIDED THAT if RSI
at any time prior to December 31, 1994 is acquired by, merges, effectuates a
business combination with, or sells substantially all of its assets to any
person or entity not controlled by COMSAT, or agrees to do any of the
foregoing, RSI shall immediately upon such action or agreement pay to COMSAT
Five Million Dollars ($5,000,000), plus all of COMSAT's costs, fees and
expenses incurred in connection with this Agreement and the Merger as
contemplated hereby, including fees and expenses of its accountants,
investment advisers and counsel, and PROVIDED FURTHER that the total payment
RSI shall pay to COMSAT immediately upon such action or agreement shall not
in any event exceed Seven Million, Five Hundred Thousand Dollars
($7,500,000).
Section 8.3 FEES AND EXPENSES; DAMAGES. Except as otherwise provided in
Section 8.2 herein, in the event this Agreement is terminated for any reason and
the Merger is not consummated each party shall be responsible for its own costs,
fees and expenses, including fees and expenses of its accountants, investment
advisers and counsel, PROVIDED, HOWEVER, that if the termination is caused by
the breach of COMSAT and CTS on the one hand, or the breach of RSI on the other
hand, the breaching party(ies) shall pay to the non-breaching party(ies) as
liquidated damages (and as its sole and exclusive remedy) the actual costs and
expenses of the non-breaching party(ies), including the fees and expenses of its
accountants, investment advisers and counsel, not to exceed Two Million Five
Hundred Thousand Dollars ($2,500,000).
ARTICLE IX
MISCELLANEOUS
Section 9.1 CONSTRUCTION.
9.1.1 WORDS. All references in this Agreement to the singular shall
include the plural where applicable, and all references to gender shall
include both genders and neuter.
9.1.2 CROSS-REFERENCES. References in this Agreement to any Article
shall include all Sections, Subsections and Paragraphs in such Article;
references in this Agreement to any Section shall include all Subsections
and Paragraphs in such Section; and references in this Agreement to any
Subsection shall include all Paragraphs in such Subsection.
9.1.3 NO PRESUMPTION. In interpreting any provision of this Agreement
no presumption shall be drawn against the party drafting the provision.
9.1.4 HEADINGS. Article, Section and Subsection headings of this
Agreement are for convenience only and are not to be construed as part of
this Agreement or as defining or limiting in any way the scope or intent of
the provisions hereof.
9.1.5 EXHIBITS. Exhibits and the Disclosure Letter referred to herein
are hereby incorporated into and made a part of this Agreement. Any material
disclosed in any part of the Disclosure Letter shall be deemed disclosed for
purposes of all of the representations and warranties of RSI contained in
Article III herein.
9.1.6 TIME. Time shall be of the essence in the performance of each
party's respective obligations under this Agreement.
Section 9.2 SEVERABILITY. If any part of this Agreement for any reason
shall be declared invalid, such decision shall not affect the validity of any
remaining portion, which shall remain in full force and effect.
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Section 9.3 FURTHER ASSURANCES. Each party shall at its own expense
furnish, execute and deliver such documents, instruments, certificates, notices
or other further assurances as the other party may reasonably require as
necessary or appropriate to effect the purposes of this Agreement or to confirm
the rights created or arising hereunder.
Section 9.4 BENEFIT. Unless otherwise specified herein, no person who is
not a party to this Agreement shall have any rights or derive any benefit
hereunder. No provision of this Agreement except Exhibit G shall constitute an
agreement of employment.
Section 9.5 SCOPE AND MODIFICATION. This Agreement, the Stock Option
Agreement, and Sections 1 through 4 and Section 7 of the Confidentiality
Agreement, constitute the entire agreement between the parties and supersede all
prior oral or written agreements (including the Confidentiality Agreement except
as specifically referenced in this Section 9.5) or understandings of the parties
with regard to the subject matter hereof. No interpretation, modification,
termination or waiver of any provision hereof shall be binding upon a party
unless in writing and executed by the other parties. No modification, waiver,
termination, rescission, discharge or cancellation of any right or claim under
this Agreement shall affect the right of any party hereto to enforce any other
claim or right hereunder.
Section 9.6 DELAYS OR OMISSIONS. Except as expressly provided in this
Agreement, no delay or omission to exercise any right, power or remedy accruing
to a party hereunder, upon any breach or default of any party under this
Agreement, shall impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or a waiver of or acquiescence in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring.
Section 9.7 SUCCESSORS AND ASSIGNS. This Agreement may not be assigned by
any party without the written consent of the other parties. Except as otherwise
expressly provided herein, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the successors and permitted assigns of the
parties hereto.
Section 9.8 GOVERNING LAW. The terms and provisions of this Agreement
shall be interpreted in accordance with and governed by the laws of the State of
Maryland and the United States of America, without giving effect to the doctrine
of conflict of laws.
Section 9.9 NOTICES. Any notice under this Agreement shall be in writing
and shall be delivered by personal service or by United States certified or
registered mail, with postage prepaid, or by facsimile or overnight express
courier, addressed to a party at the address set forth beneath its name, below,
or at such other address as one party may give written notice of to the other
parties.
(a) If to COMSAT or CTS:
C. Thomas Faulders, III
Vice President and Chief Financial Officer
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, MD 20817
Fax: (301) 214-7131
With a copy to:
Warren Y. Zeger, Esq.
Vice President and General Counsel
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, MD 20817
Fax: (301) 214-7128
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And to:
William P. O'Neill, Esq.
Crowell & Moring
1001 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2505.
Fax: (202) 628-5116
(b) If to RSI:
Richard E. Thomas
Chairman, Chief Executive Officer and President
Radiation Systems Inc.
1501 Moran Road
Sterling, VA 20166
Fax: (703) 450-2701
With a copy to:
John L. Sullivan, III, Esq.
Shaw, Pittman, Potts & Trowbridge
1501 Farm Credit Drive
Suite 4400
McLean, VA 22102-5000
Fax: (703) 821-2397
And to:
Lynn A. Soukup, Esq.
Shaw, Pittman, Potts & Trowbridge
2300 N Street, N.W.
Washington, D.C. 20037-1128
Fax: (202) 663-8007
The designation of the person(s) to be so notified, or the address or facsimile
of such person(s) for the purposes of such notice, may be changed from time to
time by means of a similar notice. Copies to counsel shall not constitute
notice.
Section 9.10 DUPLICATES. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original document.
Section 9.11 COOPERATION. The parties shall consult and cooperate with one
another regarding, and shall use their respective reasonable efforts to seek and
obtain, the approvals, consents and other documents contemplated by this
Agreement, and shall use their respective best efforts to cause the statutory
and other conditions to their respective obligations hereunder to be satisfied.
Section 9.12 PUBLIC ANNOUNCEMENTS. RSI and COMSAT agree that they will not
issue any press release or otherwise make any public statement or respond to any
press inquiry with respect to this Agreement or the transactions contemplated
hereby, without the prior approval of the other party, except as may be required
by law; if any such disclosure is required by law the disclosing party shall use
its best efforts to give notice and an opportunity to consult to the other party
prior to such required disclosure.
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EXECUTION AND DELIVERY
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement with the express intent that it be effective, legal and binding as of
the date and year first-above written.
COMSAT CORPORATION
By: /s/ BRUCE L. CROCKETT
--------------------------------------
Name: Bruce L. Crockett
Title: President
CTS AMERICA, INC.
By: /s/ C. THOMAS FAULDERS, III
--------------------------------------
Name: C. Thomas Faulders, III
Title: President
RADIATION SYSTEMS, INC.
By: /s/ RICHARD E. THOMAS
--------------------------------------
Name: Richard E. Thomas
Title: Chairman
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EXHIBIT B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT dated as of January 30, 1994, by and between COMSAT
CORPORATION, a District of Columbia corporation ("COMSAT"), and RADIATION
SYSTEMS, INC., a Nevada corporation (the "Company").
WHEREAS, the Company, COMSAT and CTS America, Inc., a Delaware corporation
and a wholly owned subsidiary of COMSAT ("CTS"), propose to enter into an
Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), which provides, among other things, upon the terms and subject to
the conditions thereof, that the Company will be merged with and into CTS, with
CTS to be the surviving corporation, and that each outstanding share of common
stock, par value $1.00 per share of the Company (the "Company Common Stock")
will be converted into the right to receive that fraction of a share, rounded to
the nearest thousandth (the "Conversion Fraction"), of common stock, without par
value, of COMSAT (the "COMSAT Stock") determined by dividing Eighteen Dollars
and twenty-five cents ($18.25) by the average closing price of a whole share of
COMSAT Stock on the New York Stock Exchange Composite Tape for the twenty (20)
Trading Days ending with the Trading Day which precedes the Closing Date by five
(5) Trading Days (a "Trading Day" being any day on which the New York Stock
Exchange is open for business and on which shares of COMSAT Stock are traded on
that Exchange), provided that the Conversion Fraction shall not be less than
.638 and shall not be greater than .780; and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, COMSAT has required that the Company agree, and in order to induce
COMSAT to enter into the Merger Agreement the Company has agreed, to grant the
COMSAT Option (as hereinafter defined).
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. GRANT OF OPTION. The Company hereby grants to COMSAT an unconditional,
irrevocable option (the "COMSAT Option") to purchase a number of shares of
Company Common Stock equal to Fifteen Percent (15%) of the shares of Company
Common Stock outstanding on the date hereof (the "Option Shares") at an exercise
price of Eighteen Dollars and twenty-five cents ($18.25) per Option Share (the
"COMSAT Option Exercise Price").
2. EXERCISE OF OPTION. Provided that COMSAT or CTS is not then in material
breach of its obligations under the Merger Agreement, COMSAT may exercise the
COMSAT Option, in whole or in part, at any time, in the event that any
corporation, partnership, person, other entity or group (as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (collectively, a "Person"), other than COMSAT or any of its subsidiaries,
(i) acquires beneficial ownership (as such term is defined in Rule 13d-3 under
the Exchange Act) of at least Fifteen Percent (15%) of the outstanding shares of
Company Common Stock, (ii) enters into an agreement with the Company or any of
its material subsidiaries to merge or consolidate with the Company or any of its
subsidiaries, or to purchase all or substantially all of the consolidated assets
of the Company (or effects any such merger, consolidation or purchase) and the
Merger Agreement is terminated, or (iii) has commenced or commences (as such
terms are defined in Rule 14d-2 under the Exchange Act) a tender or exchange
offer for at least Fifteen Percent (15%) of the outstanding shares of Company
Common Stock that is not opposed by the Company and the Company is no longer
supporting the Merger Agreement and the transactions contemplated thereby. In
the event COMSAT wishes to exercise the COMSAT Option for some or all of the
Option Shares, COMSAT shall send a written notice to the Company stating the
number of Option Shares that it wishes to purchase and setting forth a place and
date not earlier than one nor, subject to Section 8 herein, later than ten
business days from the date such notice is given for the closing of such
purchase (a "COMSAT Option Closing").
3. PAYMENT AND DELIVERY OF CERTIFICATES. (a) At a COMSAT Option Closing,
COMSAT will make payment to the Company of the aggregate price for the Option
Shares being purchased at the COMSAT
B-1
<PAGE>
Option Closing by delivery of immediately available funds to the Company, and
the Company will deliver to COMSAT a certificate or certificates representing
the Option Shares being so purchased, registered in the name of COMSAT.
(b) Certificates for the Option Shares delivered at each COMSAT Option
Closing shall be endorsed with a restrictive legend which shall read
substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF JANUARY 30,
1994. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST THEREFORE.
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if COMSAT shall
have delivered to the Company a copy of a letter from the staff of the SEC,
or an opinion of counsel in form and substance reasonably satisfactory to
the Company and its counsel, to the effect that such legend is not required
for purposes of the Securities Act.
4. OPTION VALUE. In the event that the COMSAT Option becomes exercisable
pursuant to paragraph 2 hereof, and COMSAT so requests in lieu of exercise of
the COMSAT Option, then the Company shall promptly, and in no event later than
five (5) business days after receipt of such request, pay to COMSAT an amount in
cash (the "COMSAT Option Value") equal to the product of (x) the excess, if any,
of (A) the highest price per share paid or proposed to be paid in connection
with any transaction specified in Section 2 or Section 10(b)(ii), as applicable,
herein for any shares of Company Common Stock, or the greatest aggregate
consideration paid or proposed to be paid in connection with any transaction
specified in Section 2 or Section 10(b)(ii), as applicable, herein for the
purchase of assets of the Company divided by the number of shares of Company
Common Stock then outstanding, as the case may be (the value of any such price
or consideration other than cash to be determined, in the case of consideration
with a readily ascertainable market value, by reference to such market value
and, in the case of any other consideration, by agreement in good faith between
COMSAT and the Company), over (B) the COMSAT Option Exercise Price, multiplied
by (y) the total number of shares still subject to the COMSAT Option. Such
payment shall be made by delivery of immediately available funds to COMSAT and
shall extinguish all other rights of COMSAT under this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to COMSAT as follows:
(a) AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the Board of Directors of
the Company and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the transactions
so contemplated. This Agreement has been duly and validly executed and
delivered by the Company and, assuming this Agreement and the Merger
Agreement constitute valid and binding obligations of COMSAT, this Agreement
constitutes a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms.
(b) OPTION SHARES. The Company has taken all necessary corporate action
to authorize and reserve and to permit it to issue, and at all times from
the date hereof through the Termination Date (as hereinafter defined) will
have reserved for issuance upon exercise of the COMSAT Option, a number of
shares of Company Common Stock equal to the number of Option Shares to
permit the exercise in full of the COMSAT Option, all of which shares, upon
issuance pursuant hereto, shall be duly authorized, validly issued, fully
paid and nonassessable, and shall be delivered free and clear of all claims,
liens, encumbrances and security interests and not subject to any preemptive
rights.
B-2
<PAGE>
6. REPRESENTATIONS AND WARRANTIES OF COMSAT. COMSAT hereby represents and
warrants to the Company as follows:
(a) AUTHORITY RELATIVE TO THIS AGREEMENT. COMSAT has full corporate
power and authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of COMSAT and no
other corporate proceedings on the part of COMSAT are necessary to authorize
this Agreement or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by COMSAT and,
assuming this Agreement and the Merger Agreement constitute valid and
binding obligations of the Company, this Agreement constitutes a valid and
binding agreement of COMSAT, enforceable against COMSAT in accordance with
its terms.
(b) DISTRIBUTION. COMSAT will acquire the Option Shares for its own
account and not with a view to any resale or distribution thereof, and will
not sell the Option Shares unless such shares are registered under the
Securities Act of 1933 or unless an exemption from registration is
available.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. In the event of any change
in the shares of Company Common Stock by reason of stock dividends, split-ups,
mergers, recapitalizations, combinations, conversions, exchanges of shares or
the like, the number and kind of shares of Company Common Stock subject to the
COMSAT Option and the purchase price per share shall be appropriately adjusted.
8. CONSENTS. The Company will use its best efforts to obtain any approvals
and consents, and otherwise to satisfy any requirements, of all governmental
authorities and laws necessary to the consummation of the transactions
contemplated by this Agreement. The consummation of such transactions shall be
subject to, and, if delayed pursuant to this Section 8, shall occur promptly
after (whether before or after the Termination Date) the receipt of such
necessary approvals or consents and satisfaction of such requirements.
9. REGISTRATION RIGHTS; LISTING. The Company shall, if reasonably
requested by COMSAT within three years of the first exercise of the COMSAT
Option (or any portion thereof), as expeditiously as possible prepare and file a
registration statement under the Securities Act regarding the offer and sale or
other disposition of any or all shares of Company Common Stock or other
securities that have been acquired by or are issuable to COMSAT upon exercise of
the COMSAT Option in accordance with the intended method of sale or other
disposition by COMSAT, and the Company shall use its best efforts to qualify
such shares or other securities under any applicable state securities laws.
COMSAT agrees to use all reasonable efforts to cause, and to cause any
underwriters of any sale or disposition to cause, any sale or other disposition
pursuant to such registration statement to be effected on a widely distributed
basis so that upon consummation thereof no purchaser or transferee shall own
beneficially more than 5% of the then outstanding voting power of the Company.
The Company shall use its best efforts to cause such registration statement to
become effective, to obtain all consents or waivers of other parties that are
required therefor and to keep such registration statement effective for a period
not in excess of 180 days from the day such registration statement first becomes
effective as may be reasonably necessary to effect such sale or other
disposition. The obligations of the Company hereunder to file a registration
statement and to maintain its effectiveness may be suspended for one or more
periods of time not exceeding 45 days in the aggregate if the Board of Directors
of the Company shall determined that the filing of such registration statement
or the maintenance of its effectiveness would require disclosure of nonpublic
information that would materially and adversely affect the Company. Any
registration statement prepared and filed under this Section 9, and any sale
covered thereby, shall be at the Company's expense except for underwriting
discounts or commissions, brokers' fees and the fees and disbursements of
COMSAT's counsel related thereto. COMSAT shall provide all information
reasonably requested by the Company for inclusion in any registration statement
to be filed hereunder. If during the time period referred to in the first
sentence of this Section 9 the Company effects a registration under the
Securities Act of Company Common Stock for its own account or for any other
stockholders of the Company (other than on Form S-4 or Form S-8, or any
successor form), it shall allow COMSAT the right to participate in such
registration; PROVIDED that, if the managing underwriters of such offering
advise the Company in writing that in their opinion the number of shares of
Company Common
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<PAGE>
Stock requested to be included in such registration exceeds the number which can
be sold in such offering, the Company shall include the shares requested to be
included therein by COMSAT pro rata with the shares intended to be included
therein by the Company (and by no others). In connection with any registration
pursuant to this Section 9, the Company and COMSAT shall provide each other and
any underwriter of the offering with the customary representations, warranties,
covenants, indemnification and contribution in connection with such
registration. The Company will use its best efforts promptly to list on the
NASDAQ National Market System or a national securities exchange, whichever is
the principal trading market for the Company Common Stock on the date of
exercise of the COMSAT Option, upon official notice of issuance, the Option
Shares issued upon exercise of the COMSAT Option.
10. TERMINATION; CERTAIN PROTECTION.
(a) Except as otherwise contemplated hereby, all the provisions of this
Agreement shall terminate upon the date (the "Termination Date") which is
thirty (30) days after the termination of the Merger Agreement.
(b) In the event that (i) prior to the Termination Date any Person,
other than COMSAT or any of its affiliates, shall publicly announce or
communicate to the Company a proposal (A) to merge or consolidate with the
Company or any of its subsidiaries, or to purchase all or substantially all
of the assets of or otherwise to acquire the Company, or (B) to make any
tender or exchange offer for shares of Company Common Stock and (ii) within
one year after the Termination Date such Person or a related Person (x)
acquires at least Fifteen Percent (15%) of the outstanding shares of Company
Common Stock, (y) enters into an agreement with the Company or any of its
subsidiaries to merge or consolidate with the Company or any of its
subsidiaries or to purchase all or substantially all of the assets of the
Company (or effects any such merger, consolidation or purchase) or (z)
commences a tender offer or exchange offer for at least Fifteen Percent
(15%) of the outstanding shares of Company Common Stock that is supported by
the Company, then the Company shall promptly pay to COMSAT the COMSAT Option
Value.
11. ASSIGNMENT. COMSAT shall not sell, assign, convey or transfer the
COMSAT Option other than to any wholly owned subsidiary of COMSAT. This
Agreement shall be binding upon and inure to the benefit of each party's
successors and assigns.
12. SPECIFIC PERFORMANCE. The parties hereto acknowledge that damages
would be an inadequate remedy for a breach of this Agreement and that the
obligations of the parties hereto shall be specifically enforceable.
Accordingly, it is agreed that COMSAT shall be entitled to injunctive relief to
prevent breaches of this Agreement by the Company and specifically to enforce
the terms and provisions hereof, in addition to any other remedy to which it may
be entitled, at law or in equity.
13. ENTIRE AGREEMENT. This Agreement and the Merger Agreement constitute
the entire agreement among the parties with respect to the subject matter hereof
and supersede all other prior agreements and understandings, both written and
oral, among the parties or any of them with respect to the subject matter
hereof.
14. VALIDITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
15. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in person, by registered or certified mail (postage prepaid, return receipt
requested) or by facsimile to the respective parties at their respective
addresses set forth in the Merger Agreement, or at such other address as the
person to whom notice is given may have previously furnished to the others in
writing in the manner set forth in the Merger Agreement (provided that notice of
any change of address shall be effective only upon receipt thereof).
16. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland.
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<PAGE>
17. DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
18. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
19. EXPENSES. All costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
20. BENEFIT. No person who is not a party to this Agreement shall have any
rights or derive any benefit hereunder.
21. TRANSFER. If COMSAT has exercised the COMSAT Option, COMSAT shall not
sell, transfer, pledge, or hypothecate the Option Shares except pursuant to a
bona fide third party offer (the "Third Party Offer"), and without first
tendering the Option Shares to the Company at the price or equivalent value as
that provided for in the Third Party Offer. Such tender shall be made in writing
and be held open for 15 days. Notwithstanding the above, COMSAT shall have no
obligation to tender the Option Shares if the Third Party Offer is made by any
member or members of a group (as defined in Section 13(d)(3) of the Exchange
Act) to which COMSAT is also member.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
COMSAT CORPORATION
By: /s/ BRUCE L. CROCKETT
--------------------------------------
Name: Bruce L. Crockett
Title: President
RADIATION SYSTEMS, INC.
By: /s/ RICHARD E. THOMAS
--------------------------------------
Name: Richard E. Thomas
Title: Chairman
B-5
<PAGE>
EXHIBIT C
January 30, 1994
[LOGO]
Radiation Systems, Inc.
1501 Moran Road
Sterling, Virginia 20166
Dear Sirs:
Radiation Systems, Inc. (the "Company"), Comsat Corporation ("Comsat") and
CTS America, Inc., a Delaware Corporation and wholly-owned subsidiary of Comsat
("CTS"), have proposed entering into an Agreement and Plan of Merger (the
"Agreement"). Pursuant to the Agreement, the Company will be merged with and
into CTS (the "Merger"), and each then outstanding share of common stock of the
Company (the "Common Stock"), other than shares held by Comsat or the Company,
will be converted into a number of shares of common stock of Comsat obtained by
dividing $18.25 by the average closing price of Comsat common stock, on the New
York Stock Exchange Composite Tape, for the 20 trading days (as defined in the
Agreement) ending 5 trading days before closing of the Agreement; provided,
however, that the number of shares shall not exceed .78 nor be less than .638
shares of Comsat for each share of Common Stock. You have requested our opinion
as to whether the consideration to be received by the holders of the Common
Stock pursuant to the Agreement is fair, from a financial point of view, to such
holders.
Alex. Brown & Sons Incorporated, as a customary part of its investment
banking business, is engaged in the valuation of businesses and their securities
in connection with mergers and acquisitions, negotiated underwritings, private
placements and valuations for estate, corporate and other purposes. Alex. Brown
& Sons Incorporated regularly publishes research reports regarding the
telecommunications industry and the business and securities of publicly owned
companies in that industry. We have acted as financial advisor to the Board of
Directors of the Company in connection with the transaction described above and
will receive a fee for our services, a portion of which is contingent upon the
consummation of the Agreement.
In connection with our opinion, we have reviewed certain publicly available
financial information concerning the Company and Comsat and certain internal
financial analyses and other information furnished to us by the Company and
Comsat. We have also held discussions with members of the senior management of
the Company and Comsat regarding the business and prospects of the Company and
Comsat. In addition, we have (i) reviewed the reported price and trading
activity for the Common Stock of the Company and Comsat, (ii) compared certain
financial and stock market information for the Company and Comsat with similar
information for certain comparable companies whose securities are publicly
traded, (iii) reviewed the financial terms of certain recent business
combinations which we deemed comparable in whole or in part, and (iv) performed
such other studies and analyses and considered such other factors as we deemed
appropriate.
We have not independently verified the information described above and for
purposes of this opinion have assumed the accuracy, completeness and fairness
thereof. With respect to information relating to the prospects of the Company,
we have assumed that such information reflects the best currently available
estimates and judgments of management of the Company as to the likely future
financial performance of the Company. In addition, we have not made an
independent evaluation or appraisal of the assets of the Company, nor have we
been furnished with any such evaluation or appraisal. Our opinion is based on
market, economic and other conditions as they exist and can be evaluated as of
the date of this letter.
C-1
<PAGE>
Based upon and subject to the foregoing, it is our opinion that, as of the
date of this letter, the consideration to be received by the holders of the
Common Stock pursuant to the Agreement is fair, from a financial point of view,
to such holders.
Very truly yours,
/s/ ALEX. BROWN & SONS INCORPORATED
ALEX. BROWN & SONS INCORPORATED
C-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to the provisions of Article III of the registrant's
Articles of Incorporation filed as Exhibit 4(a) hereto and the provisions of
Article VIII of the registrant's By-laws filed as Exhibit 4(b) hereto.
Section 29-304 of the District of Columbia Business Corporations Act
provides that a District of Columbia corporation shall have the power to
indemnify any and all of its directors or officers or former directors or
officers or any person who may have served at its request as a director or
officer of another corporation in which it owns shares of capital stock or of
which it is a creditor against expenses actually and necessarily incurred by
them in connection with the defense of any action, suit or proceeding in which
they, or any of them, are made parties, or a party, by reason of being or having
been directors or officers or a director or officer of the corporation, or of
such other corporation, except in relation to matters as to which any such
director or officer or former director or officer or person shall be adjudged in
such action, suit or proceeding to be liable for negligence or misconduct in the
performance of duty. Such indemnification shall not be deemed exclusive of any
other rights to which those indemnified may be entitled, under any bylaw,
agreement, vote of stockholders, or otherwise.
There are in effect directors' and officers' liability insurance policies
which insure the registrant's directors and officers against certain liabilities
that they may incur in such capacities.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The exhibits listed below are listed according to the number assigned in
the table in Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- --------------- -----------------------------------------------------------------------------------------------------
<C> <S>
2(a) Agreement and Plan of Merger, dated as of January 30, 1994, by and among COMSAT Corporation, CTS
America, Inc., and Radiation Systems, Inc. (included as Exhibit A to the Proxy Statement/Prospectus
filed as part of this Registration Statement and incorporated herein by reference; the Registrant
agrees to furnish supplementally to the Commission upon request a copy of any omitted exhibit or
schedule).
2(b) Stock Option Agreement, dated as of January 30, 1994, by and between COMSAT Corporation and Radiation
Systems, Inc. (included as Exhibit B to the Proxy Statement/Prospectus filed as part of this
Registration Statement and incorporated herein by reference).
4(a) Articles of Incorporation of COMSAT Corporation (composite copy; as amended through June 1, 1993)
(Incorporated by reference to Exhibit 4(a) to Registrant's Registration Statement on Form S-3,
Commission File No. 33-51661).
4(b) By-laws of COMSAT Corporation (as amended through March 15, 1991) (Incorporated by reference to
Exhibit 3(b) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1991).
5 Opinion of Crowell & Moring as to the legality of the Common Stock to which this Registration
Statement relates.
8 Opinion of Shaw, Pittman, Potts & Trowbridge, a partnership including professional corporations, as
to certain federal income tax consequences of the Merger.
10(a) Employment Agreement, dated as of January 30, 1994, by and among COMSAT Corporation, CTS America,
Inc., and Richard E. Thomas.
10(b) Employment Agreement, dated as of January 30, 1994, by and among COMSAT Corporation, CTS America,
Inc., and R. Doss McComas.
10(c) Employment Agreement, dated as of January 30, 1994, by and among COMSAT Corporation, CTS America,
Inc., and Marvin D. Shoemake.
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
10(d) Employment Agreement, dated as of January 30, 1994, by and among COMSAT Corporation, CTS America,
Inc., and Mark D. Funston.
10(e) Employment Agreement, dated as of January 30, 1994, by and among COMSAT Corporation, CTS America,
Inc., and William A. Thomas.
10(f) Employment Agreement, dated as of January 30, 1994, by and among COMSAT Corporation, CTS America,
Inc., and Anita M. Stutzman.
10(g) Letter Agreement, dated January 30, 1994, from COMSAT Corporation to the Board of Directors of
Radiation Systems, Inc. re indemnification.
10(h) Letter Agreement dated January 30, 1994, from COMSAT Corporation to the Board of Directors of
Radiation Systems, Inc. re certain employee benefits.
23(a) Consent of Deloitte & Touche, independent public accountants to COMSAT Corporation.
23(b) Consent of Deloitte & Touche, independent public accountants to Radiation Systems, Inc.
23(c) Consent of Crowell & Moring (included in Exhibit 5).
23(d) Consent of Shaw, Pittman, Potts & Trowbridge, a partnership including professional corporations
(included in Exhibit 8).
23(e) Consent of Alex. Brown & Sons Incorporated.
24 Powers of Attorney (see "Signatures").
99(a) Form of Radiation Systems, Inc. Proxy Card.
99(b) Communications Satellite Act of 1962, as amended (Incorporated by reference to Exhibit 28(c) to
Registrant's Registration Statement on Form S-4, Commission File No. 33-9966).
99(c) Instructions to participants in the Radiation Systems, Inc. Employee Stock Ownership Plan and form of
Directions to Trustees regarding voting of allocated shares.
</TABLE>
(b) Financial Statement Schedules II, V, VI, VIII and IX are included in
Registrant's Annual Report on Form 10-K for the year ended December 31, 1993,
and are incorporated herein by reference.
(c) The opinion of Alex. Brown & Sons Incorporated is included as Exhibit C
to the Proxy Statement/ Prospectus filed as part of this Registration Statement.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or event arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
PROVIDED, HOWEVER, that the undertakings set forth in paragraphs (a)(1)(i) and
(a)(1)(ii) above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by the registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in this registration
statement;
II-2
<PAGE>
(2) that, for the purposes of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof;
(3) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means.This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the provisions specified in Item 20 of this Registration
Statement, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the County of Montgomery, State of
Maryland, on May 2, 1994.
COMSAT CORPORATION
(REGISTRANT)
By /s/ BRUCE L. CROCKETT
--------------------------------------
BRUCE L. CROCKETT, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
Each of the undersigned hereby appoints Bruce L. Crockett, C. Thomas
Faulders, III, Warren Y. Zeger, Jerome W. Breslow and Robert N. Davis, Jr., and
each of them severally, his or her true and lawful attorneys to execute (in the
name and on behalf of and as attorneys for the undersigned) this registration
statement and any and all amendments to this registration statement, and to file
the same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the date indicated.
<TABLE>
<S> <C>
(1) PRINCIPAL EXECUTIVE OFFICER
May 2, 1994 /S/ BRUCE L. CROCKETT
---------------------------------------------------------
(BRUCE L. CROCKETT, PRESIDENT AND
CHIEF EXECUTIVE OFFICER)
(2) PRINCIPAL FINANCIAL OFFICER
May 2, 1994 /S/ C. THOMAS FAULDERS, III
---------------------------------------------------------
(C. THOMAS FAULDERS, III, VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER)
(3) PRINCIPAL ACCOUNTING OFFICER
May 2, 1994 /S/ ALLEN E. FLOWER
---------------------------------------------------------
(ALLEN E. FLOWER, CONTROLLER)
(4) BOARD OF DIRECTORS
May 2, 1994 /S/ LUCY WILSON BENSON
---------------------------------------------------------
(LUCY WILSON BENSON, DIRECTOR)
May 2, 1994 /S/ RUDY BOSCHWITZ
---------------------------------------------------------
(RUDY BOSCHWITZ, DIRECTOR)
May 2, 1994 /S/ EDWIN I. COLODNY
---------------------------------------------------------
(EDWIN I. COLODNY, DIRECTOR)
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
May 2, 1994 /S/ BRUCE L. CROCKETT
---------------------------------------------------------
(BRUCE L. CROCKETT, DIRECTOR)
May 2, 1994 /S/ FREDERICK B. DENT
---------------------------------------------------------
(FREDERICK B. DENT, DIRECTOR)
---------------------------------------------------------
(JAMES B. EDWARDS, DIRECTOR)
May 2, 1994 /S/ NEAL B. FREEMAN
---------------------------------------------------------
(NEAL B. FREEMAN, DIRECTOR)
May 2, 1994 /S/ BARRY M. GOLDWATER
---------------------------------------------------------
(BARRY M. GOLDWATER, DIRECTOR)
May 2, 1994 /S/ ARTHUR HAUSPURG
---------------------------------------------------------
(ARTHUR HAUSPURG, DIRECTOR)
May 2, 1994 /S/ MELVIN R. LAIRD
---------------------------------------------------------
(MELVIN R. LAIRD, CHAIRMAN OF THE
BOARD OF DIRECTORS)
May 2, 1994 /S/ PETER W. LIKINS
---------------------------------------------------------
(PETER W. LIKINS, DIRECTOR)
May 2, 1994 /S/ HOWARD M. LOVE
---------------------------------------------------------
(HOWARD M. LOVE, DIRECTOR)
May 2, 1994 /S/ ROBERT G. SCHWARTZ
---------------------------------------------------------
(ROBERT G. SCHWARTZ, DIRECTOR)
May 2, 1994 /S/ C.J. SILAS
---------------------------------------------------------
(C. J. SILAS, DIRECTOR)
May 2, 1994 /S/ DOLORES D. WHARTON
---------------------------------------------------------
(DOLORES D. WHARTON, DIRECTOR)
</TABLE>
II-5
<PAGE>
EXHIBIT 5
CROWELL & MORING
1001 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2595
(202) 624-2500
Facsimile (202) 628-5116
May 2, 1994
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, Maryland 20817
Re: REGISTRATION STATEMENT ON FORM S-4
Ladies and Gentlemen:
We have acted as counsel to COMSAT Corporation, a District of Columbia
corporation (the "Company"), in connection with the merger (the "Merger") of
Radiation Systems, Inc., a Nevada corporation ("RSi"), with and into CTS
America, Inc., a Delaware corporation that is a wholly owned subsidiary of the
Company ("CTS America"), pursuant to an Agreement and Plan of Merger, dated as
of January 30, 1994, by the among the Company, CTS America and RSi (the "Merger
Agreement"), and the Company's Registration Statement on Form S-4 under the
Securities Act of 1933, as amended (the "Act"), relating to the issuance of up
to 6,409,210 shares of the Company's Common Stock, without par value (the
"COMSAT Shares"), pursuant to the Merger Agreement on the Effective Date (such
Registration Statement, including all exhibits thereto, in the form declared
effective by the Commission, the "Registration Statement"). Capitalized terms
not otherwise defined herein are defined as set forth in the Merger Agreement.
In connection with this opinion, we have examined the following records,
documents, instruments and certificates:
(i) the Articles of Incorporation of the Company, as currently
in effect;
(ii) the Merger Agreement; and
(iii) such other documents as we have deemed necessary or
appropriate as a basis for the opinion set forth below.
<PAGE>
COMSAT Corporation
May 2, 1994
Page 2
Based upon and subject to the foregoing, and further subject to the
assumptions and qualifications set forth below, it is our opinion that when (i)
the Registration Statement has become effective under the Act and (ii) the
COMSAT Shares have been issued in accordance with the terms of the Merger
Agreement, as it may be amended from time to time, the COMSAT Shares will be
validly issued, fully paid and non-assessable.
In our examination, we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as certified or photostatic copies and the authenticity of the
originals of such copies. As to any facts material to this opinion which we did
not independently establish or verify, we have relied upon statements and
representations of officers and other representations of the Company and others.
We are members of the Bar of the District of Columbia and we express no
opinion with respect to the laws of any other jurisdiction other than the
District of Columbia, the United States of America and the corporate laws of the
State of Delaware.
We are furnishing this opinion to you solely in connection with the
Registration Statement. This opinion is solely for your benefit and is not to
be used, circulated, quoted or otherwise referred to for any other purpose or
relied upon by any other person without our express written permission. This
opinion is based and relies on the current status of the law, and is subject in
all respects to, and may be limited by, further rules, regulations and
legislation, as well as developing case law. We do not undertake to notify any
person of changes in facts or law occurring or coming to our attention after the
delivery of this opinion.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Proxy Statement/Prospectus that forms part of the Registration
Statement.
Very truly yours,
/s/ Crowell & Moring
CROWELL & MORING
<PAGE>
Exhibit 8
SHAW, PITTMAN, POTTS & TROWBRIDGE
A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
2300 N Street, N.W.
Washington, D.C. 20037-1128
(202) 663-8000
Facsimile
(202) 663-8007
May 2, 1994
Radiation Systems, Inc.
1501 Moran Road
Sterling, Virginia 20166
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, Maryland 20817
Ladies and Gentlemen:
You have requested our opinion with respect to certain of the
federal income tax consequences of the proposed merger (the
"Merger") of Radiation Systems, Inc. ("RSI") with and into CTS
America, Inc. ("CTS America") pursuant to the Agreement and Plan of
Merger dated as of January 30, 1994, among COMSAT Corporation
("COMSAT"), CTS America and RSI (the "Merger Agreement"). Capi-
talized terms used but not defined herein shall have the same
meaning as in the Merger Agreement.
Pursuant to the Merger Agreement, on the Effective Date RSI
will merge with and into CTS America, and CTS America will be the
surviving corporation. As of the Effective Date, each share of RSI
Common Stock outstanding immediately prior to the Effective Date
will be converted into that fraction (the "Conversion Fraction") of
a share of COMSAT Common Stock determined by dividing $18.25 by the
average closing price of COMSAT Common Stock on the New York Stock
Exchange ("NYSE") during the 20 trading days ending five trading
days prior to the Closing Date of the Merger. The Conversion
Fraction, however, will not be less than .638 and will not be
greater than .780. No certificates representing fractional shares
of COMSAT Common Stock will be issued. Rather, cash in an amount
equal to the product of the fractional share interest and the
closing price of a whole share of COMSAT Common Stock on the NYSE
on the last full trading day prior to the Effective Date will be
distributed to RSI stockholders in lieu of fractional shares.
We have examined originals, or copies certified or otherwise
identified to our satisfaction, of the Merger Agreement and the
<PAGE>
Radiation Systems, Inc.
COMSAT Corporation
Page 2
May 2, 1994
form of the Proxy Statement/Prospectus dated May __, 1994 to be
provided to stockholders of RSI (the "Proxy Statement/Prospectus").
In our examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity
of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified,
facsimile or photostatic copies and the authenticity of the
originals of such documents. As to any facts material to such
opinion that are not expressly assumed herein, we have relied upon
statements and representations of officers of COMSAT, CTS America
and RSI and on factual information in the Proxy
Statement/Prospectus.
Based upon and subject to the foregoing, and the assumptions
set forth below, and on the basis of laws, regulations, rulings and
decisions in effect as of the date hereof, all of which are subject
to change, retroactively or prospectively, or possibly differing
interpretations, it is our opinion that the Merger will constitute
a reorganization within the meaning of Sections 368(a)(1)(A) and
368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the
"Code"). Accordingly:
1. No gain or loss will be recognized by RSI, COMSAT or CTS
America as a result of the Merger;
2. No gain or loss will be recognized by any RSI stockholder
on the exchange by such stockholder of its RSI Common Stock for
COMSAT Common Stock;
3. Each RSI stockholder will take a basis for federal income
tax purposes in the COMSAT Common Stock it receives as a result of
the Merger equal to such stockholder's basis in its RSI Common
Stock surrendered therefor (reduced by any amount allocable to a
fractional share interest for which cash is received);
4. Each RSI stockholder will have a holding period for
federal income tax purposes with respect to the COMSAT Common Stock
it receives as a result of the Merger that includes such
stockholder's holding period with respect to the RSI Common Stock
surrendered therefor, provided that such stockholder held its
shares of RSI Common Stock as capital assets immediately prior to
the Effective Date; and
5. Each RSI stockholder receiving cash in lieu of a frac-
tional share interest generally should be treated as if such
<PAGE>
Radiation Systems, Inc.
COMSAT Corporation
Page 3
May 2, 1994
stockholder actually received such fractional share interest and
such interest was subsequently redeemed by COMSAT. This redemption
generally should result in either (i) capital gain or loss measured
by the difference between the amount of cash received and the
portion of the stockholder's basis in its RSI Common Stock
allocable to the fractional share of COMSAT Common Stock deemed
redeemed, or (ii) a dividend in an amount equal to the amount of
cash received, depending, among other things, on the stockholder's
percentage ownership of COMSAT, including ownership by attribution.
The foregoing opinion is based on the following assumptions:
1. The fair market value of the COMSAT Common Stock received
by each RSI stockholder will be approximately equal to the fair
market value of the RSI Common Stock exchanged therefor;
2. CTS America will acquire at least 90 percent of the fair
market value of the net assets and at least 70 percent of the fair
market value of the gross assets held by RSI immediately prior to
the Merger (treating RSI assets used to pay its reorganization
expenses or to redeem RSI Common Stock during the past 36 months as
assets held by RSI immediately prior to the Merger);
3. COMSAT has no plan or intention to sell and CTS America
has no plan or intention to issue CTS America stock if the effect
of such sale or issuance would be to reduce COMSAT's ownership of
CTS America stock to an amount that is less than the amount
required for COMSAT to be deemed to be in control of CTS America
for purposes of Section 368(a)(2)(D) of the Code;
4. COMSAT has no plan or intention to reacquire any of the
shares of COMSAT Common Stock issued as a result of the Merger;
5. COMSAT has no plan or intention to liquidate CTS America,
to merge CTS America with and into another corporation, to sell or
otherwise dispose of the stock of CTS America, or to cause CTS
America to sell or otherwise dispose of any of the assets acquired
in the Merger, except for sales or dispositions in the ordinary
course of business or transfers described in Section 368(a)(2)(C)
of the Code;
6. COMSAT, CTS America, RSI and the RSI stockholders will
pay their respective expenses, if any, incurred in connection with
the Merger, except that RSI and CTS America may pay or
<PAGE>
Radiation Systems, Inc.
COMSAT Corporation
Page 4
May 2, 1994
assume those expenses of RSI that are solely and directly related
to the Merger;
7. After the Merger, CTS America will continue RSI's his-
toric business or use a significant portion of RSI's assets in a
business;
8. The liabilities of RSI assumed by CTS America and the
liabilities to which the transferred assets of CTS America are
subject were incurred by RSI in the ordinary course of its busi-
ness;
9. There is no intercorporate indebtedness existing between
COMSAT and RSI or between CTS America and RSI that was issued,
acquired or will be settled at a discount;
10. The fair market value of the assets of RSI transferred to
CTS America will equal or exceed the sum of the liabilities assumed
by CTS America, plus the amount of liabilities, if any, to which
the transferred assets are subject;
11. As of the Effective Date, the value of the COMSAT Common
Stock received by RSI stockholders as a result of the Merger was
greater than 50% of the value of all of the RSI Common Stock
outstanding immediately prior to the Effective Date (treating
fractional share interests for which cash is received, and stock
redeemed within the past 36 months, as outstanding RSI Common
Stock); and
12. The stockholders of RSI who own five percent or more of
the RSI Common Stock (and, to the best of the knowledge of the
management of RSI, the remaining stockholders of RSI) have no plan
or intention to sell, exchange or otherwise dispose of a number of
shares of COMSAT Common Stock received in the Merger that would
reduce the RSI stockholders' ownership of COMSAT Common Stock to a
number of shares having a value as of the Effective Date of less
than 50 percent of the value of all the formerly outstanding RSI
Common Stock immediately prior to the Effective Date (treating
fractional share interests for which cash is received, and stock
redeemed within the past 36 months, as outstanding RSI Common
Stock).
This opinion is limited to the matters expressly stated
herein, and no opinion may be inferred or implied beyond such
matters. This opinion is furnished to you solely for your
<PAGE>
Radiation Systems, Inc.
COMSAT Corporation
Page 5
May 2, 1994
benefit and for the benefit of the RSI stockholders voting on this
transaction and may not be relied upon by any other party.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement on Form S-4 (Filing No. _____) of
which the Proxy Statement/Prospectus is a part. We also consent to
the references to Shaw, Pittman, Potts & Trowbridge under the
headings "Certain Federal Income Tax Consequences" and "Legal
Matters" in the Proxy Statement/Prospectus.
Very truly yours,
/s/ Shaw, Pittman, Potts & Trowbridge
Shaw, Pittman, Potts & Trowbridge
<PAGE>
Exhibit 10(a)
EMPLOYMENT AGREEMENT
--------------------
This AGREEMENT made as of the 30th day of January, 1994, by and among
COMSAT Corporation, a District of Columbia corporation ("COMSAT"), CTS America,
Inc., a Delaware corporation and a wholly owned subsidiary of COMSAT ("CTS"),
and Richard E. Thomas, a resident of the Commonwealth of Virginia (the
"Executive").
WHEREAS, COMSAT and CTS have entered into an Agreement and Plan of Merger
(the "Merger Agreement"), dated as of January 30, 1994, among COMSAT, CTS, and
Radiation Systems, Inc., a Nevada corporation ("RSI"), pursuant to which RSI
will be merged with and into CTS (the "Merger"); and
WHEREAS, the Executive currently serves as the Chairman of the Board and
Chief Executive Officer of RSI; and
WHEREAS, the Executive is currently subject to an Employment Agreement, as
amended November 20, 1993, with RSI (the "RSI Employment Agreement"); and
WHEREAS, it is a condition to COMSAT's and CTS's obligations under the
Merger Agreement to consummate the Merger that Executive enter into an
employment agreement with COMSAT on or prior to the date of the Merger; and
WHEREAS, COMSAT and CTS desire that the RSI Employment Agreement be
terminated at the time of consummation of the Merger; and
WHEREAS, COMSAT desires to employ the Executive, and the Executive desires
to become an employee of COMSAT, on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
made herein, and intending to be legally bound hereby, COMSAT and the Executive
agree as follows:
1. EMPLOYMENT; TERMINATION OF RSI EMPLOYMENT AGREEMENT; DUTIES.
(a) EMPLOYMENT AND EMPLOYMENT PERIOD. COMSAT shall employ
the Executive to serve as President of the COMSAT RSI Division or subsidiary or
other successor operating entity within COMSAT (the "Division") for a
continuous period of three (3) years (the "Employment Period") commencing on
the "Effective Date" (as such term is defined in Section 1.2 of the Merger
Agreement).
(b) TERMINATION OF RSI EMPLOYMENT AGREEMENT. Effective on
the Effective Date, the RSI Employment Agreement shall be terminated and be of
no further force and effect.
<PAGE>
(c) OFFICES, DUTIES AND RESPONSIBILITIES. Effective on the
Effective Date, Executive shall be elected President of the Division of the
COMSAT Subsidiary through which the Division shall operate. The Executive shall
report to the President of COMSAT and shall be a member of the senior management
group of COMSAT. The Executive's offices initially shall be located at RSI's
present headquarters building in Sterling, Virginia, and shall during the
Employment Period remain in the Washington, D.C. metropolitan area. The
Executive shall have the lead responsibility, working with COMSAT's senior
management group, to direct and develop the capabilities and performance of the
Division.
(d) DEVOTION TO INTERESTS OF COMSAT. During the Employment
Period the Executive shall render his business services solely in the
performance of his duties hereunder. The Executive shall use his best efforts
to promote the interests and welfare of COMSAT. Notwithstanding the foregoing,
the Executive shall be entitled to undertake such outside activities as are
approved in advance by COMSAT's Board of Directors (the "Board"), such approval
not to be unreasonably withheld.
2. COMPENSATION AND FRINGE BENEFITS.
(a) BASE COMPENSATION. COMSAT shall pay the Executive a
base salary ("Base Salary") at the rate of $315,000 per year through the end of
the Employment Period with payments made in installments in accordance with
COMSAT's regular practice for compensating executive personnel. The Base Salary
for the Executive shall be reviewed for merit-based increases to be effective
each January during the Employment Period consistent with merit-based reviews
for COMSAT's senior management group.
(b) BONUS COMPENSATION. The Executive will be eligible to
receive bonuses under COMSAT's Annual Incentive Plan (the "AIP"). For the year
ending December 31, 1994, the Executive shall be paid a guaranteed bonus of at
least $100,000 in January 1995. Thereafter, the Executive shall receive bonuses
as determined by the Board based upon his satisfying performance goals agreed to
in writing by the Executive and the President of COMSAT. In addition, the
Committee on Compensation and Management Development (the "Compensation
Committee") of the Board may in its discretion award to Executive AIP
"Restricted Stock Units" under the COMSAT 1990 Key Employee Stock Plan (the
"Option Plan").
(c) DEFERRED COMPENSATION. At Executive's option, he
may defer up to 25% of his Base Salary and up to 100% of his bonus under the
COMSAT Directors and Executives Deferred Compensation Plan.
(d) RETENTION BONUSES. The Executive shall be entitled to
receive retention bonuses so long as he remains employed by COMSAT on the date
such bonuses are payable as follows: (i) 90 days after the Effective Date, a
retention bonus of $50,000; (ii) on the first anniversary of the Effective Date,
a retention bonus
2
<PAGE>
of $50,000; (iii) on the second anniversary of the Effective Date, a retention
bonus of $50,000; and (iv) on the third anniversary of the Effective Date, a
retention bonus of $100,000.
(e) FRINGE BENEFITS. The Executive also shall be entitled
to such fringe benefits as are generally made available by COMSAT to the senior
management group. Such benefits shall include participation in the COMSAT Split
Dollar Insurance Plan (which for Executive shall provide a death benefit of
$945,000, to be increased by 5.5% annually each January during the Employment
Period), the Option Plan, the COMSAT Employee Stock Purchase Plan, the COMSAT
Dividend Reinvestment Plan, the Division's health and disability insurance
programs, and reimbursement of reasonable expenses incurred in connection with
travel and entertainment related to COMSAT's business and affairs. The
Executive shall also be provided with a car for business and personal use
consistent with his auto benefit previously provided by RSI. In the event of
the termination of this agreement for any reason, COMSAT at its expense shall
make arrangements to transfer title of the car the Executive is then using to
the Executive.
(f) SERP. Executive shall be entitled to immediate
participation in the COMSAT Insurance and Retirement Plan for Executives, and
shall be deemed fully vested in such Plan on the Effective Date.
(g) FINANCIAL PLANNING. The Executive shall be entitled to
receive financial counseling and planning services provided by COMSAT consistent
with similar services provided to the COMSAT senior management group.
3. STOCK OPTIONS. On the Effective Date COMSAT shall grant to
the Executive non-statutory stock options (the "Options") under the Option Plan
to purchase 80,000 shares of COMSAT's common stock, without par value ("Common
Stock"), at a purchase price equal to the average of the high and low trading
price of the Common Stock on the New York Stock Exchange on the date of the
execution and delivery of the Merger Agreement, or if such date is not a date
on which the Common Stock has traded, the first trading date immediately prior
to execution and delivery of the Merger Agreement. Such Options shall be
represented by a stock option agreement ("Option Agreement") in the form and
containing the terms customarily used by COMSAT for such agreements including
terms relating to the length of the Option term, vesting conditions and
termination of employment.
4. RSAs. On the Effective Date, COMSAT shall grant the Executive
18,500 Restrictive Stock Awards (RSAs) under the Option Plan, which RSAs shall
entitle Executive to receive dividends (when and in the same amounts as
dividends are paid on Common Stock) as provided under the Option Plan. The
vesting of such RSAs shall be subject to the satisfaction of objective
performance standards to be adopted by the Board and approved by COMSAT's
shareholders.
3
<PAGE>
5. TRADE SECRETS. The Executive shall not (for his own benefit
or the benefit of any person or entity other than COMSAT) use or disclose any of
COMSAT's trade secrets or other confidential information. The term "trade
secrets or other confidential information" includes, by way of example, matters
of a technical nature, such as scientific, trade and engineering secrets, "know-
how", formulae, secret processes or machines, inventions, computer programs
(including documentation of such programs) and research projects, and matters of
a business nature, such as proprietary information about costs, profits,
markets, sales, lists of customers, and other information of a similar nature to
the extent not available to the public, and plans for future development, but
shall not include the Executive's knowledge of generic concepts pertaining to
manufacturing techniques. After termination of this Agreement, the Executive
shall not use or disclose trade secrets or other confidential information unless
such information becomes a part of the public domain other than through a breach
of this Agreement or is disclosed to the Executive by a third party who is
entitled to receive and disclose such information.
6. RETURN OF DOCUMENTS AND PROPERTY. Upon the effective date of
notice of the Executive's or COMSAT's election to terminate this Agreement, or
at any time upon the request of COMSAT, the Executive (or his heirs or personal
representatives) shall deliver to COMSAT (a) all documents and materials
containing trade secrets or other confidential information relating to COMSAT's
business and affairs, and (b) all documents, materials and other property
belonging to COMSAT, which in either case are in the possession or under the
control of the Executive (or his heirs or personal representatives).
7. DISCOVERIES AND WORKS. All discoveries and works made or
conceived by the Executive during his employment by COMSAT, jointly or with
others, that relate to COMSAT's activities shall be owned by COMSAT. The term
"discoveries and works" includes, by way of example, inventions, computer
programs (including documentation of such programs), technical improvements,
processes, drawings and works of authorship. The Executive shall (a) promptly
notify, make full disclosure to, and execute and deliver any documents requested
by, COMSAT to evidence or better assure title to such discoveries and works in
COMSAT, (b) assist COMSAT in obtaining or maintaining for itself at its own
expense United States and foreign patents, copyrights, trade secret protection
or other protection of any and all such discoveries and works, and (c) promptly
execute, whether during his employment by or thereafter, all applications or
other endorsements necessary or appropriate to maintain patents and other rights
for COMSAT and to protect its title thereto. Any discoveries and works which,
within six months after the termination of the Executive's employment by COMSAT,
are made, disclosed, reduced to a tangible or written form or description, or
are reduced to practice by the Executive and which pertain to work performed by
the Executive while with COMSAT and RSI shall, as between the Executive and
COMSAT, be presumed to have been made during the Executive's employment by
COMSAT.
4
<PAGE>
8. TERMINATION. This Agreement shall remain in effect during the
Employment Term, and this Agreement and Executive's employment with COMSAT may
be terminated only as follows:
(a) By Executive at any time upon 60 day advance written
notice to COMSAT should COMSAT, without Executive's express written consent,
substantially reduce (except in connection with the termination of his
employment voluntarily by Executive or by COMSAT for "cause" as defined below)
his responsibilities as President of the Division and as a member of COMSAT's
senior management group. At the end of the 60 day advance notice period,
COMSAT shall pay Executive in a lump sum (subject to withholding obligations as
may be imposed by law) (i) his then current Base Salary through the remainder of
the Employment Period hereunder, plus (ii) an amount equal to his last bonus
under the AIP payable under paragraph (b) of Section 2 of this Agreement
multiplied by the number of January months remaining in the Employment
Period, inclusive. In such event, all fringe benefits provided under this
Agreement which have not vested shall cease upon the effective date of
termination, and COMSAT shall provide Executive such health benefits as may
be required under applicable COBRA law and regulation.
(b) For purposes of this Agreement, COMSAT shall have
"cause" to terminate the Executive's employment hereunder upon (i) the
continued and deliberate failure of the Executive to perform his duties,
in a manner substantially consistent with the manner prescribed by the Board
or the President of COMSAT (other than any such failure resulting from his
incapacity due to physical or mental illness), which failure continues for ten
days following the Executive's receipt of written notice from the Board or the
President of COMSAT specifying the manner in which the Executive is in default
of his duties, (ii) the engaging by the Executive in serious misconduct that is
materially and demonstrably injurious to COMSAT or its reputation, (iii) the
conviction of the Executive of commission of a felony involving a crime of moral
turpitude, whether or not such felony was committed in connection with COMSAT's
business, or (iv) the circumstances described in Section 9 hereof, in which case
the provisions of Section 9 shall govern the rights and obligations of the
parties.
9. DISABILITY; DEATH.
(a) If, prior to the expiration or termination of the
Employment Period, the Executive shall be unable to perform his duties by reason
of disability or impairment of health for at least six consecutive calendar
months, COMSAT shall have the right to terminate this Agreement by giving 60
days written notice to the Executive to that effect, but only if at the time
such notice is given such disability or impairment is still continuing.
Following the expiration of the notice period, the Employment Period shall
terminate with the payment of the Executive's Base Salary for the month in which
notice is given. In the event of a dispute as to whether the Executive is
disabled within the meaning of this paragraph (a) of Section 9, or the duration
of any disability, either party may request a medical examination of the
5
<PAGE>
Executive by a doctor appointed by the Chief of Staff of a hospital selected by
mutual agreement of the parties, or as the parties may otherwise agree, and the
written medical opinion of such doctor shall be conclusive and binding upon the
parties as to whether the Executive has become disabled and the date when such
disability arose. The cost of any such medical examinations shall be borne by
COMSAT.
(b) If, prior to the expiration or termination of the
Employment Period, the Executive shall die, COMSAT shall pay to the Executive's
estate his Base Salary through the end of the month in which the Executive's
death occurred, at which time the Employment Period shall terminate without
further notice.
(c) Nothing contained in this Section 9 shall impair or
otherwise affect any rights and interests of the Executive under any
compensation plan or arrangement of COMSAT which may be adopted by the Board.
10. NON-COMPETITION.
(a) Except as provided in paragraph (d) below, the Executive
agrees that for a period commencing as of the Effective Date and running through
the earlier of (i) the end of the Employment Period if the Executive remains
employed by COMSAT for the entire Employment Period or (ii) two years following
termination of the Executive's employment by COMSAT for any reason, whether by
action of the Executive or COMSAT (the "Non-Competition Period"), the Executive
will not, except as otherwise provided herein, engage or participate, directly
or indirectly, as principal, agent, employee, employer, consultant, stockholder,
partner or in any other individual capacity whatsoever, in the conduct or
management of, or own any stock or any other equity investment in or debt of,
any business which is competitive with any business conducted by the Division.
For the purpose of this Agreement, a business shall be
considered to be competitive with the business of the Division only if such
business is engaged in providing services or products (i) similar to (x) any
service or product currently provided by the Division or provided by the
Division during the Employment Period; (y) any service or product which evolves
from or results from enhancements in the ordinary course during the
Non-Competition Period to the services or products provided by the Division
as of the date hereof or during the Employment Period; or (z) any future
service or product of the Division as to which the Executive materially and
substantially participated in the design or enhancement, and (ii) to customers
and clients of the type served by the Division during the Non-Competition
Period.
(b) NON-SOLICITATION OF EMPLOYEES. During the
Non-Competition Period, the Executive will not (for his own benefit or
for the benefit of any person or entity other than COMSAT) solicit, or
assist any person or entity other than COMSAT to solicit, any officer,
director, executive or employee of COMSAT to leave his or her employment.
6
<PAGE>
(c) REASONABLENESS. The Executive acknowledges that (i) the
markets served by COMSAT are national and international and are not dependent on
the geographic location of executive personnel or the businesses by which they
are employed, (ii) the length of the Non-Competition Period is linked to the
term of the Employment Period and the severance benefit provided for in Section
8(a); and (iii) the above covenants are manifestly reasonable on their face, and
the parties expressly agree that such restrictions have been designed to be
reasonable and no greater than is required for the protection of COMSAT.
(d) INVESTMENT. Nothing in this Agreement shall be deemed
to prohibit the Executive from owning equity or debt investments in any
corporation, partnership or other entity which is competitive with COMSAT,
PROVIDED that such investments (i) are passive investments and constitute five
percent (5%) or less of the outstanding equity securities of such an entity the
equity securities of which are traded on a national securities exchange or other
public market, or (ii) are approved by the Board.
11. ENFORCEMENT. The Executive agrees that COMSAT's remedies at
law for any breach or threat of breach by him of the provisions of Sections
5, 6, 7 and 10 hereof will be inadequate, and that COMSAT shall be entitled to
an injunction or injunctions to prevent breaches of the provisions of
Sections 5, 6, 7 and 10 hereof and to enforce specifically the terms and
provisions thereof, in addition to any other remedy to which COMSAT may be
entitled at law or equity.
12. ARBITRATION.
(a) Subject to COMSAT's right to enforce Sections
5,6,7 and 10 hereof by an injunction issued by a court having jurisdiction
(which right shall prevail over and supersede the provisions of this
Section 12), any dispute relating to this Agreement, including the
enforceability of this Section 12, arising between the Executive and COMSAT
or any of its affiliates shall be settled by arbitration before a single
arbitrator in accordance with the commercial arbitration rules of the American
Arbitration Association.
(b) The award of any such arbitrator shall be final.
Judgment upon such award may be entered by the prevailing party in any
federal or state court sitting in Washington, D.C.
(c) The costs of arbitration proceedings, excluding
attorneys' fees, shall be paid by the party that does not prevail in the
arbitration proceedings.
13. SEVERABILITY. Should any provision of this Agreement be
determined to be unenforceable or prohibited by any applicable law, such
provision shall be ineffective to the extent, and only to the extent, of such
unenforceability or prohibition without invalidating the balance of such
provision or any other provision
7
<PAGE>
of this Agreement, and any such unenforceability or prohibition in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
14. ASSIGNMENT. The Executive's rights and obligations under this
Agreement shall not be assignable by the Executive. COMSAT's rights and
obligations under this Agreement shall not be assignable by COMSAT except as
incident to the transfer, by merger or otherwise, of all or substantially all of
the business of the Division. In the event of any such assignment by COMSAT,
all rights of COMSAT hereunder shall inure to the benefit of the assignee.
15. NOTICES. Any notice required or permitted under this
Agreement shall be deemed to have been effectively made or given if in writing
and personally delivered or mailed properly addressed in a sealed envelope,
postage prepaid by certified or registered mail. Unless otherwise changed by
notice, notice shall be properly addressed to Executive if addressed to:
Richard E. Thomas
9207 Light Horse Court
Annandale, VA 22030
and properly addressed to COMSAT if addressed to:
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, Maryland 20817
Attn: Vice President, Human Resources and
Organization Development
16. MISCELLANEOUS. This Agreement constitutes the entire
agreement, and supersedes all prior agreements, of the parties hereto relating
to the subject matter hereof, and there are no written or oral terms or
representations made by either party other than those contained herein. The
validity, interpretation, performance and enforcement of the Agreement shall
be governed by the laws of the State of Maryland. The headings contained herein
are for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
/s/ RICHARD E. THOMAS
---------------------------------------
Richard E. Thomas, Executive
COMSAT CORPORATION
By /s/ BRUCE L. CROCKETT
-----------------------------------
Bruce L. Crockett
President and Chief Executive Officer
CTS AMERICA, INC.
By /s/ C. THOMAS FAULDERS
-----------------------------------
C. Thomas Faulders
Vice President and Chief Financial
Officer
9
<PAGE>
EXHIBIT 10(b)
EMPLOYMENT AGREEMENT
--------------------
This AGREEMENT made as of the 30th day of January, 1994, by and among
COMSAT Corporation, a District of Columbia corporation ("COMSAT"), CTS America,
Inc., a Delaware corporation and a wholly owned subsidiary of COMSAT ("CTS"),
and R. Doss McComas, a resident of the Commonwealth of Virginia (the
"Executive").
WHEREAS, COMSAT and CTS have entered into an Agreement and Plan of Merger
(the "Merger Agreement"), dated as of January 30, 1994, among COMSAT, CTS, and
Radiation Systems, Inc., a Nevada corporation ("RSI"), pursuant to which RSI
will be merged with and into CTS (the "Merger"); and
WHEREAS, the Executive currently serves as an officer of RSI;
WHEREAS, the Executive is currently subject to an Employment Agreement, as
amended November 20, 1993, with RSI (the "RSI Employment Agreement"); and
WHEREAS, COMSAT and CTS desire that the RSI Employment Agreement be
terminated at the time of consummation of the Merger; and
WHEREAS, COMSAT desires to employ the Executive, and the Executive desires
to become an employee of COMSAT, on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
made herein, and intending to be legally bound hereby, COMSAT and the Executive
agree as follows:
1. Employment; Termination of RSI Employment Agreement; Duties.
-----------------------------------------------------------
(a) Employment and Employment Period. COMSAT shall employ the
Executive to serve as Vice President of the COMSAT RSI Division or subsidiary or
other successor operating entity within COMSAT (the "Division") for a continuous
period of three (3) years (the "Employment Period") commencing on the "Effective
Date" (as such term is defined in Section 1.2 of the Merger Agreement).
(b) Termination of RSI Employment Agreement. Effective on the
Effective Date, the RSI Employment Agreement shall be terminated and be of no
further force and effect.
(c) Offices, Duties and Responsibilities. Effective on the
Effective Date, Executive shall be elected Vice President of the Division.
The Executive shall report to the President of the Division. The Executive's
offices initially shall be located at RSI's present headquarters building in
Sterling, Virginia, and shall during the Employment Period remain in the
<PAGE>
Washington, D.C. metropolitan area.
(d) Devotion to Interests of COMSAT. Except as expressly authorized
by the President of the Division, during the Employment Period the Executive
shall render his business services solely in the performance of his duties
hereunder. The Executive shall use his best efforts to promote the interests
and welfare of COMSAT.
2. Compensation and Fringe Benefits.
--------------------------------
(a) Base Compensation. COMSAT shall pay the Executive a base salary
("Base Salary") at the rate of (i) $(RSI current salary plus $10,000) per year
through the end of the Employment Period, with payments made in installments in
accordance with COMSAT's regular practice for compensating executive personnel.
The Base Salary for the Executive shall be reviewed for merit-based increases at
least once each calendar year during the Employment Period consistent with
merit-based reviews for other COMSAT executives. Such reviews shall occur
immediately prior to his "anniversary date" for performance reviews at RSI.
(b) Bonus Compensation. For each year or partial year ending on
December 31 during the Employment Period, the Executive shall be eligible to
receive annual bonuses (payable in January) under the COMSAT Annual Incentive
Plan ("AIP") based upon performance. The standards applied for performance
reviews of the Executive under the AIP shall be consistent with the standards
applied for performance reviews of other COMSAT executives whose salaries are in
the comparable range of the then current Base Salary of the Executive under this
Agreement. Any performance bonuses so paid to Executive shall be subject to
deferral at Executive's election under the AIP.
(c) Fringe Benefits. The Executive also shall be entitled to fringe
benefits including participation in the Division's group life insurance plan,
the COMSAT 1990 Key Employee Stock Plan (the "Option Plan"), the COMSAT Employee
Stock Purchase Plan, the COMSAT Dividend Reinvestment Plan, and health and
disability insurance programs of the Division and reimbursement of premiums for
insurance coverage and reasonable expenses incurred in connection with travel
and entertainment related to COMSAT's business and affairs. The Executive also
shall be entitled to use existing balances of unused medical and legal reim-
bursement expense accounts with RSI until depleted.
(d) Retention Bonuses. The Executive shall be entitled to receive
retention bonuses so long as he remains employed by COMSAT on the date such
bonuses are payable as follows: (i) 90 days after the Effective Date, a
retention bonus of $25,000, (ii) on the first anniversary of the Effective
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Date, a retention bonus of $27,000; (iii) on the second anniversary of the
Effective Date, a retention bonus of $29,000; and (iv) on the third anniversary
of the Effective Date, a retention bonus of $31,500.
3. Stock Options. On the Effective Date, COMSAT shall grant to the
Executive nonstatutory stock options (the "Options") under the Option Plan to
purchase 7,000 shares of COMSAT's common stock, without par value ("Common
Stock"), at a purchase price equal to the closing price of the Common Stock on
the New York Stock Exchange on the date of the execution and delivery of the
Merger Agreement, or if such date is not a date on which the Common Stock has
traded, the first trading date immediately prior to execution and delivery of
the Merger Agreement. Such Options shall be represented by a stock option
agreement ("Option Agreement") in the form and containing the terms customarily
used by COMSAT for such agreements including terms relating to the length of the
Option term, vesting conditions and termination of employment.
4. RSAs. On the Effective Date, upon execution and delivery of this
Agreement, COMSAT shall grant the Executive 5,000 Restricted Stock Awards (RSAs)
under the Option Plan, which RSAs shall entitle Executive to receive dividends
(when and in the same amounts as dividends are paid on Common Stock) as provided
under the Option Plan. The vesting of such RSAs shall be subject to the
satisfaction of objective performance standards to be adopted by the Board and
approved by COMSAT's shareholders.
5. Trade Secrets. The Executive shall not (for his own benefit or the
benefit of any person or entity other than COMSAT) use or disclose any of
COMSAT's trade secrets or other confidential information. The term "trade
secrets or other confidential information" includes, by way of example, matters
of a technical nature, such as scientific, trade and engineering secrets, "know-
how", formulae, secret processes or machines, inventions, computer programs
(including documentation of such programs) and research projects, and matters of
a business nature, such as proprietary information about costs, profits,
markets, sales, lists of customers, and other information of a similar nature to
the extent not available to the public, and plans for future development. After
termination of this Agreement, the Executive shall not use or disclose trade
secrets or other confidential information unless such information becomes a part
of the public domain other than through a breach of this Agreement or is
disclosed to the Executive by a third party who is entitled to receive and
disclose such information.
6. Return of Documents and Property. Upon the effective date of notice
of the Executive's or COMSAT's election to terminate this Agreement, or at any
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<PAGE>
time upon the request of COMSAT, the Executive (or his heirs or personal
representatives) shall deliver to COMSAT (a) all documents and materials
containing trade secrets or other confidential information relating to
COMSAT's business and affairs, and (b) all documents,materials and other
property belonging to COMSAT, which in either case are in the possession or
under the control of the Executive (or his heirs or personal representatives).
7. Discoveries and Works. All discoveries and works made or conceived
by the Executive during his employment by COMSAT, jointly or with others, that
relate to COMSAT's activities shall be owned by COMSAT. The term "discoveries
and works" include, by way of example, inventions, computer programs (including
documentation of such programs), technical improvements, processes, drawings
and work of authorship. The Executive shall (a) promptly notify, make full
disclosure to, and execute and deliver any documents requested by, COMSAT to
evidence or better assure title to such discoveries and works in COMSAT,
(b) assist COMSAT in obtaining or maintaining for itself at its own expense
United States and foreign patents, copyrights, trade secret protection or other
protection of any and all such discoveries and works, and (c) promptly execute,
whether during his employment or thereafter, all applications or other
endorsements necessary or appropriate to maintain patents and other rights for
COMSAT and to protect its title thereto. Any discoveries and works which,
within six months after the termination of the Executive's employment by
COMSAT, are made, disclosed, reduced to a tangible or written form or
description, or are reduced to practice by the Executive and which pertain to
work performed by the Executive while with COMSAT and RSI shall, as between
the Executive and COMSAT, be presumed to have been made during the Executive's
employment by COMSAT.
8. Termination. This Agreement shall remain in effect during this
Employment Term, and this Agreement and Executive's employment with COMSAT may
be terminated only as follows:
(a) By Executive at any time upon 60 day advance written notice to
COMSAT should COMSAT, without Executive's express written consent,
substantially reduce (except in connection with the termination of his
employment voluntarily by Executive or by COMSAT for "cause" as defined below)
his responsibilities as Vice President of the Division. At the end of the 60
day advance notice period, COMSAT shall pay Executive in a lump sum (subject
to withholding obligations as may be imposed by law) his then current Base
Salary for a period of one year. In such event, COMSAT shall continue to pay
for the Executive's life, health and disability insurance coverage through the
remainder of the Employment Period hereunder to the extent that RSI paid for
such coverage under the RSI Employment Agreement. All other fringe
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<PAGE>
benefits provided under this Agreement which have not vested shall cease upon
the effective date of termination, and COMSAT shall provide Executive such
health benefits as may be required under applicable COBRA law and regulation at
COMSAT's expense and without charge to Executive.
(b) For purposes of this Agreement, COMSAT shall have "cause" to
terminate the Executive's employment hereunder upon (i) the continued and
deliberate failure of the Executive to perform his duties, in a manner
substantially consistent with the manner prescribed by the President of COMSAT
or the President of the Division (other than any such failure resulting from
his incapacity due to physical or mental illness) which failure continues for
ten days following the Executive's receipt of written notice from the
President of COMSAT or the President of the Division specifying the manner in
which the Executive is in default of his duties, (ii) the engaging by the
Executive in serious misconduct that is materially and demonstrably injurious
to COMSAT, (iii) the conviction of the Executive of commission of a felony
involving a crime of moral turpitude, whether or not such felony was committed
in connection with COMSAT's business, or (iv) the circumstances described in
Section 9 hereof, in which case the provision of Section 9 shall govern the
rights and obligations of the parties.
9. Disability; Death.
-----------------
(a) If, prior to the expiration or termination of the Employment
Period, the Executive shall be unable to perform his duties by reason of
disability or impairment of health for at least six consecutive calendar
months, COMSAT shall have the right to terminate this Agreement by giving 60
days written notice to the Executive to that effect, but only if at the time
such notice is given such disability or impairment is still continuing.
Following the expiration of the notice period, the Employment Period shall
terminate with the payment of the Executive's Base Salary for the month in
which notice is given. In the event of a dispute as to whether the Executive
is disabled within the meaning of this Section 9(a), or the duration of any
disability, either party may request a medical examination of the Executive by
a doctor appointed by the Chief of Staff of a hospital selected by mutual
agreement of the parties, or as the parties may otherwise agree, and the
written medical opinion of such doctor shall be conclusive and binding upon
the parties as to whether the Executive has become disabled and the date when
such disability arose. The cost of any such medical examinations shall be
borne by COMSAT.
(b) If, prior to the expiration or termination of the Employment
Period, the Executive shall die, COMSAT shall pay to the Executive's estate his
Base Salary through the end of the month in which the Executive's death
-5-
<PAGE>
occurred, at which time the Employment Period shall terminate without further
notice and COMSAT shall have no further obligations hereunder.
(c) Nothing contained in this Section 9 shall impair or otherwise
affect any rights and interests of the Executive under any compensation plan or
arrangement of COMSAT which may be adopted by the Board.
10. Non-Competition.
---------------
(a) Except as provided in paragraph (d) below, the Executive agrees
that for a period commencing as of the Effective Date and running through the
earlier of (i) the end of the Employment Period if the Executive remains
employed by COMSAT for the entire Employment Period or (ii) one year following
termination of the Executive's employment by COMSAT for any reason, whether by
action of the Executive or COMSAT (the "Non-Competition Period"), the Executive
will not, except as otherwise provided herein, engage or participate, directly
or indirectly, as principal, agent, employee, employer, consultant,
stockholder, partner or in any other individual capacity whatsoever, in the
conduct or management of, or own any stock or any other equity investment in
or debt of, any business which is competitive with any business conducted by
the Division.
For the purpose of this Agreement, a business shall be
considered to be competitive with the business of the Division only if such
business is engaged in providing services or products (i) similar to (x) any
service or product currently provided by the Division during the Employment
Period; (y) any service or product which evolves from or results from
enhancements in the ordinary course during the Non-Competition Period to the
services or products provided by the Division as of the date hereof or during
the Employment Period; or (z) any future service or product of the Division as
to which the Executive materially and substantially participated in the design
or enhancement, and (ii) to customers and clients of the type served by the
Division during the Non-Competition Period.
(b) Non-Solicitation of Employees. During the Non-Competition
Period, the Executive will not (for his own benefit or for the benefit of any
person or entity other than COMSAT) solicit, or assist any person or entity
other than COMSAT to solicit, any officer, director, executive or employee of
COMSAT to leave his or her employment.
(c) Reasonableness. The Executive acknowledges that (i) the
markets served by COMSAT are national and international and are not dependent
on the geographic location of the executive personnel or the businesses by
which they are employed, (ii) the length of the Non-Competition Period is
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<PAGE>
linked to the term of the Employment Period and the severance benefit provide
for in Section 8(a); and (iii) the above covenants are manifestly reasonable
on their face, and the parties expressly agree that such restrictions have
been designed to be reasonable and no greater than is required for the
protection of COMSAT.
(d) Investment. Nothing in this Agreement shall be deemed to
prohibit the Executive from owning equity or debt investments in any
corporation, partnership or other entity which is competitive with COMSAT,
PROVIDED that such investments (i) are passive investments and constitute five
percent (5%) or less of the outstanding equity securities of such an entity the
equity securities of which are traded on a national securities exchange or
other public market, or (ii) are approved by the Board.
11. Enforcement. The Executive agrees that COMSAT's remedies at law for
any breach or threat of breach by him of the provisions of Sections 5, 6, 7 and
10 hereof will be inadequate, and that COMSAT shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of Sections 5,
6, 7 and 10 hereof and to enforce specifically the terms and provisions
thereof, in addition to any other remedy to which COMSAT may be entitled at
law or equity.
12. Arbitration
-----------
(a) Subject to COMSAT's right to enforce Sections 5, 6, 7 and 10
hereof by an injunction issued by a court having jurisdiction (which right
shall prevail over and supersede the provisions of this Section 12), any
dispute relating to this Agreement, including the enforceability of this
Section 12, arising between the Executive and COMSAT or any of its affiliates
shall be settled by arbitration before a single arbitrator in accordance with
the commercial arbitration rules of the American Arbitration Association.
(b) The award of any such arbitrator shall be final. Judgment upon
such award may be entered by the prevailing party in any federal or state court
sitting in Washington, D.C.
(c) The costs of arbitration proceedings, excluding attorneys fees,
shall be paid by the party that does not prevail in the arbitration
proceedings.
13. Severability. Should any provision of this Agreement be
determined to be unenforceable or prohibited by any applicable law, such
provision shall be ineffective to the extent, and only to the extent, of such
unenforceability or prohibition without invalidating the balance of such
provision or any other provision of this Agreement, and any such
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<PAGE>
unenforceability or prohibition in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
14. Assignment. The Executive's rights and obligations under this
Agreement shall not be assignable by the Executive. COMSAT's rights and
obligations under this Agreement shall not be assignable by COMSAT except as
incident to the transfer, by merger or otherwise, of all or substantially all
of the business of the Division. In the event of any assignment by COMSAT, all
rights of COMSAT hereunder shall inure to the benefit of the assignee.
15. Notices. Any notice required or permitted under this Agreement shall
be deemed to have been effectively made or given if in writing and personally
delivered or mailed properly addressed in a sealed envelope, postage prepaid by
certified or registered mail. Unless otherwise changed by notice, notice shall
be properly addressed to Executive if addressed to:
R. Doss McComas
409 Biggs Drive
Front Royal, Virginia 22630
and properly addressed to COMSAT if addressed to:
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, Maryland 20817
Attn: Vice President, Human Resources
and Organization Development
16. Miscellaneous. This Agreement constitutes the entire agreement, and
supersedes all prior agreements, of the parties hereto relating to the subject
matter hereof, and there are no written or oral terms or representatives made
by either party other than those contained herein. The validity,
interpretation, performance and enforcement of the Agreement shall be governed
by the laws of the State of Maryland. The headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
-8-
<PAGE>
In WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
/s/ R. Doss McComas
- ------------------------------
R. Doss McComas, Executive
Including the Addendum to this
Employment Agreement dated
30 January 1994
COMSAT CORPORATION
By:/s/ Bruce L. Crockett
-----------------------------
Bruce L. Crockett
President and Chief Executive
Officer
CTS AMERICA, INC.
By:/s/ Richard E. Thomas
---------------------
Richard E. Thomas
President
-9-
<PAGE>
In consideration of the employment agreement executed this 30th day of
January, 1994, by and among COMSAT Corporation, a District of Columbia
corporation ("COMSAT"), CTS America, Inc., a Delaware corporation and a
wholly-owned subsidiary of COMSAT ("CTS"), and the undersigned officer of
Radiation Systems, Inc. ("RSI") (the "Executive"), Executive hereby agrees to
waive and rescind all or such portions of the provisions of Section 7 of the
amended employment agreement between Executive and RSI as Deloitte & Touche or
the Securities and Exchange Commission determine would preclude the use of
pooling accounting in conjunction with the proposed merger of RSI with and
into CTS.
/S/ R. Doss McComas
----------------------------------
Executive
Dated: January 30, 1994
----------------
<PAGE>
EXHIBIT 10(c)
EMPLOYMENT AGREEMENT
--------------------
This AGREEMENT made as of the 30th day of January, 1994, by and among
COMSAT Corporation, a District of Columbia corporation ("COMSAT"), CTS America,
Inc., a Delaware corporation and a wholly owned subsidiary of COMSAT ("CTS"),
and Marvin D. Shoemake, a resident of the State of Georgia (the "Executive").
WHEREAS, COMSAT and CTS have entered into an Agreement and Plan of Merger
(the "Merger Agreement"), dated as of January 30, 1994, among COMSAT, CTS, and
Radiation Systems, Inc., a Nevada corporation ("RSI"), pursuant to which RSI
will be merged with and into CTS (the "Merger"); and
WHEREAS, the Executive currently serves as an officer of RSI;
WHEREAS, the Executive is currently subject to an Employment Agreement, as
amended November 20, 1993, with RSI (the "RSI Employment Agreement"); and
WHEREAS, COMSAT and CTS desire that the RSI Employment Agreement be
terminated at the time of consummation of the Merger; and
WHEREAS, COMSAT desires to employ the Executive, and the Executive desires
to become an employee of COMSAT, on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
made herein, and intending to be legally bound hereby, COMSAT and the Executive
agree as follows:
1. Employment; Termination of RSI Employment Agreement; Duties.
-----------------------------------------------------------
(a) Employment and Employment Period. COMSAT shall employ the
Executive to serve as Vice President of the COMSAT RSI Division or subsidiary or
other successor operating entity within COMSAT (the "Division") for a continuous
period of three (3) years (the "Employment Period") commencing on the "Effective
Date" (as such term is defined in Section 1.2 of the Merger Agreement).
(b) Termination of RSI Employment Agreement. Effective on the
Effective Date, the RSI Employment Agreement shall be terminated and be of no
further force and effect.
(c) Offices, Duties and Responsibilities. Effective on the
Effective Date, Executive shall be elected Vice President of the Division.
The Executive shall report to the President of the Division. The Executive's
offices initially shall be located at RSI's present facilities in Duluth,
<PAGE>
Georgia, and shall during the Employment Period remain in the Atlanta, Georgia
metropolitan area.
(d) Devotion to Interests of COMSAT. Except as expressly authorized
by the President of the Division, during the Employment Period the Executive
shall render his business services solely in the performance of his duties
hereunder. The Executive shall use his best efforts to promote the interests
and welfare of COMSAT.
2. Compensation and Fringe Benefits.
--------------------------------
(a) Base Compensation. COMSAT shall pay the Executive a base salary
("Base Salary") at the rate of (i) $(RSI current salary plus $10,000) per year
through the end of the Employment Period, with payments made in installments in
accordance with COMSAT's regular practice for compensating executive personnel.
The Base Salary for the Executive shall be reviewed for merit-based increases at
least once each calendar year during the Employment Period consistent with
merit-based reviews for other COMSAT executives. Such reviews shall occur
immediately prior to his "anniversary date" for performance reviews at RSI.
(b) Bonus Compensation. For each year or partial year ending on
December 31 during the Employment Period, the Executive shall be eligible to
receive annual bonuses (payable in January) under the COMSAT Annual Incentive
Plan ("AIP") based upon performance. The standards applied for performance
reviews of the Executive under the AIP shall be consistent with the standards
applied for performance reviews of other COMSAT executives whose salaries are in
the comparable range of the then current Base Salary of the Executive under this
Agreement. Any performance bonuses so paid to Executive shall be subject to
deferral at Executive's election under the AIP.
(c) Fringe Benefits. The Executive also shall be entitled to fringe
benefits including participation in the Division's group life insurance plan,
the COMSAT 1990 Key Employee Stock Plan (the "Option Plan"), the COMSAT Employee
Stock Purchase Plan, the COMSAT Dividend Reinvestment Plan, and health and
disability insurance programs of the Division and reimbursement of premiums for
insurance coverage and reasonable expenses incurred in connection with travel
and entertainment related to COMSAT's business and affairs. The Executive also
shall be entitled to use existing balances of unused medical and legal reim-
bursement expense accounts with RSI until depleted.
(d) Retention Bonuses. The Executive shall be entitled to receive
retention bonuses so long as he remains employed by COMSAT on the date such
bonuses are payable as follows: (i) 90 days after the Effective Date, a
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<PAGE>
retention bonus of $25,000, (ii) on the first anniversary of the Effective Date,
a retention bonus of $27,000; (iii) on the second anniversary of the Effective
Date, a retention bonus of $29,000; and (iv) on the third anniversary of the
Effective Date, a retention bonus of $31,500.
3. Stock Options. On the Effective Date, COMSAT shall grant to the
Executive nonstatutory stock options (the "Options") under the Option Plan to
purchase 7,000 shares of COMSAT's common stock, without par value ("Common
Stock"), at a purchase price equal to the closing price of the Common Stock on
the New York Stock Exchange on the date of the execution and delivery of the
Merger Agreement, or if such date is not a date on which the Common Stock has
traded, the first trading date immediately prior to execution and delivery of
the Merger Agreement. Such Options shall be represented by a stock option
agreement ("Option Agreement") in the form and containing the terms customarily
used by COMSAT for such agreements including terms relating to the length of the
Option term, vesting conditions and termination of employment.
4. RSAs. On the Effective Date, upon execution and delivery of this
Agreement, COMSAT shall grant the Executive 5,000 Restricted Stock Awards (RSAs)
under the Option Plan, which RSAs shall entitle Executive to receive dividends
(when and in the same amounts as dividends are paid on Common Stock) as provided
under the Option Plan. The vesting of such RSAs shall be subject to the
satisfaction of objective performance standards to be adopted by the Board and
approved by COMSAT's shareholders.
5. Trade Secrets. The Executive shall not (for his own benefit or the
benefit of any person or entity other than COMSAT) use or disclose any of
COMSAT's trade secrets or other confidential information. The term "trade
secrets or other confidential information" includes, by way of example, matters
of a technical nature, such as scientific, trade and engineering secrets, "know-
how", formulae, secret processes or machines, inventions, computer programs
(including documentation of such programs) and research projects, and matters of
a business nature, such as proprietary information about costs, profits,
markets, sales, lists of customers, and other information of a similar nature to
the extent not available to the public, and plans for future development. After
termination of this Agreement, the Executive shall not use or disclose trade
secrets or other confidential information unless such information becomes a part
of the public domain other than through a breach of this Agreement or is
disclosed to the Executive by a third party who is entitled to receive and
disclose such information.
-3-
<PAGE>
6. Return of Documents and Property. Upon the effective date of notice
of the Executive's or COMSAT's election to terminate this Agreement, or at any
time upon the request of COMSAT, the Executive (or his heirs or personal
representatives) shall deliver to COMSAT (a) all documents and materials
containing trade secrets or other confidential information relating to COMSAT's
business and affairs, and (b) all documents, materials and other property
belonging to COMSAT, which in either case are in the possession or under the
control of the Executive (or his heirs or personal representatives).
7. Discoveries and Works. All discoveries and works made or conceived by
the Executive during his employment by COMSAT, jointly or with others, that
relate to COMSAT's activities shall be owned by COMSAT. The term "discoveries
and works" include, by way of example, inventions, computer programs (including
documentation of such programs), technical improvements, processes, drawings and
work of authorship. The Executive shall (a) promptly notify, make full
disclosure to, and execute and deliver any documents requested by, COMSAT to
evidence or better assure title to such discoveries and works in COMSAT,
(b) assist COMSAT in obtaining or maintaining for itself at its own expense
United States and foreign patents, copyrights, trade secret protection or other
protection of any and all such discoveries and works, and (c) promptly execute,
whether during his employment or thereafter, all applications or other
endorsements necessary or appropriate to maintain patents and other rights for
COMSAT and to protect its title thereto. Any discoveries and works which,
within six months after the termination of the Executive's employment by COMSAT,
are made, disclosed, reduced to a tangible or written form or description, or
are reduced to practice by the Executive and which pertain to work performed by
the Executive while with COMSAT and RSI shall, as between the Executive and
COMSAT, be presumed to have been made during the Executive's employment by
COMSAT.
8. Termination. This Agreement shall remain in effect during this
Employment Term, and this Agreement and Executive's employment with COMSAT may
be terminated only as follows:
(a) By Executive at any time upon 60 day advance written notice to
COMSAT should COMSAT, without Executive's express written consent, substantially
reduce (except in connection with the termination of his employment voluntarily
by Executive or by COMSAT for "cause" as defined below) his responsibilities as
Vice President of the Division. At the end of the 60 day advance notice period,
COMSAT shall pay Executive in a lump sum (subject to withholding obligations as
may be imposed by law) his then current Base Salary for a period of one year.
In such event, COMSAT shall continue to pay for the Executive's life, health and
disability insurance coverage through the remainder of the Employment Period
-4-
<PAGE>
hereunder to the extent that RSI paid for such coverage under the RSI Employment
Agreement. All other fringe benefits provided under this Agreement which have
not vested shall cease upon the effective date of termination, and COMSAT shall
provide Executive such health benefits as may be required under applicable COBRA
law and regulation at COMSAT's expense and without charge to Executive.
(b) For purposes of this Agreement, COMSAT shall have "cause" to
terminate the Executive's employment hereunder upon (i) the continued and
deliberate failure of the Executive to perform his duties, in a manner
substantially consistent with the manner prescribed by the President of COMSAT
or the President of the Division (other than any such failure resulting from his
incapacity due to physical or mental illness) which failure continues for ten
days following the Executive's receipt of written notice from the President of
COMSAT or the President of the Division specifying the manner in which the
Executive is in default of his duties, (ii) the engaging by the Executive in
serious misconduct that is materially and demonstrably injurious to COMSAT,
(iii) the conviction of the Executive of commission of a felony involving a
crime of moral turpitude, whether or not such felony was committed in connection
with COMSAT's business, or (iv) the circumstances described in Section 9 hereof,
in which case the provision of Section 9 shall govern the rights and obligations
of the parties.
9. Disability; Death.
-----------------
(a) If, prior to the expiration or termination of the Employment
Period, the Executive shall be unable to perform his duties by reason of
disability or impairment of health for at least six consecutive calendar months,
COMSAT shall have the right to terminate this Agreement by giving 60 days
written notice to the Executive to that effect, but only if at the time such
notice is given such disability or impairment is still continuing. Following
the expiration of the notice period, the Employment Period shall terminate with
the payment of the Executive's Base Salary for the month in which notice is
given. In the event of a dispute as to whether the Executive is disabled within
the meaning of this Section 9(a), or the duration of any disability, either
party may request a medical examination of the Executive by a doctor appointed
by the Chief of Staff of a hospital selected by mutual agreement of the parties,
or as the parties may otherwise agree, and the written medical opinion of such
doctor shall be conclusive and binding upon the parties as to whether the
Executive has become disabled and the date when such disability arose. The cost
of any such medical examinations shall be borne by COMSAT.
-5-
<PAGE>
(b) If, prior to the expiration or termination of the Employment
Period, the Executive shall die, COMSAT shall pay to the Executive's estate his
Base Salary through the end of the month in which the Executive's death
occurred, at which time the Employment Period shall terminate without further
notice and COMSAT shall have no further obligations hereunder.
(c) Nothing contained in this Section 9 shall impair or otherwise
affect any rights and interests of the Executive under any compensation plan or
arrangement of COMSAT which may be adopted by the Board.
10. Non-Competition.
---------------
(a) Except as provided in paragraph (d) below, the Executive agrees
that for a period commencing as of the Effective Date and running through the
earlier of (i) the end of the Employment Period if the Executive remains
employed by COMSAT for the entire Employment Period or (ii) one year following
termination of the Executive's employment by COMSAT for any reason, whether by
action of the Executive or COMSAT (the "Non-Competition Period"), the Executive
will not, except as otherwise provided herein, engage or participate, directly
or indirectly, as principal, agent, employee, employer, consultant, stockholder,
partner or in any other individual capacity whatsoever, in the conduct or
management of, or own any stock or any other equity investment in or debt of,
any business which is competitive with any business conducted by the Division.
For the purpose of this Agreement, a business shall be considered
to be competitive with the business of the Division only if such business is
engaged in providing services or products (i) similar to (x) any service or
product currently provided by the Division during the Employment Period; (y) any
service or product which evolves from or results from enhancements in the
ordinary course during the Non-Competition Period to the services or products
provided by the Division as of the date hereof or during the Employment Period;
or (z) any future service or product of the Division as to which the Executive
materially and substantially participated in the design or enhancement, and
(ii) to customers and clients of the type served by the Division during the Non-
Competition Period.
(b) Non-Solicitation of Employees. During the Non-Competition
Period, the Executive will not (for his own benefit or for the benefit of any
person or entity other than COMSAT) solicit, or assist any person or entity
other than COMSAT to solicit, any officer, director, executive or employee of
COMSAT to leave his or her employment.
-6-
<PAGE>
(c) Reasonableness. The Executive acknowledges that (i) the markets
served by COMSAT are national and international and are not dependent on the
geographic location of the executive personnel or the businesses by which they
are employed, (ii) the length of the Non-Competition Period is linked to the
term of the Employment Period and the severance benefit provide for in Section
8(a); and (iii) the above covenants are manifestly reasonable on their face, and
the parties expressly agree that such restrictions have been designed to be
reasonable and no greater than is required for the protection of COMSAT.
(c) Investment. Nothing in this Agreement shall be deemed to
prohibit the Executive from owning equity or debt investments in any
corporation, partnership or other entity which is competitive with COMSAT,
PROVIDED that such investments (i) are passive investments and constitute five
percent (5%) or less of the outstanding equity securities of such an entity the
equity securities of which are traded on a national securities exchange or other
public market, or (ii) are approved by the Board.
11. Enforcement. The Executive agrees that COMSAT's remedies at law for
any breach or threat of breach by him of the provisions of Sections 5, 6, 7 and
10 hereof will be inadequate, and that COMSAT shall be entitled to an injunction
or injunctions to prevent breaches of the provisions of Sections 5, 6, 7 and 10
hereof and to enforce specifically the terms and provisions thereof, in addition
to any other remedy to which COMSAT may be entitled at law or equity.
12. Arbitration
-----------
(a) Subject to COMSAT's right to enforce Sections 5, 6, 7 and 10
hereof by an injunction issued by a court having jurisdiction (which right shall
prevail over and supersede the provisions of this Section 12), any dispute
relating to this Agreement, including the enforceability of this Section 12,
arising between the Executive and COMSAT or any of its affiliates shall be
settled by arbitration before a single arbitrator in accordance with the
commercial arbitration rules of the American Arbitration Association.
(b) The award of any such arbitrator shall be final. Judgment upon
such award may be entered by the prevailing party in any federal or state court
sitting in Washington, D.C.
(c) The costs of arbitration proceedings, excluding attorneys fees,
shall be paid by the party that does not prevail in the arbitration proceedings.
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<PAGE>
13. Severability. Should any provision of this Agreement be
determined to be unenforceable or prohibited by any applicable law, such
provision shall be ineffective to the extent, and only to the extent, of such
unenforceability or prohibition without invalidating the balance of such
provision or any other provision of this Agreement, and any such
unenforceability or prohibition in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
14. Assignment. The Executive's rights and obligations under this
Agreement shall not be assignable by the Executive. COMSAT's rights and
obligations under this Agreement shall not be assignable by COMSAT except as
incident to the transfer, by merger or otherwise, of all or substantially all of
the business of the Division. In the event of any assignment by COMSAT, all
rights of COMSAT hereunder shall inure to the benefit of the assignee.
15. Notices. Any notice required or permitted under this Agreement shall
be deemed to have been effectively made or given if in writing and personally
delivered or mailed properly addressed in a sealed envelope, postage prepaid by
certified or registered mail. Unless otherwise changed by notice, notice shall
be properly addressed to Executive if addressed to:
Marvin Shoemake
1424 Stoney Point Road
Cumming, Georgia 30131
and properly addressed to COMSAT if addressed to:
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, Maryland 20817
Attn: Vice President, Human Resources
and Organization Development
16. Miscellaneous. This Agreement constitutes the entire agreement, and
supersedes all prior agreements, of the parties hereto relating to the subject
matter hereof, and there are no written or oral terms or representatives made by
either party other than those contained herein. The validity, interpretation,
performance and enforcement of the Agreement shall be governed by the laws of
the State of Maryland. The headings contained herein are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Agreement.
-8-
<PAGE>
In WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
/s/ Marvin D. Shoemake
- -----------------------------
Marvin D. Shoemake, Executive
Including Attached Addendum
dated 30 January 1994
COMSAT CORPORATION
By:/s/ Bruce L. Crockett
-----------------------------
Bruce L. Crockett
President and Chief Executive
Officer
CTS AMERICA, INC.
By:/s/ Richard E. Thomas
---------------------
Richard E. Thomas
President
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<PAGE>
In consideration of the employment agreement executed this 30th day of
January, 1994, by and among COMSAT Corporation, a District of Columbia
corporation ("COMSAT"), CTS America, Inc., a Delaware corporation and a wholly-
owned subsidiary of COMSAT ("CTS"), and the undersigned officer of Radiation
Systems, Inc. ("RSI") (the "Executive"), Executive hereby agrees to waive and
rescind all or such portions of the provisions of Section 7 of the amended
employment agreement between Executive and RSI as Deloitte & Touche or the
Securities and Exchange Commission determine would preclude the use of pooling
accounting in conjunction with the proposed merger of RSI with and into CTS.
/s/ Marvin D. Shoemake
-----------------------------------
Executive
Dated: January 30, 1994
----------------
<PAGE>
EXHIBIT 10(d)
EMPLOYMENT AGREEMENT
--------------------
This AGREEMENT made as of the 30th day of January, 1994, by and among
COMSAT Corporation, a District of Columbia corporation ("COMSAT"), CTS America,
Inc., a Delaware corporation and a wholly owned subsidiary of COMSAT ("CTS"),
and Mark D. Funston, a resident of the State of Maryland (the "Executive").
WHEREAS, COMSAT and CTS have entered into an Agreement and Plan of Merger
(the "Merger Agreement"), dated as of January 30, 1994, among COMSAT, CTS, and
Radiation Systems, Inc., a Nevada corporation ("RSI"), pursuant to which RSI
will be merged with and into CTS (the "Merger"); and
WHEREAS, the Executive currently serves as an officer of RSI;
WHEREAS, the Executive is currently subject to an Employment Agreement, as
amended November 20, 1993, with RSI (the "RSI Employment Agreement"); and
WHEREAS, COMSAT and CTS desire that the RSI Employment Agreement be
terminated at the time of consummation of the Merger; and
WHEREAS, COMSAT desires to employ the Executive, and the Executive desires
to become an employee of COMSAT, on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
made herein, and intending to be legally bound hereby, COMSAT and the Executive
agree as follows:
1. Employment; Termination of RSI Employment Agreement; Duties.
-----------------------------------------------------------
(a) Employment and Employment Period. COMSAT shall employ the
Executive to serve as Vice President of the COMSAT RSI Division or subsidiary or
other successor operating entity within COMSAT (the "Division") for a continuous
period of three (3) years (the "Employment Period") commencing on the "Effective
Date" (as such term is defined in Section 1.2 of the Merger Agreement).
(b) Termination of RSI Employment Agreement. Effective on the
Effective Date, the RSI Employment Agreement shall be terminated and be of no
further force and effect.
(c) Offices, Duties and Responsibilities. Effective on the
Effective Date, Executive shall be elected Vice President of the Division.
The Executive shall report to the President of the Division. The Executive's
offices initially shall be located at RSI's present headquarters building in
<PAGE>
Sterling, Virginia, and shall during the Employment Period remain in the
Washington, D.C. metropolitan area.
(d) Devotion to Interests of COMSAT. Except as expressly authorized
by the President of the Division, during the Employment Period the Executive
shall render his business services solely in the performance of his duties
hereunder. The Executive shall use his best efforts to promote the interests
and welfare of COMSAT.
2. Compensation and Fringe Benefits.
--------------------------------
(a) Base Compensation. COMSAT shall pay the Executive a base salary
("Base Salary") at the rate of (i) $(RSI current salary plus $10,000) per year
through the end of the Employment Period, with payments made in installments in
accordance with COMSAT's regular practice for compensating executive personnel.
The Base Salary for the Executive shall be reviewed for merit-based increases at
least once each calendar year during the Employment Period consistent with
merit-based reviews for other COMSAT executives. Such reviews shall occur
immediately prior to his "anniversary date" for performance reviews at RSI.
(b) Bonus Compensation. For each year or partial year ending on
December 31 during the Employment Period, the Executive shall be eligible to
receive annual bonuses (payable in January) under the COMSAT Annual Incentive
Plan ("AIP") based upon performance. The standards applied for performance
reviews of the Executive under the AIP shall be consistent with the standards
applied for performance reviews of other COMSAT executives whose salaries are in
the comparable range of the then current Base Salary of the Executive under this
Agreement. Any performance bonuses so paid to Executive shall be subject to
deferral at Executive's election under the AIP.
(c) Fringe Benefits. The Executive also shall be entitled to fringe
benefits including participation in the Division's group life insurance plan,
the COMSAT 1990 Key Employee Stock Plan (the "Option Plan"), the COMSAT Employee
Stock Purchase Plan, the COMSAT Dividend Reinvestment Plan, and health and
disability insurance programs of the Division and reimbursement of premiums for
insurance coverage and reasonable expenses incurred in connection with travel
and entertainment related to COMSAT's business and affairs. The Executive also
shall be entitled to use existing balances of unused medical and legal reim-
bursement expense accounts with RSI until depleted.
(d) Retention Bonuses. The Executive shall be entitled to receive
retention bonuses so long as he remains employed by COMSAT on the date such
bonuses are payable as follows:
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<PAGE>
(i) 90 days after the Effective Date, a retention bonus of $25,000, (ii) on the
first anniversary of the Effective Date, a retention bonus of $27,000; (iii) on
the second anniversary of the Effective Date, a retention bonus of $29,000; and
(iv) on the third anniversary of the Effective Date, a retention bonus of
$31,500.
3. Stock Options. On the Effective Date, COMSAT shall grant to the
Executive nonstatutory stock options (the "Options") under the Option Plan to
purchase 7,000 shares of COMSAT's common stock, without par value ("Common
Stock"), at a purchase price equal to the closing price of the Common Stock on
the New York Stock Exchange on the date of the execution and delivery of the
Merger Agreement, or if such date is not a date on which the Common Stock has
traded, the first trading date immediately prior to execution and delivery of
the Merger Agreement. Such Options shall be represented by a stock option
agreement ("Option Agreement") in the form and containing the terms customarily
used by COMSAT for such agreements including terms relating to the length of the
Option term, vesting conditions and termination of employment.
4. RSAs. On the Effective Date, upon execution and delivery of this
Agreement, COMSAT shall grant the Executive 5,000 Restricted Stock Awards (RSAs)
under the Option Plan, which RSAs shall entitle Executive to receive dividends
(when and in the same amounts as dividends are paid on Common Stock) as provided
under the Option Plan. The vesting of such RSAs shall be subject to the
satisfaction of objective performance standards to be adopted by the Board and
approved by COMSAT's shareholders.
5. Trade Secrets. The Executive shall not (for his own benefit or the
benefit of any person or entity other than COMSAT) use or disclose any of
COMSAT's trade secrets or other confidential information. The term "trade
secrets or other confidential information" includes, by way of example, matters
of a technical nature, such as scientific, trade and engineering secrets, "know-
how", formulae, secret processes or machines, inventions, computer programs
(including documentation of such programs) and research projects, and matters of
a business nature, such as proprietary information about costs, profits,
markets, sales, lists of customers, and other information of a similar nature to
the extent not available to the public, and plans for future development. After
termination of this Agreement, the Executive shall not use or disclose trade
secrets or other confidential information unless such information becomes a part
of the public domain other than through a breach of this Agreement or is
disclosed to the Executive by a third party who is entitled to receive and
disclose such information.
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<PAGE>
6. Return of Documents and Property. Upon the effective date of notice
of the Executive's or COMSAT's election to terminate this Agreement, or at any
time upon the request of COMSAT, the Executive (or his heirs or personal
representatives) shall deliver to COMSAT (a) all documents and materials
containing trade secrets or other confidential information relating to COMSAT's
business and affairs, and (b) all documents, materials and other property
belonging to COMSAT, which in either case are in the possession or under the
control of the Executive (or his heirs or personal representatives).
7. Discoveries and Works. All discoveries and works made or conceived by
the Executive during his employment by COMSAT, jointly or with others, that
relate to COMSAT's activities shall be owned by COMSAT. The term "discoveries
and works" include, by way of example, inventions, computer programs (including
documentation of such programs), technical improvements, processes, drawings and
work of authorship. The Executive shall (a) promptly notify, make full
disclosure to, and execute and deliver any documents requested by, COMSAT to
evidence or better assure title to such discoveries and works in COMSAT,
(b) assist COMSAT in obtaining or maintaining for itself at its own expense
United States and foreign patents, copyrights, trade secret protection or other
protection of any and all such discoveries and works, and (c) promptly execute,
whether during his employment or thereafter, all applications or other
endorsements necessary or appropriate to maintain patents and other rights for
COMSAT and to protect its title thereto. Any discoveries and works which,
within six months after the termination of the Executive's employment by COMSAT,
are made, disclosed, reduced to a tangible or written form or description, or
are reduced to practice by the Executive and which pertain to work performed by
the Executive while with COMSAT and RSI shall, as between the Executive and
COMSAT, be presumed to have been made during the Executive's employment by
COMSAT.
8. Termination. This Agreement shall remain in effect during this
Employment Term, and this Agreement and Executive's employment with COMSAT may
be terminated only as follows:
(a) By Executive at any time upon 60 day advance written notice to
COMSAT should COMSAT, without Executive's express written consent, substantially
reduce (except in connection with the termination of his employment voluntarily
by Executive or by COMSAT for "cause" as defined below) his responsibilities as
Vice President of the Division. At the end of the 60 day advance notice period,
COMSAT shall pay Executive in a lump sum (subject to withholding obligations as
may be imposed by law) his then current Base Salary for a period of one year.
In such event, COMSAT shall continue to pay for the Executive's life, health and
disability insurance coverage through the remainder of the Employment Period
-4-
<PAGE>
hereunder to the extent that RSI paid for such coverage under the RSI Employment
Agreement. All other fringe benefits provided under this Agreement which have
not vested shall cease upon the effective date of termination, and COMSAT shall
provide Executive such health benefits as may be required under applicable COBRA
law and regulation at COMSAT's expense and without charge to Executive.
(b) For purposes of this Agreement, COMSAT shall have "cause" to
terminate the Executive's employment hereunder upon (i) the continued and
deliberate failure of the Executive to perform his duties, in a manner
substantially consistent with the manner prescribed by the President of COMSAT
or the President of the Division (other than any such failure resulting from his
incapacity due to physical or mental illness) which failure continues for ten
days following the Executive's receipt of written notice from the President of
COMSAT or the President of the Division specifying the manner in which the
Executive is in default of his duties, (ii) the engaging by the Executive in
serious misconduct that is materially and demonstrably injurious to COMSAT,
(iii) the conviction of the Executive of commission of a felony involving a
crime of moral turpitude, whether or not such felony was committed in connection
with COMSAT's business, or (iv) the circumstances described in Section 9 hereof,
in which case the provision of Section 9 shall govern the rights and obligations
of the parties.
9. Disability; Death.
-----------------
(a) If, prior to the expiration or termination of the Employment
Period, the Executive shall be unable to perform his duties by reason of
disability or impairment of health for at least six consecutive calendar months,
COMSAT shall have the right to terminate this Agreement by giving 60 days
written notice to the Executive to that effect, but only if at the time such
notice is given such disability or impairment is still continuing. Following
the expiration of the notice period, the Employment Period shall terminate with
the payment of the Executive's Base Salary for the month in which notice is
given. In the event of a dispute as to whether the Executive is disabled within
the meaning of this Section 9(a), or the duration of any disability, either
party may request a medical examination of the Executive by a doctor appointed
by the Chief of Staff of a hospital selected by mutual agreement of the parties,
or as the parties may otherwise agree, and the written medical opinion of such
doctor shall be conclusive and binding upon the parties as to whether the
Executive has become disabled and the date when such disability arose. The cost
of any such medical examinations shall be borne by COMSAT.
-5-
<PAGE>
(b) If, prior to the expiration or termination of the Employment
Period, the Executive shall die, COMSAT shall pay to the Executive's estate his
Base Salary through the end of the month in which the Executive's death
occurred, at which time the Employment Period shall terminate without further
notice and COMSAT shall have no further obligations hereunder.
(c) Nothing contained in this Section 9 shall impair or otherwise
affect any rights and interests of the Executive under any compensation plan or
arrangement of COMSAT which may be adopted by the Board.
10. Non-Competition.
---------------
(a) Except as provided in paragraph (d) below, the Executive agrees
that for a period commencing as of the Effective Date and running through the
earlier of (i) the end of the Employment Period if the Executive remains
employed by COMSAT for the entire Employment Period or (ii) one year following
termination of the Executive's employment by COMSAT for any reason, whether by
action of the Executive or COMSAT (the "Non-Competition Period"), the Executive
will not, except as otherwise provided herein, engage or participate, directly
or indirectly, as principal, agent, employee, employer, consultant, stockholder,
partner or in any other individual capacity whatsoever, in the conduct or
management of, or own any stock or any other equity investment in or debt of,
any business which is competitive with any business conducted by the Division.
For the purpose of this Agreement, a business shall be considered to
be competitive with the business of the Division only if such business is
engaged in providing services or products (i) similar to (x) any service or
product currently provided by the Division during the Employment Period; (y) any
service or product which evolves from or results from enhancements in the
ordinary course during the Non-Competition Period to the services or products
provided by the Division as of the date hereof or during the Employment Period;
or (z) any future service or product of the Division as to which the Executive
materially and substantially participated in the design or enhancement, and
(ii) to customers and clients of the type served by the Division during the Non-
Competition Period.
(b) Non-Solicitation of Employees. During the Non-Competition
Period, the Executive will not (for his own benefit or for the benefit of any
person or entity other than COMSAT) solicit, or assist any person or entity
other than COMSAT to solicit, any officer, director, executive or employee of
COMSAT to leave his or her employment.
-6-
<PAGE>
(c) Reasonableness. The Executive acknowledges that (i) the markets
served by COMSAT are national and international and are not dependent on the
geographic location of the executive personnel or the businesses by which they
are employed, (ii) the length of the Non-Competition Period is linked to the
term of the Employment Period and the severance benefit provide for in Section
8(a); and (iii) the above covenants are manifestly reasonable on their face, and
the parties expressly agree that such restrictions have been designed to be
reasonable and no greater than is required for the protection of COMSAT.
(d) Investment. Nothing in this Agreement shall be deemed to
prohibit the Executive from owning equity or debt investments in any
corporation, partnership or other entity which is competitive with COMSAT,
PROVIDED that such investments (i) are passive investments and constitute five
percent (5%) or less of the outstanding equity securities of such an entity the
equity securities of which are traded on a national securities exchange or other
public market, or (ii) are approved by the Board.
11. Enforcement. The Executive agrees that COMSAT's remedies at law for
any breach or threat of breach by him of the provisions of Sections 5, 6, 7 and
10 hereof will be inadequate, and that COMSAT shall be entitled to an injunction
or injunctions to prevent breaches of the provisions of Sections 5, 6, 7 and 10
hereof and to enforce specifically the terms and provisions thereof, in addition
to any other remedy to which COMSAT may be entitled at law or equity.
12. Arbitration
-----------
(a) Subject to COMSAT's right to enforce Sections 5, 6, 7 and 10
hereof by an injunction issued by a court having jurisdiction (which right shall
prevail over and supersede the provisions of this Section 12), any dispute
relating to this Agreement, including the enforceability of this Section 12,
arising between the Executive and COMSAT or any of its affiliates shall be
settled by arbitration before a single arbitrator in accordance with the
commercial arbitration rules of the American Arbitration Association.
(b) The award of any such arbitrator shall be final. Judgment upon
such award may be entered by the prevailing party in any federal or state court
sitting in Washington, D.C.
(c) The costs of arbitration proceedings, excluding attorneys fees,
shall be paid by the party that does not prevail in the arbitration proceedings.
-7-
<PAGE>
13. Severability. Should any provision of this Agreement be
determined to be unenforceable or prohibited by any applicable law, such
provision shall be ineffective to the extent, and only to the extent, of such
unenforceability or prohibition without invalidating the balance of such
provision or any other provision of this Agreement, and any such
unenforceability or prohibition in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
14. Assignment. The Executive's rights and obligations under this
Agreement shall not be assignable by the Executive. COMSAT's rights and
obligations under this Agreement shall not be assignable by COMSAT except as
incident to the transfer, by merger or otherwise, of all or substantially all of
the business of the Division. In the event of any assignment by COMSAT, all
rights of COMSAT hereunder shall inure to the benefit of the assignee.
15. Notices. Any notice required or permitted under this Agreement shall
be deemed to have been effectively made or given if in writing and personally
delivered or mailed properly addressed in a sealed envelope, postage prepaid by
certified or registered mail. Unless otherwise changed by notice, notice shall
be properly addressed to Executive if addressed to:
Mark D. Funston
1095 Larkspur Terrace
Rockville, Maryland 20850
and properly addressed to COMSAT if addressed to:
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, Maryland 20817
Attn: Vice President, Human Resources
and Organization Development
16. Miscellaneous. This Agreement constitutes the entire agreement, and
supersedes all prior agreements, of the parties hereto relating to the subject
matter hereof, and there are no written or oral terms or representatives made by
either party other than those contained herein. The validity, interpretation,
performance and enforcement of the Agreement shall be governed by the laws of
the State of Maryland. The headings contained herein are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Agreement.
-8-
<PAGE>
In WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
/s/ Mark D. Funston
- ---------------------------
Mark D. Funston, Executive
Including Attached Addendum
dated 30 January 1994
COMSAT CORPORATION
By:/s/ Bruce L. Crockett
-----------------------------
Bruce L. Crockett
President and Chief Executive
Officer
CTS AMERICA, INC.
By:/s/ Richard E. Thomas
---------------------
Richard E. Thomas
President
-9-
<PAGE>
EXHIBIT 10(d)
In consideration of the employment agreement executed this 30th day of
January, 1994, by and among COMSAT Corporation, a District of Columbia
corporation ("COMSAT"), CTS America, Inc., a Delaware corporation and a wholly-
owned subsidiary of COMSAT ("CTS"), and the undersigned officer of Radiation
Systems, Inc. ("RSI") (the "Executive"), Executive hereby agrees to waive and
rescind all or such portions of the provisions of Section 7 of the amended
employment agreement between Executive and RSI as Deloitte & Touche or the
Securities and Exchange Commission determine would preclude the use of pooling
accounting in conjunction with the proposed merger of RSI with and into CTS.
/s/ Mark D. Funston
---------------------------------
Executive
Dated: January 30, 1994
----------------
<PAGE>
EXHIBIT 10(e)
EMPLOYMENT AGREEMENT
--------------------
This AGREEMENT made as of the 30th day of January, 1994, by and among
COMSAT Corporation, a District of Columbia corporation ("COMSAT"), CTS
America, Inc., a Delaware corporation and a wholly owned subsidiary of COMSAT
("CTS"), and William A. Thomas, a resident of the Commonwealth of Virginia
(the "Executive").
WHEREAS, COMSAT and CTS have entered into an Agreement and Plan of
Merger (the "Merger Agreement"), dated as of January 30, 1994, among COMSAT,
CTS, and Radiation Systems, Inc., a Nevada corporation ("RSI"), pursuant to
which RSI will be merged with and into CTS (the "Merger"); and
WHEREAS, the Executive currently serves as an officer of RSI;
WHEREAS, the Executive is currently subject to an Employment Agreement,
as amended November 20, 1993, with RSI (the "RSI Employment Agreement"); and
WHEREAS, COMSAT and CTS desire that the RSI Employment Agreement be
terminated at the time of consummation of the Merger; and
WHEREAS, COMSAT desires to employ the Executive, and the Executive
desires to become an employee of COMSAT, on the terms and conditions set
forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements made herein, and intending to be legally bound hereby, COMSAT and
the Executive agree as follows:
1. Employment; Termination of RSI Employment Agreement; Duties.
-----------------------------------------------------------
(a) Employment and Employment Period. COMSAT shall employ the
Executive to serve as Vice President of the COMSAT RSI Division or subsidiary
or other successor operating entity within COMSAT (the "Division") for a
continuous period of three (3) years (the "Employment Period") commencing on
the "Effective Date" (as such term is defined in Section 1.2 of the Merger
Agreement).
(b) Termination of RSI Employment Agreement. Effective on the
Effective Date, the RSI Employment Agreement shall be terminated and be of no
further force and effect.
(c) Offices, Duties and Responsibilities. Effective on the
Effective Date, Executive shall be elected Vice President of the Division.
The Executive shall report to the President of the Division. The Executive's
offices initially shall be located at RSI's present headquarters building in
<PAGE>
Sterling, Virginia, and shall during the Employment Period remain in the
Washington, D.C. metropolitan area.
(d) Devotion to Interests of COMSAT. Except as expressly
authorized by the President of the Division, during the Employment Period the
Executive shall render his business services solely in the performance of his
duties hereunder. The Executive shall use his best efforts to promote the
interests and welfare of COMSAT.
2. Compensation and Fringe Benefits.
--------------------------------
(a) Base Compensation. COMSAT shall pay the Executive a base
salary ("Base Salary") at the rate of (i) $(RSI current salary plus $10,000)
per year through the end of the Employment Period, with payments made in
installments in accordance with COMSAT's regular practice for compensating
executive personnel. The Base Salary for the Executive shall be reviewed for
merit-based increases at least once each calendar year during the Employment
Period consistent with merit-based reviews for other COMSAT executives. Such
reviews shall occur immediately prior to his "anniversary date" for
performance reviews at RSI.
(b) Bonus Compensation. For each year or partial year ending on
December 31 during the Employment Period, the Executive shall be eligible to
receive annual bonuses (payable in January) under the COMSAT Annual Incentive
Plan ("AIP") based upon performance. The standards applied for performance
reviews of the Executive under the AIP shall be consistent with the standards
applied for performance reviews of other COMSAT executives whose salaries are
in the comparable range of the then current Base Salary of the Executive
under this Agreement. Any performance bonuses so paid to Executive shall be
subject to deferral at Executive's election under the AIP.
(c) Fringe Benefits. The Executive also shall be entitled to
fringe benefits including participation in the Division's group life
insurance plan, the COMSAT 1990 Key Employee Stock Plan (the "Option Plan"),
the COMSAT Employee Stock Purchase Plan, the COMSAT Dividend Reinvestment
Plan, and health and disability insurance programs of the Division and
reimbursement of premiums for insurance coverage and reasonable expenses
incurred in connection with travel and entertainment related to COMSAT's
business and affairs. The Executive also shall be entitled to use existing
balances of unused medical and legal reimbursement expense accounts with RSI
until depleted.
(d) Retention Bonuses. The Executive shall be entitled to receive
retention bonuses so long as he remains employed by COMSAT on the date such
bonuses are payable as follows:
-2-
<PAGE>
(i) 90 days after the Effective Date, a retention bonus of $25,000, (ii) on
the first anniversary of the Effective Date, a retention bonus of $27,000;
(iii) on the second anniversary of the Effective Date, a retention bonus of
$29,000; and (iv) on the third anniversary of the Effective Date, a retention
bonus of $31,500.
3. Stock Options. On the Effective Date, COMSAT shall grant to the
Executive nonstatutory stock options (the "Options") under the Option Plan to
purchase 7,000 shares of COMSAT's common stock, without par value ("Common
Stock"), at a purchase price equal to the closing price of the Common Stock
on the New York Stock Exchange on the date of the execution and delivery of
the Merger Agreement, or if such date is not a date on which the Common Stock
has traded, the first trading date immediately prior to execution and
delivery of the Merger Agreement. Such Options shall be represented by a
stock option agreement ("Option Agreement") in the form and containing the
terms customarily used by COMSAT for such agreements including terms relating
to the length of the Option term, vesting conditions and termination of
employment.
4. RSAs. On the Effective Date, upon execution and delivery of this
Agreement, COMSAT shall grant the Executive 5,000 Restricted Stock Awards
(RSAs) under the Option Plan, which RSAs shall entitle Executive to receive
dividends (when and in the same amounts as dividends are paid on Common
Stock) as provided under the Option Plan. The vesting of such RSAs shall be
subject to the satisfaction of objective performance standards to be adopted
by the Board and approved by COMSAT's shareholders.
5. Trade Secrets. The Executive shall not (for his own benefit or the
benefit of any person or entity other than COMSAT) use or disclose any of
COMSAT's trade secrets or other confidential information. The term "trade
secrets or other confidential information" includes, by way of example,
matters of a technical nature, such as scientific, trade and engineering
secrets, "know-how", formulae, secret processes or machines, inventions,
computer programs (including documentation of such programs) and research
projects, and matters of a business nature, such as proprietary information
about costs, profits, markets, sales, lists of customers, and other
information of a similar nature to the extent not available to the public,
and plans for future development. After termination of this Agreement, the
Executive shall not use or disclose trade secrets or other confidential
information unless such information becomes a part of the public domain other
than through a breach of this Agreement or is disclosed to the Executive by a
third party who is entitled to receive and disclose such information.
-3-
<PAGE>
6. Return of Documents and Property. Upon the effective date of
notice of the Executive's or COMSAT's election to terminate this Agreement,
or at any time upon the request of COMSAT, the Executive (or his heirs or
personal representatives) shall deliver to COMSAT (a) all documents and
materials containing trade secrets or other confidential information relating
to COMSAT's business and affairs, and (b) all documents, materials and other
property belonging to COMSAT, which in either case are in the possession or
under the control of the Executive (or his heirs or personal
representatives).
7. Discoveries and Works. All discoveries and works made or conceived
by the Executive during his employment by COMSAT, jointly or with others,
that relate to COMSAT's activities shall be owned by COMSAT. The term
"discoveries and works" include, by way of example, inventions, computer
programs (including documentation of such programs), technical improvements,
processes, drawings and work of authorship. The Executive shall (a) promptly
notify, make full disclosure to, and execute and deliver any documents
requested by, COMSAT to evidence or better assure title to such discoveries
and works in COMSAT, (b) assist COMSAT in obtaining or maintaining for itself
at its own expense United States and foreign patents, copyrights, trade
secret protection or other protection of any and all such discoveries and
works, and (c) promptly execute, whether during his employment or thereafter,
all applications or other endorsements necessary or appropriate to maintain
patents and other rights for COMSAT and to protect its title thereto. Any
discoveries and works which, within six months after the termination of the
Executive's employment by COMSAT, are made, disclosed, reduced to a tangible
or written form or description, or are reduced to practice by the Executive
and which pertain to work performed by the Executive while with COMSAT and
RSI shall, as between the Executive and COMSAT, be presumed to have been made
during the Executive's employment by COMSAT.
8. Termination. This Agreement shall remain in effect during
this Employment Term, and this Agreement and Executive's employment with
COMSAT may be terminated only as follows:
(a) By Executive at any time upon 60 day advance written notice
to COMSAT should COMSAT, without Executive's express written consent,
substantially reduce (except in connection with the termination of his
employment voluntarily by Executive or by COMSAT for "cause" as defined
below) his responsibilities as Vice President of the Division. At the end of
the 60 day advance notice period, COMSAT shall pay Executive in a lump sum
(subject to withholding obligations as may be imposed by law) his then
current Base Salary for a period of one year. In such event, COMSAT shall
continue to pay for the Executive's life, health and disability insurance
coverage through the remainder of the Employment Period hereunder to the extent
-4-
<PAGE>
that RSI paid for such coverage under the RSI Employment Agreement. All other
fringe benefits provided under this Agreement which have not vested shall cease
upon the effective date of termination, and COMSAT shall provide Executive such
health benefits as may be required under applicable COBRA law and regulation at
COMSAT's expense and without charge to Executive.
(b) For purposes of this Agreement, COMSAT shall have "cause" to
terminate the Executive's employment hereunder upon (i) the continued and
deliberate failure of the Executive to perform his duties, in a manner
substantially consistent with the manner prescribed by the President of
COMSAT or the President of the Division (other than any such failure
resulting from his incapacity due to physical or mental illness) which
failure continues for ten days following the Executive's receipt of written
notice from the President of COMSAT or the President of the Division
specifying the manner in which the Executive is in default of his duties,
(ii) the engaging by the Executive in serious misconduct that is materially
and demonstrably injurious to COMSAT, (iii) the conviction of the Executive
of commission of a felony involving a crime of moral turpitude, whether or
not such felony was committed in connection with COMSAT's business, or
(iv) the circumstances described in Section 9 hereof, in which case the
provision of Section 9 shall govern the rights and obligations of the
parties.
9. Disability; Death.
-----------------
(a) If, prior to the expiration or termination of the Employment
Period, the Executive shall be unable to perform his duties by reason of
disability or impairment of health for at least six consecutive calendar
months, COMSAT shall have the right to terminate this Agreement by giving 60
days written notice to the Executive to that effect, but only if at the time
such notice is given such disability or impairment is still continuing.
Following the expiration of the notice period, the Employment Period shall
terminate with the payment of the Executive's Base Salary for the month in
which notice is given. In the event of a dispute as to whether the Executive
is disabled within the meaning of this Section 9(a), or the duration of any
disability, either party may request a medical examination of the Executive
by a doctor appointed by the Chief of Staff of a hospital selected by mutual
agreement of the parties, or as the parties may otherwise agree, and the
written medical opinion of such doctor shall be conclusive and binding upon
the parties as to whether the Executive has become disabled and the date when
such disability arose. The cost of any such medical examinations shall be
borne by COMSAT.
-5-
<PAGE>
(b) If, prior to the expiration or termination of the Employment
Period, the Executive shall die, COMSAT shall pay to the Executive's estate
his Base Salary through the end of the month in which the Executive's death
occurred, at which time the Employment Period shall terminate without further
notice and COMSAT shall have no further obligations hereunder.
(c) Nothing contained in this Section 9 shall impair or otherwise
affect any rights and interests of the Executive under any compensation plan
or arrangement of COMSAT which may be adopted by the Board.
10. Non-Competition.
---------------
(a) Except as provided in paragraph (d) below, the Executive
agrees that for a period commencing as of the Effective Date and running
through the earlier of (i) the end of the Employment Period if the Executive
remains employed by COMSAT for the entire Employment Period or (ii) one year
following termination of the Executive's employment by COMSAT for any reason,
whether by action of the Executive or COMSAT (the "Non-Competition Period"),
the Executive will not, except as otherwise provided herein, engage or
participate, directly or indirectly, as principal, agent, employee, employer,
consultant, stockholder, partner or in any other individual capacity whatso-
ever, in the conduct or management of, or own any stock or any other equity
investment in or debt of, any business which is competitive with any business
conducted by the Division.
For the purpose of this Agreement, a business shall be
considered to be competitive with the business of the Division only if such
business is engaged in providing services or products (i) similar to (x) any
service or product currently provided by the Division during the Employment
Period; (y) any service or product which evolves from or results from
enhancements in the ordinary course during the Non-Competition Period to the
services or products provided by the Division as of the date hereof or during
the Employment Period; or (z) any future service or product of the Division
as to which the Executive materially and substantially participated in the
design or enhancement, and (ii) to customers and clients of the type served
by the Division during the Non-Competition Period.
(b) Non-Solicitation of Employees. During the Non-Competition
Period, the Executive will not (for his own benefit or for the benefit of any
person or entity other than COMSAT) solicit, or assist any person or entity
other than COMSAT to solicit, any officer, director, executive or employee of
COMSAT to leave his or her employment.
-6-
<PAGE>
(c) Reasonableness. The Executive acknowledges that (i) the
markets served by COMSAT are national and international and are not dependent
on the geographic location of the executive personnel or the businesses by
which they are employed, (ii) the length of the Non-Competition Period is
linked to the term of the Employment Period and the severance benefit provide
for in Section 8(a); and (iii) the above covenants are manifestly reasonable
on their face, and the parties expressly agree that such restrictions have
been designed to be reasonable and no greater than is required for the
protection of COMSAT.
(d) Investment. Nothing in this Agreement shall be deemed to
prohibit the Executive from owning equity or debt investments in any
corporation, partnership or other entity which is competitive with COMSAT,
PROVIDED that such investments (i) are passive investments and constitute
five percent (5%) or less of the outstanding equity securities of such an
entity the equity securities of which are traded on a national securities
exchange or other public market, or (ii) are approved by the Board.
11. Enforcement. The Executive agrees that COMSAT's remedies at law
for any breach or threat of breach by him of the provisions of Sections 5, 6,
7 and 10 hereof will be inadequate, and that COMSAT shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of Sections
5, 6, 7 and 10 hereof and to enforce specifically the terms and provisions
thereof, in addition to any other remedy to which COMSAT may be entitled at
law or equity.
12. Arbitration
-----------
(a) Subject to COMSAT's right to enforce Sections 5, 6, 7 and 10
hereof by an injunction issued by a court having jurisdiction (which right
shall prevail over and supersede the provisions of this Section 12), any
dispute relating to this Agreement, including the enforceability of this
Section 12, arising between the Executive and COMSAT or any of its affiliates
shall be settled by arbitration before a single arbitrator in accordance with
the commercial arbitration rules of the American Arbitration Association.
(b) The award of any such arbitrator shall be final. Judgment
upon such award may be entered by the prevailing party in any federal or
state court sitting in Washington, D.C.
(c) The costs of arbitration proceedings, excluding attorneys
fees, shall be paid by the party that does not prevail in the arbitration
proceedings.
-7-
<PAGE>
13. Severability. Should any provision of this Agreement be
determined to be unenforceable or prohibited by any applicable law, such
provision shall be ineffective to the extent, and only to the extent, of such
unenforceability or prohibition without invalidating the balance of such
provision or any other provision of this Agreement, and any such
unenforceability or prohibition in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
14. Assignment. The Executive's rights and obligations under this
Agreement shall not be assignable by the Executive. COMSAT's rights and
obligations under this Agreement shall not be assignable by COMSAT except as
incident to the transfer, by merger or otherwise, of all or substantially all
of the business of the Division. In the event of any assignment by COMSAT,
all rights of COMSAT hereunder shall inure to the benefit of the assignee.
15. Notices. Any notice required or permitted under this Agreement
shall be deemed to have been effectively made or given if in writing and
personally delivered or mailed properly addressed in a sealed envelope,
postage prepaid by certified or registered mail. Unless otherwise changed by
notice, notice shall be properly addressed to Executive if addressed to:
William A. Thomas
1431 Hagus Drive
Leesburg, Virginia 22075
and properly addressed to COMSAT if addressed to:
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, Maryland 20817
Attn: Vice President, Human Resources
and Organization Development
16. Miscellaneous. This Agreement constitutes the entire agreement,
and supersedes all prior agreements, of the parties hereto relating to the
subject matter hereof, and there are no written or oral terms or
representatives made by either party other than those contained herein. The
validity, interpretation, performance and enforcement of the Agreement shall
be governed by the laws of the State of Maryland. The headings contained
herein are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
-8-
<PAGE>
In WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
/s/ William A. Thomas
- ----------------------------
William A. Thomas, Executive
Including Attached Addendum
dated 30 January 1994
COMSAT CORPORATION
By:/s/ Bruce L. Crockett
-----------------------------
Bruce L. Crockett
President and Chief Executive
Officer
CTS AMERICA, INC.
By:/s/ Richard E. Thomas
---------------------
Richard E. Thomas
President
-9-
<PAGE>
In consideration of the employment agreement executed this 30th day of
January, 1994, by and among COMSAT Corporation, a District of Columbia
corporation ("COMSAT"), CTS America, Inc., a Delaware corporation and a wholly-
owned subsidiary of COMSAT ("CTS"), and the undersigned officer of Radiation
Systems, Inc. ("RSI") (the "Executive"), Executive hereby agrees to waive and
rescind all or such portions of the provisions of Section 7 of the amended
employment agreement between Executive and RSI as Deloitte & Touche or the
Securities and Exchange Commission determine would preclude the use of pooling
accounting in conjunction with the proposed merger of RSI with and into CTS.
/s/ William A. Thomas
-----------------------------------
Executive
Dated: January 30, 1994
----------------
<PAGE>
EXHIBIT 10(f)
EMPLOYMENT AGREEMENT
--------------------
This AGREEMENT made as of the 30th day of January, 1994, by and among
COMSAT Corporation, a District of Columbia corporation ("COMSAT"), CTS
America, Inc., a Delaware corporation and a wholly owned subsidiary of COMSAT
("CTS"), and Anita M. Stutzman, a resident of the Commonwealth of Virginia
(the "Executive").
WHEREAS, COMSAT and CTS have entered into an Agreement and Plan of
Merger (the "Merger Agreement"), dated as of January 30, 1994, among COMSAT,
CTS, and Radiation Systems, Inc., a Nevada corporation ("RSI"), pursuant to
which RSI will be merged with and into CTS (the "Merger"); and
WHEREAS, the Executive currently serves as an officer of RSI;
WHEREAS, the Executive is currently subject to an Employment Agreement,
as amended November 20, 1993, with RSI (the "RSI Employment Agreement"); and
WHEREAS, COMSAT and CTS desire that the RSI Employment Agreement be
terminated at the time of consummation of the Merger; and
WHEREAS, COMSAT desires to employ the Executive, and the Executive
desires to become an employee of COMSAT, on the terms and conditions set
forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements made herein, and intending to be legally bound hereby, COMSAT and
the Executive agree as follows:
1. Employment; Termination of RSI Employment Agreement; Duties.
-----------------------------------------------------------
(a) Employment and Employment Period. COMSAT shall employ the
Executive to serve as Vice President of the COMSAT RSI Division or subsidiary
or other successor operating entity within COMSAT (the "Division") for a
continuous period of three (3) years (the "Employment Period") commencing on
the "Effective Date" (as such term is defined in Section 1.2 of the Merger
Agreement).
(b) Termination of RSI Employment Agreement. Effective on the
Effective Date, the RSI Employment Agreement shall be terminated and be of no
further force and effect.
(c) Offices, Duties and Responsibilities. Effective on the
Effective Date, Executive shall be elected Vice President of the Division.
The Executive shall report to the President of the Division. The Executive's
offices initially shall be located at RSI's present headquarters building in
<PAGE>
Sterling, Virginia, and shall during the Employment Period remain in the
Washington, D.C. metropolitan area.
(d) Devotion to Interests of COMSAT. Except as expressly
authorized by the President of the Division, during the Employment Period the
Executive shall render his business services solely in the performance of his
duties hereunder. The Executive shall use his best efforts to promote the
interests and welfare of COMSAT.
2. Compensation and Fringe Benefits.
--------------------------------
(a) Base Compensation. COMSAT shall pay the Executive a base
salary ("Base Salary") at the rate of (i) $(RSI current salary plus $10,000)
per year through the end of the Employment Period, with payments made in
installments in accordance with COMSAT's regular practice for compensating
executive personnel. The Base Salary for the Executive shall be reviewed for
merit-based increases at least once each calendar year during the Employment
Period consistent with merit-based reviews for other COMSAT executives. Such
reviews shall occur immediately prior to his "anniversary date" for
performance reviews at RSI.
(b) Bonus Compensation. For each year or partial year ending on
December 31 during the Employment Period, the Executive shall be eligible to
receive annual bonuses (payable in January) under the COMSAT Annual Incentive
Plan ("AIP") based upon performance. The standards applied for performance
reviews of the Executive under the AIP shall be consistent with the standards
applied for performance reviews of other COMSAT executives whose salaries are
in the comparable range of the then current Base Salary of the Executive
under this Agreement. Any performance bonuses so paid to Executive shall be
subject to deferral at Executive's election under the AIP.
(c) Fringe Benefits. The Executive also shall be entitled to
fringe benefits including participation in the Division's group life
insurance plan, the COMSAT 1990 Key Employee Stock Plan (the "Option Plan"),
the COMSAT Employee Stock Purchase Plan, the COMSAT Dividend Reinvestment
Plan, and health and disability insurance programs of the Division and
reimbursement of premiums for insurance coverage and reasonable expenses
incurred in connection with travel and entertainment related to COMSAT's
business and affairs. The Executive also shall be entitled to use existing
balances of unused medical and legal reimbursement expense accounts with RSI
until depleted.
(d) Retention Bonuses. The Executive shall be entitled to receive
retention bonuses so long as he remains employed by COMSAT on the date such
bonuses are payable as follows:
-2-
<PAGE>
(i) 90 days after the Effective Date, a retention bonus of $16,000, (ii) on
the first anniversary of the Effective Date, a retention bonus of $17,300;
(iii) on the second anniversary of the Effective Date, a retention bonus of
$18,600; and (iv) on the third anniversary of the Effective Date, a retention
bonus of $20,200.
3. Stock Options. On the Effective Date, COMSAT shall grant to the
Executive nonstatutory stock options (the "Options") under the Option Plan to
purchase 4,500 shares of COMSAT's common stock, without par value ("Common
Stock"), at a purchase price equal to the closing price of the Common Stock
on the New York Stock Exchange on the date of the execution and delivery of
the Merger Agreement, or if such date is not a date on which the Common Stock
has traded, the first trading date immediately prior to execution and
delivery of the Merger Agreement. Such Options shall be represented by a
stock option agreement ("Option Agreement") in the form and containing the
terms customarily used by COMSAT for such agreements including terms relating
to the length of the Option term, vesting conditions and termination of
employment.
4. RSAs. On the Effective Date, upon execution and delivery of this
Agreement, COMSAT shall grant the Executive 3,200 Restricted Stock Awards
(RSAs) under the Option Plan, which RSAs shall entitle Executive to receive
dividends (when and in the same amounts as dividends are paid on Common
Stock) as provided under the Option Plan. The vesting of such RSAs shall be
subject to the satisfaction of objective performance standards to be adopted
by the Board and approved by COMSAT's shareholders.
5. Trade Secrets. The Executive shall not (for his own benefit or the
benefit of any person or entity other than COMSAT) use or disclose any of
COMSAT's trade secrets or other confidential information. The term "trade
secrets or other confidential information" includes, by way of example,
matters of a technical nature, such as scientific, trade and engineering
secrets, "know-how", formulae, secret processes or machines, inventions,
computer programs (including documentation of such programs) and research
projects, and matters of a business nature, such as proprietary information
about costs, profits, markets, sales, lists of customers, and other
information of a similar nature to the extent not available to the public,
and plans for future development. After termination of this Agreement, the
Executive shall not use or disclose trade secrets or other confidential
information unless such information becomes a part of the public domain other
than through a breach of this Agreement or is disclosed to the Executive by a
third party who is entitled to receive and disclose such information.
-3-
<PAGE>
6. Return of Documents and Property. Upon the effective date of
notice of the Executive's or COMSAT's election to terminate this Agreement,
or at any time upon the request of COMSAT, the Executive (or his heirs or
personal representatives) shall deliver to COMSAT (a) all documents and
materials containing trade secrets or other confidential information relating
to COMSAT's business and affairs, and (b) all documents, materials and other
property belonging to COMSAT, which in either case are in the possession or
under the control of the Executive (or his heirs or personal
representatives).
7. Discoveries and Works. All discoveries and works made or conceived
by the Executive during his employment by COMSAT, jointly or with others,
that relate to COMSAT's activities shall be owned by COMSAT. The term
"discoveries and works" include, by way of example, inventions, computer
programs (including documentation of such programs), technical improvements,
processes, drawings and work of authorship. The Executive shall (a) promptly
notify, make full disclosure to, and execute and deliver any documents
requested by, COMSAT to evidence or better assure title to such discoveries
and works in COMSAT, (b) assist COMSAT in obtaining or maintaining for itself
at its own expense United States and foreign patents, copyrights, trade
secret protection or other protection of any and all such discoveries and
works, and (c) promptly execute, whether during his employment or thereafter,
all applications or other endorsements necessary or appropriate to maintain
patents and other rights for COMSAT and to protect its title thereto. Any
discoveries and works which, within six months after the termination of the
Executive's employment by COMSAT, are made, disclosed, reduced to a tangible
or written form or description, or are reduced to practice by the Executive
and which pertain to work performed by the Executive while with COMSAT and
RSI shall, as between the Executive and COMSAT, be presumed to have been made
during the Executive's employment by COMSAT.
8. Termination. This Agreement shall remain in effect during
this Employment Term, and this Agreement and Executive's employment with
COMSAT may be terminated only as follows:
(a) By Executive at any time upon 60 day advance written notice to
COMSAT should COMSAT, without Executive's express written consent,
substantially reduce (except in connection with the termination of his
employment voluntarily by Executive or by COMSAT for "cause" as defined
below) his responsibilities as Vice President of the Division. At the end of
the 60 day advance notice period, COMSAT shall pay Executive in a lump sum
(subject to withholding obligations as may be imposed by law) his then
current Base Salary for a period of one year. In such event, COMSAT shall
continue to pay for the Executive's life, health and disability insurance
coverage through the remainder of the Employment Period hereunder to the extent
-4-
<PAGE>
that RSI paid for such coverage under the RSI Employment Agreement. All other
fringe benefits provided under this Agreement which have not vested shall cease
upon the effective date of termination, and COMSAT shall provide Executive such
health benefits as may be required under applicable COBRA law and regulation at
COMSAT's expense and without charge to Executive.
(b) For purposes of this Agreement, COMSAT shall have "cause" to
terminate the Executive's employment hereunder upon (i) the continued and
deliberate failure of the Executive to perform his duties, in a manner
substantially consistent with the manner prescribed by the President of
COMSAT or the President of the Division (other than any such failure
resulting from his incapacity due to physical or mental illness) which
failure continues for ten days following the Executive's receipt of written
notice from the President of COMSAT or the President of the Division
specifying the manner in which the Executive is in default of his duties,
(ii) the engaging by the Executive in serious misconduct that is materially
and demonstrably injurious to COMSAT, (iii) the conviction of the Executive
of commission of a felony involving a crime of moral turpitude, whether or
not such felony was committed in connection with COMSAT's business, or
(iv) the circumstances described in Section 9 hereof, in which case the
provision of Section 9 shall govern the rights and obligations of the
parties.
9. Disability; Death.
-----------------
(a) If, prior to the expiration or termination of the Employment
Period, the Executive shall be unable to perform his duties by reason of
disability or impairment of health for at least six consecutive calendar
months, COMSAT shall have the right to terminate this Agreement by giving 60
days written notice to the Executive to that effect, but only if at the time
such notice is given such disability or impairment is still continuing.
Following the expiration of the notice period, the Employment Period shall
terminate with the payment of the Executive's Base Salary for the month in
which notice is given. In the event of a dispute as to whether the Executive
is disabled within the meaning of this Section 9(a), or the duration of any
disability, either party may request a medical examination of the Executive
by a doctor appointed by the Chief of Staff of a hospital selected by mutual
agreement of the parties, or as the parties may otherwise agree, and the
written medical opinion of such doctor shall be conclusive and binding upon
the parties as to whether the Executive has become disabled and the date when
such disability arose. The cost of any such medical examinations shall be
borne by COMSAT.
-5-
<PAGE>
(b) If, prior to the expiration or termination of the Employment
Period, the Executive shall die, COMSAT shall pay to the Executive's estate
his Base Salary through the end of the month in which the Executive's death
occurred, at which time the Employment Period shall terminate without further
notice and COMSAT shall have no further obligations hereunder.
(c) Nothing contained in this Section 9 shall impair or otherwise
affect any rights and interests of the Executive under any compensation plan
or arrangement of COMSAT which may be adopted by the Board.
10. Non-Competition.
---------------
(a) Except as provided in paragraph (d) below, the Executive
agrees that for a period commencing as of the Effective Date and running
through the earlier of (i) the end of the Employment Period if the Executive
remains employed by COMSAT for the entire Employment Period or (ii) one year
following termination of the Executive's employment by COMSAT for any reason,
whether by action of the Executive or COMSAT (the "Non-Competition Period"),
the Executive will not, except as otherwise provided herein, engage or
participate, directly or indirectly, as principal, agent, employee, employer,
consultant, stockholder, partner or in any other individual capacity whatso-
ever, in the conduct or management of, or own any stock or any other equity
investment in or debt of, any business which is competitive with any business
conducted by the Division.
For the purpose of this Agreement, a business shall be
considered to be competitive with the business of the Division only if such
business is engaged in providing services or products (i) similar to (x) any
service or product currently provided by the Division during the Employment
Period; (y) any service or product which evolves from or results from
enhancements in the ordinary course during the Non-Competition Period to the
services or products provided by the Division as of the date hereof or during
the Employment Period; or (z) any future service or product of the Division
as to which the Executive materially and substantially participated in the
design or enhancement, and (ii) to customers and clients of the type served
by the Division during the Non-Competition Period.
(b) Non-Solicitation of Employees. During the Non-Competition
Period, the Executive will not (for his own benefit or for the benefit of any
person or entity other than COMSAT) solicit, or assist any person or entity
other than COMSAT to solicit, any officer, director, executive or employee of
COMSAT to leave his or her employment.
-6-
<PAGE>
(c) Reasonableness. The Executive acknowledges that (i) the
markets served by COMSAT are national and international and are not dependent
on the geographic location of the executive personnel or the businesses by
which they are employed, (ii) the length of the Non-Competition Period is
linked to the term of the Employment Period and the severance benefit provide
for in Section 8(a); and (iii) the above covenants are manifestly reasonable
on their face, and the parties expressly agree that such restrictions have
been designed to be reasonable and no greater than is required for the
protection of COMSAT.
(d) Investment. Nothing in this Agreement shall be deemed to
prohibit the Executive from owning equity or debt investments in any
corporation, partnership or other entity which is competitive with COMSAT,
PROVIDED that such investments (i) are passive investments and constitute
five percent (5%) or less of the outstanding equity securities of such an
entity the equity securities of which are traded on a national securities
exchange or other public market, or (ii) are approved by the Board.
11. Enforcement. The Executive agrees that COMSAT's remedies at law
for any breach or threat of breach by him of the provisions of Sections 5, 6,
7 and 10 hereof will be inadequate, and that COMSAT shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of Sections
5, 6, 7 and 10 hereof and to enforce specifically the terms and provisions
thereof, in addition to any other remedy to which COMSAT may be entitled at
law or equity.
12. Arbitration
-----------
(a) Subject to COMSAT's right to enforce Sections 5, 6, 7 and 10
hereof by an injunction issued by a court having jurisdiction (which right
shall prevail over and supersede the provisions of this Section 12), any
dispute relating to this Agreement, including the enforceability of this
Section 12, arising between the Executive and COMSAT or any of its affiliates
shall be settled by arbitration before a single arbitrator in accordance with
the commercial arbitration rules of the American Arbitration Association.
(b) The award of any such arbitrator shall be final. Judgment
upon such award may be entered by the prevailing party in any federal or
state court sitting in Washington, D.C.
(c) The costs of arbitration proceedings, excluding attorneys
fees, shall be paid by the party that does not prevail in the arbitration
proceedings.
-7-
<PAGE>
13. Severability. Should any provision of this Agreement be
determined to be unenforceable or prohibited by any applicable law, such
provision shall be ineffective to the extent, and only to the extent, of such
unenforceability or prohibition without invalidating the balance of such
provision or any other provision of this Agreement, and any such
unenforceability or prohibition in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
14. Assignment. The Executive's rights and obligations under this
Agreement shall not be assignable by the Executive. COMSAT's rights and
obligations under this Agreement shall not be assignable by COMSAT except as
incident to the transfer, by merger or otherwise, of all or substantially all
of the business of the Division. In the event of any assignment by COMSAT,
all rights of COMSAT hereunder shall inure to the benefit of the assignee.
15. Notices. Any notice required or permitted under this Agreement
shall be deemed to have been effectively made or given if in writing and
personally delivered or mailed properly addressed in a sealed envelope,
postage prepaid by certified or registered mail. Unless otherwise changed by
notice, notice shall be properly addressed to Executive if addressed to:
Anita M. Stutzman
1510 Scandia Circle
Reston, Virginia 22090
and properly addressed to COMSAT if addressed to:
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, Maryland 20817
Attn: Vice President, Human Resources
and Organization Development
16. Miscellaneous. This Agreement constitutes the entire agreement,
and supersedes all prior agreements, of the parties hereto relating to the
subject matter hereof, and there are no written or oral terms or
representatives made by either party other than those contained herein. The
validity, interpretation, performance and enforcement of the Agreement shall
be governed by the laws of the State of Maryland. The headings contained
herein are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
-8-
<PAGE>
In WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
/s/ Anita M. Stutzman
- ------------------------------
Anita M. Stutzman, Executive
Including the Addendum to this
Employment Agreement dated
30 January 1994
COMSAT CORPORATION
By:/s/ Bruce L. Crockett
- --------------------------------
Bruce L. Crockett
President and Chief Executive
Officer
CTS AMERICA, INC.
By:/s/ Richard E. Thomas
- ------------------------
Richard E. Thomas
President
-9-
<PAGE>
In consideration of the employment agreement executed this 30th day of
January, 1994, by and among COMSAT Corporation, a District of Columbia
corporation ("COMSAT"), CTS America, Inc., a Delaware corporation and a wholly-
owned subsidiary of COMSAT ("CTS"), and the undersigned officer of Radiation
Systems, Inc. ("RSI") (the "Executive"), Executive hereby agrees to waive and
rescind all or such portions of the provisions of Section 7 of the amended
employment agreement between Executive and RSI as Deloitte & Touche or the
Securities and Exchange Commission determine would preclude the use of pooling
accounting in conjunction with the proposed merger of RSI with and into CTS.
/s/ Anita M. Stutzman
-----------------------------------
Executive
Dated: January 30, 1994
----------------
<PAGE>
Exhibit 10(g)
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, MD 20817
Telephone 301 214 3000
Fax 301 214 7100
Telex 197800
January 30, 1994
Board of Directors
Radiation Systems, Inc.
1501 Moran Road
Sterling, Virginia 20166
Dear Sirs:
In consideration of Radiation Systems, Inc. ("RSI") entering into an
Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), with COMSAT Corporation ("COMSAT") and CTS America, Inc. ("CTS")
which provides, among other things, that RSI will be merged into CTS upon the
terms and subject to the conditions thereof, COMSAT hereby agrees as follows
(all capitalized terms not otherwise defined herein shall have the definitions
ascribed thereto in the Merger Agreement):
1. If the Merger is consummated pursuant to the Merger Agreement, COMSAT
shall, or shall cause the Surviving Corporation to, indemnify to the fullest
extent provided in RSI's Articles of Incorporation and By-Laws as in effect on
the date hereof, the persons who are, at any time from and including the date
hereof through and including the Effective Date, the directors and officers of
RSI and the RSI ESOP trustees.
2. If the Merger is consummated pursuant to the Merger Agreement and
there is then or thereafter instituted or pending any action or proceeding
before any Federal, state or foreign court or governmental agency or other
regulatory or administrative agency or instrumentality challenging the Merger,
or otherwise seeking to restrain or prohibit consummation of the transactions
contemplated by the Merger Agreement, or seeking to impose any material
limitations on any provision of the Merger Agreement, then, in addition to the
indemnification described in paragraph 1, COMSAT shall promptly advance expenses
to the fullest extent permitted by Nevada law as if such mandatory advancement
were provided for in
<PAGE>
Board of Directors
January 30, 1994
Page 2
RSI's Articles of Incorporation except that COMSAT shall not require an
undertaking to repay such expenses as a condition to advancement.
3. COMSAT's obligation pursuant to paragraph 2 above shall terminate upon
the expiration of the relevant statute of limitations with respect to any claim
which could form the basis of an action or proceeding described in paragraph 2.
COMSAT CORPORATION
/s/ C. Thomas Faulders III
-----------------------------
By:
Its: Chief Financial Officer
<PAGE>
Exhibit 10(h)
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, MD 20817
Telephone 301 214 3000
Fax 301 214 7100
Telex 197800
January 30, 1994
Board of Directors
Radiation Systems, Inc.
1501 Moran Road
Sterling, Virginia 20166
Dear Sirs:
In consideration of Radiation Systems, Inc. ("RSI") entering into an
Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), with COMSAT Corporation ("COMSAT") and CTS America, Inc. ("CTS")
which provides, among other things, that RSI will be merged into CTS upon the
terms and subject to the conditions thereof, COMSAT hereby agrees as follows
(all capitalized terms not otherwise defined herein shall have the definitions
ascribed thereto in the Merger Agreement):
1. If the Merger is consummated pursuant to the Merger Agreement, COMSAT
shall, or shall cause the Surviving Corporation to, assume the sponsorship of
the Radiation Systems, Inc. Employee Stock Ownership Plan (the "ESOP") and
COMSAT shall cause COMSAT stock to be exchanged for the stock of RSI held by the
ESOP as provided under the Merger Agreement. If the Merger is consummated
pursuant to the Merger Agreement, COMSAT shall, or shall cause the Surviving
Corporation to, make contributions to the ESOP in an amount sufficient to
amortize the existing ESOP loans in accordance with their terms or, in COMSAT's
discretion, more rapidly. Following the Merger, participation in the ESOP may
not be extended to employees of COMSAT or its subsidiaries other than employees
of the Surviving Corporation.
2. If the Merger is consummated pursuant to the Merger Agreement, COMSAT
shall, or shall cause the Surviving Corporation to, indemnify to the fullest
extent permitted under applicable law, the ESOP trustees and all other
fiduciaries of any currently existing Plans maintained by RSI prior to the
Merger. If the Merger
<PAGE>
Board of Directors
January 30, 1994
Page 2
is consummated pursuant to the Merger Agreement, COMSAT shall extend the
coverage of COMSAT's fiduciary liability insurance to the ESOP trustees
following the Merger.
3. If the Merger is consummated pursuant to the Merger Agreement, COMSAT
shall, or shall cause the Surviving Corporation to, maintain for at least one
year following the Effective Date of the Merger the group health coverage, group
life coverage and group disability coverage as provided to RSI employees prior
to the Merger and shall provide continuation coverage under COBRA under the
group health plan to any individual who was entitled to such coverage from RSI
immediately prior to the Merger.
4. If the Merger is consummated pursuant to the Merger Agreement, each
Director of RSI (other than Richard E. Thomas) will be considered to have left
the Board of RSI as of the Effective Date of the Merger and COMSAT shall, or
shall cause the Surviving Corporation to, enter into a contract with each of the
directors of RSI (other than Richard E. Thomas) to provide the benefits
specified in the "Board of Directors Retirement/Service Compensation" program of
RSI or the present value of such benefits determined using an interest rate not
to exceed eight percent (8%) per annum.
COMSAT's obligations pursuant to this letter shall be binding on its
successors and assigns.
COMSAT CORPORATION
/s/ C. Thomas Faulders III
-----------------------------
By:
Its: Chief Financial Officer
<PAGE>
EXHIBIT 23(a)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of COMSAT Corporation on Form S-4 of our report dated February 16, 1994,
appearing in the Annual Report on Form 10-K, as amended on Form 10-K/A, of
COMSAT Corporation for the year ended December 31, 1993 and to the reference to
us under the heading "Experts" in the Prospectus, which is part of this
Registration Statement.
DELOITTE & TOUCHE
Washington, D.C.
May 2, 1994
<PAGE>
EXHIBIT 23(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of COMSAT Corporation
on Form S-4 of our report dated August 20, 1993, relating to the consolidated
financial statements of Radiation Systems, Inc., appearing in the Proxy
Statement/Prospectus, which is part of this Registration Statement, and to the
incorporation by reference in this Registration Statement of our report dated
August 20, 1993, appearing in the Annual Report on Form 10-K of Radiation
Systems, Inc. for the year ended June 30, 1993 (as amended by Amendment Nos. 1,
2 and 3 thereto) and to the reference to us under the heading "Experts" in the
Proxy Statement/Prospectus, which is part of this Registration Statement.
DELOITTE & TOUCHE
Washington, D.C.
May 2, 1994
<PAGE>
EXHIBIT 23(e)
CONSENT OF ALEX. BROWN & SONS INCORPORATED
We hereby consent to the inclusion of our opinion letter dated January 30,
1994 to the Board of Directors of Radiation Systems, Inc. as Exhibit C to the
Proxy Statement-Prospectus which forms a part of the Registration Statement on
Form S-4 relating to the proposed merger of Radiation Systems, Inc. with and
into CTS America, Inc., a wholly-owned subsidiary of Comsat Corporation, and to
the references to such opinion in such Proxy Statement-Prospectus under the
captions "SUMMARY -- Opinion of RSi's Financial Advisor" and "THE MERGER --
Background of the Merger," "-- Recommendation of the RSi Board of Directors;
RSi's Reasons for the Merger" and "-- Opinion of RSi's Financial Advisor." In
giving such consent, we do not admit and we disclaim that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, or the rules and regulations issued by the Securities
and Exchange Commission thereunder.
Alex. Brown & Sons Incorporated
By: /s/ PATRICK J. KERINS
--------------------------------------
Baltimore, Maryland
May 2, 1994
<PAGE>
RADIATION SYSTEMS, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
JUNE 3, 1994
The undersigned hereby appoints Richard E. Thomas, Anita M. Stutzman and
Harold Aryai Siegel, and each of them, with full power of substitution, proxies
for the undersigned to represent and to vote all shares of common stock of
Radiation Systems, Inc. ("RSi") which the undersigned would be entitled to vote,
as fully as the undersigned could vote and act if personally present, at the
Special Meeting of Stockholders to be held on June 3, 1994, and all adjournments
thereof. The proxies are authorized to vote in their discretion upon all other
matters properly brought before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
For the approval and adoption of an Agreement and Plan of Merger, dated as
of January 30, 1994, among RSi, COMSAT Corporation ("COMSAT"), and CTS America,
Inc., a wholly owned subsidiary of COMSAT ("CTS America"), pursuant to which:
(a) RSi will merge into CTS America, and CTS America will be the surviving
corporation (the "Merger"), and (b) each share of common stock, par value $1.00
per share, of RSi issued and outstanding immediately prior to the effective date
of the Merger, other than shares held by RSi, COMSAT or a subsidiary of RSi or
of COMSAT, shall be converted into that fraction (the "Conversion Fraction") of
a fully paid and non-assessable share of the common stock, without par value, of
COMSAT ("COMSAT Common Stock") determined by dividing $18.25 by the average
closing price of the COMSAT Common Stock on the New York Stock Exchange
Composite Tape during the 20 trading days ending five trading days prior to the
closing date of the Merger; PROVIDED, that the Conversion Fraction shall not be
less than .638 and shall not be greater than .780, and that cash shall be paid
in lieu of fractional shares, all as described in the Proxy Statement/Prospectus
of RSi and COMSAT.
/ / FOR / / AGAINST / / ABSTAIN
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
(Continued on the Reverse Side)
<PAGE>
The undersigned hereby acknowledges receipt of the Notice of Special Meeting
of Stockholders and the Proxy Statement/Prospectus. Any proxy heretofore given
to vote said common stock is hereby revoked. The undersigned hereby ratifies and
confirms all that said proxies or their substitutes may lawfully do by virtue
hereof. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE PROPOSAL.
Please complete, date and sign your
name(s) as it appear(s) to the left
and return in the enclosed
envelope. If acting as an executor,
administrator, trustee, guardian,
etc., you should so indicate when
signing. If the signer is a
corporation, please sign the full
corporate name, by a duly
authorized officer. If shares are
held jointly, each stockholder
named should sign.
Date _______________________ , 1994
Signature _________________________
Signature _________________________
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS OF
RADIATION SYSTEMS, INC.
IMPORTANT-- Please sign, date and return this Proxy in the enclosed envelope,
which requires no postage if mailed in the United States.
<PAGE>
EXHIBIT 99(c)
To: Participants in the Radiation Systems, Inc.
Employee Stock Ownership Plan
A Special Meeting of Stockholders of Radiation Systems, Inc.
("RSi") will be held at 10:00 a.m. on Friday, June 3, 1994 to consider and
vote upon a proposal to approve and adopt the merge agreement between RSi,
CTS America, Inc. ("CTS America"), and COMSAT Corporation ("COMSAT") providing
for the merger of RSi into a subsidiary of COMSAT (the "Merger").
As a participant in the Radiation Systems, Inc. Employee Stock
Ownership Plan (the "ESOP"), you are entitled to instruct the Trustees of the
ESOP in the voting of the shares of common stock of RSi allocated to your
account under the ESOP. You may instruct the Trustees to vote your shares "for"
the Merger or "against" the Merger or to abstain from voting your shares. A
direction to abstain from voting will have the effect of directing the Trustees
to vote your shares against the Merger.
An affirmative vote by the holders of a majority of the
outstanding shares of RSi common stock is necessary for the approval of the
merger agreement and the transactions contemplated thereby.
Under the terms of the merger agreement RSi common stock
outstanding immediately prior to the effective date of the Merger (including the
881,072 shares held by the ESOP) will be converted into COMSAT common stock.
The amount of COMSAT stock that the ESOP will receive will be determined by
multiplying the number of RSi shares held by the ESOP by a fraction determined
by dividing $18.25 by the average closing price of COMSAT common stock on the
New York Stock Exchange during the 20 trading days ending five trading days
prior to the closing date of the Merger (the "Conversion Fraction"). The
Conversion Fraction, however, will not be less than .638 and will not be greater
than .780. If the stockholders of RSi approve the transaction, RSi and COMSAT
intend to close the Merger on the day of the Special Meeting.
Following the Merger, RSi will be combined with COMSAT's existing
systems integration business, COMSAT Technology Services, to form COMSAT RSI,
which will pursue opportunities in satellite and other wireless communications,
radar, scientific and related special application markets.
COMSAT has agreed to (i) assume the sponsorship of the ESOP;
(ii) make contributions to the ESOP in an amount sufficient to continue to make
payments on the existing bank loans to the ESOP in accordance with their terms
or, in COMSAT's discretion, more rapidly; and (iii) limit participation in the
ESOP to persons who are employed by CTS America.
<PAGE>
The enclosed Proxy Statement/Prospectus describes in greater
detail the transaction to be considered and voted upon. Please give this
information your careful consideration and promptly complete, sign, date and
return the enclosed Directions to Trustees in the enclosed envelope. TO BE
EFFECTIVE, YOUR DIRECTIONS TO TRUSTEES MUST BE RECEIVED BY WACHOVIA BANK OF
NORTH CAROLINA, N.A., AT THE ADDRESS BELOW BY THE CLOSE OF BUSINESS (5:00 P.M.
EDT) ON JUNE 2, 1994. DIRECTIONS TO TRUSTEES RECEIVED AFTER THE CLOSE OF
BUSINESS ON JUNE 2, 1994, OR RECEIVED AT AN ADDRESS OTHER THAN THAT LISTED
BELOW, WILL NOT BE EFFECTIVE. Your directions, once given, may be revoked only
by completing and delivering new Directions to Trustees TO WACHOVIA BANK OF
NORTH CAROLINA, N.A. BY THE CLOSE OF BUSINESS (5:00 P.M. EDT), JUNE 2, 1994.
Your individual directions will not be disclosed to COMSAT, RSi or the ESOP
trustees and will be tabulated by Wachovia Bank of North Carolina, N.A.
By Regular Or Express Mail
Wachovia Corporate Trust
301 North Church, Second Floor
Winston-Salem, NC 27102
Attn: Stock Transfer
The enclosed Directions to Trustees applies only to the shares
allocated to your account under the ESOP. If you own other RSi shares, please
follow the instructions in the Proxy Statement/Prospectus regarding voting of
those shares.
THE TRUSTEES OF THE ESOP WILL VOTE THE SHARES ALLOCATED TO YOUR
ACCOUNT UNDER THE ESOP IN THE MANNER YOU DIRECT. IF NO DIRECTION IS GIVEN, THE
TRUSTEES WILL VOTE THE SHARES ALLOCATED TO YOUR ACCOUNT IN A MANNER WHICH IS
PROPORTIONATE WITH THE VOTING OF THE ALLOCATED SHARES FOR WHICH DIRECTIONS HAVE
BEEN RECEIVED UNLESS, IN THE TRUSTEES' OPINION, SUCH ACTION WOULD BE
INCONSISTENT WITH THEIR FIDUCIARY DUTIES TO THE ESOP OR OTHERWISE INCONSISTENT
WITH APPLICABLE REGULATIONS.
Sincerely,
----------------------------------
Mark D. Funston, Trustee
----------------------------------
George Reed, Trustee
----------------------------------
Anita M. Stutzman, Trustee
Enclosures
-2-
<PAGE>
RADIATION SYSTEMS, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
DIRECTIONS TO TRUSTEES
REGARDING VOTING OF ALLOCATED SHARES
IN CONNECTION WITH SPECIAL MEETING OF STOCKHOLDERS
With respect to the shares of common stock of Radiation Systems,
Inc. ("RSi") allocated to my account under the Radiation Systems, Inc. Employee
Stock Ownership Plan (the "ESOP"), the Trustees of the ESOP are directed to vote
as instructed with respect to the proposal set forth below at the Special
Meeting of Stockholders of RSi on June 3, 1994, and to act in their discretion
upon all other matters properly brought before the Special Meeting.
PROPOSAL TO BE VOTED UPON: The approval and adoption of an
Agreement and Plan of Merger, dated as of January 30, 1994, among RSi, COMSAT
Corporation ("COMSAT"), and CTS America, Inc., a wholly-owned subsidiary of
COMSAT ("CTS America"), pursuant to which: (a) RSi will merge into CTS America,
and CTS America will be the surviving corporation (the "Merger"), and (b) each
share of common stock, par value $1.00 per share, of RSi issued and outstanding
immediately prior to the effective date of the Merger, other than shares held by
RSi, COMSAT or a subsidiary of RSi or of COMSAT, shall be converted into that
fraction (the "Conversion Fraction") of a fully paid and non-assessable share of
the common stock, without par value, of COMSAT ("COMSAT Common Stock")
determined by dividing $18.25 by the average closing price of the COMSAT Common
Stock on the New York Stock Exchange Composite Tape during the 20 trading days
ending five trading days prior to the closing date of the Merger; provided,
that the Conversion Fraction shall not be less than .638 and shall not be
greater than .780, and that cash shall be paid in lieu of fractional shares,
all as described in the Proxy Statement/Prospectus of RSi and COMSAT.
PLEASE VOTE THE SHARES OF RSI COMMON STOCK ALLOCATED TO MY
ACCOUNT UNDER THE ESOP AS FOLLOWS ON THE PROPOSAL:
____ ____ ____
FOR THE MERGER /___/ AGAINST THE MERGER /___/ ABSTAIN /___/
<PAGE>
I HAVE RECEIVED THE NOTICE OF SPECIAL MEETING OF STOCKHOLDERS AND
THE PROXY STATEMENT/PROSPECTUS.
ANY DIRECTION THAT I HAVE PREVIOUSLY GIVEN TO THE TRUSTEES
REGARDING THE VOTING OF THE SHARES ALLOCATED TO MY ACCOUNT UNDER THE ESOP IS
HEREBY REVOKED.
WHEN THIS FORM IS PROPERLY SIGNED, THE TRUSTEES OF THE ESOP WILL
VOTE THE SHARES ALLOCATED TO YOUR ACCOUNT AS DIRECTED. YOUR DIRECTIONS, ONCE
GIVEN, MAY BE REVOKED ONLY BY COMPLETING A NEW DIRECTION TO TRUSTEES AND
DELIVERING IT TO WACHOVIA BANK OF NORTH CAROLINA, N.A. IF NO DIRECTION IS
GIVEN, THE TRUSTEES WILL VOTE THE SHARES ALLOCATED TO YOUR ACCOUNT IN A MANNER
THAT IS PROPORTIONATE WITH THE VOTING OF THE ALLOCATED SHARES FOR WHICH
DIRECTIONS HAVE BEEN RECEIVED UNLESS, IN THE TRUSTEES' OPINION, SUCH ACTION
WOULD BE INCONSISTENT WITH THEIR FIDUCIARY DUTIES TO THE RADIATION SYSTEMS, INC.
EMPLOYEE STOCK OWNERSHIP PLAN OR OTHERWISE INCONSISTENT WITH APPLICABLE
REGULATIONS.
Date: , 1994
---------------------
Signature
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(Please sign exactly as
name appears to the left)
PLEASE SIGN, DATE, AND RETURN THIS
FORM IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES.
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