<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED
BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
COMSAT CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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[LOGO OF COMSAT CORPORATION APPEARS HERE]
July 15, 1997
Dear Shareholder:
The 1997 Annual Meeting of Shareholders will be held at 9:30 a.m. on Friday,
August 15, 1997, at the Performing Arts Center, Montgomery College, 51
Mannakee Street, Rockville, Maryland. The matters on the meeting agenda are
described on the following pages.
If you are a shareholder of record, we urge that you send in your proxy
promptly for the Annual Meeting whether or not you plan to attend. Giving your
proxy will not affect your right to vote in person if you attend. If you wish
to give a proxy to someone other than the persons named on the enclosed proxy
form, you may cross out their names and insert the name of some other person
who will be at the meeting. The signed proxy form then should be given to that
person for his or her use at the meeting. If your shares are held in the name
of a broker and you wish to attend the meeting, you should obtain a letter of
identification from your broker and bring it to the meeting. In order to vote
personally shares held in the name of your broker, you must obtain from the
broker a proxy issued to you.
We wish to thank C.J. Silas, COMSAT's former Chairman of the Board, and
Dolores D. Wharton, who resigned as Directors in 1997, and Arthur Hauspurg and
Howard M. Love, who have decided not to stand for re-election at the 1997
Annual Meeting, for their many years of distinguished service to the
Corporation as Directors.
A map and directions by car and the Washington Metro to the Montgomery
College Performing Arts Center, the location for the 1997 Annual Meeting,
appear at the end of the proxy statement.
Sincerely,
/s/ Edwin I. Colodny /s/ Betty C. Alewine
Edwin I. Colodny Betty C. Alewine
Chairman of the Board President and Chief Executive
Officer
YOUR PROXY IS IMPORTANT . . . PLEASE VOTE PROMPTLY
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of
COMSAT CORPORATION:
The 1997 Annual Meeting of Shareholders of COMSAT Corporation will be held
at the Performing Arts Center, Montgomery College, 51 Mannakee Street,
Rockville, Maryland, on August 15, 1997, at 9:30 a.m., Eastern Daylight Time,
for the following purposes:
1. election of 12 directors;
2. action on a proposal to amend the Non-Employee Directors Stock Plan to
(i) authorize the grant of share awards or phantom stock units in lieu
of the annual cash retainer for Directors, and (ii) authorize the
Chairman of the Board of Directors to elect to receive stock or stock
options in lieu of all or a portion of his or her annual cash
compensation;
3. appointment of independent public accountants;
4. action on a shareholder proposal to recommend that the Corporation
affirm its political non-partisanship and require the reporting of
certain practices; and
5. action on such other matters as may properly come before the meeting or
any reconvened session thereof.
The Board of Directors has fixed the close of business on July 8, 1997, as
the record date for the determination of shareholders entitled to notice of
and to vote at the meeting and at any reconvened session thereof.
YOUR PROXY IS IMPORTANT TO ENSURE A QUORUM AT THE MEETING. EVEN IF YOU HOLD
ONLY A FEW SHARES, AND WHETHER OR NOT YOU EXPECT TO BE PRESENT, YOU ARE
URGENTLY REQUESTED TO DATE, SIGN AND MAIL THE ENCLOSED PROXY IN THE POSTAGE-
PAID ENVELOPE THAT IS PROVIDED. THE PROXY MAY BE REVOKED BY YOU AT ANY TIME,
AND THE GIVING OF YOUR PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF
YOU ATTEND THE MEETING.
This notice is given pursuant to direction of the Board of Directors.
/s/ Warren Y. Zeger
Warren Y. Zeger
Vice President, General
Counsel and Secretary
Bethesda, Maryland
July 15, 1997
<PAGE>
COMSAT CORPORATION
6560 Rock Spring Drive
Bethesda, Maryland 20817
Telephone: (301) 214-3000
PROXY STATEMENT
This Proxy Statement is provided by the Board of Directors of COMSAT
Corporation (the Corporation or COMSAT) in connection with its solicitation of
proxies for the 1997 Annual Meeting of Shareholders. The Proxy Statement is
first being mailed on or about July 15, 1997.
Shareholders of record of the Corporation's common stock, without par value
(Common Stock), at the close of business on July 8, 1997 are entitled to vote
at the meeting in person or by proxy. Each share is entitled to one vote.
Shareholders may cumulate votes in the election of directors. The number of
shares printed on the accompanying proxy card includes, when applicable,
shares held in the Corporation's INVESTORS Plus Dividend Reinvestment and
Share Purchase Plan, Savings and Profit-Sharing Plan, and Employee Stock
Purchase Plan.
If a proxy in the accompanying form is properly executed and returned, the
shares represented by the proxy will be voted as the shareholder specifies. A
shareholder may revoke a proxy at any time before it is exercised by
submitting a written revocation, submitting a later-dated proxy, or voting in
person at the meeting.
Abstentions and broker non-votes will not be counted for purposes of
determining whether any given proposal has been approved by the shareholders.
Accordingly, abstentions and broker non-votes will not affect the votes on any
of the proposals, all of which require for approval the affirmative vote of a
majority of the shares represented and entitled to vote at the meeting.
OWNERSHIP OF COMMON STOCK
As of July 8, 1997, the record date, approximately 49,160,000 shares of
Common Stock were outstanding, of which 20,824 were Series II shares (held by
communications common carriers authorized to hold shares by the Federal
Communications Commission) and approximately 49,140,000 were Series I shares
(held by other persons).
To the knowledge of the Corporation, based upon Schedules 13G or 13D filed
with the Securities and Exchange Commission (the SEC) as of June 1, 1997, the
following persons reported beneficial ownership of more than five percent of
the Corporation's Common Stock.
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- ----------------------------- -------------------- --------
<S> <C> <C>
Capital Group Companies, Inc. 2,567,100(1) 5.3%
333 South Hope Street
Los Angeles, CA 90071
Ryback Management Corporation 2,591,400(2) 5.4%
7711 Carondelet Avenue
Box 16900
St. Louis, MO 63105
Travelers Group, Inc. 4,100,425(3) 8.4%
Smith Barney Holdings Inc.
388 Greenwich Street
New York, NY 10013
</TABLE>
- --------
(1) The Capital Group Companies, Inc., a parent holding company of a group of
investment management companies, reported indirect sole voting power with
respect to 2,282,500 shares and indirect sole dispositive power with
respect to 2,567,100 shares. The Capital Group Companies, Inc. disclaims
beneficial ownership of all of the shares reported.
(2) Ryback Management Corporation reported sole voting and dispositive power
with respect to 2,591,400 shares held in a fiduciary capacity by Ryback
Management Corporation and/or the Lindner Investment Series Trust.
(3) Travelers Group, Inc. and Smith Barney Holdings Inc. reported shared
voting and dispositive power with respect to 4,100,425 and 3,810,425
shares, respectively. The Travelers Group, Inc. and Smith Barney Holding
Inc. both disclaim beneficial ownership of the shares reported.
There are certain limitations on ownership of the Corporation's Common Stock
that are intended to ensure that the Common Stock is widely held. The
Communications Satellite Act of 1962, as amended (the Satellite Act), provides
that no stockholder (other than communications common carriers authorized to
hold shares by the Federal Communications Commission), or any syndicate or
affiliated group of stockholders, may own more than 10 percent of the
aggregate number of outstanding shares of Common Stock. The Corporation's
Articles of Incorporation authorize the Board to establish an ownership
limitation below the 10 percent statutory maximum. Pursuant to this authority,
the Board has set the ownership limitation at 10 percent and has also
established a voting limitation of 5 percent pursuant to which shares owned in
excess of the 5 percent limitation, but not in excess of the 10 percent
limitation, may not be voted by the holder but will be voted pro rata with all
other shares of Common Stock voted on any given matter.
ITEM 1. ELECTION OF DIRECTORS
BOARD OF DIRECTORS
The Satellite Act provides that the Corporation's Board of Directors shall
consist of 15 directors, of whom 12 are to be elected annually by the
shareholders for terms of one year and three are to be appointed by the
President of the United States, with the advice and consent of the United
States Senate, for terms of three years and, in each case, until their
successors have been appointed and qualified.
The Board met 10 times in 1996. All incumbent directors, except Messrs.
Eagleburger and Knight, attended 75% or more of Board meetings and meetings of
Board committees of which they were members in 1996.
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VOTING FOR DIRECTORS
At the meeting 12 directors will be elected to serve until the 1998 Annual
Meeting. As provided in the Satellite Act, because the Series II shares
outstanding at the record date constituted less than 8 percent of the total
outstanding shares, all shareholders will vote together for the election of
directors.
Subject to the voting limitation of 5 percent described above, each
shareholder may vote the number of shares held by such shareholder for each of
12 nominees. Alternatively, the shareholder may cumulate such votes; that is,
give one nominee a number of votes equal to the number of the shareholder's
shares multiplied by 12 or distribute such votes among any number of nominees
not exceeding 12.
The Board of Directors has authorized the management to solicit proxies in
favor of the election of the 12 nominees whose biographical information is set
forth under the caption "Nominees For Election As Directors." Each of the
nominees currently serve as directors, except Ms. Turner and Messrs. Bennett,
Schafran and Wyser-Pratte. Biographical information for the Presidentially
appointed directors is set forth under the caption "Presidentially Appointed
Directors."
Shares represented by proxies in the accompanying form will be voted for the
12 stated nominees unless the proxy is otherwise marked. If any of these
nominees becomes unavailable for election, which is not currently anticipated,
shares represented by proxies in the accompanying form will be voted for a
substitute nominee designated by the proxy holders. The proxy holders may in
their discretion vote the shares cumulatively for fewer than 12 of the
nominees.
REQUIREMENTS FOR NOMINATIONS AND SHAREHOLDER PROPOSALS
The Corporation's By-laws require that shareholders provide advance notice
of director nominations or proposals which they would like to have brought
before an annual meeting of shareholders. A shareholder generally must deliver
certain information concerning himself and any director nomination or
shareholder proposal to the Corporation not less than 60 nor more than 90 days
prior to the anniversary date of the immediately preceding annual meeting of
shareholders (the Anniversary Date). In the event that the annual meeting is
scheduled to be held on a date more than 30 days before or after the
Anniversary Date, such information must be received by the Corporation no
later than the close of business on the 10th day following the day on which
notice of the date of the annual meeting was mailed or public disclosure of
the date of the annual meeting was made, whichever first occurs. On April 21,
1997, the Corporation issued a press release announcing, among other things,
the date of the 1997 Annual Meeting. Accordingly, nominations by shareholders
for director and proposals by shareholders were required to be received no
later than May 1, 1997 to be considered at the 1997 Annual Meeting.
In addition, a director nominee must file with the Secretary a statement of
his or her interests in communications common carriers in such reasonable
detail as the Board of Directors may require. The form of such statement will
be provided by the Secretary upon written request.
A list of persons whose nominations have been duly proposed in accordance
with the By-laws and not withdrawn will be provided to any shareholder upon
written request to the Secretary. Such list, together with the statement of
interests filed by each such person, also may be inspected by any shareholder
(1) at the office of the Secretary, 6560 Rock Spring Drive, Bethesda, Maryland
20817, during normal business hours from the date of this Proxy Statement
until the date of the meeting, and (2) at the place of the meeting during the
meeting.
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NOMINEES FOR ELECTION AS DIRECTORS
BETTY C. ALEWINE, 49, has been President and Chief
Executive Officer of COMSAT since July 1996. She was
President, COMSAT International Communications from
January 1995 to July 1996, and was President, COMSAT [PICTURE]
World Systems from May 1991 to January 1995. She joined
COMSAT from MCI Communications Corporation in 1986 and
has been a director since July 1996. She is a member of
the President's National Security Telecommunications
Advisory Council (NSTAC) and the Inter-American
Development Bank Advisory Council.
MARCUS C. BENNETT, 61, is Executive Vice President and
Chief Financial Officer and a director of Lockheed Martin
Corporation. He joined Martin Marietta Corporation in [PICTURE]
1959 and has held various administrative and finance
positions with Martin Marietta and Lockheed Martin
Corporation. He also is a director of Carpenter
Technology, Inc. and Martin Marietta Materials, Inc. and
a member of the board of directors of the Private Sector
Council and the Georgia Tech Advisory Board.
LUCY WILSON BENSON, 69, has been a director of various
business, educational and nonprofit organizations since
1980. She was Under Secretary of State for Security
Assistance, Science and Technology from 1977 to 1980. She [PICTURE]
has been a COMSAT director since September 1987. She also
is a director of General Re Corporation and Logistics
Management Institute, a trustee of the Alfred P. Sloan
Foundation and Vice Chairman of the Atlantic Council of
the U.S. and Vice Chairman of the Board of Trustees of
Lafayette College. She also is a director or trustee of
funds of The Dreyfus Corporation.
EDWIN I. COLODNY, 71, has been Chairman of the Board of
COMSAT since April 1997 and a director since May 1992. He
was Chairman of USAir Group, Inc. and of its subsidiary,
USAir, Inc., a commercial airline company, from 1978
until July 1992 and was a director of both corporations [PICTURE]
until May 1997. He was Chief Executive Officer of USAir
Group from 1983 to June 1991 and of its subsidiary from
1975 to June 1991. He also is a director of Esterline
Technologies Corporation. He has served as counsel to the
Washington, D. C., law firm of Paul, Hastings, Janofsky
and Walker since September 1991.
LAWRENCE S. EAGLEBURGER, 66, has been Senior Foreign
Policy Advisor for Baker, Donelson, Bearman & Caldwell, a
Washington, D.C., law firm, since January 1993. He
previously served as United States Secretary of State
from December 1992 through January 1993, Acting Secretary [PICTURE]
of State from August 1992 to December 1992, and Deputy
Secretary of State from February 1989 to August 1992. He
has been a COMSAT director since May 1995. He also is a
director of Corning Incorporated, Dresser Industries,
Inc., Jefferson Bankshares, Inc., Phillips Petroleum
Company, Stimsonite Corporation and Universal
Corporation.
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NEAL B. FREEMAN, 57, has been Chairman and Chief
Executive Officer of The Blackwell Corporation, a
television production and distribution company, since
1981. He was a Presidentially appointed COMSAT director [PICTURE]
from November 1983 to September 1988 and has been an
elected director since May 1991. He also is Vice Chairman
of The Ethics and Public Policy Center and a director of
National Review, Inc. and Infosafe Systems, Inc.
CALEB B. HURTT, 65, is a director or trustee of various
organizations. He was President of Martin Marietta
Aerospace from 1982 to 1987 and then President and Chief
Operating Officer of Martin Marietta Corporation from
1987 through 1989. He is a director of Lockheed Martin [PICTURE]
Corporation and is Vice Chairman of the Board of Trustees
of Stevens Institute of Technology. He also has served as
Chairman of the Board of Governors of the Aerospace
Industries Association, as Chairman of the NASA Advisory
Council and as Chairman of the Federal Reserve Bank,
Denver Branch. He has been a COMSAT director since May
1996.
PETER W. LIKINS, 61, has been President of Lehigh
University since 1982. He was Provost of Columbia
University from 1980 to 1982 and Professor and Dean of
the Columbia University School of Engineering and Applied [PICTURE]
Science from 1976 to 1980. He has been a COMSAT director
since September 1987. He also is a director of Parker
Hannifin, Inc. and Safeguard Scientifics, Inc. and a
trustee of Consolidated Edison Company of New York, Inc.
LARRY G. SCHAFRAN, 59, has been the Managing General
Partner of L.G. Schafran & Associates, a real estate
investment and development firm, since 1984. He is a
director and the Chairman of the Executive Committee of [PICTURE]
Dart Group Corporation and a director of its publicly-
traded affiliates: Trak Auto Corporation and Crown Books
Corporation. He also is a director of Publicker
Industries Inc., Capsure Holdings Corp. and Glasstech,
Inc., a trustee of National Income Realty Trust and
Chairman of the board of directors of Delta-Omega
Technologies, Inc.
ROBERT G. SCHWARTZ, 69, is a director or trustee of
various business organizations. He was Chairman of the
Board, President and Chief Executive Officer of
Metropolitan Life Insurance Co. (MetLife) from September [PICTURE]
1989 to March 1993 and remains a director of MetLife. He
was Chairman of the Board of MetLife from February 1983
to September 1989. He has been a COMSAT director since
May 1986. He also is a trustee of Consolidated Edison
Company of New York, Inc. and a director of Lone Star
Industries, Inc., Lowe's Companies, Inc., Mobil Oil
Corporation, Potlatch Corporation and The Reader's Digest
Association, Inc.
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KATHRYN C. TURNER, 50, is the founder and principal
shareholder of Standard Technology, Inc., a high-
technology, engineering and systems integration firm. She
previously has been appointed by the President to serve
on the President's Export Council, the Eximbank Advisory [PICTURE]
Committee, and the Commission on the Future of Worker-
Management Relations and by the Secretary of Defense to
the Defense Policy Advisory Committee on Trade. She also
is a director of Phillips Petroleum Company and Carpenter
Technology Corporation.
GUY P. WYSER-PRATTE, 57, is President of Wyser-Pratte &
Co., Inc. and Wyser-Pratte Management Co., Inc. He also
serves on the board of directors of the International [PICTURE]
Rescue Committee, a non-governmental international
refugee organization, and as a trustee of the U.S. Marine
Corps University Foundation.
PRESIDENTIALLY APPOINTED DIRECTORS
PETER S. KNIGHT, 46, is a partner in the law firm of
Wunder, Knight, Levine, Thelen & Foresey in Washington,
D.C. In 1996, Mr. Knight took a leave of absence from his
firm to serve as Campaign Manager for Clinton/Gore '96.
From 1989 to 1991, he was General Counsel and Secretary [PICTURE]
of Medicis Pharmaceutical Corporation. From 1977 to 1989,
he served as the Chief of Staff to Congressman and later
Senator Al Gore. He has been a Presidentially appointed
COMSAT director since September 1994. He also is a
director of Medicis Pharmaceutical Corporation, the
Whitman Education Group, and the Schroeder Series Trust.
His current term expires at the 1999 Annual Meeting.
CHARLES T. MANATT, 61, is the senior partner of Manatt,
Phelps & Phillips, a Washington, D.C., and Los Angeles
law firm which he founded in 1965. He was Chairman of the [PICTURE]
Democratic National Committee from 1981 through 1985. He
has been a Presidentially appointed COMSAT director since
May 1995. He also is a director of the Federal Express
Corporation and ICN Pharmaceuticals, Inc. His current
term expires at the 1997 Annual Meeting.
The third Presidentially appointed director position is currently vacant
pending nomination and confirmation of a successor to fill the vacancy.
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OTHER INFORMATION CONCERNING DIRECTORS
COMMITTEES
The Board currently has five standing committees, described below.
The Committee on Audit, Corporate Responsibility and Ethics consists of Lucy
Wilson Benson (Chairman), Edwin I. Colodny, Lawrence S. Eagleburger, Peter W.
Likins, Howard M. Love and Charles T. Manatt. The Committee makes
recommendations to the Board concerning the selection of independent public
accountants; reviews with the independent accountants the scope of their
audit; reviews the financial statements with the independent accountants;
reviews with the independent accountants and the Corporation's management and
internal auditors the Corporation's accounting and audit practices and
procedures, its internal controls and its compliance with laws and
regulations; and reviews the Corporation's policies regarding community and
governmental relations, conflicts of interest, business conduct, ethics and
other social, political and public matters, and the administration of such
policies. The Committee met seven times during 1996.
The Committee on Compensation and Management Development consists of Caleb
B. Hurtt (Chairman), Neal B. Freeman, Peter S. Knight and Robert G. Schwartz.
The Committee approves long-term compensation for senior executives; considers
and makes recommendations to the Board with respect to programs for human
resources development and management organization and succession; recommends
salary and bonus awards for senior executives; reviews compensation policies
and employee benefit and incentive plans; and exercises authority granted to
it to administer such plans. The Committee met 11 times during 1996.
The Finance and Planning Committee consists of Robert G. Schwartz
(Chairman), Betty C. Alewine, Neal B. Freeman, Arthur Hauspurg, Peter S.
Knight and Howard M. Love. The Committee considers and makes recommendations
to the Board with respect to the financial affairs of the Corporation,
including matters relating to capital structure and requirements, financial
performance, dividend policy, capital and expense budgets and significant
capital commitments, strategic business planning, and such other matters as
may be referred to it by the Board, the Chairman of the Board or the Chief
Executive Officer. The Committee met six times during 1996.
The Nominating and Corporate Governance Committee consists of Edwin I.
Colodny (Chairman), Arthur Hauspurg and Robert G. Schwartz. The Committee
recommends to the Board qualified candidates for election as directors and as
Chairman of the Board, and considers, acts upon or makes recommendations to
the Board with respect to such other matters as may be referred to it by the
Board, the Chairman of the Board or the Chief Executive Officer. The Committee
met three times during 1996. It will consider candidates recommended by
shareholders, if the recommendations are submitted in writing to the Secretary
of the Corporation.
The Committee on Research and International Matters consists of Peter W.
Likins (Chairman), Lucy Wilson Benson, Lawrence S. Eagleburger, Caleb B.
Hurtt, Peter S. Knight and Charles T. Manatt. The Committee considers and
makes recommendations to the Board with respect to the research and
development programs of the Corporation and the relationship of such programs
to the business of the Corporation; matters relating to the Corporation's
responsibilities and activities under the Satellite Act and the relationships
of the Corporation with international organizations such as INTELSAT and
Inmarsat or with foreign governments or entities; and such other matters as
may be referred to it by the Board, the Chairman of the Board or the Chief
Executive Officer. The Committee met three times during 1996.
DIRECTORS COMPENSATION
Directors, other than the Chairman of the Board and the President, currently
receive an annual cash retainer of $10,000 payable in equal quarterly
installments and 600 shares of the Corporation's Common Stock payable at the
first meeting of the Board of Directors after the Annual Meeting of
Shareholders. Those directors also receive a fee of $1,000 per meeting for
attending Board meetings, Board committee meetings or meetings held pursuant
to a special assignment; and, for service as chair of a Board committee, an
annual retainer of $3,000
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paid in quarterly installments. The Chairman of the Board is compensated
solely on an annual basis in the amount of $190,000 per year and 600 shares of
Common Stock. The President and Chief Executive Officer is not compensated
separately for service as a director.
If the shareholders approve the proposed amendments to the Non-Employee
Directors Stock Plan discussed under the caption "Item 2. Proposed Amendments
to Non-Employee Directors Stock Plan," beginning in 1997, in lieu of the
current annual cash retainer of $10,000 and award of 600 shares, directors
would receive an annual award of 1,000 shares of the Corporation's Common
Stock payable at the first meeting of the Board of Directors after each Annual
Meeting of Shareholders. In addition, the Chairman of the Board of Directors
would be permitted to elect to receive all or a portion of the annual cash
compensation for that position in the form of COMSAT stock or stock options.
Under the Directors and Executives Deferred Compensation Plan, a non-
employee director may elect to defer all or part of the cash retainer and
fees. Amounts deferred are credited with interest and are paid out after the
director's retirement from the Board, in a lump sum or in up to 15 annual
installments beginning not later than age 73. In the case of death, the
accumulated deferrals are paid to the director's beneficiary. For 1996, the
interest crediting rate was 12% for amounts deferred after January 1994 and
13% for amounts deferred prior to that period under the Directors and
Executives Deferred Compensation Plan; and the aggregate amount of interest
credited in respect of amounts deferred by participating directors (13
persons) was $376,496.
In 1991, each then-current participating director was given an election to
receive his or her account balance as of March 31, 1991, together with
interest accumulated on such balance to a date in the year 2000 (to the extent
that such amounts were not previously distributed), in a lump sum in the year
2000 if he or she is then an active director or a retiree receiving
installment payments. The payment would be made to the beneficiary of a
deceased electing director if such beneficiary is then receiving such
installment payments. The lump sum payment will be offset against the amounts
otherwise payable to the director or beneficiary under the Plan.
In 1992, the Directors and Executives Deferred Compensation Plan was amended
to provide an additional lump sum payment election for the additional amounts
deferred under the plan from April 1, 1991 through March 31, 1992, together
with interest accumulated on such amounts to a date in the year 2001, with
payment of the lump sum to be made in the year 2001.
Under the Split Dollar Insurance Plan, the Corporation provides to non-
employee directors, through split dollar life insurance policies, a death
benefit equal to $50,000 for each year or partial year of his or her Board
service until the benefit reaches $200,000, and then increased for each such
director (except Presidential appointees) by 5.5% for each additional year of
Board service to age 72. Such coverage continues after retirement from the
Board. For 1996, the aggregate value of split dollar life insurance premiums
paid for the benefit of all covered directors was $129,568.
Under the Non-Employee Directors Stock Plan, the Corporation grants annually
in March to each non-employee director, who was also serving on the date of
the Annual Meeting of Shareholders for the prior year, an option to purchase
shares of Common Stock. For options granted before March 16, 1990, each option
is for 2,000 shares, the exercise price per share is the fair market value of
a share of Common Stock on the date of grant, and the option expires 10 years
from the date of grant. For options granted on or after March 16, 1990, and
before March 19, 1993, each option is for 2,000 shares, the exercise price per
share is 50% of the fair market value on the date of grant, and the option
expires 15 years from the date of grant. For options granted on or after March
19, 1993, each option is for 4,000 shares, the exercise price per share is the
fair market value of a share of Common Stock on the date of grant, and the
option expires 15 years from the date of grant. All data related to shares of
Common Stock, options to purchase shares of Common Stock and share prices
prior to June 1, 1993 have been adjusted to reflect the two-for-one split in
the Corporation's Common Stock effective June 1, 1993.
All options granted before March 15, 1996 under the Non-Employee Directors
Stock Plan are currently exercisable. For options granted on or after that
date, each option becomes exercisable for 2,000 shares one year
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after the date of grant and for the remaining 2,000 shares two years after the
date of grant. If the director's service on the Board terminates by reason of
retirement at age 72, expiration of a term as a Presidentially appointed
director, failure to stand for election with the Board's consent or
resignation with the Board's consent, the option becomes fully exercisable and
continues in force for the duration of its term. If the director's service
terminates under any other circumstance except death, the option terminates
immediately. If the director dies at any time before the option terminates,
the option becomes fully exercisable and continues in force for one year after
the date of death. The option also becomes fully exercisable and continues in
force for the duration of its term in the event of certain changes in control.
A "Change of Control" includes: (1) the acquisition by any person (other than
the Corporation or an employee benefit plan sponsored by the Corporation) of
beneficial ownership of 50% or more of the outstanding voting securities of
the Corporation; (2) any change in the composition of the Board of Directors
such that the elected directors as of May 17, 1996 (the Incumbent Directors)
cease to constitute a majority of the Board (provided that any individual
whose nomination or election is approved by a vote of three-fourths of the
then Incumbent Directors shall be treated as an Incumbent Director); (3)
approval by the shareholders of a merger, share exchange, swap, consolidation,
recapitalization or other business combination which, if consummated, would
result in the Corporation's shareholders holding less than 60% of the combined
voting power of the Corporation, the surviving entity or its parent (as
applicable); (4) approval by the shareholders of the liquidation or
dissolution of the Corporation, or sale by the Corporation of all or
substantially all of the Corporation's assets, other than to an entity 80% of
the combined voting power of which would be beneficially owned by the
Corporation's then existing shareholders; or (5) any event which would have to
be reported as a "change of control" under the regulations governing the
solicitation of proxies by the SEC.
In 1996, options for a total of 56,000 shares of Common Stock were granted
to non-employee directors at a purchase price per share of $28.8125, which was
the fair market value of the Common Stock on the date of grant. In 1996, Mr.
Goldwater, a former Director, exercised options for 4,000 shares previously
granted under the plan and realized a net value (market value on exercise date
less exercise price) of $36,156.
On June 27, 1997, COMSAT distributed its ownership interest in Ascent
Entertainment Group, Inc. (Ascent) to its shareholders in the form of a
special dividend. The option amounts discussed above are the actual number of
options previously granted and have not been adjusted to give effect to the
Ascent spin-off. All outstanding options under the Non-Employee Directors
Stock Plan on that date were adjusted by multiplying the number of options
held by an adjustment ratio of 1.2402, and the exercise price for such options
was adjusted by dividing the exercise price by the same ratio. Future annual
option grants under the Non-Employee Directors Stock Plan will be in the
adjusted amount of 4,961 shares.
Executive compensation is described below under the caption "Executive
Compensation."
COMPENSATION COMMITTEE INTERLOCKS, INSIDER PARTICIPATION AND RELATED PARTY
TRANSACTIONS
There were no compensation committee interlocks or insider participation in
compensation decisions during 1996.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 9, 1997, the Corporation entered into a Settlement Agreement (the
Settlement Agreement) with Herbert A. Denton, Guy P. Wyser-Pratte and certain
other persons and entities (collectively, the Group), pursuant to which
existing disputes between the Corporation and the Group were resolved.
On May 1, 1997, certain members of the Group furnished the Corporation with
a submission dated April 30, 1997 (the Advance Notice Submission) of their
intention to (i) nominate, and solicit proxies in support of, nine candidates
to stand for election to the Board of Directors at the 1997 Annual Meeting and
(ii) propose, and solicit proxies in support of, a non-binding resolution at
the 1997 Annual Meeting (collectively, the Proxy Contest). The Settlement
Agreement, among other things, provides for the termination of the Proxy
Contest.
9
<PAGE>
Under the terms of the Settlement Agreement, four new directors will stand
for election to the Corporation's Board of Directors at the 1997 Annual
Meeting, two of whom (Mr. Bennett and Ms. Turner) have been selected by the
Board and two of whom (Messrs. Schafran and Wyser-Pratte) have been selected
by the Group. The remaining eight nominees were selected by the Corporation's
Board of Directors from among the current elected directors. The Settlement
Agreement generally provides that the Corporation will re-nominate Messrs.
Schafran and Wyser-Pratte, or designated replacement nominees for them, on the
Board's slate of candidates at the Corporation's 1998 Annual Meeting of
Shareholders (the 1998 Annual Meeting). The members of the Group agreed to
vote, and to cause their affiliates and associates to vote, their shares of
COMSAT Common Stock in favor of the agreed upon slate of nominees at the 1997
and 1998 Annual Meetings. The Corporation's Board also includes three
directors appointed by the President of the United States who serve for three-
year terms.
The Settlement Agreement further provides that following the 1997 Annual
Meeting, the Board of Directors will establish a new strategic planning
committee to be comprised of three directors to be selected by the Board, one
of whom will be Mr. Schafran. The committee will review and make
recommendations to the Corporation's full Board of Directors concerning
COMSAT's current and future business operations and strategies, and the
enhancement of shareholder value.
The Group also agreed to certain "standstill" provisions for a period ending
on the earlier of February 28, 1999 or 75 days prior to the Corporation's 1999
Annual Meeting of Shareholders. The Corporation may, under certain
circumstances, terminate the Settlement Agreement prior to the 1998 Annual
Meeting, in which case the Group's two nominees will not be included on the
Board's slate of nominees and the "standstill" provisions will terminate. The
"standstill" provisions provide, among other things, that members of the
Group, and their affiliates and associates, will not (i) acquire in excess of
5% of COMSAT's voting securities or (ii) except as otherwise specifically
provided by the Settlement Agreement, engage in any solicitation of proxies or
consents, or initiate any shareholder proposals. In addition, pursuant to the
Settlement Agreement, the Corporation has agreed to reimburse the Group for
reasonable, documented, out-of-pocket expenses in an aggregate amount not to
exceed $845,000 incurred in connection with the Proxy Contest, the Litigation
(as defined below), the solicitation by the Group of consents to hold a
special meeting of shareholders and the negotiation of the Settlement
Agreement.
As part of the Settlement Agreement, the Corporation also agreed to dismiss
as to those members of the Group who are defendants, litigation brought by the
Corporation in the United States District Court for the Eastern District of
Virginia entitled COMSAT Corporation v. Bruce L. Crockett et al. (the
Litigation). In accordance with the Settlement Agreement, the Litigation was
dismissed with prejudice as to those members of the Group who were identified
as the Group's nominees in the Advance Notice Submission and without prejudice
as to all other members of the Group who are defendants therein. COMSAT has
agreed not to reinstate the Litigation claims against such persons while the
"standstill" remains in effect.
10
<PAGE>
COMMON STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Corporation's Common Stock as of June 1, 1997, by all
directors and nominees, by each of the executive officers named in the Summary
Compensation Table under the caption "Executive Compensation," and by all
directors and executive officers as a group. Under the rules of the SEC,
beneficial ownership includes any shares over which an individual has the
right to acquire within 60 days through the exercise of any stock option or
other right.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP OF
NAME(1) COMSAT COMMON STOCK(2)
- ------- -----------------------
<S> <C>
Betty C. Alewine....................................... 319,299(3)
Marcus C. Bennett...................................... --
Lucy Wilson Benson..................................... 24,800
Edwin I. Colodny....................................... 15,000
Bruce L. Crockett...................................... 499,815(4)
Lawrence S. Eagleburger................................ 2,700
John V. Evans.......................................... 95,331(5)
Allen E. Flower........................................ 68,440(6)
Neal B. Freeman........................................ 18,400
Arthur Hauspurg........................................ 18,400
Caleb B. Hurtt......................................... 1,000
Peter S. Knight........................................ 3,000
Peter W. Likins........................................ 21,850(7)
Howard M. Love......................................... 22,300(8)
Charles Lyons.......................................... 243,678(9)
Charles T. Manatt...................................... 3,500
Larry G. Schafran...................................... 5,000(10)
Robert G. Schwartz..................................... 26,600
Kathryn C. Turner...................................... --
Richard E. Thomas...................................... 267,927(11)
Guy P. Wyser-Pratte.................................... 1,454,200(12)
Warren Y. Zeger........................................ 180,044(13)
All directors and executive officers as a group (32
persons).............................................. 3,453,439(14)
</TABLE>
- --------
(1) Unless otherwise indicated, each person has sole voting and investment
powers over the shares listed, and no director or executive officer
beneficially owns more than 1.0% of the common stock of the Corporation.
(2) Each number in this column has been rounded to the nearest whole share.
Beneficial ownership of COMSAT Common Stock includes shares that may be
acquired within 60 days after June 1, 1997 through the exercise of options
as follows: Mrs. Alewine, 231,734 shares; Mrs. Benson, 24,000 shares; Mr.
Colodny, 14,000 shares; Mr. Crockett, 465,000 shares; Mr. Eagleburger,
2,000 shares; Dr. Evans, 77,438 shares; Mr. Flower, 38,450 shares; Mr.
Freeman, 18,000 shares; Mr. Hauspurg, 14,000 shares; Mr. Knight, 2,000
shares; Dr. Likins, 19,000 shares; Mr. Love, 17,000 shares; Mr. Lyons,
191,500 shares; Mr. Manatt, 2,000 shares; Mr. Schwartz, 24,000 shares; Mr.
Thomas, 117,500 shares; Mr. Zeger, 147,644 shares; and all directors and
executive officers as a group, 1,489,291 shares. The number of option
shares and shares awarded under COMSAT benefit plans which are restricted
against transfer that are included as beneficially owned have not been
adjusted to give effect to the Ascent spin-off to COMSAT shareholders on
June 27, 1997. All outstanding options and restricted shares held on that
date were adjusted by multiplying the number of options or shares held by
an adjustment ratio of 1.2402.
(3) Includes 57,900 shares which are restricted against transfer and 921
shares which are held in the Corporation's Savings and Profit-Sharing Plan
as of March 31, 1997.
11
<PAGE>
(4) Includes 3,400 shares held by Mrs. Crockett with respect to which Mr.
Crockett disclaims beneficial ownership. Also includes 131 shares which
are held in the Corporation's Savings and Profit-Sharing Plan as of March
31, 1997. Mr. Crockett beneficially owned 1.0% of the Corporation's
outstanding Common Stock as of June 1, 1997.
(5) Includes 15,300 shares which are restricted against transfer and 837
shares which are held in the Corporation's Savings and Profit-Sharing Plan
as of March 31, 1997.
(6) Includes 14,200 shares which are restricted against transfer and 719
shares which are held in the Corporation's Savings and Profit-Sharing Plan
as of March 31, 1997.
(7) Includes 2,850 shares over which Dr. Likins shares voting power and
investment power with Mrs. Likins.
(8) Includes 2,500 shares held in a trust over which Mr. Love has no voting
and shared investment power.
(9) Includes 30,900 shares which are restricted against transfer and 876
shares which are held in the Corporation's Savings and Profit-Sharing Plan
as of March 31, 1997.
(10) Mr. Schafran disclaims beneficial ownership of the 5,000 shares, which
are held by Mrs. Schafran.
(11) Includes 104,371 shares over which Mr. Thomas shares voting power and
investment power with Mrs. Thomas. Also includes 21,750 shares which are
restricted against transfer and 6,756 shares which are held in the COMSAT
RSI, Inc. Employee Stock Ownership Plan as of December 31, 1996.
(12) Includes 1,414,200 shares owned by investment partnerships and other
managed accounts for which Wyser-Pratte Management Co., Inc. and its
affiliates are the general partner or investment manager. Mr. Wyser-
Pratte beneficially owned 3.0% of the Corporation's outstanding Common
Stock as of June 1, 1997.
(13) Includes 27,300 shares which are restricted against transfer and 847
shares which are held in the Corporation's Savings and Profit-Sharing
Plan as of March 31, 1997.
(14) Includes 8,900 shares with respect to which beneficial ownership is
disclaimed. Also includes an aggregate of 228,823 shares which are
restricted against transfer, which are held in the Corporation's Savings
and Profit-Sharing Plan as of March 31, 1997, or which are held in the
COMSAT RSI, Inc. Employee Stock Ownership Plan as of December 31, 1996.
All directors and executive officers as a group beneficially owned 6.8%
of the Corporation's outstanding Common Stock as of June 1, 1997.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Mrs. Alewine, a director and executive officer of the Corporation, reported
two transactions (the grant of options and phantom stock) on a single amended
report less than one month late due to an inadvertent staff oversight.
ITEM 2. PROPOSED AMENDMENTS TO NON-EMPLOYEE DIRECTORS STOCK PLAN
The Non-Employee Directors Stock Plan (the Plan) was adopted by the Board of
Directors and approved by the shareholders in 1988. Amendments to the Plan
were adopted and approved by the Board of Directors and the shareholders in
1990, 1993 and 1996. The Plan is described under the caption "Other
Information Concerning Directors--Directors Compensation."
The Board of Directors has adopted two amendments to the Plan that are
subject to the approval of the shareholders. The first amendment, if approved,
would provide for directors to receive all of their annual retainer in shares
of the Corporation's Common Stock, or phantom stock units (PSUs) if a director
elects to defer receipt of the shares.
Non-employee directors, except for the Chairman, currently receive an annual
cash retainer of $10,000 payable in quarterly installments and 600 shares of
the Corporation's Common Stock payable at the first meeting of the Board of
Directors after each Annual Meeting of Shareholders. If the amendment is
approved, the $10,000 annual cash retainer would be eliminated and the current
600-share stock award would be increased to 1,000
12
<PAGE>
shares beginning as of the 1997 Annual Meeting. As with the current 600-share
stock award under the Plan, the 1,000-share stock award would be paid at the
first meeting of the Board of Directors after each Annual Meeting to directors
who are elected at the Annual Meeting or who then serve as Presidential
appointees. Non-employee directors elected by the Board or appointed by the
President to fill vacancies would receive a prorated share grant based on the
number of full months such director serves between his or her election or
appointment and the next Annual Meeting.
As under the current Plan, directors may elect to defer receipt of the
annual stock award and receive PSUs in lieu thereof. The PSUs would be held in
an account for the director pending his or her retirement or termination of
service on the Board. Upon payment of a dividend on the Corporation's Common
Stock, an equivalent amount would be converted to PSUs, based on the fair
market value of the stock on the dividend payment date, and would be credited
to the director's account. The PSUs would increase or decrease in value based
on an equivalent number of shares of the Corporation's Common Stock. Upon
retirement or termination of service, a director would receive payment in
shares of the Corporation's Common Stock equal to the number of PSUs credited
to his or her account under the Plan.
If the amendment is approved, the Corporation's non-employee directors other
than Mr. Colodny, who is compensated separately as Chairman, would each
receive a stock award of 1,000 shares or a like amount of PSUs. A total of
12,000 shares or PSUs would be granted to 12 directors if the amendment is
approved; and those shares or PSUs would have had an aggregate fair market
value of $274,500 ($22,875 per director receiving an award) based on the
average of the high and low sales prices for the Corporation's Common Stock on
July 1, 1997. The actual number of shares or PSUs awarded in any year may vary
depending on the number of non-employee directors serving as of the first
Board meeting after the Annual Meeting and the timing of Presidential
appointments.
The second amendment, if approved, would permit the Chairman of the Board of
Directors to elect to receive shares of the Corporation's Common Stock or
options to purchase shares of the Corporation's Common Stock in lieu of all or
a portion of his or her annual cash compensation. The shares or stock options
would be granted on the date of each Annual Meeting of Shareholders based on
the amount of the annual cash compensation, if any, which the Chairman elects
to receive in shares or stock options. The number of shares of Common Stock
granted would be determined by dividing the amount which the Chairman elects
to receive in shares by the fair market value of the Common Stock on the date
of the grant. The number of stock options granted would be determined by
multiplying the amount which the Chairman elects to receive in options by
three and then dividing by the fair market value of the Common Stock on the
date of grant. The exercise price per share of options granted pursuant to the
Chairman's election to receive options would be the fair market value of a
share of Common Stock on the date of grant. Each option would expire 10 years
from the date of grant and would be exercisable for half of the shares covered
by the option six months after the date of grant and for the remaining half of
the shares one year after such date.
Mr. Colodny has elected to receive $90,000 of the $190,000 of annual cash
compensation payable to him as Chairman in stock options. Pursuant to his
election, he was granted options to purchase 13,000 shares of Common Stock
determined in the manner described above except that the date used to
calculate the number of options was April 29, 1997, the date of his election
as Chairman, since the Annual Meeting of Shareholders is being held in August
and not May this year. Mr. Colodny's stock option award is subject to the
approval of the Plan amendments by the shareholders.
The purpose of both amendments is to facilitate the ownership of the
Corporation's Common Stock by directors. The Board of Directors believes that
the ownership of Common Stock by directors supports the maximization of long-
term shareholder value by aligning the interests of directors with those of
the shareholders. The amendments are also consistent with recent compensation
changes adopted by the Board of Directors and the Corporation's current
executive compensation policies which are designed to align the interests of
senior management and the shareholders. See "Committee on Compensation and
Management Development Report on Executive Compensation."
13
<PAGE>
If the amendments are approved, the remaining provisions of the Plan will
continue in effect.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL. PROXIES
SOLICITED BY THE MANAGEMENT WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY A
CONTRARY CHOICE IN THEIR PROXIES. FOR APPROVAL, THE PROPOSAL REQUIRES THE
AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES REPRESENTED AND ENTITLED TO VOTE
AT THE MEETING.
COMMITTEE ON COMPENSATION AND MANAGEMENT DEVELOPMENT
REPORT ON EXECUTIVE COMPENSATION
The Committee on Compensation and Management Development, which is composed
of independent outside directors, is responsible for establishing and
administering the Corporation's executive compensation philosophy. Set forth
below is the Committee's report on the 1996 compensation of the executive
officers of the Corporation, including Mrs. Alewine and Mr. Crockett, each of
whom held the position of Chief Executive Officer for a portion of 1996, and
the other executive officers named in the Summary Compensation Table below
(the Named Executive Officers).
The Corporation's executive compensation philosophy is designed to attract,
motivate and retain talented executives critical to the long-term success of
the Corporation. The hallmark of this philosophy is to align executive
compensation more closely with the interests of shareholders through
performance incentives. The main components of this philosophy are annual
compensation, consisting of salary plus bonuses awarded under the
Corporation's Annual Incentive Plan, and long-term compensation, consisting of
stock-based incentives. The Committee reviews and recommends to the Board the
annual compensation of all executive officers, and reviews and approves
executive officers' long-term compensation. Mr. Lyons' compensation as Chief
Executive Officer of Ascent Entertainment Group, Inc. is determined by the
Ascent Board of Directors and its Compensation Committee.
There are two groups of competitive companies that are used in the executive
compensation analysis. The first group, consisting of the larger companies
that make up the Peer Group Index discussed under the caption "Performance
Graph," is used to compare executive compensation strategy and practices. The
second group, consisting of companies in the telecommunications and
entertainment industries with revenues more comparable to the Corporation's,
is used to benchmark competitive compensation levels.
During 1995, the Committee engaged an independent consultant to evaluate the
effectiveness of the executive compensation philosophy that had been in place
since 1993. Based on the consultant's report, the Committee concluded that
annual cash compensation levels for the five highest paid executives had
fallen significantly behind the market while long-term compensation levels
were above the market, with the result that total compensation (annual cash
compensation plus long-term compensation) had been achieving desired 75th
percentile positioning. However, the combination of low base salaries,
aggressive annual bonus targets and above-market long-term compensation was
causing salary compression below the executive officer level where annual
bonus and long-term compensation comprise a smaller percentage of the total
compensation package.
Beginning in 1996, the Committee decided to modify the executive
compensation philosophy to reflect a compensation mix that is more consistent
with market practice. This involves setting base salaries at competitive
levels and adjusting annual bonus targets, which are set as a percentage of
base salary, to achieve competitive cash compensation when business results
are attained. The Corporation will continue to use a mix of long-term
compensation, awarding stock options at levels consistent with the median for
the revenue group of competitive companies and performance-based restricted
stock at levels consistent with the 75th percentile for these companies if the
business achieves prescribed performance standards over the long term. The
performance of the revenue group of competitive companies, however, was not
considered in establishing these benchmark compensation levels.
14
<PAGE>
ANNUAL COMPENSATION
The independent consultant engaged in 1995 conducted an analysis of
competitive cash compensation for the Corporation's Chief Executive Officer
position at the median of the market based on comparably sized
telecommunications and entertainment companies. Based on this analysis, the
consultant recommended a base salary of $500,000 with an annual bonus target
of 70% of base salary. The Committee used this data in determining Mr.
Crockett's base salary and bonus target for 1996. Mr. Crockett's salary
remained frozen at $350,000 since January 1993. The Committee recommended that
Mr. Crockett's base salary be increased to the median of the market in two
steps, with a base salary increase to $425,000 for 1996 coupled with a bonus
target of 100% of base salary. This would produce the same level of total cash
compensation, provided the Corporation achieved targeted financial results in
1996. The Board approved the Committee's recommendation. Mr. Crockett resigned
as Chief Executive Officer effective July 19, 1996, and did not receive a cash
bonus award for 1996.
Mrs. Alewine was elected to succeed Mr. Crockett as Chief Executive Officer
of the Corporation. Upon recommendation of the Committee, the Board approved
an employment agreement for Mrs. Alewine which is summarized below under the
caption "Agreements with Executive Officers." Mrs. Alewine's annual
compensation under the employment agreement is based on the independent
consultant's recommendations for the Chief Executive Officer position. The
agreement provides for a base salary of $450,000 for the first year, with an
increase to $500,000 beginning in the second year, and for an annual bonus
target of 70% of base salary. Mrs. Alewine's 1996 bonus was prorated based on
her base salary and bonus target for the first and second halves of the year,
when she held the positions of President of COMSAT International
Communications and Chief Executive Officer, respectively. The bonus formula
for each position measures profit before tax compared to planned achievement
at the corporate and business unit level, as well as individual performance
based on the achievement of established performance goals for the year. Taking
these factors into account, the Committee recommended to the Board a 1996 cash
bonus award of $180,000 for Mrs. Alewine. The Board approved the Committee's
recommendation.
In accordance with the modifications to the Corporation's executive
compensation philosophy beginning in 1996, base salary ranges have been
established for the other executive officers based on the average of the
market for comparable positions in the revenue group of competitive companies.
Individual salaries within each range will be based on recommendations to the
Committee by the Chief Executive Officer taking into account such factors as
experience, performance and time in the position. The bonus opportunities for
other executive officers for 1996 were based on target award percentages of
base salary for each position determined by the Committee, as adjusted to
reflect the adjustment of annual bonus targets pursuant to the compensation
philosophy modification. A portion of each target award was tied to corporate
and business unit performance criteria based on the achievement of one or more
financial measures as compared to planned performance, and individual
performance criteria based on the Committee's evaluation of each individual
executive officer's achievement of established performance goals for the year.
The actual award increased or decreased in relation to the target award,
depending on the actual results. The Committee recommended a bonus award for
each executive officer based on the targets and the performance measures noted
above. The Board had final approval authority for these awards. Mr. Richard
Thomas was awarded the same bonus as he received the prior year pursuant to
the agreement entered into in connection with his resignation as an executive
officer.
LONG-TERM COMPENSATION
Long-term compensation is an integral element of the Corporation's executive
compensation philosophy because the Committee believes that stock ownership by
senior management and stock-based performance-compensation arrangements
enhance shareholder value. The Corporation's long-term compensation strategy
includes a blend of stock compensation. For 1996, awards by the Committee
consisted of non-qualified stock options, restricted stock awards (RSAs),
restricted stock units (RSUs) and phantom stock units (PSUs). These awards
were consistent with ranges in the revenue group of competitive companies
which were approved by the Committee. In accordance with the 1996
modifications to the executive compensation philosophy, the stock option
ranges position the Corporation at the median of the market for these
companies while the performance-
15
<PAGE>
based restricted stock awards allow for total long-term compensation to reach
the 75th percentile for this market if the business achieves prescribed
performance standards over the long term.
A significant portion of executive compensation is represented by stock
options granted at fair market value which the Committee believes provide a
strong tie to shareholder interests. In January 1996, Mr. Crockett was awarded
120,000 such stock options in his capacity as Chief Executive Officer at the
time. This award was within the competitive range approved by the Committee.
Pursuant to the terms of her employment agreement, on October 17, 1996, Mrs.
Alewine was granted 150,000 stock options at fair market value in recognition
of her promotion to Chief Executive Officer. She will not be eligible for
another stock option grant until 1998.
Stock options were also granted to the other Named Executive Officers in
January 1996 as reflected in the table below setting forth 1996 option grants.
These stock option awards were determined on the basis of two factors. First,
the Committee established target award guidelines for each executive officer
based on a percentage of that officer's base salary. Second, the Committee
approved the actual awards for each executive officer based on these
guidelines and performance recommendations made by Mr. Crockett when he was
Chief Executive Officer based on his evaluation of each officer's performance
for 1995.
RSAs are restricted shares of COMSAT stock which are granted to executive
officers and selected key employees as a retention device based on the vesting
schedule established by the Committee for each grant. The vesting of RSAs is
subject to both a length of service requirement and the achievement of
objective performance-based criteria which have been approved by the
Committee. The percent of the award earned is based on the level of
achievement of the performance objectives over the performance period
established by the Committee. The RSAs earned then become subject to vesting
over an additional 1, 2 and 3 years at the rate of 20%, 40% and 40%,
respectively. In January 1996, Mr. Crockett received 20,000 RSAs in
recognition of his position as CEO at the time and his performance in that
position during 1995, which award was designed to put more of his total
compensation at risk in the form of long-term compensation. The other Named
Executive Officers also received RSAs in January 1996 as shown in the Summary
Compensation Table, the number of which in each case was consistent with the
guidelines approved by the Committee.
The performance-based criteria applicable to RSAs are intended to ensure the
Federal tax deductibility under Section 162(m) of the Internal Revenue Code of
compensation paid to the Corporation's executive officers pursuant to RSAs.
The Corporation intends to preserve the tax deductibility under Section 162(m)
of all compensation paid to its executive officers.
RSUs and PSUs are equivalent in value to shares of COMSAT stock and vest
after 3 years. In January 1996, the Committee awarded 5,520 PSUs to Mr.
Crockett in his position as the Chief Executive Officer in lieu of $80,000 of
the cash bonus that otherwise would have been paid to him for 1995 under the
Annual Incentive Plan. As part of the modification of the executive
compensation philosophy, PSUs have been eliminated and annual bonus awards are
being paid solely in cash beginning with the 1996 bonuses reported in this
Proxy Statement. Pursuant to the terms of her employment agreement, Mrs.
Alewine was granted 5,000 RSUs on October 17, 1996 in recognition of her
promotion to Chief Executive Officer.
COMMITTEE ON COMPENSATION AND MANAGEMENT DEVELOPMENT
Edwin I. Colodny, Chairman
Neal B. Freeman
Caleb B. Hurtt
Robert G. Schwartz
C.J. Silas
Dolores D. Wharton
March 20, 1997
16
<PAGE>
EXECUTIVE COMPENSATION
The following table shows the compensation for the three fiscal years ended
December 31, 1996 received by (1) Mrs. Alewine, the Chief Executive Officer
since July 19, 1996; (2) the other four most highly compensated executive
officers of the Corporation who were serving as such at year-end 1996; (3) Mr.
Crockett, who served as the Chief Executive Officer until July 19, 1996; and
(4) Richard E. Thomas, who resigned as an executive officer on September 20,
1996 and whose compensation would have been reportable but for the fact that
he was not an executive officer of the Corporation at year-end 1996 (the Named
Executive Officers).
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-
ANNUAL COMPENSATION TERM COMPENSATION
------------------------------------ ---------------------
OTHER RESTRICTED SECURITIES ALL
ANNUAL STOCK UNDERLYING OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($)(5) ($)(7) ($)(8) (#)(9) ($)(11)
- ------------------------ ---- -------- -------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Betty C. Alewine, 1996 $355,846 $189,111 $ 3,238 $ 238,188 210,000 $ 20,799
President & Chief 1995 226,923 142,993 448 178,363 55,000 20,536
Executive Officer 1994 210,000 198,792 387 562,788 80,000 22,429
John V. Evans, 1996 195,000 55,865 7,284 63,000 25,000 72,072
Chief Technical 1995 184,000 52,998 6,103 123,061 25,000 55,348
Officer 1994 184,000 79,861 4,405 288,338 30,000 55,691
Allen E. Flower, 1996 180,000 73,301 60,122 90,000 35,000 31,578
Vice President and 1995 145,000 46,483 0 121,563 7,000 10,053
Chief Financial Officer 1994 134,039 41,500 0 81,438 5,000 12,366
Charles Lyons, (1) 1996 507,500(4) 256,926 62,399 0 0 54,524
President, Ascent 1995 328,461 169,371 1,886 382,113 352,500(10) 283,904
Entertainment Group, 1994 210,000 195,028 992 562,788 80,000 33,775
Inc.
Warren Y. Zeger, 1996 196,551 181,487(6) 2,422 63,000 30,000 25,871
Vice President, 1995 184,050 71,196 2,755 123,061 30,000 23,677
General Counsel and 1994 179,999 97,376 12,431 301,813 60,000 24,801
Secretary
Bruce L. Crockett, (2) 1996 433,173 20,244 5,017 459,360 120,000 27,892
Former President & 1995 350,000 181,112 6,142 547,091 130,000 114,293
Chief Executive Officer 1994 350,000 366,912 28,930 1,139,050 200,000 123,303
Richard E. Thomas, (3) 1996 315,016 140,000 440 90,000 40,000 5,073
Retired President, 1995 315,071 140,000 0 239,680 55,000 6,648
COMSAT RSI, Inc. 1994 181,740 150,000 0 431,281 80,000 4,251
</TABLE>
- --------
(1) Effective as of June 27, 1997, the distribution date for the spin-off of
COMSAT's ownership interest in Ascent, Mr. Lyons is no longer deemed to be
an executive officer of COMSAT.
(2) Mr. Crockett resigned as President and Chief Executive Officer of the
Corporation in July 1996. His compensation for 1996 includes amounts paid
after that date pursuant to an agreement with the Corporation. See
"Agreements with Executive Officers."
(3) Mr. Thomas became an executive officer on June 3, 1994, when he became
President, COMSAT RSI, Inc., upon consummation of the acquisition of
Radiation Systems, Inc. His compensation for 1994 reflects amounts paid
after that date. Mr. Thomas resigned in September 1996. His compensation
for 1996 reflects amounts paid after that date pursuant to an agreement
with the Corporation. See "Agreements with Executive Officers."
(4) Includes, $7,500 which Mr. Lyons received in 1996 as a retroactive pay
increase for 1995.
17
<PAGE>
(5) Bonus for 1996 for each Named Executive Officer, as indicated below,
includes: (i) unused credits under the Corporation's cafeteria plan that
were paid in cash to the Named Executive Officers; and (ii) time off buy-
back under the Corporation's cafeteria plan that was paid in cash to the
Named Executive Officers. Bonus for Mr. Lyons for 1996 also includes
$149,435 of relocation expenses paid to him as a result of the relocation
of Ascent's offices to Denver.
<TABLE>
<CAPTION>
UNUSED TIME OFF
CREDITS BUY-BACK
------- --------
<S> <C> <C>
Mrs. Alewine............................................. $ 9,111 $ 0
Dr. Evans................................................ 4,695 1,170
Mr. Flower............................................... 4,701 3,600
Mr. Lyons................................................ 22,491 10,000
Mr. Zeger................................................ 7,725 3,762
Mr. Crockett............................................. 20,244 0
Mr. Thomas............................................... 0 0
</TABLE>
(6) The bonus reflected for Mr. Zeger for 1996 includes a special performance-
based spot bonus in the amount of $100,000.
(7) With the exception of Mr. Flower, Other Annual Compensation shown for
1994, 1995 and 1996 does not include perquisites and other personal
benefits because the aggregate amount of such compensation does not exceed
the lesser of (i) $50,000 or (ii) 10 percent of individual combined salary
and bonus for the Named Executive Officer in each year. For Mr. Flower,
Other Annual Compensation for 1996 includes $30,000 for club membership
fees.
(8) Includes restricted stock awards (RSAs), restricted stock units (RSUs) and
phantom stock units (PSUs). Dividends are paid on RSAs. Half of the RSAs
granted to Named Executive Officers in 1994 were forfeited in 1996 based
on the non-satisfaction of certain required performance measures during
1994 and 1995. Dividend equivalents are paid on RSUs and PSUs. The number
and value of the aggregate restricted stock holdings of each of the Named
Executive Officers as of December 31, 1996, are as follows:
<TABLE>
<CAPTION>
NUMBER OF VALUE AS OF
RSAS/RSUS/PSUS 12/31/96
-------------- -----------
<S> <C> <C>
Mrs. Alewine................................... 62,305 $1,483,638
Dr. Evans...................................... 15,510 369,332
Mr. Flower..................................... 12,550 298,847
Mr. Lyons...................................... 60,305 1,436,013
Mr. Zeger...................................... 26,000 619,125
Mr. Crockett................................... 121,380 2,890,361
Mr. Thomas..................................... 26,515 631,388
</TABLE>
The amounts shown are the actual number of RSAs, RSUs or PSUs held as of
December 31, 1996 and have not been adjusted to give effect to the Ascent
spin-off to COMSAT shareholders on June 27, 1997. In lieu of receiving a
distribution of Ascent stock, all outstanding RSAs, RSUs and PSUs held on
that date were adjusted by multiplying the number of shares or units held
by an adjustment ratio of 1.2402.
(9) All options shown are the actual number of options granted in 1996 and
have not been adjusted to give effect to the Ascent spin-off to COMSAT
shareholders on June 27, 1997. All outstanding options held on that date
were adjusted by multiplying the number of options held by an adjustment
ratio of 1.2402.
(10) Includes options to acquire 55,000 shares of the Corporation's Common
Stock and options to acquire 297,500 shares of Ascent's common stock.
(11) All Other Compensation for 1996 includes the following elements: (i)
contributions by the Corporation to the Corporation's 401(k) Plan on
behalf of the Named Executive Officers; (ii) above-market interest
accrued
18
<PAGE>
for the Named Executive Officers under the Corporation's Deferred
Compensation Plan; and (iii) life insurance premiums for the Named
Executive Officers. The life insurance premiums shown for Mr. Thomas
represent the premiums paid by the Corporation with respect to a term life
insurance policy for him. The life insurance premiums shown for the other
Named Executive Officers represent split dollar premiums which include (i)
the value of the premiums paid by the Corporation with respect to the term
life insurance portion of the policy for each Named Executive Officer,
determined under the P.S. 58 table published by the Internal Revenue
Service, and (ii) the value of the benefit to each Named Executive Officer
of the remainder of the premiums paid by the Corporation, determined by
calculating the present value of the cumulative interest payments that
would be made based on the assumption that the premiums were loaned to each
Named Executive Officer at an interest rate of 7.5% until the Named
Executive Officer reaches the normal retirement age of 65, at which time
the policy splits and the premiums are refunded to the Corporation.
<TABLE>
<CAPTION>
ABOVE-
401(K) PLAN MARKET LIFE INSURANCE
CONTRIBUTIONS INTEREST PREMIUMS
------------- -------- --------------
<S> <C> <C> <C>
Mrs. Alewine........................ $4,500 $ 6,680 $ 9,619
Dr. Evans........................... 4,244 58,717 9,111
Mr. Flower.......................... 4,500 8,385 18,693
Mr. Lyons........................... 4,500 34,648 15,376
Mr. Zeger........................... 4,500 5,380 15,991
Mr. Crockett........................ 346 2 27,544
Mr. Thomas.......................... 0 0 5,073
</TABLE>
OPTION GRANTS
The following table sets forth information on options granted to the Named
Executive Officers in 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS OPTIONS EXERCISE
GRANTED GRANTED TO PRICE EXPIRATION GRANT DATE
NAME (#)(1) EMPL IN FY(2) ($/SH)(3) DATE PRESENT VALUE(4)
- ---- ------------------ ------------- --------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Betty C. Alewine........ 60,000 7.12% $18.0000 01/19/06 $ 286,200
150,000 17.79 22.4375 10/17/06 1,149,000
John V. Evans........... 25,000 2.97 18.0000 01/19/06 119,250
Allen E. Flower......... 35,000 4.15 18.0000 01/19/06 166,950
Charles Lyons........... 0 -- -- -- --
Warren Y. Zeger......... 30,000 3.56 18.0000 01/19/06 143,100
Bruce L. Crockett....... 120,000 14.23 18.0000 01/19/06 572,400
Richard E. Thomas....... 40,000 4.74 18.0000 01/19/06 190,800
</TABLE>
- --------
(1) Except for the second option grant to Mrs. Alewine, the options shown were
granted on January 19, 1996 to acquire the Corporation's Common Stock. The
second option grant to Mrs. Alewine was made on October 17, 1996. All
options granted in 1996 vest as follows: 25% on the first anniversary of
the date of grant; another 25% on second anniversary of the date of grant;
and the remaining 50% on the third anniversary of the date of grant. All
options shown are the actual number of options granted in 1996 and have
not been adjusted to give effect to the Ascent spin-off to COMSAT
shareholders on June 27, 1997. All outstanding options held on that date
were adjusted by multiplying the number of options held by an adjustment
ratio of 1.2402.
(2) The total number of COMSAT options granted to key employees in 1996 was
843,150.
19
<PAGE>
(3) The exercise price shown is the exercise price at the time of grant in
1996 without adjustment to give effect to the Ascent spin-off to COMSAT
shareholders on June 27, 1997. The exercise price for all options
outstanding on that date was adjusted by dividing the exercise price by
1.2402.
(4) The Corporation used the Black-Scholes option pricing model to determine
grant date present values using the following assumptions: a dividend
yield of 3.39% for the January grants and 3.32% for the October grant;
stock price volatility of 0.28 for the January grants and 0.36 for the
October grant; a seven-year option term; a risk-free rate of return of
5.48% for the January grants and 6.26% for the October grant; a retention
discount of 3.39% for the January grant and 3.32% for the October grant;
and the vesting schedule described in footnote 1 above. The use of this
model is in accordance with SEC rules; however, the actual value of an
option realized will be measured by the difference between the stock price
and the exercise price on the date the option is exercised.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information on (1) options exercised by the
Named Executive Officers in 1996, and (2) the number and value of their
unexercised options as of December 31, 1996.
AGGREGATED OPTION EXERCISES IN 1996 AND 12/31/96 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
UNDERLYING OPTIONS AT 12/31/96 (1) OPTIONS AT 12/31/96
OPTIONS VALUE ------------------------- -------------------------
EXERCISED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
- ---- ---------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Betty C. Alewine........ 0 $ 0 165,984 291,250 $500,802 $ 740,625
John V. Evans........... 5,000 120,156 49,938 58,750 210,399 229,688
Allen E. Flower......... 2,000 8,685 28,450 42,750 247,768 227,063
Charles Lyons........... 0 0 137,750 81,250 133,250 185,625
0 0 0 297,500(2) 0 0
Warren Y. Zeger......... 1,000 11,719 104,144 82,500 116,411 275,625
Bruce L. Crockett....... 11,400 57,342 332,500 317,500 146,250 1,136,250
Richard E. Thomas....... 0 0 53,750 121,250 61,875 418,125
</TABLE>
- --------
(1) The amounts shown are the actual number of exercisable or unexercisable
options at December 31, 1996 and have not been adjusted to give effect to
the Ascent spin-off to COMSAT shareholders on June 27, 1997. All
outstanding options held on the date of the spin-off were adjusted by
multiplying the number of options held by an adjustment ratio of 1.2402.
(2) Option to acquire Ascent stock. All other options shown are to acquire
COMSAT stock.
PENSION PLANS
The following table shows the estimated annual benefits payable upon
retirement under the Corporation's Retirement Plan to persons in the salary
and years-of-service classifications specified. The Internal Revenue Code
limits the annual benefits payable under the Retirement Plan. Under this
limitation, the maximum annual benefit for 1996 is $120,000.
20
<PAGE>
<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFITS PAYABLE UPON RETIREMENT
-----------------------------------------------------
YEARS OF SERVICE
-----------------------------------------------------
AVERAGE ANNUAL SALARY 15 20 25 30 35
- --------------------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$100,000................. $ 25,520 $ 38,056 $ 43,290 $ 52,176 $ 59,007
150,000................. 39,645 58,501 67,415 81,301 91,882
200,000................. 51,307 76,483 89,077 107,963 120,000
250,000................. 60,095 91,591 107,865 120,000 120,000
300,000................. 67,095 104,911 120,000 120,000 120,000
350,000................. 74,095 118,231 120,000 120,000 120,000
400,000................. 81,095 120,000 120,000 120,000 120,000
450,000................. 88,095 120,000 120,000 120,000 120,000
500,000................. 95,095 120,000 120,000 120,000 120,000
</TABLE>
The compensation covered by the Retirement Plan includes only base salary.
Benefits are determined on a straight life annuity basis under a formula based
on length of service and average annual base salary for the highest five
consecutive years during the final 10 years of employment. Prior to 1989,
benefits were offset by a portion of each participant's estimated Social
Security benefits. Beginning in 1989, each participant accrues a benefit at a
specified percentage of salary up to the Social Security wage base, and at a
higher percentage of salary above the Social Security wage base. The years of
credited service for the Named Executive Officers as of December 31, 1996 are:
10 for Mrs. Alewine; 13 for Dr. Evans; 27 for Mr. Flower; 5 for Mr. Lyons; 21
for Mr. Zeger; and 16 for Mr. Crockett. Mr. Thomas was not a participant in
the Retirement Plan, and Mr. Lyons ceased accruing benefits under the
Retirement Plan as of December 31, 1995.
The Corporation also maintains the Insurance and Retirement Plan for
Executives (the Supplemental Retirement Plan), which covers those executive
officers and other key employees who are designated by the Board of Directors
to participate. The Supplemental Retirement Plan provides an annuity for life
equal to 60% (70% for the Chief Executive Officer) of the participant's
average annual compensation (salary and incentive compensation) during the 48
consecutive months of highest compensation (or during all consecutive months
of employment if the participant has been employed less than 48 months),
offset by pension benefits payable under the Retirement Plan, the qualified
retirement plans of former employers, Social Security, and government and
military pensions.
Payment begins upon the participant's normal retirement at age 65 under the
Supplemental Retirement Plan. A participant may retire as early as age 55 (but
only with the Board's consent if before age 62) and receive an annuity reduced
by 3% for each year payment begins before age 62. For employees who became
participants in the Supplemental Retirement Plan before January 1, 1993,
benefits vest ratably over the first five years of the participant's service.
For employees who become participants in the Supplemental Retirement Plan on
or after January 1, 1993, benefits are 50% vested after five years of service
and then vest an additional 10% per year over the following five years of
service, provided that the sum of the participant's age and years of service
equals 60.
The annual benefits payable upon retirement at age 65 based upon the 48
consecutive months of highest compensation as of December 31, 1996 for each of
the Named Executive Officers under the Supplemental Retirement Plan are:
$270,173 for Mrs. Alewine; $102,945 for Dr. Evans; $42,313 for Mr. Flower;
$86,001 for Mr. Zeger; and $251,605 for Mr. Thomas. Mrs. Alewine and Messrs.
Evans, Flower, Zeger and Thomas are each 100% vested in the Plan. Mr. Lyons is
not a participant in the Plan. For description of the annual benefits payable
to Mr. Crockett upon retirement, see "Agreements with Executive Officers."
AGREEMENTS WITH EXECUTIVE OFFICERS
The Corporation and Mrs. Alewine have entered into an employment agreement
dated July 19, 1996 which provides for successive three-year terms from each
successive day thereafter until July 19, 2003. The agreement provides for a
base salary of $450,000 for the first year, with an increase to $500,000 in
the second year, subject
21
<PAGE>
to further increases at the discretion of the Corporation's Board of
Directors. Mrs. Alewine is eligible for an annual bonus based on performance
measures determined by the Board's Compensation Committee with a target bonus
equal to 70% of Mrs. Alewine's base salary. Pursuant to the agreement, on
October 17, 1996, Mrs. Alewine was granted (i) an option to purchase 150,000
shares of the Corporation's common stock at a price equal to the market value
of the stock on the grant date, which vests 25% after one year, another 25%
after the second year and the remaining 50% after the third year; and (ii)
5,000 restricted stock units which vest after three years. Mrs. Alewine was
also granted 20,000 restricted stock awards on February 20, 1997 pursuant to
the agreement which are subject to the same terms as restricted stock awards
made to other executives of the Corporation on that date.
If Mrs. Alewine's employment is terminated without "cause," or if Mrs.
Alewine elects to terminate her employment for "good reason" (both as defined
in the agreement), Mrs. Alewine will be entitled to receive the following for
three years from her termination date or until July 19, 2003, whichever is
earlier, but in no case for less than one year following termination: (i) her
then current base salary; (ii) an annual bonus equal to 70% of her then
current base salary; and (iii) all other benefits provided for pursuant to the
agreement, which shall be deemed fully and immediately vested if subject to
vesting. The agreement provides that if Mrs. Alewine's employment is not
renewed after July 19, 2003 or is terminated before then either by Mrs.
Alewine for "good reason" or by the Corporation without "cause," Mrs. Alewine
will be entitled to begin receiving retirement benefits at age 55 under the
Insurance and Retirement Plan for Executives at the actuarially reduced rate
for early retirement, subject to the Board's discretion to waive such
reduction.
The Corporation and Mr. Flower have entered into a three-year employment
agreement dated April 18, 1997. Pursuant to the agreement, Mr. Flower's base
salary is $210,000 per year, subject to increases at the discretion of the
Corporation's Board of Directors. Mr. Flower is eligible for an annual bonus
based on performance measures determined by the Board's Compensation Committee
with a target bonus equal to 50% of his base salary. If Mr. Flower's
employment is terminated without "cause," or if Mr. Flower elects to terminate
his employment for "good reason" (both as defined in the agreement), Mr.
Flower will be entitled to receive the following until the later of one year
from his termination date or April 17, 2000: (i) his then current base salary;
(ii) an annual bonus equal to 50% of his then current base salary; and (iii)
all other benefits provided for pursuant to the agreement, which shall be
deemed fully and immediately vested if subject to vesting. The agreement
provides that if Mr. Flower's employment is not renewed after April 17, 2000,
Mr. Flower will be entitled to receive (i) the benefits described in the
preceding sentence for one year thereafter and (ii) retirement benefits under
the Insurance and Retirement Plan for Executives beginning on May 1, 2000 at
the actuarially reduced rate for early retirement, subject to the Board's
discretion to waive such reduction. If Mr. Flower's employment is terminated
by Mr. Flower for "good reason" or by the Corporation without "cause" before
he attains age 55, Mr. Flower will be entitled to begin receiving retirement
benefits under the plan at age 55 at the actuarially reduced rate for early
retirement, again subject to the Board's discretion to waive such reduction.
In the event that Mr. Flower dies after his employment terminates but before
his retirement benefits begin, his spouse will receive the death benefits
provided in the plan for participants who die while employed by the
Corporation.
The Corporation and Mr. Zeger have entered into a five-year employment
agreement dated April 18, 1997. Pursuant to the agreement, Mr. Zeger's base
salary is $230,000 per year, subject to increases at the discretion of the
Corporation's Board of Directors. Mr. Zeger is eligible for an annual bonus
based on performance measures determined by the Board's Compensation Committee
with a target bonus equal to 50% of his base salary. If Mr. Zeger's employment
is terminated without "cause," or if Mr. Zeger elects to terminate his
employment for "good reason" (both as defined in the agreement), Mr. Zeger
will be entitled to receive the following until April, 2002: (i) his then
current base salary; (ii) an annual bonus equal to 50% of his then current
base salary; and (iii) all other benefits provided for pursuant to the
agreement, which shall be deemed fully and immediately vested if subject to
vesting. The agreement provides that if Mr. Zeger's employment is not renewed
after April 17, 2002 or is terminated before then either by Mr. Zeger for
"good reason" or by the Corporation without "cause," Mr. Zeger will be
entitled to begin receiving retirement benefits at age 55 under the Insurance
and Retirement Plan for Executives at the actuarially reduced rate for early
retirement, subject to the Board's discretion to waive such
22
<PAGE>
reduction. In the event that Mr. Zeger dies after his employment terminates
but before his retirement benefits begin, his spouse will receive the death
benefits provided in the plan for participants who die while employed by the
Corporation.
Effective as of June 27, 1997, the distribution date for the spin-off of
COMSAT's ownership interest in Ascent, Mr. Lyons is no longer deemed to be an
executive officer of COMSAT. Subsequent to the spin-off, Mr. Lyons entered
into a new employment agreement with Ascent. The following is a summary of the
terms of Mr. Lyons' employment agreement prior to the spin-off while he was
deemed to be an executive officer of COMSAT. Ascent and Mr. Lyons entered into
a five-year employment agreement that became effective upon completion of
Ascent's initial public offering on December 18, 1995. Pursuant to the
agreement, Mr. Lyons' base salary was $500,000 per year, subject to increases
at the discretion of Ascent's board of directors. Mr. Lyons was also eligible
for an annual bonus based on performance measures determined by Ascent's
compensation committee with a target bonus equal to 70% of Mr. Lyons' base
salary. Pursuant to the agreement, Mr. Lyons was granted an option to purchase
297,500 shares of Ascent's common stock, which represented 1% of Ascent's
outstanding stock upon completion of Ascent's initial public offering, at the
offering price of $15 per share. The option was to have vested 10% after one
year, an additional 15% after two years and an additional 25% each year
thereafter until fully vested. Until the third anniversary of the grant, Mr.
Lyons was not to have been eligible for any further option grants. Pursuant to
the agreement, Mr. Lyons' participation in COMSAT's executive compensation
plans ceased and Mr. Lyons participated in benefit plans offered to executives
of Ascent. However, existing COMSAT stock and option awards granted to Mr.
Lyons continue to vest according to their respective vesting schedules as long
as Mr. Lyons is employed by Ascent.
If Mr. Lyons' employment had terminated without "cause" (as defined in the
agreement), or if Mr. Lyons elected to terminate his employment as a result of
certain events defined in the agreement with the effect of a constructive
termination, Mr. Lyons would have been entitled, for the remainder of the term
of the agreement as if the agreement had not been terminated, to receive: (i)
his then current base salary; (ii) an annual bonus equal to 70% of his then
current base salary; and (iii) all other benefits provided for pursuant to the
agreement; provided that if Mr. Lyons became employed during such period, any
compensation from such employment would have offset up to 50% of the amounts
owed by Ascent pursuant to the agreement. In addition, Mr. Lyons' employment
agreement provided that upon a "Change of Control Event" (as defined in the
agreement), Mr. Lyons would be entitled to elect to terminate his employment
with Ascent and receive the same benefits described in the preceding sentence.
A "Change of Control Event" was defined as an affirmative determination,
either jointly by Mr. Lyons and the board of directors of Ascent or pursuant
to an arbitration which Mr. Lyons had the right to invoke, that any "change of
control" of Ascent (defined as an event as a result of which a person or
entity other than COMSAT owned 50% or more of the voting stock of Ascent) or
prospective change of control would have been reasonably likely to have a
materially detrimental effect on either the day-to-day circumstances of Mr.
Lyons' employment or the compensation payable to Mr. Lyons under such
agreement.
Ascent and Mr. Lyons amended and restated Mr. Lyons' employment agreement on
November 18, 1996. The material changes were (i) Mr. Lyons' stock options to
purchase 297,500 shares of common stock of Ascent were to have vested
immediately upon a "change of control," as defined above, or if Ascent was no
longer publicly traded; (ii) Ascent agreed to use its best efforts to cause
100% of Mr. Lyons' COMSAT stock awards to vest upon a "change of control";
(iii) if Mr. Lyons' employment with Ascent was not renewed at the end of his
term of employment, he would be retained as a consultant to Ascent for 18
months with full pay and benefits; and (iv) upon a termination of the
agreement upon which Mr. Lyons received continued benefits, such benefits
would continue for the longer of the remainder of the term or one year after
termination.
In connection with Mr. Crockett's resignation as President and Chief
Executive Officer of the Corporation on July 19, 1996, the Corporation and Mr.
Crockett entered into an agreement, which provided that he would remain an
employee, and would continue to receive salary at the same rate and to
participate in the Corporation's executive benefit plans, until January 31,
1998. The agreement provided, however, that Mr. Crockett would not be eligible
for any bonuses or stock-based awards during this period. In accordance with
their terms, the existing stock options and other stock-based awards granted
to Mr. Crockett would have continued to vest during this period but any
unvested options or awards would be forfeited after January 31, 1998 and
options exercisable as
23
<PAGE>
of such date would have terminated if not exercised within three months
thereafter, or such later date as provided in the option agreement. As
executed, the agreement also provided that when Mr. Crockett reached age 55 in
April 1999, he would be entitled to begin receiving retirement benefits under
the Insurance and Retirement Plan for Executives at a reduced rate determined
in accordance with the plan's early retirement and termination of employment
factors. The agreement also provided that in the event that Mr. Crockett died
after his employment terminated but before his retirement benefits began, his
spouse would be entitled to receive the death benefits provided in the plan
for participants who die while employed by the Corporation.
Mr. Crockett's salary continuation and benefits under the agreement were
specifically conditioned upon his agreement not to disparage, harm, compete
with or disclose confidential information about COMSAT (or its directors and
officers) during the term of the agreement. In April 1997, COMSAT filed suit
against Mr. Crockett alleging, among other things, that he had breached his
agreement with COMSAT. COMSAT has terminated the agreement with Mr. Crockett.
In June 1997, COMSAT dismissed the suit against Mr. Crockett without prejudice
to refile at a later date.
In connection with his resignation as President of COMSAT RSI, Inc. on
September 20, 1996, the Corporation and Richard Thomas entered into an
agreement which amends and supersedes Mr. Thomas' employment agreement with
the Corporation. Under the agreement, Mr. Thomas remained an employee, and
continued to receive salary and participated in the Corporation's executive
benefit plans until June 3, 1997, the date on which his employment agreement
terminated, at which time he retired. Pursuant to the agreement, Mr. Thomas
received a bonus of $90,000 in February 1997 but was not eligible for any
stock-based awards during the term of the agreement. In accordance with their
terms, the existing stock options and other stock-based awards granted to Mr.
Thomas continued to vest during that period and became fully vested on his
retirement to the extent not previously vested. The agreement also provided
for Mr. Thomas to receive the $100,000 retention bonus payable on June 3, 1997
under his prior employment agreement. Mr. Thomas is entitled to receive
retirement benefits under the Insurance and Retirement Plan as a result of his
retirement. The agreement provided for the retention bonuses of $150,000
previously paid to Mr. Thomas under his employment agreement and the $100,000
retention bonus paid upon his retirement to be included in the compensation
which was taken into account in calculating his retirement benefits under the
Plan.
CHANGE IN CONTROL ARRANGEMENTS
Certain of the Corporation's benefit and compensation programs have
provisions that are intended to assure the continuity and stability of
management and the Board of Directors necessary to protect shareholders'
interests, and to protect the rights of the participants under those programs,
in the event of a "Change of Control" of the Corporation. A "Change of
Control" for this purpose is defined in the same manner as described above
under the caption "Directors' Compensation." The following actions will take
place upon the occurrence of a Change of Control: (1) the vesting of all stock
options, RSAs, RSUs and PSUs will be accelerated under the Corporation's 1990
and 1995 Key Employee Stock Plans and Annual Incentive Plan; (2) the deferred
compensation accounts under the Corporation's Directors and Executives
Deferred Compensation Plan, Annual Incentive Plan and Non-Employee Directors
Stock Option Plan will become immediately payable; (3) participants in the
Split Dollar Insurance Plan will receive fully-paid individual policies; (4)
directors will receive an immediate lump sum payment of their accrued benefits
under the Directors Retirement Plan using present value assumptions; and (5)
participants in the Corporation's Insurance and Retirement Plan for Executives
will become vested in their accrued benefits under the plan and will receive
an immediate lump sum payment using present value assumptions.
The Board of Directors retains the authority under the Change-of-Control
provisions to determine that the provisions should not apply to a particular
transaction. In the event of such a determination, the vesting of stock awards
and the payment of various plan benefits would not be accelerated. This
feature is intended to afford the Board of Directors flexibility in
structuring transactions and to encourage negotiated transactions.
24
<PAGE>
PERFORMANCE GRAPH
The following line graph compares the cumulative total shareholder return
for the Corporation's Common Stock with the cumulative total return of the S&P
500 Stock Index and a Peer Group Index constructed by the Corporation for the
five fiscal years beginning on January 1, 1992, and ending on December 31,
1996.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG
COMSAT, S&P 500 INDEX & PEER GROUP INDEX
(ASSUMES $100 INVESTED ON DECEMBER 31, 1991 & DIVIDENDS REINVESTED)
<TABLE>
<CAPTION>
PEER
Measurement Period S&P GROUP
(Fiscal Year Covered) COMSAT 500 INDEX INDEX
- --------------------- --------------- --------- ----------
<S> <C> <C> <C>
Measurement Pt-12/31/1991 $100.00 $100.00 $100.00
FYE 12/31/1992 $143.00 $108.00 $118.00
FYE 12/31/1993 $184.00 $118.00 $134.00
FYE 12/31/1994 $119.00 $120.00 $127.00
FYE 12/31/1995 $123.00 $165.00 $180.00
</TABLE>
- --------
* Peer Group consists of three S&P Industry Groups: Telecommunications (Long-
Distance) (AT&T Corporation, MCI Communications Corporation and Sprint
Corporation); Telephone Companies (Ameritech Corp., Bell Atlantic Corp.,
BellSouth Corp., GTE Corp., NYNEX Corp., Pacific Telesis Group, Inc., SBC
Communications Inc., and US West Corp.); and Entertainment (The Walt Disney
Company, King World Productions Inc. and Viacom Inc.).
25
<PAGE>
ITEM 3. APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The shareholders will vote at the meeting to appoint independent public
accountants to audit and certify to the shareholders the financial statements
of the Corporation for the fiscal year ending December 31, 1997. The Board of
Directors has recommended the appointment of Deloitte & Touche LLP as such
independent public accountants; they acted in such capacity for fiscal year
1996. Representatives of Deloitte & Touche LLP will be present at the meeting
to respond to appropriate questions and to make a statement if they desire to
do so.
THE DIRECTORS RECOMMEND A VOTE FOR THE APPOINTMENT OF DELOITTE & TOUCHE LLP
AS INDEPENDENT PUBLIC ACCOUNTANTS. PROXIES SOLICITED BY THE MANAGEMENT WILL BE
SO VOTED UNLESS SHAREHOLDERS SPECIFY A CONTRARY CHOICE IN THEIR PROXIES. FOR
APPROVAL, THE PROPOSAL REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF THE
SHARES REPRESENTED AND ENTITLED TO VOTE AT THE MEETING.
ITEM 4. SHAREHOLDER PROPOSAL
Mrs. Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Avenue, N.W.,
Suite 215, Washington, D.C. 20037, owner of 200 shares of Common Stock of the
Corporation, has given notice that she will introduce the following resolution
at the meeting:
RESOLVED: "That the stockholders of COMSAT assembled in Annual Meeting in
person and by proxy, hereby recommend that the Corporation affirm its
political non-partisanship. To this end the following practices are to be
avoided:
"(a) The handing of contribution cards of a single political party to an
employee by a supervisor.
"(b) Requesting an employee to send a political contribution to an individual
in the Corporation for a subsequent delivery as part of a group of
contributions to a political party or fund raising committee.
"(c) Requesting an employee to issue personal checks blank as to payee for
subsequent forwarding to a political party, committee or candidate.
"(d) Using supervisory meetings to announce that contribution cards of one
party are available and that anyone desiring cards of a different party
will be supplied one on request to his supervisor.
"(e) Placing a preponderance of contribution cards of one party at mail
station locations."
And if the Company engages in none of the above, to disclose this each quarter
to ALL shareholders."
REASONS: "The Corporation must deal with a great number of governmental units,
commissions and agencies. It should maintain scrupulous political neutrality
to avoid embarrassing entanglements detrimental to its business. Above all, it
must avoid the appearance of coercion in encouraging its employees to make
political contributions against their personal inclinations. The Troy (Onio)
News has condemned partisan solicitation for political purposes by managers in
a local company (not )."
"If you AGREE, please mark your proxy FOR this resolution."
THE DIRECTORS OPPOSE THIS PROPOSAL.
COMSAT Corporation has a strong record of supporting the political process
in a bipartisan manner. To the knowledge of the directors and management of
the Corporation, the types of practices described in the proposal as "to be
avoided" have not occurred at the Corporation. The Corporation has directors
who have served as political appointees of both Democratic and Republican
administrations, which promotes a corporate culture of bi-partisanship.
26
<PAGE>
The COMSAT Political Action Committee (PAC), which is funded by voluntary
contributions from employees, contributes to candidates of both of the two
major political parties. Employees are not required to contribute to the
COMSAT PAC. The COMSAT PAC solicits contributions once a year, and informs
employees that all contributions are entirely voluntary.
In light of the Corporation's past history of bi-partisanship, the Board of
Directors believes that the resolution is unnecessary. If passed, the
resolution would create an administrative quarterly reporting burden without
resulting in any real benefit to shareholders. Other companies, including the
Corporation's competitors, would not be subject to similar reporting
requirements and the related compliance burden and associated costs. For those
reasons, the company recommends that shareholders vote "no."
IT IS RECOMMENDED THAT THE SHAREHOLDERS VOTE AGAINST THIS PROPOSAL. PROXIES
SOLICITED BY THE MANAGEMENT WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY A
CONTRARY CHOICE IN THEIR PROXIES. FOR APPROVAL, THE PROPOSAL REQUIRES THE
AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES REPRESENTED AND ENTITLED TO BE
VOTED AT THE MEETING.
OTHER MATTERS
At July 8, 1997, the management knew of no other matters to be presented for
action at the meeting. If any other matter is properly introduced, the persons
named in the accompanying form of proxy will vote the shares represented by
the proxies according to their judgment. In accordance with the Corporation's
By-Laws, proposals by shareholders were required to be received no later than
May 1, 1997 to be considered at the 1997 Annual Meeting. See "Item 1. Election
of Directors--Requirements for Nominations and Shareholder Proposals."
The Corporation will bear all costs of the proxy solicitation. In addition
to the solicitation by mail, the Corporation's directors, officers and
employees, without additional compensation, may solicit proxies by telephone,
personal contact or other means. The Corporation also has retained D. F. King
& Co., Inc., of New York, N.Y., to assist in the solicitation, at a cost of
$5,000. The Corporation will reimburse brokers and other persons holding
shares in their names, or in the names of nominees, for their expenses in
forwarding proxy materials to the beneficial owners.
The Corporation contemplates that the 1998 Annual Meeting will be held on or
about May 15, 1998. Shareholders wishing to submit proposals for consideration
at the 1998 Annual Meeting should submit them in writing to the Secretary,
COMSAT Corporation, 6560 Rock Spring Drive, Bethesda, Maryland 20817, to be
received no later than January 15, 1998.
This proxy statement is provided by direction of the Board of Directors.
/s/ Warren Y. Zeger
Warren Y. Zeger
Vice President, General Counsel
and Secretary
July 15, 1997
A COPY OF THE CORPORATION'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION FOR 1996 ON FORM 10-K, AS AMENDED, WITH A LIST OF THE EXHIBITS,
WILL BE SENT WITHOUT CHARGE TO ANY SHAREHOLDER OF RECORD OR BENEFICIAL OWNER
OF SHARES OF THE CORPORATION'S COMMON STOCK UPON RECEIPT OF A WRITTEN REQUEST
ADDRESSED TO: SHAREHOLDER SERVICES, COMSAT CORPORATION, 6560 ROCK SPRING
DRIVE, BETHESDA, MARYLAND 20817. ANY EXHIBIT WILL BE PROVIDED UPON PAYMENT OF
THE REASONABLE COST OF PROVIDING SUCH EXHIBIT.
27
<PAGE>
DIRECTIONS
MONTGOMERY COLLEGE
PERFORMING ARTS CENTER (PAC)
51 MANNAKEE STREET
ROCKVILLE, MARYLAND
[DIRECTION GRAPHS APPEAR HERE]
. FROM 1-270 NORTH: Take Exit 6A--West Montgomery Ave. (Rt.
28). Get in left lane on exit ramp. Cross W. Montgomery Ave.
at stoplight onto Nelson St. Follow Nelson St. and proceed
through residential area and two stop signs. Turn left at
stoplight onto Mannakee St. Go 1/5 mile and turn left onto
West Campus Dr. The PAC is on the far right of the parking
lot.
. FROM 1-270 SOUTH: Take Exit 6--West Montgomery Ave. (Rt. 28).
Turn left at the stoplight at the end of the Exit ramp onto
W. Montgomery Ave. At the next stoplight, turn left onto
Nelson St. Follow Nelson St. and proceed through residential
area and two stop signs. Turn left at stoplight onto Mannakee
St. Go 1/5 mile and turn left onto West Campus Dr. The PAC is
on the right of the parking lot.
. FROM RT. 355 (ROCKVILLE PIKE/HUNGERFORD DR.): Turn at
stoplight onto Mannakee St. (about 1 mile north of the
Rockville Metro/Viers Mill Road and about 1 mile south of
Gude Drive), then turn right onto South Campus Dr. The PAC is
on the right side of the parking lot.
. Handicapped Parking and the Access Ramp are located on the
left side when facing the PAC.
. Montgomery College-Rockville is located between the Rockville
and Shady Grove MetroRail stations and is accessible by
MetroBus (Q-2) & Ride-On #46 or #55.
<PAGE>
[LOGO OF COMSAT CORPORATION APPEARS HERE]
The 1997 Annual Meeting of Shareholders of COMSAT Corporation will be held
at the Performing Arts Center, Montgomery College, 51 Mannakee Street,
Rockville, Maryland, on August 15, 1997, at 9:30 a.m., Eastern Daylight Time,
for the following purposes:
1. election of 12 directors;
2. action on a proposal to amend the Non-Employee Directors Stock Plan to (i)
authorize the grant of share awards or phantom stock units in lieu of cash
retainers, and (ii) authorize the Chairman of the Board to elect to receive
stock or stock options in lieu of all or a portion of cash compensation;
3. appointment of independent public accountants;
4. action on a shareholder proposal to recommend that the Corporation affirm its
political non-partisanship and require the reporting of certain practices;
and
5. action on such other matters as may properly come before the meeting or any
reconvened session thereof.
TO BE SURE THAT YOUR VOTE IS COUNTED, WE URGE YOU TO COMPLETE AND SIGN THE
PROXY CARD BELOW, AND DETACH AND RETURN IT IN THE POSTAGE PAID ENVELOPE ENCLOSED
IN THIS PACKAGE. The giving of such proxy does not affect your right to vote in
person if you attend the meeting. The prompt return of your signed proxy will
aid the Corporation in reducing the expense of additional proxy solicitation.
DETACH PROXY CARD HERE
- --------------------------------------------------------------------------------
[_]
DIRECTORS RECOMMEND A VOTE FOR PROPOSALS 1 THROUGH 3 AND AGAINST PROPOSAL 4.
1. Election of Directors
[_] FOR all nominees listed below
[_] WITHHOLD AUTHORITY to vote for all nominees listed below
[_] * EXCEPTIONS
Nominees: Betty C. Alewine, Marcus C. Bennett, Lucy W. Benson, Edwin I. Colodny,
Lawrence S. Eagleburger, Neal B. Freeman, Caleb B. Hurtt, Peter W.
Likins, Larry S. Schafran, Robert G. Schwartz, Kathryn C. Turner and
Guy P. Wyser-Pratte.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
*Exceptions
--------------------------------------------------------------------
2. Amendment of Non-Employee Directors Stock Plan.
FOR [_] AGAINST [_] ABSTAIN [_]
3. Appointment of independent accountants.
FOR [_] AGAINST [_] ABSTAIN [_]
4. Action on a shareholder proposal relating to political non-partisanship.
FOR [_] AGAINST [_] ABSTAIN [_]
In their discretion the proxies are authorized to vote upon such other matters
as may properly come before the meeting or any reconvened session thereof.
CHANGE OF ADDRESS AND/OR COMMENTS MARK HERE [_]
Please sign exactly as name or names appear on this proxy. If stock is held
jointly, each holder should sign. If signing as attorney, trustee, executor,
administrator, custodian, guardian or corporate officer, please give full
title.
DATE , 1997
---------------- PLEASE MARK VOTES
AS IN THIS EXAMPLE
SIGNED
------------------------- [X]
-------------------------
PLEASE SIGN, DATE AND RETURN THIS CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
<PAGE>
DIRECTIONS
MONTGOMERY COLLEGE
PERFORMING ARTS CENTER (PAC)
51 MANNAKEE STREET
ROCKVILLE, MARYLAND
- FROM I-270 NORTH: Take Exit 6A - West Montgomery Ave. (Rt. 28). Get in left
lane on exit ramp. Cross W. Montgomery Ave. at stoplight onto Nelson St.
Follow Nelson St. and proceed through residential area and two stop signs.
Turn left at stoplight onto Mannakee St. Go 1/5 mile and turn left onto
West Campus Dr. The PAC is on the right of the parking lot.
- FROM I-270 SOUTH: Take Exit 6 - West Montgomery Ave. (Rt. 28). Turn left at
the stoplight at the end of the exit ramp onto W. Montgomery Ave. At the
next stoplight, turn left onto Nelson St. Follow Nelson St. and proceed
through residential area and two stop signs. Turn left at stoplight onto
Mannakee St. Go 1/5 mile and turn left onto West Campus Dr. The PAC is on
the right of the parking lot.
- FROM RT. 355 (ROCKVILLE PIKE/HUNGERFORD DR.): Turn at stoplight onto
Mannakee St. (about 1 mile north of the Rockville Metro/Viers Mill Road and
about 1 mile south of Gude Drive), then turn right onto South Campus Dr.
The PAC is on the right side of the parking lot.
- Handicapped Parking and the Access Ramp are located on the left side
when facing the PAC.
- Montgomery College-Rockville is located between the Rockville and Shady
Grove MetroRail stations and is accessible by MetroBus (Q-2) & Ride-On #46
or #55.
COMSAT CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, AUGUST 15, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Betty C. Alewine, Lucy W. Benson and Robert
G. Schwartz, and each or any of them (with power of substitution), proxies for
the undersigned to represent and to vote, as designated on the reverse side
hereof, all shares of Common Stock of COMSAT Corporation which the undersigned
would be entitled to vote if personally present at the Annual Meeting of its
shareholders to be held on August 15, 1997, and at any reconvened session
thereof, subject to any directions indicated on the reverse side of this card.
IF NO DIRECTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 THROUGH 3
AND AGAINST PROPOSAL 4.
Your vote for the election of directors may be indicated on the reverse.
Nominees are: Betty C. Alewine, Marcus C. Bennett, Lucy W. Benson, Edwin I.
Colodny, Lawrence S. Eagleburger, Neal B. Freeman, Caleb B. Hurtt, Peter W.
Likins, Larry G. Schafran, Robert G. Schwartz, Kathryn C. Turner and Guy P.
Wyser-Pratte.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE. PLEASE SIGN AND RETURN PROMPTLY
IN THE ENVELOPE PROVIDED. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
IF YOU ATTEND THE MEETING AND VOTE IN PERSON, THIS PROXY WILL NOT BE USED.
- -------------------------------------------------------------------------------
Continued and to be signed and dated on reverse side.
COMSAT CORPORATION
P.O. BOX 11141
NEW YORK, NY, 10203-0141
<PAGE>
Appendix A
COMSAT CORPORATION
NON-EMPLOYEE DIRECTORS STOCK PLAN
---------------------------------
Adopted by the Board of Directors on January 15, 1988,
and approved by the Shareholders on May 20, 1988
Amendments adopted by the Board of Directors
on March 16, 1990, January 15, 1993, February 16, 1996 and
July 7, 1997, and approved by the Shareholders on May 18, 1990,
May 21, 1993, May 17, 1996 [and August 15, 1997]
<PAGE>
COMSAT CORPORATION
NON-EMPLOYEE DIRECTORS STOCK PLAN
---------------------------------
1. Purpose. The purpose of the plan ("Plan") is to advance the
-------
interests of COMSAT Corporation ("Corporation") and its shareholders by
encouraging increased share ownership by members of the Board of Directors
("Board") of the Corporation who are not employees of the Corporation, or any of
its subsidiaries. The Plan does this by enhancing the Corporation's ability to
attract and retain the services of experienced, able and knowledgeable persons
to serve as directors and by providing additional incentive for such directors
to make a maximum contribution to the Corporation's success through continuing
and increased share ownership in the Corporation.
2. Administration. The Plan shall be administered by the Board. In
--------------
addition to its duties with respect to the Plan stated elsewhere in the Plan,
the Board shall have full authority, consistent with the Plan, to interpret the
Plan, to promulgate such rules and regulations with respect to the Plan as it
deems desirable and to make all other determinations necessary or desirable for
the administration of the Plan. All decisions, determinations and
interpretations of the Board shall be binding upon all persons.
3. Shares Covered by the Plan. Under the Plan, grants of stock
--------------------------
options ("Options") and retainer awards ("Retainer Awards") will provide the
opportunity for eligible members of the Board to acquire shares of the
Corporation's common stock without par value ("Common Stock"). Shares of Common
Stock which may be delivered on exercise of Options and in satisfaction of
Retainer Awards may be previously issued shares reacquired by the Corporation or
authorized but previously unissued shares.
<PAGE>
4. Granting of Options.
--------------------
(a) Eligible Directors. Each member of the Board who is not an
employee of the Corporation or any of its subsidiaries ("Non-Employee Director")
shall be eligible to receive Options in accordance with this Section 4. As used
herein, the term "subsidiary" means any corporation at least 40% of whose
outstanding voting stock is owned, directly or indirectly, by the Corporation.
(b) Automatic Grants. An Option to purchase 2,000 shares of Common
Stock shall be granted annually at a meeting of the Board held in March (or the
next succeeding meeting date if no March meeting is held), beginning in 1988, to
each Non-Employee Director who was a director as of the date of the Annual
Meeting of Shareholders for the prior year, provided the Non-Employee Director
continues in office after the Board meeting date on which the Option is granted.
Beginning in 1993, each annual Option grant shall be for 4,000 shares of Common
Stock.
(c) Option Agreement. Each Option shall be evidenced by a written
instrument which shall state the terms and conditions of the grant, not
inconsistent with the Plan, as the Board in its sole discretion shall determine
and approve.
(d) Option Price. The purchase price for each share of Common
Stock subject to an Option shall be 100% (50% for Options granted from 1990 to
1992) of the fair market value of the Common Stock on the date the Option is
granted. For this purpose, as well as other purposes under the Plan, fair market
value shall be deemed to be the average of the highest and lowest selling prices
of Common Stock as reported under New York Stock Exchange-Composite Transactions
on the date on which the Option was granted or, if there were no sales of Common
Stock on that date, then on the next preceding date on which there were sales.
(e) Option Duration. Each Option shall expire fifteen years (ten
years for Options granted in 1988 and 1989) from the
2
<PAGE>
date that it is granted, except that in the instance where a Non-Employee
Director dies within the 15th year following the date of grant of an Option, any
unexercised portion of the Option will continue to be exercisable for one year
following the date of death.
(f) Nontransferability. An Option shall be nonassignable and
nontransferable by a Non-Employee Director other than by will or the laws of
descent and distribution. An Option shall be exercisable during the Non-
Employee Director's lifetime only by him or his guardian.
5. Option Exercises.
----------------
(a) Exercise Timing. Except as provided in Section 5(c) or 5(d)
below, each Option shall become exercisable for 50% of the shares of Common
Stock covered by the Option after the expiration of one year following the date
of grant and exercisable for 100% of the shares covered by the Option after the
expiration of two years following the date of grant.
(b) Method of Exercise. Exercise of each Option granted under the
Plan shall be by written notice in the form and manner determined by the Board.
Each notice of exercise shall be accompanied by the full purchase price of the
shares being purchased pursuant to the exercise. Such payment may be made in
cash, check, shares of Common Stock valued using the fair market value as of the
date of exercise or a combination thereof.
(c) Termination of Board Service. If a Non-Employee Director
granted an Option ceases to be a member of the Board, any unexercised or
partially exercised Options held by such Non-Employee Director shall be
exercisable in accordance with the following provisions:
(i) if termination of Board service is due to (A) retirement
from the Board upon reaching 72 years of age, (B) expiration of
the Non-Employee Director's term as a Presidential appointee to
the Board,
3
<PAGE>
(C) failure to stand for reelection to the Board with the Board's
consent, or (D) resignation from the Board with the Board's
consent, all outstanding Options shall become fully exercisable
and shall continue in force for the duration of their respective
terms, or
(ii) if termination of Board service is due to a Non-
Employee Director's death, or in the event of a Non-Employee
Director's death following termination of Board service for a
reason provided in (i) above, all outstanding Options shall become
fully exercisable and shall continue in force for one year
following the date of death, or
(iii) if termination of Board service is for any reason
other than one of the reasons provided in (i) and (ii) above, all
outstanding Options shall terminate immediately.
(d) Change in Control. Each Option granted under the Plan shall
immediately vest and become fully exercisable upon the occurrence of a "Change
in Control" of the Corporation. For purposes of this Plan, a "Change in Control"
of the Corporation shall be deemed to have occurred upon the happening of any
one of the following events:
(i) the acquisition by any individual, entity or group
(within the meaning of Sections 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of fifty percent (50%) or more
of the combined voting power of the then outstanding voting
securities of the Corporation; provided, however, that the
following acquisitions shall not constitute a Change in Control
for purposes of this definition: (A) any acquisitions of voting
securities of the Corporation by the Corporation, or (B) any
4
<PAGE>
acquisitions of voting securities of the Corporation by any
employee benefit or stock ownership plan or related trust
sponsored or maintained by the Corporation for the benefit of its
employees;
(ii) any change in the composition of the Board such that
the individuals who, as of May 17, 1996, constitute those members
of the Board who have been elected by the shareholders of the
Corporation in accordance with the provisions of Section 303(a) of
the Communications Satellite Act of 1962, as amended (the
"Incumbent Directors"), cease for any reason to constitute a
majority of the Board at any time; provided, however, that any
individual becoming a director subsequent to such date whose
election, or nomination for election, was approved by a vote of at
least three-fourths (3/4) of the then Incumbent Directors shall be
considered as though such individual were an Incumbent Director;
(iii) approval by the shareholders of the Corporation of a
merger, share exchange, swap, consolidation, recapitalization or
other business combination involving any other corporation or
entity (a "Transaction"), the effect of which would result in the
combined voting securities of the Corporation immediately prior to
the effectiveness of such Transaction continuing to represent less
than sixty percent (60%) of the combined voting power of the
voting securities of the Corporation, or of any surviving entity
of, or parent entity following, the Transaction, immediately after
the effectiveness of the Transaction;
(iv) approval by the shareholders of the Corporation of (A)
a complete liquidation or dissolution of the Corporation, or (B)
the sale or
5
<PAGE>
disposition by the Corporation of all or substantially all of its
assets other than to a corporation or entity with respect to which
following such sale or other disposition more than eighty percent
(80%) of the then combined voting power of the voting securities
of such corporation or entity is, immediately following such sale
or disposition, beneficially owned (within the meaning of Rule
13d-3 promulgated under the Exchange Act) by all or substantially
all of the individuals and entities who were the beneficial owners
of the voting securities of the Corporation upon or immediately
before such approval; or
(v) any event that would be required to be reported in
response to Item 6(e) or any successor thereto of Schedule 14A of
Regulation 14A promulgated under the Exchange Act; provided,
however, that none of the events described in clauses (i) through
(v) shall be deemed to constitute a Change in Control if, prior to
the occurrence of such event, the Board adopts a resolution
specifically providing that the event shall not be deemed to
constitute a Change in Control for purposes of the Plan.
6. Granting of Retainer Awards.
---------------------------
(a) Automatic Grants. A Retainer Award of 600 shares of Common
Stock shall be granted annually at the first meeting of the Board following the
Annual Meeting of Shareholders to each Non-Employee Director who is serving as a
director at such Board meeting. Beginning in 1997, each annual Retainer Award
shall be for 1,000 shares of Common Stock. Non-Employee Directors who are
elected by the Board or appointed by the President of the United States to fill
vacancies between Annual Meetings shall receive a prorated Retainer Award,
payable at the time of election or appointment, equal to the number of whole
shares of Common Stock
6
<PAGE>
determined by multiplying (i) the number of full months of service as a director
between election or appointment and the next Annual Meeting by (ii) the number
50 (83.33 beginning in 1997).
(b) Phantom Stock Units. A Non-Employee Director may elect to defer
the entire annual Retainer Award to which he or she is entitled under Section
6(a) by filing a deferral election ("Deferral Election"), in the form and manner
prescribed by the Board, by December 15 of the year immediately preceding the
year in which the Retainer Award otherwise would be paid, except that a Deferral
Election with respect to a prorated Retainer Award shall be filed at such time
following election or appointment as the Board shall determine. If a Non-
Employee Director makes a Deferral Election, 600 (1,000 beginning in
1997)phantom stock units ("Phantom Stock Units") shall be credited to an account
maintained for the director. Each Phantom Stock Unit shall be equivalent in
value to a share of Common Stock. Upon payment of a dividend on the
Corporation's Common Stock, the Non-Employee Director's account shall be
credited with additional Phantom Stock Units equal to the quotient obtained by
dividing (i) the amount of the dividend the Corporation would have paid to the
director as if the director had been the record owner of the shares of Common
Stock covered by the Phantom Stock Units in the director's account on the record
date for the payment of the dividend by (ii) the fair market value of the Common
Stock on the dividend payment date. Upon the Non-Employee Director's
termination of Board service for any reason, the Non-Employee Director shall
receive payment in shares of the Corporation's Common Stock equal to the number
of whole Phantom Stock Units credited to his account, plus cash in an amount
equal to the fair market value of any fractional Phantom Stock Unit interests.
The Phantom Stock Units credited to the account of a Non-Employee Director shall
become immediately payable, in the manner
7
<PAGE>
described in the preceding sentence, upon the occurrence of a Change in Control.
7. Grants to Chairman. If the Chairman of the Board ("Chairman") is a
------------------
Non-Employee Director who receives annual cash compensation for his or her
services as Chairman, the Chairman may elect each year to receive shares of
Common Stock or Options in lieu of all or a portion of such annual cash
compensation by filing an election, in the form and manner prescribed by the
Board, prior to the date on which such shares of Common Stock or Options are
granted pursuant to this Section 7. Such election shall specify the amount of
the Chairman's annual cash compensation which he or she elects to receive in
shares of Common Stock or Options, as the case may be. The number of shares of
Common Stock to be granted pursuant to an election to receive an amount of
annual cash compensation in shares shall be determined by dividing such amount
by the fair market value of the Common Stock on the date of grant. The number of
Options to be granted pursuant to an election to receive an amount of annual
cash compensation in Options shall be determined by dividing such amount by the
fair market value of the Common Stock on the date of grant and multiplying the
resulting quotient by three (3). The number of shares of Common Stock or Options
so determined pursuant to the Chairman's election shall be granted to the
Chairman on the date of the Annual Meeting of Shareholders for the year in which
the election is made, provided that in the event the Chairman is first elected
to such position on a date other than the date of the Annual Meeting of
Shareholders and makes an election pursuant to this Section 7, the date of grant
shall be as soon as practicable after such election and the number of shares of
Common Stock or Options to be granted pursuant to the election shall be
determined by using the fair market value of the Common Stock on the date of the
Chairman's election. The terms of any Options granted pursuant to this
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Section 7 shall be governed by Sections 4(c) through (e) and 5, except that each
such option shall expire ten years from the date that it is granted and shall
become exercisable for 50% of the shares of Common Stock covered by the Option
after the expiration of six months following the date of grant and for 100% of
the shares covered by the Option after the expiration of one year following the
date of grant.
8. Adjustment Upon Changes in Capitalization. If there is a change in
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the number or kind of outstanding shares of the Corporation's stock by reason of
a stock dividend, stock split, recapitalization, merger, consolidation,
combination or other similar event, or if there is a distribution to
shareholders of the Corporation's Common Stock other than a cash dividend,
appropriate adjustments shall be made by the Board to the number of shares
covered by the automatic Option grants provided for in Section 4(b) and by any
outstanding Options; the purchase price for shares of Common Stock covered by
outstanding Options; the number of shares covered by the automatic Retainer
Award grants provided for in Section 6(a) and by any outstanding Phantom Stock
Units; and other relevant provisions, to the extent that the Board, in its sole
discretion, determines that such change makes such adjustments necessary or
equitable.
9. Tax Withholding. Any exercise of an Option or payment of a
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Retainer Award pursuant to the Plan shall be subject to withholding of income
tax, FICA tax or other taxes to the extent the Corporation is required to make
such withholding.
10. Laws and Regulations. The Plan, the grant and exercise of Options,
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the grant and deferral of Retainer Awards, and the obligation of the Corporation
to sell or deliver shares of Common Stock under the Plan shall be subject to all
applicable laws, regulations and rules.
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11. Termination and Amendment of the Plan. The Board may at any time
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terminate the Plan or may at any time or times amend the Plan or amend any
outstanding Options or Phantom Stock Units for the purpose of satisfying the
requirements of any changes in applicable laws or regulations or for any other
purpose which at the time may be permitted by law, provided that:
(i) no amendment of any outstanding Options or Phantom Stock
Units shall contain terms or conditions inconsistent with the
provisions of the Plan as determined by the Board; and
(ii) except as provided in Section 8, no such amendment
shall, without the approval of the shareholders of the
Corporation: (a) increase the number of shares of Common Stock for
which each Option or Retainer Award may be granted under the Plan;
(b) increase the frequency of Option or Retainer Award grants; (c)
reduce the price at which Options may be granted or exercised
below the price provided for in Section 4(d); (d) extend the
period during which any outstanding Option may be exercised; (e)
shorten the exercise timing as provided for in Section 5(a) or
Section 7; (f) materially increase in any other way the benefits
accruing to Non-Employee Directors; (g) expand Plan eligibility
beyond Non-Employee Directors; or (h) disqualify a Non-Employee
Director from being a "disinterested" administrator, as defined
for the purposes of Rule 16b-3 (or any successor rule) under the
Securities Exchange Act of 1934, of any other stock-based plan of
the Corporation.
12. Effective Date. The Plan shall become effective upon approval by
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the Board; provided, however, that the Plan shall be submitted to the
shareholders of the Corporation for approval,
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and if not approved by the shareholders within one year from the date of
approval by the Board shall be of no force and effect. Options granted under the
Plan before approval of the Plan by the shareholders shall be granted subject to
such approval and shall not be exercisable before such approval.
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