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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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COMSAT CORPORATION
(NAME OF SUBJECT COMPANY)
COMSAT CORPORATION
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, WITHOUT PAR VALUE
(TITLE OF CLASS OF SECURITIES)
20564D107
(CUSIP NUMBER OF CLASS OF SECURITIES)
WARREN Y. ZEGER, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
COMSAT CORPORATION
6560 ROCK SPRING DRIVE
BETHESDA, MARYLAND 20817
(301) 214-3000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICE AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
WITH A COPY TO:
RICHARD L. EASTON, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022-3897
(212) 735-3000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is COMSAT Corporation, a District of
Columbia corporation (the "Company"), and the address of the principal
executive offices of the Company is 6560 Rock Spring Drive, Bethesda, Maryland
20817. The title of the class of equity securities to which this statement
relates is the common stock, without par value, of the Company (the "Company
Common Stock" or the "Shares").
ITEM 2. TENDER OFFER OF THE PURCHASER.
This statement relates to the tender offer by Regulus, LLC, a single member
Delaware limited liability company (the "Purchaser") and a wholly-owned
subsidiary of Lockheed Martin Corporation, a Maryland corporation ("Parent"),
disclosed in a Tender Offer Statement on Schedule 14D-1, dated September 25,
1998 (the "Schedule 14D-1"), to purchase up to 49% of the issued and
outstanding Shares, at a price of $45.50 per Share, net to the seller in cash
(the "Offer Price"), upon the terms and subject to the conditions set forth in
the Offer to Purchase, dated September 25, 1998 (the "Offer to Purchase"), and
the related Letter of Transmittal (which together with the Offer to Purchase
constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of September 18, 1998 (the "Merger Agreement"), by and among the Company,
Parent and Deneb Corporation ("Acquisition Sub"), a wholly-owned subsidiary of
Parent. The Merger Agreement provides, among other things, that as soon as
practicable after the satisfaction or waiver of the conditions set forth in
the Merger Agreement, including the amendment or repeal of the Communications
Satellite Act of 1962 (the "Satellite Act"), the Company will be merged with
and into Acquisition Sub (the "Forward Merger"), with Acquisition Sub
surviving the Forward Merger as a wholly-owned subsidiary of Parent; however,
if certain conditions to the merger have not been satisfied, Acquisition Sub
will be merged with and into the Company (the "Reverse Merger"), with the
Company surviving the Reverse Merger as a wholly-owned subsidiary of Parent.
The term the "Merger" refers to either the Forward Merger or the Reverse
Merger, as applicable, in the context in which it is used herein. The
surviving corporation of the Forward Merger or the Reverse Merger, as the case
may be, is referred to herein as the "Surviving Corporation." A copy of the
Merger Agreement is filed herewith as Exhibit 2 and is incorporated herein by
reference.
As set forth in the Schedule 14D-1, the principal executive offices of
Parent and the Purchaser are located at 6801 Rockledge Drive, Bethesda,
Maryland 20817-1877.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Except as set forth in this Item 3(b), to the knowledge of the Company,
there are no material contracts, agreements, arrangements or understandings
and no actual or potential conflicts of interest between the Company or its
affiliates and (i) the Company's executive officers, directors or affiliates
or (ii) Parent or the Purchaser or their respective executive officers,
directors or affiliates.
Information with respect to certain contracts, agreements, arrangements or
understandings between the Company and certain of its directors, executive
officers and affiliates is set forth in the Company's Proxy Statements dated
April 7, 1995, for its 1995 Annual Meeting of Stockholders (the "1995 Proxy
Statement") and dated March 31, 1998, for its 1998 Annual Meeting of
Stockholders (the "1998 Proxy Statement"). A copy of the relevant portions of
the 1995 Proxy Statement and the entire 1998 Proxy Statement are attached
hereto as Exhibits 21 and 22, respectively, and the relevant portions thereof
are incorporated herein by reference.
ARRANGEMENTS WITH PARENT, THE PURCHASER OR THEIR AFFILIATES
Confidentiality Agreements
The following is a summary of certain material provisions of the
Confidentiality Agreements, each dated as of August 5, 1997, between the
Company and Parent (the "Confidentiality Agreements"). This summary does
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not purport to be complete and is qualified in its entirety by reference to
the complete text of the Confidentiality Agreements, copies of which are filed
as Exhibit 1 hereto and are incorporated herein by reference. Capitalized
terms not otherwise defined below have the meanings ascribed to them in the
Confidentiality Agreements.
The Confidentiality Agreements contain customary provisions pursuant to
which, among other matters, each of Parent and the Company agreed to keep
confidential all nonpublic, confidential or proprietary information furnished
to one party by the other, subject to certain exceptions (the "Confidential
Information"), and to use the Confidential Information solely for the purpose
of evaluating a possible transaction involving the Company and Parent. Each of
Parent and the Company have agreed in the Confidentiality Agreements that,
unless otherwise agreed to in writing, neither would for a period of three
years from the date thereof, directly or indirectly, acquire, or offer to
acquire, or agree to acquire, directly or indirectly, by purchase or otherwise
any securities or assets of the other party or any affiliate, successor or
subsidiary thereof. Each of Parent and the Company further agreed that, for a
period of two years from the date of the Confidentiality Agreements, without
the prior written consent of the other party, neither would solicit for
employment any of the current employees of the other party or its affiliates
so long as they were employed by such other party or such affiliate.
The Merger Agreement
The following is a summary of certain material provisions of the Merger
Agreement. This summary does not purport to be complete and is qualified in
its entirety by reference to the complete text of the Merger Agreement, a copy
of which is filed as Exhibit 2 hereto and is incorporated herein by reference.
Capitalized terms not otherwise defined below have the meanings ascribed to
them in the Merger Agreement.
The Offer. The Merger Agreement provides that the Purchaser will commence
the Offer and that, upon the terms and subject to the prior satisfaction or
waiver of the Offer Conditions (which are set forth in Section 14 of the Offer
to Purchase), the Purchaser will purchase up to 49% of the total number of the
outstanding Shares of the Company less certain adjustments as set forth in the
Merger Agreement (the "Maximum Number of Shares") validly tendered pursuant to
the Offer. The Merger Agreement provides that the Purchaser may modify and
extend the terms of the Offer. Subject to the terms and conditions of the
Offer, the Purchaser shall pay, as soon as reasonably practicable after it is
permitted to do so under applicable law, for all Shares validly tendered and
not withdrawn (subject to proration, if applicable).
The Merger. The Merger Agreement provides that, subject to the terms and
conditions thereof, and in accordance with the District of Columbia Business
Corporation Act (the "DCBCA") and the Delaware General Corporation Law (the
"DGCL"), at the effective time of the Merger (the "Effective Time"), the
Forward Merger will be effected as soon as practicable following the
satisfaction or waiver of certain conditions to the Merger (as outlined in
Section 12 of the Offer to Purchase) or on such other date as the parties
hereto may agree; provided, however, that if certain conditions relating to
the tax treatment of the Merger and the receipt of certain governmental
approvals (as outlined in Section 12 of the Offer to Purchase) are not
satisfied, then the Reverse Merger shall be effected. At the Effective Time,
if the Forward Merger is effected, then the separate existence of the Company
shall cease and Acquisition Sub shall continue as the surviving corporation
under the name "COMSAT Corporation" or, if the Reverse Merger is effected,
then the separate existence of Acquisition Sub shall cease and the Company
shall continue as the Surviving Corporation.
If the Forward Merger is consummated, the Certificate of Incorporation and
By-Laws of Acquisition Sub, each as in effect at the Effective Time, shall be
the Certificate of Incorporation and By-Laws of the Surviving Corporation,
until amended in accordance with applicable law, except that Article FIRST of
the Certificate of Incorporation shall be amended so that it reads in its
entirety as follows: "The name of the corporation is COMSAT Corporation." If
the Reverse Merger is consummated, the Articles of Incorporation of the
Company shall be amended at the Effective Time to read in their entirety as
set forth in an exhibit to the Merger Agreement and shall be the Articles of
Incorporation of the Surviving Corporation, and the By-Laws of the Company as
in effect at the Effective Time shall be the By-Laws of the Surviving
Corporation, each until amended in accordance with applicable law.
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Consideration to be Paid in the Merger. In the Merger, each Share issued and
outstanding immediately prior to the Effective Time (other than shares of
Company Common Stock held in the treasury of the Company, held by the
Purchaser, held by Parent, if any, and shares or Company Common Stock with
respect to which written demand shall have been made and not withdrawn under
Section 29-373 of the DCBCA (the "Dissenting Shares"), if any) will be
converted into the right to receive 0.5 shares of common stock, par value
$1.00 per share, of Parent (the "Parent Common Stock"), subject to adjustment
as provided in the Merger Agreement (the "Merger Consideration").
The Merger Agreement provides that each share of Company Common Stock held
in the treasury of the Company, each share of Company Common Stock held by the
Purchaser, and each share of Company Common Stock held by Parent, if any,
immediately prior to the Effective Time shall be cancelled and retired and
cease to exist and no consideration shall be received therefor; provided, that
shares of Company Common Stock held beneficially or of record by any plan,
program or arrangement sponsored or maintained for the benefit of employees of
Parent or the Company or any of their respective subsidiaries shall be deemed
not to be held by Parent, the Purchaser or the Company regardless of whether
Parent, the Purchaser or the Company has, directly or indirectly, the power to
vote or control the disposition of such shares of Company Common Stock.
In addition, the Merger Agreement provides that in the case of the Forward
Merger, each share of common stock, par value $1.00 per share, of Acquisition
Sub issued and outstanding immediately prior to the Effective Time shall
remain outstanding as one share of the Surviving Corporation, or in the case
of the Reverse Merger, be converted into and exchangeable for one share of
common stock of the Surviving Corporation.
Surviving Corporation's Directors and Officers. The directors of Acquisition
Sub at the Effective Time shall be the initial directors of the Surviving
Corporation and will hold office from the Effective Time until their
respective successors are duly elected or appointed. The officers of the
Company at the Effective Time shall be the initial officers of the Surviving
Corporation and will hold office from the Effective Time until their
respective successors are duly elected or appointed.
Dissenting Shares. Shares of Company Common Stock which are issued and
outstanding immediately prior to the Effective Time and which are held by
shareholders who have not voted such Shares in favor of the Merger and shall
have delivered a written demand for appraisal of such Shares in the manner
provided in Section 29-373 of the DCBCA shall not be converted into or be
exchangeable for the right to receive the Merger Consideration, unless and
until such holder shall have failed to perfect or shall have effectively
withdrawn or lost such holder's right to appraisal and payment under the
DCBCA. If such holder shall have so failed to perfect or shall have
effectively withdrawn or lost such right, such holder's Shares shall thereupon
be deemed to have been converted into and to have become exchangeable for, at
the Effective Time, the right to receive the Merger Consideration.
Stock Options and Awards. The Merger Agreement provides that, except as
provided below, as of the Effective Time, Parent shall assume all options (the
"Company Stock Options") granted under the Company's Stock Option Plans (the
"Company Stock Option Plans") and any program of the Company or any of its
subsidiaries that affords employees and directors of the Company and its
subsidiaries the opportunity to acquire shares of Company Common Stock, each
as amended (the "Company Stock Plans"). Each Company Stock Option outstanding
at the Effective Time shall be deemed to constitute an option to acquire, on
the same terms and conditions, as were applicable under such Company Stock
Option prior to the Effective Time, (i) the number of shares of Parent Common
Stock as the holder of such Company Stock Option would have been entitled to
receive pursuant to the Merger had such holder exercised such Company Stock
Option in full immediately prior to the Effective Time (not taking into
account whether or not such option was in fact then exercisable), (ii) at a
price per share equal to (x) the aggregate exercise price for Company Common
Stock otherwise purchasable pursuant to such Company Stock Option divided by
(y) the number of shares of Parent Common Stock deemed purchasable pursuant to
such assumed Company Stock Option, provided that the number of shares of
Parent Common Stock that may be purchased upon exercise of any such option and
other right to acquire shares of Parent Common Stock (the "Parent Stock
Option") shall not include any fractional share and, upon exercise of any such
Parent Stock Option, a cash payment shall be made for any fractional share
based on the last sale price per share of Parent Common Stock on the trading
day immediately preceding the date of exercise. The Company
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shall amend each other benefit plan, agreement or arrangement that provides
benefits or payments by reference to the price of the Company Common Stock,
other than the Company Stock Option Plans, to provide that as of and after the
Effective Time, the payments or benefits shall be measured by reference to the
price of shares of Parent Common Stock, determined in like manner to the
adjustments prescribed above with
respect to the exercise price of Company Stock Options and the number of
shares of the Company Common Stock into which Company Stock Options are
exercisable. In respect of each Company Stock Option to be converted into
options or rights to acquire Parent Common Stock, Parent has agreed to file as
soon as practicable after the Effective Time with the Securities and Exchange
Commission (the "Commission"), and keep current the effectiveness of, a
registration statement on Form S-8 or other appropriate form for as long as
such options or rights remain outstanding (and maintain the current status of
the prospectus with respect thereto). Parent has agreed to reserve for
issuance a number of shares of Parent Common Stock equal to the number of
shares of Parent Common Stock issuable under the Company Stock Options. In the
Merger Agreement, the Company has agreed to terminate each employee stock
purchase plan it maintains for its or any of its subsidiaries' employees no
later than the Effective Time.
The Merger Agreement also provides that the Company shall cause to be
amended certain plans (the "Plans") and/or the Company's Board of Directors
shall adopt a resolution to provide that (i) for purposes of certain of the
Company's Plans neither the execution of the Merger Agreement, the
consummation of the transactions contemplated by the Merger Agreement nor
approval of the Merger Agreement or the transactions contemplated thereby by
the Company's Board of Directors or shareholders shall be a "Change in
Control" of the Company (or any similar triggering event resulting in the
acceleration or other change in the terms of benefits payable under the
Plans); and (ii) for the purposes of certain of the Company's Plans a "Change
in Control" of the Company (or any similar triggering event resulting in the
acceleration or other change in the terms of benefits payable under the Plans)
shall occur at the Effective Time.
The Merger Agreement also provides that, for a period of at least one year
following the Effective Time, Parent shall, or shall cause the Surviving
Corporation to, provide each of the Company's employees with qualified plan
and employee welfare plan benefits (other than plans provided exclusively to
management) which are comparable in the aggregate to the qualified plan and
welfare plan benefits (other than plans provided exclusively to management)
provided to such employees of the Company immediately prior to the Effective
Time. As of the Effective Time, Parent will assume and will cause the
Surviving Corporation to assume in accordance with their terms all Plans and
agreements listed on a disclosure schedule to the Merger Agreement.
Approval Required; Shareholders Meeting. The DCBCA requires, among other
things, that the adoption of any plan of merger or consolidation of the
Company must be approved by the Board of Directors of the Company and by the
holders of two-thirds ( 2/3) of the Company's outstanding shares of Company
Common Stock. The Board of Directors of the Company has approved the Offer,
the Merger and the Merger Agreement; consequently, the only additional
corporate action of the Company that is necessary to effect the Merger is
approval by the Company's shareholders. See also "--Conditions to the Merger"
for a discussion of other conditions that must be satisfied prior to the
consummation of the Offer and the Merger. Under the DCBCA, the affirmative
vote of holders of two-thirds ( 2/3) of the outstanding Shares (including any
Shares owned by the Purchaser) is generally required to approve the Merger.
Pursuant to the Merger Agreement, the Company will duly call a special
meeting of its shareholders (the "Company Shareholders Meeting") at such time
as determined by Parent, after consultation with the Company, for the purpose
of voting upon the Merger and the adoption of the Merger Agreement. The Merger
Agreement provides that in connection with the Company Shareholders Meeting,
Parent will, in cooperation with the Company, (i) as soon as reasonably
practicable after the date of the Merger Agreement, prepare and file with the
Commission preliminary proxy materials which shall constitute the Proxy
Statement/Prospectus in connection with the Merger and a registration
statement on Form S-4 with respect to the issuance of Parent Common Stock in
the Merger, together with any other materials required to be filed with the
Commission in connection with the Merger. Each of Parent and the Company shall
use all reasonable efforts to have such Proxy
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Statement/Prospectus and any supplement or amendment thereto cleared by the
Commission and kept effective as long as is necessary to consummate the
Merger. The Proxy Statement/Prospectus will be mailed to the
shareholders of the Company prior to the Company Shareholders Meeting. The
Company has agreed, subject to its fiduciary duties under applicable law, to
include in the proxy statement the recommendation of the Board of Directors
that shareholders of the Company vote in favor of the approval of the Merger
and the adoption of the Merger Agreement.
Interim Operations. The Company has agreed that during the period from the
date of the Merger Agreement until the Effective Time (except as permitted by,
or described in the Merger Agreement, or as consented to in writing by Parent,
which consent will not be unreasonably withheld or delayed) the business of
the Company and its subsidiaries shall be conducted according to its ordinary
course, using commercially reasonable efforts to preserve intact its business
organization and goodwill and maintain satisfactory relationships with those
persons having business relationships with them, and using commercially
reasonable efforts to keep available the services of its officers and
employees. In addition, subject to the exceptions described above and
exceptions described in the Company's disclosure schedule to the Merger
Agreement, both of the Company and its subsidiaries:
(i) except as required to give effect to changes in law, shall not amend
their respective articles of incorporation or by-laws or other comparable
governing instruments in a manner that would adversely affect the
consummation of the transactions contemplated by, or otherwise adversely
affect the rights of Parent or its subsidiaries under, the Merger
Agreement, the Shareholders Agreement entered into by the Company and
Parent, dated as of September 18, 1998 (the "Shareholders Agreement"), the
Registration Rights Agreement entered into by Parent and the Company, dated
as of September 18, 1998 (the "Registration Rights Agreement"), and the
Carrier Acquisition Agreement entered into by the Company, COMSAT
Government Systems, Inc., a Delaware corporation ("CGSI") and wholly-owned
subsidiary of the Company, Parent and the Purchaser, dated as of September
18, 1998 (the "Carrier Acquisition Agreement") (collectively, the
"Transaction Agreements");
(ii) shall not, and shall not permit any of its subsidiaries to, issue
any shares of their capital stock or Equity Securities (as defined below)
(except by the Company as permitted by the Merger Agreement, in connection
with the Company Stock Options that are outstanding on the date of the
Merger Agreement or which may thereafter be granted as permitted by the
Merger Agreement under Company Stock Plans or shares of Company Common
Stock pursuant to nondiscretionary grants under the current terms of any
benefit plan existing as of the date of the Merger Agreement), or grant,
confer or award any options, appreciation rights, warrants, conversion
rights, restricted stock, stock units, performance shares or other rights,
not existing on the date of the Merger Agreement, with respect to any
shares of its capital stock or other Equity Securities of the Company or
its subsidiaries except that, during the twelve-month period beginning upon
the date of the Merger Agreement and ending on the first anniversary
thereof and during each subsequent twelve-month period ending upon
subsequent anniversaries thereof, the Company may grant Company Stock
Options to acquire up to the number of shares of Company Common Stock as is
equal to 1.5% of the number of issued and outstanding shares of Company
Common Stock as of the end of the preceding fiscal year pursuant to the
continued operation of the Company Stock Plans, and up to 200,000 shares of
Company Common Stock during each calendar year beginning after the date of
the Merger Agreement pursuant to the continued operation of the Company
Employee Stock Purchase Plan, all in the ordinary course of business and
consistent with past practice, or effect any stock split or otherwise
change its capitalization. The term "Equity Securities" of a person means
the capital stock of the person and all other securities (whether or not
issued by such person but excluding any exchange traded or privately
granted options) convertible into or exchangeable or exercisable for any
shares of its capital stock, all rights or warrants to subscribe for or to
purchase, all options for the purchase of, and all calls, commitments,
agreements, arrangements, undertakings or claims of any character relating
to, any shares of its capital stock and any securities convertible into or
exchangeable or exercisable for any of the foregoing;
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(iii) shall not, and shall not permit any of its subsidiaries to, (A)
declare, set aside or pay any dividend or make any other distribution or
payment with respect to any shares of its capital stock or other ownership
interests (other than regular quarterly cash dividends not to exceed $0.05
per share of Company Common Stock and dividends and distributions from
subsidiaries of the Company to the Company or another of its subsidiaries)
or (B) directly or indirectly redeem, purchase or otherwise acquire any
shares of its capital stock or capital stock of any of its subsidiaries, or
make any commitment for any such action;
(iv) shall not pledge or otherwise encumber shares of capital stock of
the Company or any of its subsidiaries;
(v) except (A) as required by law (including any amendment required to
maintain the qualification of any benefit plan intended to be "qualified"
under Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), or (B) as contemplated by the Merger Agreement, shall not, (a)
except in the ordinary course of business and consistent with past
practice, enter into or amend any employment or similar agreements or
arrangements with any of its directors or executive officers, (b) amend or
otherwise change the terms of any benefit plan in any manner which would
constitute a material change in plan design or materially increase the cost
of a benefit plan, including, without limitation, amend any employment,
severance or similar agreements or arrangements in existence on the date of
the Merger Agreement, (c) adopt any new employee benefit plans, programs or
arrangements or any severance or similar agreements or arrangements, or (d)
except in the ordinary course of business and consistent with past
practice, increase any compensation, bonus or other benefits payable to any
current or former director or executive officer;
(vi) shall not transfer, sell, lease, license or dispose of any material
lines of business, subsidiaries, divisions, operating units or facilities
(other than facilities currently closed or currently proposed to be closed)
outside the ordinary course of business or enter into any material
commitment or transaction outside the ordinary course of business;
(vii) shall not, and shall not permit any of its subsidiaries to,
authorize, propose or announce an intention to authorize or propose to
another person, or enter into an agreement with respect to, any merger,
consolidation or business combination, any acquisition of assets of
whatever nature, tangible, intangible, real or personal ("Assets") or
Equity Securities (other than the purchase of Assets in the ordinary course
of business), any disposition of Assets or Equity Securities (other than
the disposition of Assets or Equity Securities in the ordinary course of
business) or any release or relinquishment of any contract rights in which,
in any such case, the aggregate consideration is in excess of $5 million
for any individual transaction or $20 million for all of such transactions
in any one year period or which would materially adversely affect the
ability of the Company or any of its subsidiaries to consummate any of the
transactions contemplated by the Merger Agreement. For purposes of this
paragraph (vii), paragraph (ix), paragraph (x)(B) and paragraph (xii) only,
any actions taken by the Company to preserve substantially (or to increase
or decrease such interest by no more than 2.0% in any fiscal year) its
ownership interest in the International Telecommunications Satellite
Organization ("INTELSAT") or the International Maritime Satellite
Organization ("Inmarsat") existing on the date of the Merger Agreement in
connection with (A) annual share redeterminations and adjustments or (B)
pursuant to capital calls approved by the governing bodies of INTELSAT or
Inmarsat in accordance with their charter documents, shall be deemed to be
in the ordinary course of the Company's business;
(viii) shall not make any material tax election other than in the
ordinary course of business and consistent with past practice, or settle or
compromise any tax liability in excess of $3 million arising from or in
connection with any single issue;
(ix) shall not make or agree to make any capital expenditures other than
(A) expenditures in the ordinary course of business, (B) capital
expenditures that are consistent with the Company's strategic business
plans (the "Company Business Plans") and (C) additional capital
expenditures not in excess of $5 million;
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(x) except in the ordinary course of business and except as consistent
with the Company Business Plans, shall not, and shall not permit any of its
subsidiaries to, (A) incur, create, assume or otherwise become liable for
borrowed money or assume, guarantee, endorse or otherwise become
responsible or liable for the obligations of any other person (other than
the Company and its subsidiaries) in excess of $5 million per occurrence
and $20 million in the aggregate or (B) make any loans or advances to any
other person (other than the Company and its subsidiaries) in excess of $5
million per occurrence and $20 million in the aggregate;
(xi) except as required by law or generally accepted accounting
principles ("GAAP"), shall not effect any material change in any of its
methods of accounting in effect as of December 31, 1997;
(xii) except as provided in the Shareholders Agreement, shall not impose
limitations not already in existence on the date of the Merger Agreement,
not imposed on other shareholders of the Company, on the enjoyment by any
of Parent and its subsidiaries of the legal rights generally enjoyed by
shareholders of the Company;
(xiii) shall not pay, discharge or satisfy any material liabilities,
other than the payment, discharge or satisfaction of any such liability (A)
reflected or reserved against in, or contemplated by, the financial
statements (or the notes thereto) of the Company and its subsidiaries, (B)
incurred in the ordinary course of business or (C) which is legally
required to be paid, discharged or satisfied;
(xiv) shall not adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other material reorganization of the Company or any plan of merger or
consolidation of any of its subsidiaries in which such subsidiary is not
the surviving entity;
(xv) shall not, and shall not permit any of its subsidiaries to, take any
action which would make any representation or warranty of the Company
contained in the Merger Agreement untrue or incorrect in any material
respect as of the Effective Time;
(xvi) shall not fail to take reasonable efforts to cause the Merger to
constitute a reorganization within the meaning of Section 368(a) of the
Code; and
(xvii) shall not enter into a legally binding commitment with respect to,
or any agreement to take, any of the foregoing actions.
The Merger Agreement also provides that any actions taken pursuant to U.S.
Government instruction and any actions taken in good faith by the Company or
its subsidiaries in connection with the planned privatization of INTELSAT or
Inmarsat shall not be considered a breach of its obligations under the Merger
Agreement. Notwithstanding the foregoing, other than as disclosed in the
Merger Agreement or pursuant to the existing INTELSAT Documents, the Existing
Inmarsat Documents, or the Inmarsat Restructuring Documents or the New Skies
Documents (as such terms are defined in the Merger Agreement), the Company
shall not:
(i) sell, transfer, assign or dispose of or agree to sell, transfer,
assign or dispose of the INTELSAT Interests or the Inmarsat Interests (each
as defined in the Merger Agreement) (including, without limitation, by
entering into any options with respect thereto);
(ii) enter into any voting rights, proxy or other agreement with respect
to the voting of any of the INTELSAT Interests or the Inmarsat Interests
that would be binding on Parent, the Company or their respective
subsidiaries following the Merger;
(iii) enter into any lock-up, standstill or other similar agreement (a
"Lock-Up Agreement") with respect to the INTELSAT Interests or the Inmarsat
Interests that would be binding on Parent, the Company or their respective
subsidiaries following the Merger; provided that the Company or its
subsidiaries may enter into a Lock-Up Agreement in connection with an
initial public offering by INTELSAT, Inmarsat or New Skies Satellites,
N.V., on terms that are usual and customary to those entered into by
directors, affiliates or significant shareholders in similar transactions;
or
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(iv) take any other action or omit to take any action (including by way
of votes in the INTELSAT Board of Governors or Meeting of Signatories, or
the Inmarsat Council, in either case except to the extent instructed to the
contrary by the U.S. Government, pursuant to the Satellite Act) which would
reasonably be expected to materially impair the economic value of or any of
the rights associated with the INTELSAT Interests or the Inmarsat
Interests; provided, that the Company shall not be required to force a vote
to be held on a matter in any of the foregoing bodies where consistent with
past practice such decision would be decided by consensus rather than a
vote.
No Solicitation. The Merger Agreement provides that the Company shall, and
shall cause its subsidiaries and their respective officers, directors,
employees, consultants, investment bankers, accountants, attorneys and other
advisors, representatives and agents (collectively, "Company Representatives")
to immediately cease any discussions or negotiations with any person that may
be ongoing with respect to any Acquisition Proposal (as defined below). The
Company shall not, nor shall it permit any of its subsidiaries to, nor shall
it authorize or permit any Company Representative to, directly or indirectly,
(i) solicit or initiate, or knowingly encourage the submission of, any
Acquisition Proposal or (ii) participate in any discussions or negotiations
regarding, or furnish to any person (other than Parent or its representatives
or affiliates) any information, that may reasonably be expected to lead to, an
Acquisition Proposal; provided, however, that if, prior to the Company
Shareholders Meeting, the Company's Board of Directors determines in good
faith, based upon advice of independent counsel, that it is necessary to do so
in order to comply with its fiduciary duties to the Company's shareholders
under applicable law, the Board of Directors may permit the Company in
response to an Acquisition Proposal that was not solicited by the Company or
its officers, directors or employees (x) to furnish information (including any
non-public information) with respect to the Company (including its
subsidiaries) and afford access to its properties, books and records pursuant
to a confidentiality agreement designed to reasonably protect the
confidentiality of such information, and (y) to participate in discussions or
negotiations regarding such Acquisition Proposal. The term "Acquisition
Proposal" means any proposal or offer from any person (other than Parent or
its representatives or affiliates) to acquire, directly or indirectly, in one
or more transactions, assets (including, without limitation, the capital stock
of subsidiaries) of the Company or any of its subsidiaries having an aggregate
value equal to more than 10% of the market capitalization of the Company, any
tender offer or exchange offer that if consummated would result in any person
beneficially owning more than 10% of any class of Equity Securities of the
Company, any merger, consolidation, business combination, sale of all or
substantially all the assets, recapitalization, liquidation, dissolution or
similar transaction involving the Company, other than the transactions
contemplated by the Merger Agreement; provided that no transaction referred to
in the Merger Agreement shall be deemed to be an Acquisition Proposal.
Except as set forth in the Merger Agreement, neither the Company's Board of
Directors nor any committee thereof shall (i) withdraw, modify or materially
qualify (or publicly propose to withdraw, modify or materially qualify) its
approval or recommendation of the Offer, the Merger or the Merger Agreement,
(ii) approve or recommend, or publicly propose to approve or recommend, any
Acquisition Proposal or (iii) enter, or publicly propose to enter, into any
agreement with respect to any Acquisition Proposal. Notwithstanding the
foregoing, in the event that, prior to the Company Shareholders Meeting, the
Company's Board of Directors determines in good faith, based upon advice of
independent counsel, that it is necessary to do so in order to comply with its
fiduciary duties to the Company's shareholders under applicable law, the Board
of Directors of the Company may terminate the Merger Agreement pursuant to the
terms of the Merger Agreement solely in order to concurrently enter into a
definitive agreement to effect a Superior Proposal. The term "Superior
Proposal" means any bona fide proposal or offer from one or more persons
(other than Parent and its affiliates) to acquire, directly or indirectly, in
one or more transactions for consideration consisting of cash and/or
securities, more than 50% of the shares of Company Common Stock then
outstanding or all or substantially all the assets of the Company and its
subsidiaries taken as a whole, and otherwise on terms which the Company's
Board of Directors determines in its good faith judgment (based on the advice
of a financial advisor of nationally recognized reputation) to be more
favorable to the holders of Company Common Stock than are the Offer and the
Merger and for which financing, to the extent required, is then committed or
which, in the good faith judgment of the
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Board of Directors of the Company (based on the advice of a financial advisor
of nationally recognized reputation), is reasonably capable of being financed
by such person. Nothing contained above shall prohibit the Company from taking
and disclosing to its shareholders a position contemplated by Rule 14e-2(a)
under the Securities and Exchange Act of 1934, as amended (the "Exchange Act")
or from issuing a communication meeting the requirements of Rule 14d-9(e);
provided, however, that neither the Company nor its Board of Directors (or any
committee thereof) shall, except as otherwise permitted in the Merger
Agreement, withdraw, modify or materially qualify (or publicly propose the
foregoing) the Company's position with respect to the Offer, the Merger or the
Merger Agreement or approve or recommend, or publicly propose to approve or
recommend, an Acquisition Proposal.
The Merger Agreement requires the Company to advise Parent orally and in
writing of the Company's receipt of any Acquisition Proposal, any request for
information or an inquiry that could lead to or is otherwise related to any
Acquisition Proposal, the identity of the person making such request or
Acquisition Proposal and the material terms of any such Acquisition Proposal.
The Company is under an obligation to keep Parent fully informed of the status
and terms (including amendments) of any such request or Acquisition Proposal,
unless the Board of Directors determines in good faith, based upon advice of
independent counsel, that it is necessary not to do so in order to comply with
its fiduciary duties to the Company's shareholders under applicable law.
Reasonable Efforts. The Merger Agreement provides that the parties thereto
shall use all reasonable efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, all things reasonably necessary, proper or
advisable under applicable law to consummate and make effective the
transactions contemplated thereby. Each party agrees to cooperate and use its
respective reasonable efforts to promptly make all filings and obtain all
consents and approvals of Governmental Authorities (including, without
limitation, the Federal Communications Commission (the "FCC")) and other
persons necessary to consummate the transactions contemplated thereby
including, without limitation, to permit Parent and the Purchaser to
consummate the Carrier Acquisition (as hereinafter defined), to cause the
Purchaser to become an "authorized carrier" as defined in the Satellite Act
(an "Authorized Carrier") and to consummate the Offer and the Merger. The
parties agree to each use all reasonable efforts to resolve any objections as
may be asserted under any Antitrust Law or any other applicable law, with
respect to any transaction contemplated by the Merger Agreement. If any
administrative, judicial or legislative action or proceeding is initiated (or
threatened to be initiated) or any other action is taken by any person
challenging any transaction contemplated by the Merger Agreement as violative
of any Antitrust Law or any other applicable law, the parties agree to
cooperate to contest and resist any such action or proceeding, and to have
vacated, lifted, reversed or overturned any decree, judgment, injunction,
ruling, decision, finding or other order (whether temporary, preliminary or
permanent) or other official action or decision of any Governmental Authority
that is in effect and that restricts, prevents or prohibits consummation of
any transaction contemplated by the Merger Agreement, including, without
limitation, by pursuing all reasonable avenues of administrative and judicial
appeal. Notwithstanding the foregoing:
(i) in no event shall Parent or its subsidiaries be required to agree to
hold separate or to divest any of their respective businesses or assets, or
agree to any other restriction or condition with respect to the acquisition
or ownership of any of their respective businesses or assets or the conduct
or operation of any of their respective businesses or assets, or following
the consummation of the Offer or the Merger, of the Company or any of its
subsidiaries, as may be required (i) by any applicable Governmental
Authority (including, without limitation, the Federal Trade Commission, the
Antitrust Division of the Department of Justice or any state attorney
general) in order to resolve such objections as such Governmental Authority
may have to such transactions under any Antitrust Law, or (ii) by any
domestic or foreign court or other tribunal, in any action or proceeding
brought by any person challenging such transactions as violative of any
Antitrust Law, in order to avoid the entry of, or to effect the
dissolution, vacating, lifting, altering or reversal of, any order that has
the effect of restricting, preventing or prohibiting the consummation of
any transaction contemplated by the Merger Agreement, if the Board of
Directors of Parent determines in good faith that any such agreement to
hold separate or to divest or agreement to other restriction or condition
is not in the best interests of Parent; and
(ii) Except for seeking review by the full FCC of any FCC staff decision
denying any application to permit Parent or the Purchaser to consummate the
Carrier Acquisition, to cause the Purchaser to become an
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Authorized Carrier or to consummate the Offer, Parent is not required to
undertake or continue any contest or resistance of an action or pending
legal proceeding or take any other action if, after taking into account
advice of independent counsel with respect to relevant matters, including,
without limitation, the likely outcome of the action or proceeding, the
timing thereof and the likely costs related thereto, the Board of Directors
of Parent determines in good faith that undertaking or continuing any such
contest or resistance or taking any such other action is not in the best
interests of Parent.
Directors' and Officers' Insurance; Indemnification. The Merger Agreement
provides that, from and after the Effective Time, Parent shall cause the
Surviving Corporation to indemnify, defend and hold harmless the present and
former officers, directors, employees and agents of the Company and its
subsidiaries (the "Indemnified Parties") against all losses, claims, damages,
expenses or liabilities arising out of or related to actions or omissions or
alleged actions or omissions occurring at or prior to the Effective Time to
the same extent and on the same terms and conditions (including with respect
to advancement of expenses) provided for in the Company's Articles of
Incorporation and By-Laws and agreements in effect on the date of the Merger
Agreement (to the extent consistent with applicable law as of the Effective
Time), which provisions will survive the Merger and continue in full force and
effect after the Effective Time, in each case consistent with applicable law.
Parent shall, and shall cause the Surviving Corporation to, periodically
advance expenses (including attorneys' fees) as incurred by an Indemnified
Party with respect to the foregoing to the extent required under the Company's
Articles of Incorporation and By-laws in effect on the date of the Merger
Agreement (to the extent consistent with applicable law) and any determination
required to be made with respect to whether an Indemnified Party shall be
entitled to indemnification shall, if requested by such Indemnified Party, be
made by independent legal counsel selected by the Surviving Corporation and
reasonably satisfactory to such Indemnified Party. In the Merger Agreement,
Parent guarantees the obligation of the Surviving Corporation provided for
above.
The Merger Agreement also provides that, for a period of six years after the
Effective Time, Parent shall use reasonable efforts to cause to be maintained
in effect the current policies of directors' and officers' liability insurance
maintained by the Company (provided that Parent may substitute therefor
policies with reputable and financially sound carriers of at least the same
coverage and amounts containing terms and conditions which are no less
advantageous in the aggregate) with respect to claims arising from or related
to facts or events which occurred at or before the Effective Time; provided,
that Parent shall not be obligated to make annual premium payments for such
insurance to the extent such premiums exceed 150% of the annual premiums paid
as of the date of the Merger Agreement by the Company for such insurance (the
"Maximum Amount"). If the amount of the annual premiums necessary to maintain
or procure such insurance coverage exceeds the Maximum Amount, Parent and the
Surviving Corporation shall maintain the most advantageous policies of
directors' and officers' insurance obtainable for an annual premium equal to
the Maximum Amount.
Conditions to the Merger. The Merger Agreement provides that the respective
obligations of the Company, Parent and Acquisition Sub to consummate the
Merger are subject to the satisfaction or waiver of the following conditions:
(i) the Purchaser shall have purchased Shares pursuant to the Offer;
(ii) the Satellite Act, and other applicable laws, shall have been
amended or repealed, and all applicable proceedings before the FCC or other
Governmental Authority (as defined below) necessary to implement such
amendment or repeal shall have been completed to the extent necessary to
permit the consummation of the Merger as contemplated by the terms of the
Merger Agreement;
(iii) any applicable waiting period related to the Merger under the
Antitrust Laws shall have terminated or expired and all consents or
approvals required under the Antitrust Laws shall have been received;
(iv) the Parent Common Stock to be issued in the Merger and such other
shares to be reserved for issuance in connection with the Merger shall have
been approved upon official notice of issuance for listing on the New York
Stock Exchange, Inc. ("NYSE");
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(v) the Form S-4 shall have been declared effective by the Commission
under the Securities Act. No stop order suspending the effectiveness of the
Form S-4 shall have been issued by the Commission and no proceedings for
that purpose shall have been initiated or threatened by the Commission; and
(vi) the shareholders of the Company shall have approved the Merger and
the Merger Agreement pursuant to Section 29-367 of the DCBCA.
In addition, the obligations of Parent and Acquisition Sub to effect the
Merger are further subject to the satisfaction at or prior to the Effective
Time of the following conditions:
(i) (A) after the date of the Merger Agreement, there shall not have been
any change in existing law or any new law promulgated, enacted, enforced or
deemed applicable to the Company or to the transactions contemplated by the
Merger Agreement nor (B) shall INTELSAT or Inmarsat have adopted a plan for
privatization, or have been privatized, in whole or in part, in a manner or
pursuant to terms and conditions (or, in the case of an adopted plan,
proposed terms and conditions), in the case of either clause (A) or clause
(B) that Parent determines in good faith (after consultation with the
Company) would reasonably be expected to have a Significant Adverse Effect
(as defined below);
(ii) all consents and approvals from Governmental Authorities (including
the FCC) or any other person required for the consummation of the Merger as
contemplated by the terms of the Merger Agreement shall have been granted,
except where the failure to obtain such consent or approval, individually
or in the aggregate, would not reasonably be expected to have a Significant
Adverse Effect; and
(iii) since the date of the Merger Agreement, there shall not have
occurred any event that has had or would reasonably be expected to have a
Significant Adverse Effect.
The Merger Agreement also provides that the obligation of each party to
effect the Forward Merger is further subject to the satisfaction at or prior
to the Effective Time of the following conditions and if any of the following
conditions are not satisfied, but the conditions set forth in the paragraphs
above are satisfied, the Reverse Merger shall be effected:
(i) the aggregate fair market value of the Parent Common Stock,
deliverable pursuant to the Merger Agreement upon consummation of the
Forward Merger, based upon the most recent closing price of such stock on
the NYSE Composite Tape on the last full trading day prior to the Effective
Time (the "Stock Value"), would be at least 40% of the sum of (A) the Stock
Value, (B) the aggregate amount paid by Parent to purchase Shares pursuant
to the Offer, (C) cash payable in respect of Dissenting Shares (assuming
for these purposes that the per share amount payable in respect of
Dissenting Shares is $50), and (D) cash
payable in respect of fractional shares (assuming for these purposes that
each holder of record of Company Common Stock as of the close of the last
trading day prior to the Effective Time is entitled to receive $50 in
respect of fractional share interests);
(ii) the Company and Parent shall have received a written tax opinion
from their respective counsel stating that the Forward Merger will be
treated for U.S. federal income tax purposes as a reorganization qualifying
under the provision of Section 368(a) of the Code; and
(iii) all required consents or approvals from governmental authorities
(including the FCC) or any other person shall have been obtained to permit
the consummation of the Forward Merger, except where the failure to obtain
such consent or approval, individually or in the aggregate, would not
reasonably be expected to have a material adverse effect on the Company's
business.
For purposes of the Merger Agreement the term "Significant Adverse Effect"
means a Material Adverse Effect on the Company (as hereinafter defined, but
including, for purposes of determining whether there has been a Significant
Adverse Effect, any effects or changes arising out of, resulting from or
relating to general economic, financial or industry conditions) of such
seriousness and significance that a reasonable businessperson in similar
circumstances would not proceed with the Merger on the terms and conditions
set forth in the Merger Agreement.
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The term "Material Adverse Effect," means any change or effect that is
materially adverse to (i) the business, properties, operations, results of
operations or financial condition of the referenced person and its
subsidiaries, taken as a whole, other than any effects or changes arising out
of, resulting from or relating to general economic, financial or industry
conditions or (ii) the ability of any of the referenced person and its
subsidiaries to perform its obligations under the Merger Agreement and the
Carrier Acquisition Agreement.
IN VIEW OF THE AUTHORIZED CARRIER CONDITIONS, IT IS EXPECTED THAT A
SIGNIFICANT PERIOD OF TIME WILL ELAPSE BETWEEN THE COMMENCEMENT AND THE
CONSUMMATION OF THE OFFER, WHILE THE PARTIES SEEK TO OBTAIN THE REGULATORY
APPROVALS REQUIRED IN ORDER TO SATISFY THE CONDITIONS TO THE OFFER. THE
PURCHASER MAY BE REQUIRED TO EXTEND THE EXPIRATION DATE ONE OR MORE TIMES
WHILE THE PURCHASER SEEKS TO OBTAIN SUCH REGULATORY APPROVALS. IN ADDITION, IN
VIEW OF THE NEED FOR LEGISLATION RELATING TO THE AMENDMENT OR REPEAL OF THE
SATELLITE ACT AND FOR ADDITIONAL REGULATORY APPROVALS AS CONDITIONS TO THE
CONSUMMATION OF THE MERGER, THERE MAY BE A FURTHER SIGNIFICANT PERIOD OF TIME
BETWEEN THE PURCHASE OF SHARES PURSUANT TO THE OFFER AND THE CONSUMMATION OF
THE MERGER. THERE CAN BE NO ASSURANCE THAT ANY SUCH REGULATORY APPROVALS WILL
BE OBTAINED OR THAT ANY SUCH LEGISLATION WILL BE ENACTED, AND IF OBTAINED AND
ENACTED, THERE CAN BE NO ASSURANCE AS TO THE DATE SUCH APPROVALS AND
ENACTMENTS WILL OCCUR. SEE SECTION 14 OF THE OFFER TO PURCHASE.
Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to Parent and Acquisition Sub
with respect to, among other things, its organization, capitalization,
financial statements, public filings, conduct of business, compliance with
laws, litigation, non-contravention, consents and approvals, opinions of
financial advisors, undisclosed liabilities and the absence of certain changes
with respect to the Company since June 30, 1998.
Termination; Fees. The Merger Agreement may be terminated and the Offer and
the Merger may be abandoned at any time (notwithstanding approval of the
Merger by the shareholders of the Company) prior to the Effective Time:
(i) by mutual written consent of the Company and Parent;
(ii) by the Company or Parent if any court of competent jurisdiction in
the U.S. or other U.S. governmental authority shall have issued a final
decree, or other order or taken any other final action restraining,
enjoining or otherwise prohibiting the consummation of the Offer or the
Merger and such decree or other order or other action is or shall have
become nonappealable;
(iii) by Parent if, due to an occurrence or circumstance which would
result in a failure to satisfy any of the closing conditions to the Merger
(as outlined in Section 14 of the Offer to Purchase), Parent shall have (A)
failed to commence the Offer within the time required by Regulation 14D
under the Exchange Act, (B) terminated the Offer without the purchase of
any Shares thereunder or (C) failed to accept for payment and pay for
Shares pursuant to the Offer prior to the one year anniversary of the date
of the Merger Agreement; provided that Parent may not terminate pursuant to
this paragraph if Parent is in material breach of the Merger Agreement;
(iv) by the Company if (A) there shall not have occurred a material
breach of any representation, warranty, covenant or agreement of the
Company or any of its subsidiaries contained in the Merger Agreement and
Parent shall have (I) failed to commence the Offer within the time required
by Regulation 14D under the Exchange Act, (II) terminated the Offer without
the purchase of any Shares thereunder or (III) failed to accept for payment
and pay for Shares pursuant to the Offer on or prior to the one year
anniversary of the date of the Merger Agreement or (B) prior to the
purchase of Shares pursuant to the Offer, the Board of Directors of the
Company or any committee thereof shall have (I) determined that an
Acquisition Proposal is a Superior Proposal, and approved a definitive
agreement to effect such Superior Proposal and directed the authorized
officers of the Company to execute and deliver such definitive agreement
concurrently with the effectiveness of the termination of the Merger
Agreement pursuant to paragraph (iv)(B) or (II) adopted any resolution to
effect any of the foregoing; provided, that such termination under this
paragraph (iv)(B) shall not be effective until payment of the Termination
Fee required by the Merger Agreement (as defined below);
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(v) by Parent prior to the purchase of Shares pursuant to the Offer, if
(A) there shall have occurred a breach of any representation or warranty of
the Company or its subsidiaries contained in the Merger Agreement that
would reasonably be expected to have a Material Adverse Effect on the
Company or would reasonably be expected to materially adversely affect (or
materially delay) the consummation of the Offer, (B) there shall have
occurred a breach of any covenant or agreement of the Company or its
subsidiaries contained in the Merger Agreement that has or would reasonably
be expected to have a Material Adverse Effect on the Company or that would
reasonably be expected to materially adversely affect (or materially delay)
the consummation of the Offer, which shall not have been cured prior to the
earlier of (I) ten days following notice of such breach and (II) two
business days prior to the date on which the Offer expires, (C) the Board
of Directors of the Company or any committee thereof shall have (I)
determined that an Acquisition Proposal is a Superior Proposal, (II)
withdrawn, modified or materially qualified (including by amendment of the
Schedule 14D-9) in a manner adverse to Parent or Acquisition Sub its
approval or recommendation of the Offer, the Merger or the Merger
Agreement, (III) recommended to the Company's shareholders another
Acquisition Proposal, (IV) adopted any resolution to effect any of the
foregoing, or (D) the Minimum Condition shall not have been satisfied upon
the expiration of the Offer and at or prior to such time a person or group
(other than Parent or Acquisition Sub) shall have commenced, publicly
proposed or publicly disclosed an Acquisition Proposal;
(vi) by the Company prior to the purchase of Shares pursuant to the Offer
if (A) there shall have occurred a breach of any representation or warranty
of Parent or Acquisition Sub contained in the Merger Agreement that would
reasonably be expected to materially adversely affect (or materially delay)
the consummation of the Offer or (B) there shall have occurred a material
breach of any covenant or agreement of Parent or Acquisition Sub contained
in the Merger Agreement that would reasonably be expected to materially
adversely affect (or materially delay) the consummation of the Offer which
shall not have been cured prior to the earlier of (I) ten days following
notice of such breach and (II) two business days prior to the date on which
the Offer expires;
(vii) by Parent or the Company if the shareholders of the Company shall
not have approved the Merger and the Merger Agreement at the Company
Shareholders Meeting, including any postponement or adjournment thereof, on
or before the one year anniversary of the date of the Merger Agreement; or
(viii) by the Company or Parent if (A) there shall not have occurred a
material breach of any representation, warranty, covenant or agreement of
such party contained in the Merger Agreement and (B) the Effective Time
shall not have occurred on or before the two year anniversary of the date
of the Merger Agreement.
The Merger Agreement also provides that if any of the following shall
occur:
(i) The Company or Parent terminates the Merger Agreement pursuant to
paragraph (v)(D) or paragraph (vii) above and, within 12 months thereafter,
the Company or any of its subsidiaries enters into
an agreement with respect to an Acquisition Proposal, or an Acquisition
Proposal is consummated, involving any person or affiliate, or any group in
which such person (or any affiliate thereof, or any group in which such
person or affiliate is a member) (A) with whom the Company or any Company
Representative had discussions with respect to an Acquisition Proposal, (B)
to whom the Company or any Company Representative furnished information
with respect to an Acquisition Proposal or (C) who had commenced, publicly
proposed or publicly disclosed an Acquisition Proposal or expressed to the
Company an interest in an Acquisition Proposal, in the case of each of
clauses (A), (B) and (C) after the date of the Merger Agreement and prior
to such termination; or
(ii) The Company terminates the Merger Agreement pursuant to paragraph
(iv)(B) above;
then, in each case, the Company shall pay to Parent, within one business day
following the execution and delivery of such agreement or such occurrence, as
the case may be, or simultaneously with such determination pursuant to
paragraph (iv)(B) above, a fee, in cash, of $75 million (the "Termination
Fee"); provided, that the Company in no event shall be obligated to pay more
than one such Termination Fee with respect to all such agreements and
occurrences and such termination.
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Fees and Expenses. Except as specifically provided in the Merger Agreement
or the Registration Rights Agreement, each party shall bear its own expenses
incurred in connection with the transactions contemplated by the Transaction
Agreements, including, without limitation, out-of-pocket costs, and fees and
expenses of investment bankers, finders, brokers, agents, representatives,
counsel and accountants as well as fees and expenses incident to the
negotiation, preparation and execution of the Transaction Agreements and
related documentation, preparation of filings and consents with Governmental
Authorities and other persons, and any litigation resulting from the execution
of the Transaction Agreements; provided, that in the event the Termination Fee
becomes payable, the Company shall, upon the receipt of documentation in form
reasonably satisfactory to the Company, promptly reimburse Parent and its
subsidiaries in cash in immediately available funds, for any of the foregoing
expenses of Parent or its subsidiaries, up to $5.0 million in the aggregate.
Shareholders Agreement.
The following is a summary of certain material provisions of the
Shareholders Agreement. This summary does not purport to be complete and is
qualified in its entirety by reference to the complete text of the
Shareholders Agreement, a copy of which is filed as Exhibit 3 hereto and is
incorporated herein by reference. Capitalized terms not otherwise defined
below have the meanings ascribed to them in the Shareholders Agreement.
In connection with the execution of the Merger Agreement, the Company has
entered into a Shareholders Agreement dated as of September 18, 1998, with
Parent pursuant to which promptly after the consummation of the Offer, but in
any event within thirty (30) days thereafter and from time to time thereafter
until the consummation of the Merger or until the Shareholders Agreement is
otherwise terminated, the Company will take all actions necessary to cause (i)
the election as directors of the Company of three individuals selected by
Parent (collectively, the "Parent Designees"), (ii) the appointment of a
Parent Designee as a member of the Committee on Audit, Corporate
Responsibility and Ethics, the Committee on Compensation and Management
Development, the Finance Committee, the Nominating and Corporate Governance
Committee, the Committee on Research and International Matters and the
Strategic Planning Committee (or committees having similar functions) of the
Company's Board of Directors (collectively, the "Committees"), and (iii) if
any such Parent Designee shall cease to be a director for any reason, the
filling of the vacancy resulting thereby with and individual selected by
Parent (such individual thereafter being a Parent Designee). Any Parent
officer or employee serving as a director of the Company will be deemed a
Parent Designee. Notwithstanding the foregoing, with respect to any election
of directors at any meeting of shareholders of the Company that occurs after
the consummation of the Offer, the Company shall be deemed to have satisfied
its obligations under clause (i) of the foregoing sentence if the three Parent
Designees are included on the Company's slate of nominees for election at such
meeting of shareholders. The Shareholders Agreement further provides that the
Company agrees not to amend or repeal the provisions of Section 3.08 of its
By-Laws permitting any three directors to call a special meeting of the board
of directors or otherwise amend its Articles of Incorporation or By-Laws in
any manner that would adversely affect the rights of Parent or its
subsidiaries under the Shareholders Agreement or the Registration Rights
Agreement.
The Shareholders Agreement also provides that, if requested by Parent, the
Company shall cause its directors to adopt resolutions (i) to approve an
amendment to the Company's articles of incorporation to eliminate the transfer
restrictions set forth in Section 5.03(c) of the Company's articles of
incorporation (the "Amendment"), (ii) to direct that the Amendment be
submitted to a vote of the shareholders of the Company and (iii) to recommend
approval of the Amendment by the shareholders of the Company.
The Shareholders Agreement also prohibits Parent and its affiliates from,
among other things: (i) purchasing more than 49% of the issued and outstanding
shares of Company Common Stock, unless otherwise approved by the Company, (ii)
selling or otherwise transferring (a "Transfer") any of their beneficial
ownership of shares of Company Common Stock, except in compliance with
applicable law and upon receipt of any necessary approvals of any governmental
authority, (iii) other than a Transfer which has been approved by the
Company's Board of Directors, Transferring any Shares except through a bona
fide public offering of Company Common Stock pursuant to a registration
statement effective under the Securities Act or through a bona fide open
market
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"brokers" transaction as permitted by Rule 144 under the Securities Act and
(iv) soliciting proxies with respect to the Company in opposition to any
matter which has been recommended by the Company's Board of Directors or in
favor of any matter which has not been approved by the Company's Board of
Directors.
Registration Rights Agreement.
The following is a summary of certain material provisions of the
Registration Rights Agreement. This summary does not purport to be complete
and is qualified in its entirety by reference to the complete text of the
Registration Rights Agreement, a copy of which is filed as Exhibit 4 hereto
and is incorporated herein by reference. Capitalized terms not otherwise
defined below have the meanings ascribed to them in the Registration Rights
Agreement.
In connection with the Merger Agreement, Parent and the Company have entered
into the Registration Rights Agreement dated as of September 18, 1998 pursuant
to which, after the termination of the Merger Agreement and assuming the
Purchaser acquired Company Common Stock pursuant to the Offer, the Parent has
the right (the "Demand Registration Right") to require the Company to prepare
and file up to five registration statements under the Securities Act to
register shares of Company Common Stock held by Parent. However, the Company
is not required to effect a registration of Company Common Stock for less than
3,000,000 Shares in the aggregate. In addition, if with respect to an
underwritten offering, the managing underwriter advises against proceeding
with such offering because the number of Shares proposed to be included in
such offering would adversely affect the offering, Parent can request, subject
to the limitations described above, registration of the maximum number of
Shares which it is advised can be sold without adverse effect. Expenses
related to the exercise of the Demand Registration Right will generally be
payable by the Company.
Under the Registration Rights Agreement, Parent also has the right (the
"Piggy-Back Registration Right"), with respect to any underwritten offerings,
including registered offerings, of Company Common Stock for cash proposed by
the Company, to require the Company to include Company Common Stock held by
Parent in such offering and registration, except the Company shall not be
required to effect a registration of Company Common Stock owned by Parent in
any registration statement on Form S-4 or S-8 or a registration statement
filed in connection with an exchange offer or other offering of securities
solely to the then existing shareholders of the Company. Expenses relating to
exercises of the Piggy-Back Registration Right will generally be payable by
the Company.
In other respects, the Registration Rights Agreement contains terms that are
customary to registration rights agreements of its type including mutual
indemnification provisions and black-out provisions relating to the
prohibition of the sale of shares of the Company's Common Stock for a certain
period of time.
Carrier Acquisition Agreement.
The following is a summary of certain material provisions of the Carrier
Acquisition Agreement. This summary does not purport to be complete and is
qualified in its entirety by reference to the complete text of the Carrier
Acquisition Agreement, a copy of which is filed as Exhibit 5 hereto and is
incorporated herein by reference. Capitalized terms not otherwise defined
below have the meanings ascribed to them in the Carrier Acquisition Agreement.
In connection with the Merger Agreement and to facilitate consummation of
the Offer and the Merger, the Company has entered into a Carrier Acquisition
Agreement dated as of September 18, 1998 with Parent, the Purchaser and CGSI,
pursuant to which CGSI will be merged with and into the Purchaser (the
"Carrier Acquisition") as soon as practicable following the satisfaction or
waiver of the conditions set forth in the Carrier Acquisition Agreement, or on
such other date as the parties may agree, but in all events prior to the
consummation of the Offer. At the effective time of the Carrier Acquisition,
the separate existence of CGSI shall cease and the Purchaser shall continue as
the surviving entity under the name "COMSAT Government Systems, LLC."
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In the Carrier Acquisition, the Purchaser will acquire the common carrier
telecommunications business of CGSI. In connection with this transaction, the
Purchaser will seek the approvals from appropriate Governmental Authorities
(including the FCC) necessary to continue the common carrier
telecommunications business of CGSI and to purchase the Maximum Number of
Shares pursuant to the terms of the Offer.
COMMERCIAL ARRANGEMENTS
The Company and its affiliates have, from time to time, had contractual
relationships with Parent and its affiliates in the ordinary course of their
respective businesses. Parent is a customer of COMSAT Laboratories and most
recently, in June 1998, awarded a contract to COMSAT Laboratories for a N-
Orbit testing of a mobile telephone communications satellite.
ARRANGEMENTS WITH EXECUTIVE OFFICERS, DIRECTORS OR AFFILIATES OF THE COMPANY
In connection with the transactions contemplated by the Merger, the
following agreements (collectively, the "Agreements") were entered into and/or
actions (collectively, the "Actions") were taken by the Company: adoption of
amendments to the Amended and Restated Employment Agreements between the
Company and Betty C. Alewine, Allen E. Flower and Warren Y. Zeger; adoption of
the COMSAT Corporation Retention Bonus Plan (the "Retention Bonus Plan");
adoption of the COMSAT Corporation Amended and Restated Change in Control
Severance Plan (the "Amended Severance Plan"); adoption of amendments to the
COMSAT Corporation 1995 Key Employee Stock Plan (the "1995 Key Employee Stock
Plan"), the COMSAT Corporation 1990 Key Employee Stock Plan (the "1990 Key
Employee Stock Plan"), the COMSAT Corporation Non-Employee Directors Stock
Plan (the "Directors Stock Plan"), and the COMSAT Corporation Directors and
Executives Deferred Compensation Plan (the "Deferred Compensation Plan"); and
adoption of certain resolutions by the Board with respect to the "change in
control" provisions of certain of the Company's employee benefit plans.
A summary of certain material provisions of each of the Agreements and
Actions follows. These summaries do not purport to be complete and are
qualified in their entirety by reference to the complete text of the
Agreements or Actions, as the case may be, which are filed as Exhibits 9
through 20 hereto and incorporated herein by reference.
Amendments to Employment Agreements
As of September 18, 1998, the Company entered into certain amendments (the
"Employment Agreement Amendments") to the Amended and Restated Employment
Agreements dated as of July 18, 1997 (the "Employment Agreements") with Mrs.
Alewine and Messrs. Flower and Zeger (each an "Executive" and, collectively,
the "Executives"). Pursuant to the Employment Agreement Amendments, the
Employment Agreements were amended to provide that, upon the occurrence of a
"Change in Control," the term of each Employment Agreement shall automatically
end on the third anniversary of the date of such Change in Control, and Mr.
Flower's Employment Agreement was further amended to extend the term of
employment under his Employment Agreement until April 17, 2002. As defined in
the Employment Agreement Amendments, a "Change in Control" is deemed to have
occurred upon the happening of any one of the following events: (1) the
acquisition by any person (other than the Company or any of its subsidiaries,
an employee benefit plan sponsored by the Company, an underwriter temporarily
holding securities pursuant to an offering of such securities, or a
corporation owned by the stockholders of the Company in substantially the same
proportions as their ownership of the Company) of beneficial ownership of 50%
or more of the combined voting power of the outstanding voting securities of
the Company; (2) any change in the composition of the Board of Directors of
the Company (the "Board") 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 Company's shareholders holding less
than 60% of the combined voting power of the Company, the surviving entity or
its parent (as applicable); (4) approval by the shareholders of the
liquidation or dissolution of the Company, or sale by the Company of all or
substantially all of the Company's assets, other than to an entity 80% of the
combined voting power of which would be beneficially owned by the Company's
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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; provided, however, that none of the events described in
clauses (1) through (5) above 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 Employment Agreements; and
provided, further, that neither the signing of the Merger Agreement, the
approval by the Board or the Company's shareholders of the Merger or the
Merger Agreement, the commencement or the closing of the Offer, nor the
acquisition by Parent or Regulus, LLC of COMSAT Government Systems, Inc. shall
constitute a Change in Control for purposes of the Employment Agreements, and
that, upon the closing of the Merger, a Change in Control of the Company shall
be deemed to have occurred for purposes of the Employment Agreements.
The Employment Agreement Amendments also amended the Employment Agreements
to provide that each of the Executives shall be entitled to receive the
following retention bonuses, subject to his or her continued employment
through the applicable determination date for such bonuses: (i) a bonus on the
date of the closing of the Merger (the "Closing Date") (or on a specified
later date if the Merger does not close within a specified period of time) in
an amount equal to 150% of the sum of the Executive's base salary plus the
Executive's targeted annual bonus, assuming all performance targets are met to
the maximum extent, under the Company's Annual Incentive Plan, and (ii) a
bonus on the eighteen month anniversary of the Closing Date in an amount equal
to 100% of the sum of the Executive's base salary plus the Executive's
targeted annual bonus, assuming all performance targets are met to the maximum
extent, under the Company's Annual Incentive Plan. If, on or before the
applicable determination date for such bonuses, the Executive's employment is
terminated without "cause" (as defined in the Employment Agreements) or by
reason of the Executive's death or disability, or the Executive elects to
terminate his or her employment for "good reason" (as defined in the
Employment Agreements), in lieu of the bonuses described above, the Executive
will be entitled to receive a payment at that time in an amount equal to the
bonus to which the Executive would have been entitled had the Executive
remained employed by the Company through the applicable determination date,
provided, however, that if the Executive and Parent are unable to reach an
agreement regarding the terms and conditions of the Executive's employment
within 30 days following the closing of the Merger and the Executive's
employment is terminated within such 30 day period, the Executive shall
forfeit all rights to receive the bonus which otherwise would have been
payable to the Executive on the eighteen month anniversary of the Closing Date
(or the payment which would have been payable to the Executive in the event of
a termination of the Executive's employment between the Closing Date and the
eighteen month anniversary of the Closing Date, as described above).
The Employment Agreement Amendments amended the Employment Agreements to
provide that each of the Executives shall be entitled to receive the severance
benefits and payments to which he or she was entitled under his or her
Employment Agreement prior to the Employment Agreement Amendments only in the
event that the termination of his or her employment which gives rise to such
payments occurs prior to a Change in Control of the Company. Pursuant to the
Employment Agreement Amendments, each of the Employment Agreements was also
amended to provide that, if a Change in Control of the Company occurs and the
Executive's employment is terminated during the period beginning on the date
of the Change in Control and ending on the last day of the Executive's
employment term (a) by the Company other than for "cause" or disability, or
(b) by the Executive for "good reason," then, in lieu of any other severance
payments or severance benefits payable to the Executive under the Employment
Agreements, the Executive will be entitled to receive the following until the
expiration of the Executive's employment term: (i) the Executive's base
salary; (ii) the Executive's targeted annual bonus under the Company's Annual
Incentive Plan; and (iii) continued group health and welfare plan benefits for
the Executive and the Executive's dependents (subject to reduction under
certain circumstances described in the Employment Agreement Amendments). In
addition, in the event of such a termination, the Executive would be entitled
to receive benefits under the Company's Insurance and Retirement Plan for
Executives (the "SERP") commencing as early as age 55 without any actuarial
reduction for early commencement of benefits. In addition, the Employment
Agreement Amendments modified the Employment Agreements to provide that if a
Change in Control of the Company occurs and (i) if the Executive and Parent
have negotiated in good faith but have been unable to reach an agreement
regarding the terms and conditions of
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the Executive's employment within 30 days following the closing of the Merger
and the Executive's employment is terminated, or (ii) if the Executive
continues to be employed until the expiration of the Executive's employment
term, then the Executive shall be entitled to receive the SERP benefits noted
above.
Each of the Executives also would be entitled to receive a gross-up payment
if any payment or benefit to the Executive would constitute an "excess
parachute payment" under Section 280G of the Internal Revenue Code.
Retention Bonus Plan
Effective as of September 18, 1998, the Company adopted the Retention Bonus
Plan. The Retention Bonus Plan generally provides retention bonuses to certain
key employees who remain employed by the Company (or who incur a termination
of employment under certain circumstances described in the Retention Bonus
Plan) through specified dates following the signing of the Merger Agreement.
The Retention Bonus Plan covers approximately 108 participants, who are
classified as either "Group I Participants" or "Group II Participants" (each
as defined in the Retention Bonus Plan). Certain executive officers of the
Company (not including Mrs. Alewine or Messrs. Flower or Zeger) are Group I
Participants. No executive officer of the Company is a Group II Participant.
Under the Retention Bonus Plan, each Group I Participant shall be entitled
to receive the following retention bonuses, subject to such participant's
continued employment through the applicable determination date for such
bonuses: (i) a bonus on the Closing Date (or on a specified later date if the
Merger does not close within a specified period of time) in an amount equal to
50% of the sum of the participant's base salary plus his or her targeted
annual bonus under the Company's Annual Incentive Plan, and (ii) a bonus on
the eighteen month anniversary of the Closing Date in an amount equal to 100%
of the sum of the participant's base salary plus his or her targeted annual
bonus under the Company's Annual Incentive Plan. If, on or before the
applicable determination date for such bonuses, a Group I Participant's
employment is terminated without "Cause" (as defined in the Retention Bonus
Plan) or by reason of his or her death or disability, or, if a Group I
Participant elects to terminate his or her employment for "Good Reason" (as
defined in the Retention Bonus Plan), such Group I Participant will be
entitled to receive a payment upon termination (in lieu of any bonuses which
have not yet become payable to the participant under the Retention Bonus Plan)
in an amount equal to the bonus to which he or she would have been entitled
had he or she remained employed by the Company through the applicable
determination date, provided, however, that, if the aggregate amount of any
severance payments to which the participant is entitled under any severance
plan of the Company (to the extent that such severance payment is based on the
participant's salary and/or bonus) is greater than or equal to the amount of
the bonus payable upon such a termination under the Retention Bonus Plan, then
the participant shall forfeit all rights to receive such payment and any other
bonus payments that have not yet become payable to the participant under the
Retention Bonus Plan. In the event that the participant receives a payment
upon termination of employment under the Retention Bonus Plan, such
participant shall not be entitled to any severance payment under any severance
plan of the Company to the extent that such severance payment is based on the
participant's salary and/or bonus.
Group II Participants are entitled to receive bonuses under the Retention
Bonus Plan at the same times and, in general, on the same terms as the Group I
Participants, except that the bonuses are based on a lower percentage of their
base salary and targeted annual bonus.
Amended Severance Plan
Effective as of September 18, 1998, the Company adopted the Amended
Severance Plan. The Amended Severance Plan amends and restates the Change in
Control Severance Plan adopted by the Company on June 20, 1997. The Amended
Severance Plan generally provides severance payments and benefits to certain
key employees, including executive officers (but not including Mrs. Alewine or
Messrs. Flower and Zeger), of the Company who incur a termination of
employment under certain circumstances following a "Change in Control" (as
defined in the Amended Severance Plan) of the Company. The Amended Severance
Plan covers 14 participants, who are classified as either "Group I
Participants," "Group II Participants" or "Group III
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Participants" (each as defined in the Amended Severance Plan). For purposes of
the Amended Severance Plan, the definition of "Change in Control" is
substantively identical to the definition of such term described above under
the caption "Amendments to Employment Agreements."
Under the Amended Severance Plan, if a Change in Control of the Company
occurs and a participant's employment is terminated during the period
beginning on the date of the Change in Control and ending on the date which is
eighteen months after the date of such Change in Control (a) by the Company
other than for "Cause" or "Disability" (each as defined in the Amended
Severance Plan), or (b) by the participant for "Good Reason" (as defined in
the Amended Severance Plan), then, in lieu of any other severance payments or
severance benefits payable to the participant by the Company, the participant
will be entitled to receive the following during the "Benefits Continuation
Period" (as defined below): (i) the participant's base salary; (ii) the
participant's targeted annual bonus under the Company's Annual Incentive Plan;
and (iii) the same group health and welfare benefits to which the participant
would have been entitled had he or she remained continuously employed by the
Company during the Benefits Continuation Period (subject to reduction under
certain circumstances described in the Amended Severance Plan). If, however,
the amount of the payment that the participant is entitled to receive upon a
termination of employment under the Retention Bonus Plan is greater than the
aggregate amount that the participant is entitled to receive under clauses (i)
and (ii) above, then the participant shall forfeit all rights to receive the
amounts payable under clauses (i) and (ii) above. For purposes of the Amended
Severance Plan, "Benefits Continuation Period" means (a) with respect to each
Group I Participant, the 24 month period immediately following the
participant's date of termination of employment, (ii) with respect to each
Group II Participant, the 18 month period immediately following the
participant's date of termination of employment and (iii) with respect to each
Group III Participant, the 15 month period immediately following the
participant's date of termination of employment.
The Amended Severance Plan also provides that, in the event of a
participant's termination of employment under the circumstances described
above, such participant would be entitled to receive a gross-up payment if any
payment or benefit to such participant would constitute an "excess parachute
payment" under Section 280G of the Internal Revenue Code.
Amendments to Certain Company Plans (the "Plan Amendments")
Effective as of September 18, 1998, the Company amended the 1990 Key
Employee Stock Plan, the 1995 Key Employee Stock Plan, and the Directors Stock
Plan to revise the definition of "Change in Control" in each such plan. The
amendments to each of these plans conformed the definition of Change in
Control therein to the definition of such term described above under the
caption "Amendments to Employment Agreements." Accordingly, the closing of the
Merger will constitute a Change in Control of the Company for purposes of
these plans, resulting in the acceleration of the vesting and/or
exercisability of all stock options, restricted stock and other awards
outstanding under these plans at such time.
In addition, effective as of September 18, 1998, the Company amended the
Deferred Compensation Plan to provide that if the Deferred Compensation Plan
is terminated, each participant therein shall be paid the full amount of his
or her account in accordance with the terms of the plan and the participant's
elections thereunder.
Board Resolutions Regarding Change in Control Provisions under Certain
Company Plans
The Company's Board of Directors retains the authority under certain of the
Company's employee benefit plans to determine that the Change in Control
provisions under the respective plan should not apply to a particular
transaction. Pursuant to such authority, the Board has determined that for
purposes of the SERP, the Deferred Compensation Plan, the Company's Split
Dollar Insurance Plan for Directors, and the Company's Split Dollar Insurance
Plan for Executive Officers, the Merger and the transactions contemplated by
the Merger Agreement shall not constitute a Change in Control of the Company,
and the Board has adopted resolutions to such effect.
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Certain Provisions of the Merger Agreement
Certain other contracts, agreements, arrangements and understandings between
the Company and certain of its directors, executive officers and affiliates
are described above under the caption "The Merger--Directors' and Officers'
Insurance and Indemnification".
POTENTIAL CONFLICT OF INTEREST
Marcus C. Bennett and Caleb B. Hurtt serve on the Boards of both the Company
and Parent. To avoid any actual, potential or perceived conflict of interest,
each of Mr. Bennett and Mr. Hurtt recused themselves from the deliberations
relating to the Offer, the Merger and the transactions contemplated by the
Merger Agreement (the "Transaction") conducted by both Boards. Mr. Hurtt and
Mr. Bennett may be deemed to have beneficial ownership of 83,562 and 3,338
shares of Parent Common Stock, respectively. Edwin I. Colodny, Chairman of the
Board of Directors of the Company and a former Parent Board member, owns 2,102
shares of Parent Common Stock and, therefore, also recused himself from the
Company's deliberations relating to negotiation of the Merger Agreement and
approval of the Transaction.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION OF THE COMPANY BOARD
The Board of Directors of the Company has by a unanimous vote (excluding
four Directors who either were absent or recused themselves) approved the
Offer, the Merger and the Merger Agreement and determined that the terms of
each of the Offer, Merger and the Merger Agreement are consistent with, and in
furtherance of, the long-term business strategy of the Company and are fair to
the Company's shareholders. The Board of Directors recommends that the
Company's shareholders accept the Offer and tender their shares of Company
Common Stock pursuant to the Offer. This recommendation is based in part upon
an opinion the Board of Directors received from Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ"), as of September 18, 1998, to the effect that,
as of the date thereof, the Consideration to be received by the Company's
shareholders pursuant to the Merger Agreement is fair to such shareholders
from a financial point of view (the "DLJ Fairness Opinion"). The full text of
the DLJ Fairness Opinion, which sets forth the factors considered and the
assumptions made by DLJ, is attached hereto as Annex A and filed as Exhibit 6
hereto. Shareholders are urged to read the DLJ Fairness Opinion in its
entirety.
A letter to the Company's shareholders communicating the Company Board's
recommendation and a press release announcing the execution of the Merger
Agreement are filed herewith as Exhibits 7 and 8, respectively, and are
incorporated herein by reference.
(b) REASONS FOR THE COMPANY BOARD'S RECOMMENDATION
Factors Considered by the Board of Directors. In approving the Merger
Agreement and the transactions contemplated thereby, and recommending that
shareholders tender their Shares pursuant to the Offer, the Board of Directors
of the Company considered a number of factors including:
(1) the financial and other terms of the Offer, the Merger Agreement and the
related transaction agreements;
(2) the presentation of DLJ and the DLJ Fairness Opinion that, as of the
date thereof, the Consideration to be received by the Company's shareholders
pursuant to the Merger Agreement is fair to such shareholders from a financial
point of view;
(3) that the $45.50 per share Offer Price represents a premium of
approximately 33.5% over the closing price of the Company's Common Stock ($34
1/16) on the New York Stock Exchange on September 18, 1998, the last full
trading day prior to the execution of the Merger Agreement;
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(4) the absence of a financing condition to the Offer and the perceived
ability of Parent, vis-a-vis other potential acquirors, to seek and obtain the
regulatory approvals and legislative changes required to consummate the Offer,
the Merger and the transactions contemplated by the Merger Agreement;
(5) the Company's future prospects, financial resources and ability to
access the capital markets as a stand-alone enterprise;
(6) proposed legislation that, if enacted, could significantly and adversely
harm the Company's core businesses and the value of its shareholders'
investments;
(7) increased competition in all segments of the Company's business from
other companies with substantially greater financial resources and the ability
of such companies to exercise greater influence over the legislative and
regulatory process;
(8) progress in efforts to privatize the INTELSAT and Inmarsat satellite
systems and the anticipated effects of privatization upon the Company
(including potential changes in the Company's role as an investor and service
re-seller, method of accounting for its investment, and future cash flows);
(9) consolidation trends and global alliances within the satellite and
telecommunications industries which have adversely affected, and are expected
to continue to adversely affect, the Company's relative competitive position;
(10) the capital investment required to expand COMSAT International's
digital networking business in emerging markets around the world and the
limited period in which such investments must be completed to establish a
presence in those markets in advance of competitors;
(11) constraints upon the Company's ability to fully commercialize its
technology assets, given the Company's size and resources;
(12) the strategic value of the Company's principal assets in the hands of a
larger enterprise, such as Parent, with the financial and other resources
necessary to better utilize those assets;
(13) the Board's belief that the Transaction represents an opportunity to
reduce certain of the risks described above by effecting a strategic business
combination with a larger enterprise, such as Parent, and achieve an
attractive valuation for the Company's shareholders;
(14) the financial resources and expertise of Parent in the research,
manufacture and integration of advanced-technology satellite systems and
products, and the opportunity to effect a strategic combination with the
Parent's new Global Telecommunications subsidiary and its complementary assets
and telecommunications growth strategy;
(15) the view of the Board of Directors, based in part upon the presentation
of management to the Board of Directors, that there was a limited likelihood
of a superior offer arising;
(16) the provisions of the Merger Agreement which permit the Board to
consider an unsolicited Superior Proposal in order to comply with the Board's
fiduciary duties to the Company's shareholders and to terminate the Merger
Agreement upon payment to Parent of the Termination Fee and reimbursement of
up to $5 million of Parent's aggregate expenses; and
(17) the ability to benefit the Company's customers, communications users
around the world and employees by creating a dynamic new global competitor.
The foregoing discussion of the information and factors considered and given
weight by the Board of Directors of the Company is not intended to be
exhaustive. In view of the variety of factors considered in connection with
its evaluation and approval of the Merger Agreement and the transactions
contemplated thereby, the Board of Directors of the Company did not find it
practicable to, and did not, quantify or otherwise assign relative weights to
the specific factors considered in reaching its determination. In addition,
individual members of the Board of Directors of the Company may have given
different weights to different factors.
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ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to the terms of an engagement letter, dated as of September 18,
1998 (the "DLJ Engagement Letter"), the Company has engaged DLJ to act as its
principal financial advisor for a period of 24 months in connection with the
sale, merger, consolidation or any other business combination involving all or
a substantial amount of the business, securities or assets of the Company (a
"Company Sale") and certain other transactions. As part of its role as
principal financial advisor, DLJ has delivered to the Board of Directors the
DLJ Fairness Opinion.
Pursuant to the terms of the DLJ Engagement Letter, the Company has paid DLJ
a retainer fee of $350,000 in connection with the execution of the DLJ
Engagement Letter and $2,000,000 in connection with execution of the Merger
Agreement. The Company has agreed to pay DLJ an additional $2,000,000 upon
consummation of the Offer. In the event of a Company Sale, the Company also
will pay DLJ additional compensation (the "Additional Fee") in the amount of
0.35% of the aggregate value of the outstanding Company Common Stock (treating
any shares issuable upon exercise of options as outstanding), plus the amount
of any debt assumed, acquired, remaining outstanding, retired or defeased or
preferred stock redeemed or remaining outstanding in connection with the
Company Sale, less $4,175,000 of the amounts previously paid or to be paid to
DLJ under the terms of the DLJ Engagement Letter. A Company Sale shall be
deemed to have been consummated upon the earliest of any of the following
events to occur: (i) the acquisition of over 50% of the outstanding Company
Common Stock calculated on a fully diluted basis; (ii) a merger or
consolidation of the Company with another person (including the Merger); (iii)
the acquisition by another person of a significant portion of the assets of
the Company representing over 50% of the Company's book value (as adjusted to
exclude certain designated assets) or (iv) in the case of any other Company
Sale, other than referred to in (i), (ii) or (iii) above, the consummation
thereof. The DLJ Engagement Letter provides that the aggregate value of
outstanding Company Common Stock will be determined, in the case of the Offer
and the Merger, based on the amount of cash to be received by the Company's
shareholders for the Shares in the Offer plus the fair market value of
Parent's common stock to be received by the Company's remaining shareholders
in the Merger. For that purpose, the fair market value of the Parent's common
stock to be received in the Merger will be determined based on the average of
the high and low sales prices for such stock over the five trading days
immediately prior to consummation of the Merger. The Company estimates that an
Additional Fee of approximately $7.7 million would have been payable to DLJ if
the Offer and the Merger were consummated as of September 18, 1998. The actual
amount of the Additional Fee will depend upon a number of factors, including
the number of shares tendered in the Offer, the number of shares outstanding
as of the Merger, the number of Dissenting Shares and the fair market value of
Parent Common Stock as of the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except as set forth on Schedule I, no transactions in the Shares have
been effected during the past 60 days by the Company or, to the best of the
Company's knowledge, by any executive officer, director, affiliate or
subsidiary of the Company.
(b) To the best knowledge of the Company, all of its executive officers,
directors, affiliates and subsidiaries currently intend to tender pursuant to
the Offer all Shares held of record or beneficially owned by them (other than
Shares issuable upon exercise of stock options and Shares, if any, which if
tendered could cause such persons to incur liability under the provisions of
Section 16(b) of the Exchange Act).
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Schedule 14D-9, the Company is not engaged
in any negotiation in response to the Offer which relates to or would result
in (i) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary of the Company; (ii) a purchase, sale
or transfer of a material amount of assets by the Company or any subsidiary of
the Company; (iii) a tender offer for or other
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acquisition of securities by or of the Company; or (iv) any material change in
the present capitalization or dividend policy of the Company.
(b) Except as described in Item 3(b) and Item 4 above (the provisions of
which are hereby incorporated by reference), there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer which relate to or would result in one or more of the matters referred
to in paragraph (a) of this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
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ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<C> <S>
Exhibit 1 Confidentiality Agreements, dated August 5, 1997, between COMSAT
Corporation and Lockheed Martin Corporation.
Exhibit 2 Agreement and Plan of Merger, dated as of September 18, 1998, among
COMSAT Corporation, Lockheed Martin Corporation and Deneb
Corporation.
Exhibit 3 Shareholders Agreement, dated as of September 18, 1998, between
COMSAT Corporation and Lockheed Martin Corporation.
Exhibit 4 Registration Rights Agreement, dated as of September 18, 1998,
between COMSAT Corporation and Lockheed Martin Corporation.
Exhibit 5 Carrier Acquisition Agreement, dated as of September 18, 1998, by
and among COMSAT Corporation, Lockheed Martin Corporation, Regulus,
LLC, and COMSAT Government Systems, Inc.
Exhibit 6 Opinion of Donaldson, Lufkin & Jenrette Securities Corporation
Inc. dated as of September 18, 1998.*
Exhibit 7 Letter to Shareholders of COMSAT Corporation, dated September 25,
1998.*
Exhibit 8 Joint Press Release issued by COMSAT Corporation and Lockheed
Martin Corporation on September 20, 1998.
Exhibit 9 Amended and Restated Employment Agreement, dated as of July 18,
1997, between COMSAT Corporation and Betty C. Alewine.
Exhibit 10 Amendment to Amended and Restated Employment Agreement, between
COMSAT Corporation and Betty C. Alewine, dated as of September 18,
1998.
Exhibit 11 Amended and Restated Employment Agreement, dated as of July 18,
1997, between COMSAT Corporation and Allen E. Flower.
Exhibit 12 Amendment to Amended and Restated Employment Agreement, between
COMSAT Corporation and Allen E. Flower, dated as of September 18,
1998.
Exhibit 13 Amended and Restated Employment Agreement, dated as of July 18,
1997, between COMSAT Corporation and Warren Y. Zeger.
Exhibit 14 Amendment to Amended and Restated Employment Agreement, between
COMSAT Corporation and Warren Y. Zeger, dated as of September 18,
1998.
Exhibit 15 COMSAT Corporation Retention Bonus Plan, effective as of September
18, 1998.
Exhibit 16 COMSAT Corporation Amended and Restated Change of Control Severance
Plan, effective as of September 18, 1998.
Exhibit 17 Amendment to COMSAT Corporation 1995 Key Employee Stock Plan,
dated as of September 18, 1998.
Exhibit 18 Amendment to COMSAT Corporation 1990 Key Employee Stock Plan,
dated as of September 18, 1998.
Exhibit 19 Amendment to COMSAT Corporation Non-Employee Directors Stock Plan,
dated as of September 18, 1998.
Exhibit 20 Amendment to COMSAT Corporation Directors and Executives Deferred
Compensation Plan, dated as of September 18, 1998.
Exhibit 21 Relevant Portions of COMSAT Corporation's Proxy Statement on
Schedule 14A, dated April 7, 1995.
Exhibit 22 COMSAT Corporation's Proxy Statement on Schedule 14A, dated March
31, 1998.
</TABLE>
- --------
* Included in copies of Schedule 14D-9 mailed to shareholders.
24
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
COMSAT Corporation
/s/ Allen E. Flower
By: _______________________________
Name: Allen E. Flower
Title: Vice President and Chief
Financial Officer
Dated: September 25, 1998
25
<PAGE>
SCHEDULE I
CERTAIN TRANSACTIONS IN SHARES OF COMMON STOCK OF THE COMPANY EFFECTED DURING
THE PAST 60 DAYS
Guy P. Wyser-Pratte, a director of the Company, purchased 5,000 shares of
Company common stock on each of September 21, 1998 and September 22, 1998 for
$34.47 per share and $33 per share, respectively and on September 24, 1998,
purchased 45,000 shares of Company common stock at $37.78 per share.
The following table shows the options granted to executive officers of the
Company during the past 60 days.
<TABLE>
<CAPTION>
EXECUTIVE NUMBER OF OPTIONS EXERCISE
OFFICER OR UNITS GRANTED PRICE $
- --------- ---------------------------- --------
<S> <C> <C>
Edward Berger 10,000 Options 30.125
1,000 Restricted Stock Units
</TABLE>
26
<PAGE>
Exhibit 1
August 5, 1997
CONFIDENTIAL
- ------------
COMSAT Corporation
6801 Rockledge Drive
Bethesda, Maryland 20817-1877
Re: Confidentiality Agreement
-------------------------
Ladies and Gentlemen:
In connection with the evaluation by Lockheed Martin Corporation
("Lockheed Martin"), a Maryland corporation, of a possible transaction (the
"Transaction") involving COMSAT Corporation ("COMSAT"), a District of Columbia
corporation, our two companies have agreed that Lockheed Martin will provide
COMSAT or its affiliates and Representatives (as defined below) with certain
Confidential Information (as defined below) relating to the businesses of
Lockheed Martin and its subsidiaries and other controlled affiliates.
As a condition to furnishing you such information, COMSAT agrees as
follows:
1. Nondisclosure of Confidential Information. The Confidential
-----------------------------------------
Information (as defined in Section 4 hereof) shall be kept confidential by you
and your officers, employees, counsel, accountants, agents, advisors and other
representatives (collectively, "Representatives"), and specifically shall not be
disclosed by you or your Representatives to any third parties, except that any
of the Confidential Information may be disclosed to your Representatives, but
only to the extent such Representatives need to know the Confidential
Information for the purpose described above. In this Agreement, "you" and
"your" refers to COMSAT, together with each of its affiliates, as such term is
defined in Rule 12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended (collectively referred to herein as
"affiliates"). The Confidential Information shall not be used other than in
connection with evaluation of the possible Transaction. Specifically, and
without limitation, the Confidential Information shall not be used by you to (i)
compete with Lockheed Martin or its affiliates in a manner that you would not
otherwise have competed, or (ii) to attain a competitive advantage over Lockheed
Martin or its affiliates that you would not otherwise be able to attain absent
access to the Confidential Information. It is understood (i) that each such
Representative shall be informed by you of the confidential nature of the
Confidential Information and the requirement that it not be used other than for
the purpose described above, (ii) that each such Representative shall be
required to agree to and be bound by the terms of this Agreement as a condition
to receiving the Confidential Information and (iii) that, in any event, you
shall be responsible for any breach of this Agreement
1
<PAGE>
COMSAT Corporation
August 5, 1997
Page 2
by any of your Representatives. You will not disclose the Confidential
Information other than as permitted hereby, and you will use the same care in
keeping confidential the Confidential Information as you would use in
safeguarding your similar information, but in no event less than reasonable
care. The term "person" as used in this Agreement shall be broadly interpreted
to include, without limitation, any corporation, company, partnership, entity,
individual or group.
2. Notice Preceding Compelled Disclosure. If you or your
-------------------------------------
Representatives are requested or required (by oral question, interrogatories,
requests for information or documents, subpoena, civil investigative demand or
similar process) to disclose any Confidential Information, you will promptly
notify Lockheed Martin of such request or requirement so that Lockheed Martin
may seek an appropriate protective order or waive compliance by you with the
provisions of this Agreement. If, in the absence of a protective order or the
receipt of a waiver hereunder, you or your Representatives are compelled, in the
opinion of your counsel, to disclose the Confidential Information, you may
disclose only such of the Confidential Information to the party requiring
disclosure as is required by law or other regulatory requirement pursuant to
such opinion and will request that the party to whom the Confidential
Information is furnished agree in writing that the Confidential Information will
be kept confidential by that party and its Representatives. In any event, you
will cooperate with Lockheed Martin if it chooses to obtain a protective order
or other reliable assurance that confidential treatment will be accorded the
Confidential Information.
3. Purchase or Sale of Securities. You hereby acknowledge that you
------------------------------
are aware (and that your Representatives who are informed of this matter have
been or will be advised) that the United States securities laws restrict persons
with material non-public information concerning a company obtained directly or
indirectly from that company from purchasing or selling securities of that
company or its affiliates, or from communicating such information to any other
person under any circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell such securities. You agree that, for a
period of three years from the date of this letter agreement, neither you nor
any of your affiliates will, without the prior written consent of Lockheed
Martin: (i) acquire, offer to acquire, or agree to acquire, directly or
indirectly, by purchase or otherwise, any voting securities or direct or
indirect rights to acquire any voting securities of Lockheed Martin or any
affiliate thereof, or of any successor to or person in control of Lockheed
Martin, or any assets of Lockheed Martin or any subsidiary or division thereof
or of any such successor or controlling person; (ii) make, or in any way
participate in, directly or indirectly, any "solicitation" of "proxies" (as such
terms are used in the rules of the Securities Exchange Commission) to vote, or
seek to advise or influence any person or entity with respect to the voting of,
any voting securities of Lockheed Martin; (iii) make any public announcement
with respect to, or submit a proposal for, or offer of (with or without
conditions) any
2
<PAGE>
COMSAT Corporation
August 5, 1997
Page 3
extraordinary transaction involving Lockheed Martin, its affiliates or any of
their respective securities or assets; (iv) form, join or in any way participate
in a "group" (as defined in Section 13(d)(3) of the Securities Exchange Act of
1934) in connection with any of the foregoing; or (v) request Lockheed Martin or
any of its Representatives, directly or indirectly, to amend or waive any
provision of this paragraph. You will promptly advise Lockheed Martin of any
inquiry or proposal made to you with respect to any of the foregoing.
4. Definition of "Confidential Information". As used herein,
----------------------------------------
"Confidential Information" means all information, data, reports,
interpretations, forecasts and records (whether in written form, orally,
electronically or otherwise) containing or otherwise reflecting information
concerning Lockheed Martin, its affiliates or Representatives or any assets that
may be disposed of that is or has been furnished to you or your Representatives
by Lockheed Martin or any of its affiliates or Representatives which is either
confidential, proprietary or otherwise not generally available to the public.
Notwithstanding the foregoing, the following will not constitute Confidential
Information for purposes of this Agreement: (a) information which is or becomes
generally available to the public other than as a result of a disclosure by you
or your Representatives not otherwise permitted by this Agreement; (b)
information which was already known to you on a nonconfidential basis (except
for Confidential Information provided to you by Lockheed Martin or any of its
respective affiliates or Representatives prior to the date hereof, if any); or
(c) information which becomes available to you on a nonconfidential basis from a
source other than Lockheed Martin, its affiliates or Representatives if you have
no knowledge, after reasonable inquiry, that such source was subject to a
prohibition against transmitting the information to you.
5. Return of Information. At the request of Lockheed Martin at any
---------------------
time, all written Confidential Information provided by Lockheed Martin or its
respective affiliates or Representatives will be returned to the party providing
such information promptly by you and your Representatives without retention of
copies thereof, except that any portion of the written Confidential Information
that consists of summaries, analyses, extracts, compilations, studies, personal
notes or other documents or records prepared by COMSAT or any of its affiliates
or Representatives shall be destroyed (such destruction to be confirmed in
writing) without the retention of any copies thereof. For purposes of this
Agreement, "written" Confidential Information shall include, without limitation,
information contained in printed, electronic, magnetic or other tangible media,
or in information storage and retrieval systems. That portion of the
Confidential Information consisting of oral Confidential Information and written
Confidential Information not so requested to be returned will be held by you or
your Representatives and kept subject to the terms of this Agreement, or
destroyed. The performance by COMSAT of its
3
<PAGE>
COMSAT Corporation
August 5, 1997
Page 4
obligations under this paragraph 5 shall not relieve or otherwise release COMSAT
from any of its obligations under this agreement.
6. No Other Rights. Nothing contained in this Agreement shall be
---------------
construed as (i) requiring Lockheed Martin, or their respective affiliates or
Representatives, to disclose to you, or for you to accept, any particular
information, or (ii) granting to you a license, either express or implied, under
any patent, copyright, trade secret or other intellectual property rights now or
hereafter owned, obtained or licensed by Lockheed Martin or any of its
respective affiliates. COMSAT understands and acknowledges that any and all
information contained in the Confidential Information is being provided without
any representation or warranty, express or implied, as to the accuracy or
completeness of the Confidential Information on the part of Lockheed Martin or
its affiliates or Representatives. COMSAT agrees that none of Lockheed Martin
or any of its respective affiliates or Representatives shall have any liability
to COMSAT or its affiliates or Representatives. It is understood that the scope
of representations and warranties to be given by Lockheed Martin will, if
applicable, be in a mutually acceptable definitive agreement between COMSAT and
Lockheed Martin should discussions regarding a Transaction progress to such a
point. The parties agree that unless and until a definitive agreement between
COMSAT and Lockheed Martin with respect to a Transaction has been executed and
delivered, neither party will be under any legal obligation of any kind
whatsoever with respect to such a Transaction by virtue of this or any other
written or oral expression with respect to such a Transaction by it or any of
its Representatives except, in the case of this letter, for the matters
specifically agreed to herein. COMSAT further acknowledges and agrees that
Lockheed Martin reserves the right, in its sole discretion, to reject any and
all proposals made by COMSAT or any of its Representatives with regard to the
Transaction and to terminate discussions and negotiations with COMSAT at any
time.
7. Nondisclosure of Discussions. Without the prior consent of
----------------------------
Lockheed Martin, you will not, and will direct your Representatives not to,
disclose to any person your evaluation of the Transaction, that the Confidential
Information is being made available to you, that you have inspected any portion
of the Confidential Information, or that discussions with respect to the above
purposes are taking place or other facts with respect to these discussions,
including the status thereof.
8. No Waiver. No failure or delay in exercising any right, power
---------
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise thereof preclude any further exercise thereof or the
exercise of any right, power or privilege hereunder or thereunder. Neither the
waiver by Lockheed Martin of a breach of or a default under any provisions of
this
4
<PAGE>
COMSAT Corporation
August 5, 1997
Page 5
Agreement, nor the failure of Lockheed Martin, on one or more occasions, to
enforce any of the provisions of this Agreement or to exercise any right or
privilege hereunder shall thereafter be construed as a waiver of any subsequent
breach or default of a similar nature, or as a waiver of such provisions, rights
or privileges hereunder.
9. Remedies, Expenses, Jurisdiction, Governing Law. The parties
-----------------------------------------------
agree that any breach or threatened breach will cause Lockheed Martin
irreparable harm, money damages would not be a sufficient remedy for any actual
or threatened breach of this Agreement, and Lockheed Martin shall be entitled to
specific performance and injunctive relief as remedies for any actual or
threatened breach of this Agreement, without the necessity of proving actual
damages and without posting a bond or other security. Such remedies shall not
be deemed to be the exclusive remedies for a breach but shall be in addition to
all other remedies at law or in equity. In the event a court of competent
jurisdiction determines in a final non-appealable order that this Agreement has
or may be breached by you or your Representatives, then you will reimburse
Lockheed Martin for its costs and expenses (including, without limitation, legal
fees and expenses) incurred in connection with such litigation. You consent to
personal jurisdiction in any action brought in any court, federal or state,
within the State of Maryland having subject matter jurisdiction arising under
this Agreement. This Agreement shall be governed and construed in accordance
with the internal laws of the State of Maryland, without regard to the choice or
conflicts of law doctrines thereof.
10. Invalidity; Unenforceability. The invalidity or unenforceability
----------------------------
of any provision of this Agreement shall not affect the validity or
enforceability of the other provisions of this Agreement, which shall remain in
full force and effect. If any of the provisions of this Agreement shall be
deemed to be unenforceable by reason of its extent, duration, scope or
otherwise, then the parties contemplate that the court making such determination
shall enforce the remaining provisions of this Agreement, shall reduce such
extent, duration, scope or other provision and shall enforce them in their
reduced form for all purposes contemplated by this Agreement.
11. Contact with and Solicitation of Employees. COMSAT agrees not to
------------------------------------------
contact any employee of Lockheed Martin or its affiliates regarding the
Transaction or the Confidential Information without the prior approval of: the
chief executive officer, the chief financial officer, the general counsel of
Lockheed Martin or their respective designees. You and your Representatives
agree that for a period of two years from the date of this Agreement that you or
your Representatives will not solicit for employment any of the current
employees of Lockheed Martin or its affiliates so long as they are employed by
Lockheed Martin or such affiliate without
5
<PAGE>
COMSAT Corporation
August 5, 1997
Page 6
the prior written consent of Lockheed Martin. A general advertisement by COMSAT
or its affiliates for solicitation of employees shall not constitute a
solicitation under this Agreement.
12. Binding Effect; Construction. This Agreement shall inure to the
----------------------------
benefit of and be binding upon each of the parties and their respective
successors and assigns. Each party hereto hereby acknowledges that all parties
hereto participated equally in the negotiation and drafting of this agreement
and that, accordingly, no court construing this agreement shall construe it more
stringently against one party than against the others.
13. Entire Agreement. This Agreement expresses the entire agreement
----------------
between the parties respecting the subject matter hereof and shall not be
modified except by a written instrument signed by authorized representatives of
the parties on or after the date hereof.
If the foregoing is acceptable, please sign and return the enclosed
copy of this letter.
Lockheed Martin Corporation
By: /s/ Mel R. Brashears
-------------------------------------------
Mel R. Brashears
President and Chief Operating Officer
Space & Strategic Missiles Sector
ACCEPTED AND AGREED
COMSAT CORPORATION
By: /s/ Warren Y. Zeger
-----------------------------------
Warren Y. Zeger
Vice President, General
Counsel and Secretary
6
<PAGE>
August 5, 1997
CONFIDENTIAL
- ------------
Lockheed Martin Corporation
6801 Rockledge Drive
Bethesda, Maryland 20817-1877
Re: Confidentiality Agreement
-------------------------
Ladies and Gentlemen:
In connection with the evaluation by Lockheed Martin Corporation
("Lockheed Martin"), a Maryland corporation, of a possible transaction (the
"Transaction") involving COMSAT Corporation ("COMSAT"), a District of Columbia
corporation, our two companies have agreed that COMSAT will provide Lockheed
Martin or its affiliates and Representatives (as defined below) with certain
Confidential Information (as defined below) relating to the businesses of COMSAT
and its subsidiaries and other controlled affiliates.
As a condition to furnishing you such information, Lockheed Martin
agrees as follows:
1. Nondisclosure of Confidential Information. The Confidential
-----------------------------------------
Information (as defined in Section 4 hereof) shall be kept confidential by you
and your officers, employees, counsel, accountants, agents, advisors and other
representatives (collectively, "Representatives"), and specifically shall not be
disclosed by you or your Representatives to any third parties, except that any
of the Confidential Information may be disclosed to your Representatives, but
only to the extent such Representatives need to know the Confidential
Information for the purpose described above. In this Agreement, "you" and
"your" refers to Lockheed Martin, together with each of its affiliates, as such
term is defined in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended (collectively referred to herein as
"affiliates"). The Confidential Information shall not be used other than in
connection with evaluation of the possible Transaction. Specifically, and
without limitation, the Confidential Information shall not be used by you to (i)
compete with COMSAT or its affiliates in a manner that you would not otherwise
have competed, or (ii) to attain a competitive advantage over COMSAT or its
affiliates that you would not otherwise be able to attain absent access to the
Confidential Information. It is understood (i) that each such Representative
shall be informed by you of the confidential nature of the Confidential
Information and the requirement that it not be used other than for the purpose
described above, (ii) that each such Representative shall be required to agree
to and be bound by the terms of this Agreement as a condition to receiving the
Confidential Information and (iii) that, in any event, you shall be responsible
for any breach of
7
<PAGE>
Lockheed Martin Corporation
August 5, 1997
Page 2
this Agreement by any of your Representatives. You will not disclose the
Confidential Information other than as permitted hereby, and you will use the
same care in keeping confidential the Confidential Information as you would use
in safeguarding your similar information, but in no event less than reasonable
care. The term "person" as used in this Agreement shall be broadly interpreted
to include, without limitation, any corporation, company, partnership, entity,
individual or group.
2. Notice Preceding Compelled Disclosure. If you or your
-------------------------------------
Representatives are requested or required (by oral question, interrogatories,
requests for information or documents, subpoena, civil investigative demand or
similar process) to disclose any Confidential Information, you will promptly
notify COMSAT of such request or requirement so that COMSAT may seek an
appropriate protective order or waive compliance by you with the provisions of
this Agreement. If, in the absence of a protective order or the receipt of a
waiver hereunder, you or your Representatives are compelled, in the opinion of
your counsel, to disclose the Confidential Information, you may disclose only
such of the Confidential Information to the party requiring disclosure as is
required by law or other regulatory requirement pursuant to such opinion and
will request that the party to whom the Confidential Information is furnished
agree in writing that the Confidential Information will be kept confidential by
that party and its Representatives. In any event, you will cooperate with
COMSAT if it chooses to obtain a protective order or other reliable assurance
that confidential treatment will be accorded the Confidential Information.
3. Purchase or Sale of Securities. You hereby acknowledge that you
------------------------------
are aware (and that your Representatives who are informed of this matter have
been or will be advised) that the United States securities laws restrict persons
with material non-public information concerning a company obtained directly or
indirectly from that company from purchasing or selling securities of that
company or its affiliates, or from communicating such information to any other
person under any circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell such securities. You agree that, for a
period of three years from the date of this letter agreement, neither you nor
any of your affiliates will, without the prior written consent of COMSAT: (i)
acquire, offer to acquire, or agree to acquire, directly or indirectly, by
purchase or otherwise, any voting securities or direct or indirect rights to
acquire any voting securities of COMSAT or any affiliate thereof, or of any
successor to or person in control of COMSAT, or any assets of COMSAT or any
subsidiary or division thereof or of any such successor or controlling person;
(ii) make, or in any way participate in, directly or indirectly, any
"solicitation" of "proxies" (as such terms are used in the rules of the
Securities Exchange Commission) to vote, or seek to advise or influence any
person or entity with respect to the voting of, any voting securities of COMSAT;
(iii) make any public announcement with respect
8
<PAGE>
Lockheed Martin Corporation
August 5, 1997
Page 3
to, or submit a proposal for, or offer of (with or without conditions) any
extraordinary transaction involving COMSAT, its affiliates or any of their
respective securities or assets; (iv) form, join or in any way participate in a
"group" (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934)
or any "syndicate" or "affiliated group" as defined in Section 304(b)(3) of the
Communications Satellite Act of 1962) in connection with any of the foregoing;
or (v) request COMSAT or any of its Representatives, directly or indirectly, to
amend or waive any provision of this paragraph. You will promptly advise COMSAT
of any inquiry or proposal made to you with respect to any of the foregoing.
4. Definition of "Confidential Information". As used herein,
----------------------------------------
"Confidential Information" means all information, data, reports,
interpretations, forecasts and records (whether in written form, orally,
electronically or otherwise) containing or otherwise reflecting information
concerning COMSAT, its affiliates or Representatives or any assets that may be
disposed of that is or has been furnished to you or your Representatives by
COMSAT or any of its affiliates or Representatives which is either confidential,
proprietary or otherwise not generally available to the public. Notwithstanding
the foregoing, the following will not constitute Confidential Information for
purposes of this Agreement: (a) information which is or becomes generally
available to the public other than as a result of a disclosure by you or your
Representatives not otherwise permitted by this Agreement; (b) information which
was already known to you on a nonconfidential basis (except for Confidential
Information provided to you by COMSAT or any of its respective affiliates or
Representatives prior to the date hereof, if any); or (c) information which
becomes available to you on a nonconfidential basis from a source other than
COMSAT, its affiliates or Representatives if you have no knowledge, after
reasonable inquiry, that such source was subject to a prohibition against
transmitting the information to you.
5. Return of Information. At the request of COMSAT at any time,
---------------------
all written Confidential Information provided by COMSAT or its respective
affiliates or Representatives will be returned to the party providing such
information promptly by you and your Representatives without retention of copies
thereof, except that any portion of the written Confidential Information that
consists of summaries, analyses, extracts, compilations, studies, personal notes
or other documents or records prepared by Lockheed Martin or any of its
affiliates or Representatives shall be destroyed (such destruction to be
confirmed in writing) without the retention of any copies thereof. For purposes
of this Agreement, "written" Confidential Information shall include, without
limitation, information contained in printed, electronic, magnetic or other
tangible media, or in information storage and retrieval systems. That portion of
the Confidential Information consisting of oral Confidential Information and
written Confidential Information not so requested to be returned will be held by
you or your Representatives and kept
9
<PAGE>
Lockheed Martin Corporation
August 5, 1997
Page 4
subject to the terms of this Agreement, or destroyed. The performance by
Lockheed Martin of its obligations under this paragraph 5 shall not relieve or
otherwise release Lockheed Martin from any of its obligations under this
agreement.
6. No Other Rights. Nothing contained in this Agreement shall be
---------------
construed as (i) requiring COMSAT, or their respective affiliates or
Representatives, to disclose to you, or for you to accept, any particular
information, or (ii) granting to you a license, either express or implied, under
any patent, copyright, trade secret or other intellectual property rights now or
hereafter owned, obtained or licensed by COMSAT or any of its respective
affiliates. Lockheed Martin understands and acknowledges that any and all
information contained in the Confidential Information is being provided without
any representation or warranty, express or implied, as to the accuracy or
completeness of the Confidential Information on the part of COMSAT or its
affiliates or Representatives. Lockheed Martin agrees that none of COMSAT or
any of its respective affiliates or Representatives shall have any liability to
Lockheed Martin or its affiliates or Representatives. It is understood that the
scope of representations and warranties to be given by COMSAT will, if
applicable, be in a mutually acceptable definitive agreement between Lockheed
Martin and COMSAT should discussions regarding a Transaction progress to such a
point. The parties agree that unless and until a definitive agreement between
Lockheed Martin and COMSAT with respect to a Transaction has been executed and
delivered, neither party will be under any legal obligation of any kind
whatsoever with respect to such a Transaction by virtue of this or any other
written or oral expression with respect to such a Transaction by it or any of
its Representatives except, in the case of this letter, for the matters
specifically agreed to herein. Lockheed Martin further acknowledges and agrees
that COMSAT reserves the right, in its sole discretion, to reject any and all
proposals made by Lockheed Martin or any of its Representatives with regard to
the Transaction and to terminate discussions and negotiations with Lockheed
Martin at any time.
7. Nondisclosure of Discussions. Without the prior consent of
----------------------------
COMSAT, you will not, and will direct your Representatives not to, disclose to
any person your evaluation of the Transaction, that the Confidential Information
is being made available to you, that you have inspected any portion of the
Confidential Information, or that discussions with respect to the above purposes
are taking place or other facts with respect to these discussions, including the
status thereof.
8. No Waiver. No failure or delay in exercising any right, power
---------
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise thereof preclude any further exercise thereof or the
exercise of any right, power or privilege hereunder or thereunder.
10
<PAGE>
Lockheed Martin Corporation
August 5, 1997
Page 5
Neither the waiver by COMSAT of a breach of or a default under any provisions of
this Agreement, nor the failure of COMSAT, on one or more occasions, to enforce
any of the provisions of this Agreement or to exercise any right or privilege
hereunder shall thereafter be construed as a waiver of any subsequent breach or
default of a similar nature, or as a waiver of such provisions, rights or
privileges hereunder.
9. Remedies, Expenses, Jurisdiction, Governing Law. The parties
-----------------------------------------------
agree that any breach or threatened breach will cause COMSAT irreparable harm,
money damages would not be a sufficient remedy for any actual or threatened
breach of this Agreement, and COMSAT shall be entitled to specific performance
and injunctive relief as remedies for any actual or threatened breach of this
Agreement, without the necessity of proving actual damages and without posting a
bond or other security. Such remedies shall not be deemed to be the exclusive
remedies for a breach but shall be in addition to all other remedies at law or
in equity. In the event a court of competent jurisdiction determines in a final
non-appealable order that this Agreement has or may be breached by you or your
Representatives, then you will reimburse COMSAT for its costs and expenses
(including, without limitation, legal fees and expenses) incurred in connection
with such litigation. You consent to personal jurisdiction in any action
brought in any court, federal or state, within the State of Maryland having
subject matter jurisdiction arising under this Agreement. This Agreement shall
be governed and construed in accordance with the internal laws of the State of
Maryland, without regard to the choice or conflicts of law doctrines thereof.
10. Invalidity; Unenforceability. The invalidity or unenforceability
----------------------------
of any provision of this Agreement shall not affect the validity or
enforceability of the other provisions of this Agreement, which shall remain in
full force and effect. If any of the provisions of this Agreement shall be
deemed to be unenforceable by reason of its extent, duration, scope or
otherwise, then the parties contemplate that the court making such determination
shall enforce the remaining provisions of this Agreement, shall reduce such
extent, duration, scope or other provision and shall enforce them in their
reduced form for all purposes contemplated by this Agreement.
11. Contact with and Solicitation of Employees. Lockheed Martin
------------------------------------------
agrees not to contact any employee of COMSAT or its affiliates regarding the
Transaction or the Confidential Information without the prior approval of: the
chief executive officer, the chief financial officer, the general counsel of
COMSAT or their respective designees. You and your Representatives agree that
for a period of two years from the date of this Agreement that you or your
Representatives will not solicit for employment any of the current employees of
COMSAT or its affiliates so long as they are employed by COMSAT or such
affiliate without the prior written
11
<PAGE>
Lockheed Martin Corporation
August 5, 1997
Page 6
consent of COMSAT. A general advertisement by Lockheed Martin or its affiliates
for solicitation of employees shall not constitute a solicitation under this
Agreement.
12. Binding Effect; Construction. This Agreement shall inure to the
----------------------------
benefit of and be binding upon each of the parties and their respective
successors and assigns. Each party hereto hereby acknowledges that all parties
hereto participated equally in the negotiation and drafting of this agreement
and that, accordingly, no court construing this agreement shall construe it more
stringently against one party than against the others.
13. Entire Agreement. This Agreement expresses the entire agreement
----------------
between the parties respecting the subject matter hereof and shall not be
modified except by a written instrument signed by authorized representatives of
the parties on or after the date hereof.
If the foregoing is acceptable, please sign and return the enclosed
copy of this letter.
COMSAT CORPORATION
By: /s/ Warren Y. Zeger
--------------------------------
Warren Y. Zeger
Vice President, General
Counsel and Secretary
ACCEPTED AND AGREED
LOCKHEED MARTIN CORPORATION
By: /s/ Mel R. Brashears
--------------------------------------
Mel R. Brashears
President and Chief Operating Officer
Space & Strategic Missiles Sector
12
<PAGE>
AGREEMENT AND PLAN OF MERGER
DATED AS OF SEPTEMBER 18, 1998
AMONG
COMSAT CORPORATION,
LOCKHEED MARTIN CORPORATION
AND
DENEB CORPORATION
<PAGE>
ARTICLE I
THE OFFER
SECTION 1.1. THE OFFER............................................. 1
SECTION 1.2. COMSAT ACTIONS........................................ 3
SECTION 1.3. SHAREHOLDER LISTS..................................... 4
ARTICLE II
RELATED AGREEMENTS
SECTION 2.1. REGISTRATION RIGHTS AGREEMENT......................... 5
SECTION 2.2. SHAREHOLDERS AGREEMENT................................ 5
SECTION 2.3. CARRIER ACQUISITION AGREEMENT......................... 5
ARTICLE III
THE MERGER
SECTION 3.1. THE MERGER........................................... 5
SECTION 3.2. EFFECTIVE TIME....................................... 6
SECTION 3.3. EFFECTS OF THE MERGER................................ 6
SECTION 3.4. CERTIFICATE OF INCORPORATION AND BY-LAWS............. 6
SECTION 3.5. DIRECTORS............................................ 6
SECTION 3.6. OFFICERS............................................. 6
SECTION 3.7. EFFECT ON CAPITAL STOCK.............................. 7
SECTION 3.8. DISSENTING SHARES.................................... 7
SECTION 3.9. EXCHANGE OF STOCK.................................... 8
SECTION 3.10. NO FRACTIONAL SHARES OF LOCKHEED MARTIN COMMON STOCK. 10
SECTION 3.11. TERMINATION OF EXCHANGE FUND......................... 10
SECTION 3.12. NO LIABILITY......................................... 11
SECTION 3.13. LOST CERTIFICATES.................................... 11
SECTION 3.14. CERTAIN ADJUSTMENTS.................................. 11
SECTION 3.15. CONDITIONS TO CLOSING OF MERGER...................... 11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COMSAT
SECTION 4.1. ORGANIZATION........................................ 14
SECTION 4.2. AUTHORITY........................................... 15
SECTION 4.3. CONSENTS AND APPROVALS; NO VIOLATIONS............... 15
SECTION 4.4. CAPITALIZATION...................................... 16
SECTION 4.5. ABSENCE OF CERTAIN CHANGES.......................... 18
i
<PAGE>
SECTION 4.6. REPORTS............................................. 18
SECTION 4.7. NO DEFAULT.......................................... 19
SECTION 4.8. LITIGATION; COMPLIANCE WITH LAW..................... 19
SECTION 4.9. EMPLOYEE BENEFIT PLANS; ERISA....................... 20
SECTION 4.10. INTELLECTUAL PROPERTY; YEAR 2000.................... 21
SECTION 4.11. CERTAIN CONTRACTS AND ARRANGEMENTS.................. 22
SECTION 4.12. TAXES............................................... 23
SECTION 4.13. GOVERNMENTAL AUTHORIZATIONS......................... 24
SECTION 4.14. ENVIRONMENTAL MATTERS............................... 25
SECTION 4.15. BROKERAGE FEES AND COMMISSIONS...................... 25
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF LOCKHEED MARTIN AND ACQUISITION SUB
SECTION 5.1. ORGANIZATION........................................ 25
SECTION 5.2. AUTHORITY........................................... 25
SECTION 5.3. CONSENTS AND APPROVALS; NO VIOLATIONS............... 26
SECTION 5.4. CAPITALIZATION...................................... 27
SECTION 5.5. ABSENCE OF CERTAIN CHANGES.......................... 27
SECTION 5.6. REPORTS............................................. 28
SECTION 5.7. OPINION OF FINANCIAL ADVISOR........................ 28
SECTION 5.8. BROKERS............................................. 28
ARTICLE VI
COVENANTS
SECTION 6.1. CONDUCT OF BUSINESS OF COMSAT....................... 28
SECTION 6.2. INTELSAT AND INMARSAT PRIVATIZATIONS................ 32
SECTION 6.3. CONDUCT OF BUSINESS OF LOCKHEED MARTIN.............. 34
SECTION 6.4. NO SOLICITATION..................................... 35
SECTION 6.5. PREPARATION OF PROXY STATEMENT; COMSAT SHAREHOLDERS
MEETING........................................... 36
SECTION 6.6. ACCESS TO INFORMATION............................... 38
SECTION 6.7. REASONABLE EFFORTS.................................. 38
SECTION 6.8. LISTING APPLICATION................................. 38
SECTION 6.9. CONSENTS AND APPROVALS.............................. 39
SECTION 6.10. PUBLIC ANNOUNCEMENTS................................ 41
SECTION 6.11. NOTIFICATION........................................ 41
SECTION 6.12. CERTAIN LITIGATION.................................. 41
SECTION 6.13. EMPLOYEE AND BENEFIT MATTERS; STOCK OPTIONS
AND AWARDS......................................... 42
SECTION 6.14. NO RESTRICTIONS..................................... 44
SECTION 6.15. ADVICE OF CHANGES................................... 44
SECTION 6.16. INDEMNIFICATION..................................... 44
ii
<PAGE>
SECTION 6.17. NO CONTROL.......................................... 45
SECTION 6.18. ACCOUNTANT'S LETTERS................................ 45
SECTION 6.19. NORTH AMERICAN NUMBERING PLAN....................... 45
SECTION 6.20. AFFILIATE LETTERS................................... 45
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
SECTION 7.1. TERMINATION.......................................... 45
SECTION 7.2. EFFECT OF TERMINATION................................ 47
SECTION 7.3. FEES AND EXPENSES.................................... 47
SECTION 7.4. AMENDMENT............................................ 48
SECTION 7.5. EXTENSION; WAIVER.................................... 49
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. SURVIVAL............................................. 49
SECTION 8.2. ENTIRE AGREEMENT..................................... 49
SECTION 8.3. GOVERNING LAW........................................ 49
SECTION 8.4. NOTICES.............................................. 49
SECTION 8.5. SUCCESSORS AND ASSIGNS; NO THIRD PARTY BENEFICIARIES. 50
SECTION 8.6. COUNTERPARTS......................................... 51
SECTION 8.7. INTERPRETATION....................................... 51
SECTION 8.8. SCHEDULES............................................ 51
SECTION 8.9. LEGAL ENFORCEABILITY................................. 51
SECTION 8.10. NO WAIVERS; REMEDIES; SPECIFIC PERFORMANCE........... 51
SECTION 8.11. EXCLUSIVE JURISDICTION............................... 51
SECTION 8.12. WAIVER OF JURY TRIAL................................. 52
iii
<PAGE>
EXHIBITS
--------
Exhibit A............................................. Conditions to Offer
Exhibit B........................... Form of Registration Rights Amendment
Exhibit C.................................. Form of Shareholders Agreement
Exhibit D........................... Form of Carrier Acquisition Agreement
Exhibit E.......... Form of Amended and Restated Articles of Incorporation
Exhibit F............................................ Form of Tax Opinions
SCHEDULES
---------
Schedule 1..................................... COMSAT Disclosure Schedule
iv
<PAGE>
TABLE OF DEFINED TERMS
Term Section No.
- ---- ---------------
Acquisition Proposal.................................................... 6.4(a)
Acquisition Sub......................................... Introductory Paragraph
Agreement............................................... Introductory Paragraph
Amendment.................................................................. 4.2
Antitrust Laws.......................................................... 6.9(c)
Assets..................................................................... 4.3
Audit............................................................... 4.12(j)(i)
Authorized Carrier Conditions........................................ Exhibit A
Authorized Carriers..................................................... 1.1(a)
Average Price........................................................ 3.7(a)(i)
Carrier Acquisition........................................................ 2.3
Carrier Acquisition Agreement.............................................. 2.3
CCEC.................................................................... 6.9(c)
Certificates............................................................ 3.9(b)
Closing.................................................................... 3.2
Closing Date............................................................... 3.2
Code............................................................... 3.15(c)(ii)
Communications Act......................................................... 4.3
COMSAT.................................................. Introductory Paragraph
COMSAT Affiliate Letter................................................... 6.20
COMSAT Business Plans................................................... 6.1(i)
COMSAT Carrier Subsidiary.................................................. 2.3
COMSAT Common Stock..................................................... 1.1(a)
COMSAT Contracts....................................................... 4.11(a)
COMSAT Disclosure Schedule.......................................... Article IV
COMSAT Employees....................................................... 6.13(d)
COMSAT Form 10-K........................................................... 4.5
COMSAT Preferred Stock.................................................. 4.4(a)
COMSAT Representatives.................................................. 6.4(a)
COMSAT SEC Documents....................................................... 4.6
COMSAT Shareholders Meeting............................................. 6.5(b)
COMSAT Stock Options.................................................... 4.4(a)
COMSAT Stock Plans...................................................... 4.4(a)
Confidentiality Agreements................................................. 8.2
DCBCA................................................................... 1.1(a)
DCRA....................................................................... 3.2
DGCL....................................................................... 3.1
v
<PAGE>
Term Section No.
- ---- -----------
Determination Date.................................................... 3.7(a)(i)
Dissenting Shares.......................................................... 3.8
EC Merger Regulations................................................... 6.9(c)
Effective Time............................................................. 3.2
Environmental Claims...................................................... 4.14
Environmental Laws........................................................ 4.14
Equity Securities........................................................ 4.4(a)
ERISA.................................................................... 4.9(a)
ERISA Affiliate.......................................................... 4.9(a)
Exchange Act............................................................. 1.1(a)
Exchange Agent........................................................... 3.9(a)
Exchange Fund............................................................ 3.9(a)
FCC................................................................. 3.15(a)(ii)
Form S-4................................................................ 6.5(a)
Forward Merger............................................................. 3.1
GAAP....................................................................... 4.6
Governmental Authorizations................................................ 4.13
Governmental Authority.................................................... 3.11
HSR Act................................................................. 6.9(c)
ICO.................................................................. 6.2(e)(i)
Indemnified Parties.................................................... 6.16(a)
Inmarsat................................................................ 3.9(b)
Inmarsat Convention................................................. 6.2(e)(ii)
Inmarsat Existing Documents........................................ 6.2(e)(iii)
Inmarsat Interests.................................................. 6.2(e)(iv)
Inmarsat Investment Share............................................ 6.2(e)(v)
Inmarsat Privatization.............................................. 6.2(e)(vi)
Inmarsat Restructuring Documents................................... 6.2(e)(vii)
Intellectual Property.................................................. 4.10(a)
INTELSAT................................................................ 3.9(b)
INTELSAT Agreement................................................ 6.2(e)(viii)
INTELSAT Existing Documents....................................... 6.2(e)(viii)
INTELSAT Operating Agreement...................................... 6.2(e)(viii)
INTELSAT Interests................................................... 6.2(e)(ix)
INTELSAT Investment Share............................................. 6.2(e)(x)
IRS...................................................................... 4.9(a)
Laws....................................................................... 4.1
vi
<PAGE>
Term Section No.
- ---- -----------
Liabilities................................................................ 4.6
Lien....................................................................... 4.3
Lockheed Martin......................................... Introductory Paragraph
Lockheed Martin Common Stock............................................ 3.7(a)
Lockheed Martin Form 10-K.................................................. 5.5
Lockheed Martin Preferred Stock......................................... 5.4(a)
Lockheed Martin SEC Documents.............................................. 5.6
Lockheed Martin Series Preferred Stock.................................. 5.4(a)
Lockheed Martin Stock Options........................................... 5.4(a)
Lockheed Martin Stock Plans............................................. 5.4(a)
Lock-Up Agreement....................................................... 6.2(c)
Material Adverse Effect.................................................... 4.1
Maximum Amount......................................................... 6.16(b)
Measurement Date..................................................... Exhibit A
Merger..................................................................... 3.1
Merger Consideration.................................................... 3.7(a)
Minimum Condition.................................................... Exhibit A
NYSE....................................................................... 3.2
Offer................................................................... 1.1(a)
Offer Closing Time...................................................... 1.1(a)
Offer Documents......................................................... 1.1(d)
Offer Price............................................................. 1.1(a)
Offer Subsidiary........................................................ 1.1(a)
Order................................................................... 6.9(d)
PBGC.................................................................... 4.9(a)
Person.................................................................. 3.9(b)
Plans................................................................... 4.9(a)
Proxy Statement/Prospectus.............................................. 6.5(a)
Recent SEC Documents.................................................... 4.8(b)
Registration Rights Agreement...............................................2.1
Reverse Merger..............................................................3.1
Satellite Act........................................................... 1.1(a)
Schedule 14D-9.......................................................... 1.2(b)
SEC..................................................................... 1.1(a)
Securities Act...................................................... 3.15(a)(v)
Shareholders Agreement......................................................2.2
Shares.................................................................. 1.1(a)
vii
<PAGE>
Term Section No.
- ---- -------------
Significant Adverse Effect............................................ 3.15(b)
Significant Subsidiary.................................................... 4.3
Stock Option Plans..................................................... 4.4(a)
Stock Value........................................................ 3.15(c)(i)
Subsidiary.................................................................4.2
Superior Proposal...................................................... 6.4(b)
Surviving Corporation......................................................3.1
Taxes............................................................. 4.12(j)(ii)
Tax Returns...................................................... 4.12(j)(iii)
Termination Fee.................................................... 7.3(a)(ii)
Transaction Agreements.....................................................2.3
viii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") dated as of September 18,
1998 among LOCKHEED MARTIN CORPORATION, a Maryland corporation ("LOCKHEED
MARTIN"), DENEB CORPORATION, a Delaware corporation and a wholly-owned
subsidiary of Lockheed Martin ("ACQUISITION SUB"), and COMSAT CORPORATION, a
District of Columbia corporation ("COMSAT").
In consideration of the representations, warranties, covenants and
agreements herein contained, and intending to be legally bound hereby, Lockheed
Martin, Acquisition Sub and COMSAT hereby agree as follows:
ARTICLE I
THE OFFER
SECTION 1.1. THE OFFER.
(a) Subject to this Agreement not having been terminated in accordance with
the provisions of Section 7.1 hereof, Lockheed Martin, acting through a wholly-
owned single member Delaware limited liability company (the "OFFER SUBSIDIARY"),
shall as promptly as practicable, but in no event later than five business days
from the date of the public announcement of the terms of this Agreement,
commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of
1934, as amended, and all rules and regulations promulgated thereunder (the
"EXCHANGE ACT")) an offer to purchase for cash (as it may be amended in
accordance with the terms of this Agreement, the "OFFER") up to the number of
shares (collectively, the "SHARES") of COMSAT's common stock, without par value
(the "COMSAT COMMON STOCK"), that is equal to the remainder of (i) 49% of the
number of shares of COMSAT Common Stock outstanding at the close of business on
the date of purchase pursuant to the Offer minus (ii) the number of shares of
-----
COMSAT Common Stock then owned of record by "authorized carriers" (as defined in
the Communications Satellite Act of 1962, as amended, 47 U.S.C. (S)701 et. seq.,
and all rules and regulations promulgated thereunder (the "SATELLITE ACT"))
("AUTHORIZED CARRIERS"), as evidenced by issuance of shares of Series II COMSAT
Common Stock, minus (iii) the number of shares of COMSAT Common Stock with
-----
respect to which written demand shall have been made and not withdrawn under
Section 29-373 of the District of Columbia Business Corporation Act (the
"DCBCA"), at a price of not less than $45.50 per Share, net to the seller in
cash (the "OFFER PRICE"). Lockheed Martin shall extend the Offer, for periods
of no more than 60 days, until the earlier of (i) the one year anniversary of
the date hereof or (ii) 10 business days after the date on which the last of the
Authorized Carrier Conditions (as defined in Exhibit A hereto) shall have been
---------
obtained. The obligation of Lockheed Martin to accept for payment, and pay for,
any Shares tendered pursuant to the Offer shall be subject to the conditions set
forth in Exhibit A (any of which may be waived in whole or in part by Lockheed
---------
Martin in its sole discretion), and to the terms and conditions of this
Agreement. Lockheed Martin expressly reserves the right to modify the terms and
1
<PAGE>
conditions of the Offer, except that, without the prior written consent of
COMSAT, Lockheed Martin shall not (i) reduce the number of Shares subject to the
Offer, (ii) waive the Minimum Condition (as defined in Exhibit A hereto), (iii)
---------
reduce the Offer Price, (iv) modify or add to the conditions set forth in
Exhibit A, (v) except as provided in this Section 1.1(a), extend the term of the
- ---------
Offer, (vi) change the form of the consideration payable in the Offer or (vii)
make any other modifications that are otherwise materially adverse to holders of
COMSAT Common Stock. Notwithstanding the foregoing, Lockheed Martin may,
without the consent of COMSAT, (A) extend the term of the Offer beyond any
scheduled expiration date of the Offer (but not beyond the two year anniversary
of the date hereof) if, at any such scheduled expiration date, any of the
conditions to Lockheed Martin's obligation to accept for payment, and pay for,
Shares tendered pursuant to the Offer shall not have been satisfied or waived
and (B) extend the Offer (but not beyond the two year anniversary of the date
hereof) for any period required by any rule, regulation, interpretation or
position of the Securities and Exchange Commission (the "SEC") or the staff
thereof applicable to the Offer or any other applicable Law (as hereinafter
defined). Upon the terms and subject to the conditions of the Offer, Lockheed
Martin shall accept for payment and will pay for, as soon as permitted under the
terms of the Offer, Shares validly tendered and not withdrawn prior to the
expiration of the Offer. The date and time at which the Offer shall close is
referred to as the "OFFER CLOSING TIME".
(b) Lockheed Martin shall not, nor shall it permit any of its affiliates
to, tender into the Offer any shares of COMSAT Common Stock beneficially owned
by it; provided, that shares of COMSAT Common Stock held beneficially or of
--------
record by any plan, program or arrangement sponsored by Lockheed Martin or
maintained for the benefit of employees of Lockheed Martin or any of its
Subsidiaries (as hereinafter defined) shall be deemed not to be held by Lockheed
Martin or an affiliate thereof regardless of whether Lockheed Martin has,
directly or indirectly, the power to vote or control the disposition of such
shares of COMSAT Common Stock. COMSAT shall not, nor shall it permit any of its
Subsidiaries to, tender into the Offer any shares of COMSAT Common Stock
beneficially owned by it; provided, that shares of COMSAT Common Stock held
--------
beneficially or of record by any plan, program or arrangement sponsored by
COMSAT or maintained for the benefit of employees of COMSAT or any of its
Subsidiaries shall be deemed not to be held by COMSAT regardless of whether
COMSAT has, directly or indirectly, the power to vote or control the disposition
of such shares of COMSAT Common Stock.
(c) Notwithstanding anything to the contrary contained in this Agreement,
Lockheed Martin shall not be required to commence the Offer in any foreign
country where the commencement of the Offer, in Lockheed Martin's reasonable
opinion, would violate the applicable Law of such jurisdiction.
(d) On the date of the commencement of the Offer, Lockheed Martin shall
file with the SEC a Tender Offer Statement on Schedule 14D-1 with respect to the
Offer, which will contain the offer to purchase and form of the related letter
of transmittal (together with any supplements or amendments thereto, the "OFFER
DOCUMENTS"). The Offer Documents shall comply as to form in all material
respects with the requirements of the Exchange Act and, on the date filed with
the SEC and when first published, sent or given to COMSAT's shareholders,
2
<PAGE>
shall not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that no representation is made by Lockheed Martin with
respect to information supplied by COMSAT in writing for inclusion in the Offer
Documents or incorporated therein by reference to any statement, report or other
document filed by or on behalf of COMSAT with the SEC. Upon obtaining
knowledge, Lockheed Martin or COMSAT shall correct promptly any information
provided by it for use in the Offer Documents if and to the extent that such
information shall have become false or misleading in any material respect, and
Lockheed Martin further shall take all steps necessary to amend or supplement
the Offer Documents and to cause the Offer Documents as so amended or
supplemented to be filed with the SEC and to be disseminated to COMSAT's
shareholders, in each case as and to the extent required by applicable federal
securities Laws. COMSAT and its counsel shall be given a reasonable opportunity
to review and comment on the Offer Documents prior to the filing of such Offer
Documents with the SEC. Lockheed Martin shall provide COMSAT and its counsel in
writing with any comments Lockheed Martin and its counsel may receive from the
SEC or its staff with respect to the Offer Documents promptly after the receipt
thereof. Lockheed Martin shall take all steps reasonably necessary to cause the
Offer Documents to be filed with the SEC and disseminated to the holders of
COMSAT Common Stock, in each case as, and to the extent, required by applicable
Law.
SECTION 1.2. COMSAT ACTIONS.
(a) COMSAT hereby consents to the Offer and represents that its Board of
Directors, at a meeting duly called and held, has by resolutions duly adopted,
and not rescinded or modified, by a unanimous vote (excluding any directors
absent and any directors who recused themselves pursuant to Section 8.06 of
COMSAT's Articles of Incorporation) (i) determined as of the date hereof that
the Offer and the Merger are fair to the shareholders of COMSAT, are advisable
and are in the best interests of the shareholders of COMSAT, (ii) subject to the
terms and conditions set forth herein, approved the Offer, the Merger and this
Agreement, which approval constitutes approval of the Merger and this Agreement
for purposes of Section 29-364 of DCBCA, (iii) directed that the Merger and this
Agreement be submitted to a vote of the shareholders of COMSAT, which direction
constitutes the direction required by Section 29-366 of the DCBCA with respect
to the Merger and this Agreement and (iv) recommended acceptance of the Offer
and approval of the Merger and this Agreement by the shareholders of COMSAT,
which approval, if obtained, will constitute approval of the Merger and this
Agreement for purposes of Section 29-367 of DCBCA. COMSAT further represents
that Donaldson, Lufkin & Jenrette Securities Corporation has delivered to the
Board of Directors of COMSAT its opinion that as of the date hereof the
consideration to be received in the Offer and the Merger by holders of shares of
COMSAT Common Stock is fair to the holders of COMSAT Common Stock from a
financial point of view.
(b) COMSAT shall, subject to the provisions of this Agreement (i) file with
the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (the "SCHEDULE
14D-9") containing a recommendation of acceptance of the Offer and approval of
the Merger and this Agreement by the shareholders of COMSAT and (ii) mail such
Schedule 14D-9 to the
3
<PAGE>
shareholders of COMSAT; provided, that subject to the provisions of Section
--------
6.4(b) hereof, such recommendation may be withdrawn, modified or amended. Such
Schedule 14D-9 shall be, if so requested by Lockheed Martin, filed on the same
date as Lockheed Martin's Schedule 14D-1 is filed and mailed together with the
Offer Documents; provided, that in any event the Schedule 14D-9 shall be filed
--------
and mailed no later than 10 business days following the commencement of the
Offer. The Schedule 14D-9 shall comply as to form in all material respects with
the requirements of the Exchange Act and, on the date filed with the SEC and
when first published, sent or given to COMSAT's shareholders, shall not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by COMSAT with respect to
information supplied by Lockheed Martin in writing for inclusion in the Schedule
14D-9. Upon obtaining knowledge, each of COMSAT and Lockheed Martin shall
correct promptly any information provided by it for use in the Schedule 14D-9 if
and to the extent that such information shall have become false or misleading in
any material respect, and COMSAT further shall take all steps necessary to amend
or supplement the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended
or supplemented to be filed with the SEC and disseminated to COMSAT's
shareholders, in each case as and to the extent required by applicable federal
securities Laws. Lockheed Martin and its counsel shall be given a reasonable
opportunity to review and comment on the Schedule 14D-9, and each such amendment
or supplement, prior to COMSAT's filing of the Schedule 14D-9 or such supplement
or amendment, as the case may be, with the SEC. COMSAT shall provide Lockheed
Martin and its counsel in writing with any comments COMSAT or its counsel may
receive from the SEC or its staff with respect to the Schedule 14D-9 or such
supplement or amendment, as the case may be, promptly after the receipt thereof.
SECTION 1.3. SHAREHOLDER LISTS. In connection with the Offer, at the
request of Lockheed Martin, from time to time after the date hereof, COMSAT
shall promptly furnish Lockheed Martin with mailing labels, security position
listings and any available listing or computer file containing the names and
addresses of the record holders of the Shares as of a recent date and shall
furnish Lockheed Martin with such information and assistance as Lockheed Martin
or its agents may reasonably request in communicating the Offer to the record
and beneficial holders of Shares. Subject to the requirements of applicable
Law, and except for such steps as are necessary to disseminate the Offer
Documents and any other documents necessary to consummate the Merger, Lockheed
Martin shall hold in confidence the information contained in any such labels,
listings and files, and the additional information referred to in the preceding
sentence, will use such information only in connection with the Offer and the
Merger and, if this Agreement shall be terminated, shall, upon request, deliver
to COMSAT all copies of such information then in its possession or control or in
the possession or control of its agents or representatives.
4
<PAGE>
ARTICLE II
RELATED AGREEMENTS
SECTION 2.1. REGISTRATION RIGHTS AGREEMENT. Simultaneous with the
execution and delivery of this Agreement, Lockheed Martin and COMSAT shall
execute and deliver the Registration Rights Agreement, substantially in the form
attached hereto as Exhibit B (the "REGISTRATION RIGHTS AGREEMENT"), with respect
---------
to the Shares.
SECTION 2.2. SHAREHOLDERS AGREEMENT. Simultaneous with the
execution and delivery of this Agreement, Lockheed Martin and COMSAT shall
execute and deliver the Shareholders Agreement, substantially in the form
attached hereto as Exhibit C (the "SHAREHOLDERS AGREEMENT").
---------
SECTION 2.3. CARRIER ACQUISITION AGREEMENT. Simultaneous with the
execution and delivery of this Agreement, Lockheed Martin, Offer Subsidiary,
COMSAT and COMSAT Government Systems, Inc., a Delaware corporation ("COMSAT
CARRIER SUBSIDIARY"), shall enter into an agreement pursuant to which COMSAT
Carrier Subsidiary shall be merged with and into Offer Subsidiary, which
agreement shall be substantially in the form attached hereto as Exhibit D (the
---------
"CARRIER ACQUISITION AGREEMENT," and the transactions contemplated by the
Carrier Acquisition Agreement, the "CARRIER ACQUISITION"). (This Agreement, the
Registration Rights Agreement, the Shareholders Agreement and the Carrier
Acquisition Agreement are hereinafter collectively referred to as the
"TRANSACTION AGREEMENTS"). This Agreement contemplates the transactions set
forth in the Carrier Acquisition Agreement.
ARTICLE III
THE MERGER
SECTION 3.1. THE MERGER. Upon the terms and subject to the
conditions hereof, and in accordance with the DCBCA and the Delaware General
Corporation Law (the "DGCL"), at the Effective Time (as hereinafter defined)
COMSAT shall be merged with and into Acquisition Sub (the "FORWARD MERGER") as
soon as practicable following the satisfaction or waiver of the conditions set
forth in Section 3.15 hereof or on such other date as the parties hereto may
agree; provided, however, that if the conditions in subsections (a) and (b) of
-------- -------
such Section 3.15 are satisfied, but any of the conditions in Section 3.15(c)
are not satisfied, then Acquisition Sub shall be merged with and into COMSAT at
the Effective Time (the "REVERSE MERGER"). At the Effective Time, if the
Forward Merger is effected, then the separate existence of COMSAT shall cease
and Acquisition Sub shall continue as the surviving corporation under the name
"COMSAT" or, if the Reverse Merger is effected, then the separate existence of
Acquisition Sub shall cease and COMSAT shall continue as the surviving
corporation. The surviving corporation of the Forward Merger or the Reverse
Merger, as the case may be, shall be herein referred to as the "SURVIVING
CORPORATION" and the Forward Merger and Reverse Merger shall alternatively be
referred to as the "MERGER."
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SECTION 3.2. EFFECTIVE TIME; CLOSING. The Merger shall be
consummated by (i) filing with the Department of Consumer and Regulatory Affairs
of the District of Columbia (the "DCRA") articles of merger, executed and filed
in accordance with Section 29-368 of the DCBCA and such other documents as are
required by Section 29-371 of the DCBCA and (ii) filing with the Secretary of
State of the State of Delaware a certificate of merger, executed and filed in
accordance with Sections 103 and 252 of the DGCL (the time the Merger becomes
effective being referred to as the "EFFECTIVE TIME"). The parties will
cooperate to cause the Effective Time to occur outside of New York Stock
Exchange ("NYSE") trading hours. The Merger shall be effective upon the latest
to occur of (i) the issuance by the DCRA of a certificate of merger with respect
thereto pursuant to Section 29-369 of the DCBCA, (ii) the acceptance for filing
of the certificate of merger by the Secretary of State of the State of Delaware
pursuant to Section 252 of the DGCL and (iii) the time, if any, specified as the
effective time of the Merger in the articles of merger filed in accordance with
the DCBCA and the certificate of merger filed in accordance with the DGCL.
Prior to the filings referred to in this Section 3.2, a closing (the "CLOSING")
will be held at the offices of O'Melveny & Myers LLP, 555 13th Street, N.W.,
Suite 500 West, Washington, D.C. 20004-1109 (or such other place as the parties
may agree), for the purpose of confirming all of the foregoing no later than the
second business day after satisfaction or waiver of all the conditions set forth
in Section 3.15 (the date of the Closing herein referred to as the "CLOSING
DATE").
SECTION 3.3. EFFECTS OF THE MERGER. The Merger shall have the
effects set forth in Section 29-370 of the DCBCA and Section 259 of the DGCL.
As of the Effective Time, the Surviving Corporation shall be a wholly-owned
Subsidiary of Lockheed Martin.
SECTION 3.4. CERTIFICATE OF INCORPORATION AND BY-LAWS. If the
Forward Merger is consummated, the Certificate of Incorporation and By-Laws of
Acquisition Sub, each as in effect at the Effective Time, shall be the
Certificate of Incorporation and By-Laws of the Surviving Corporation, until
amended in accordance with applicable Law, except that Article FIRST of the
Certificate of Incorporation shall be amended so that it reads in its entirety
as follows: "The name of the corporation is COMSAT Corporation". If the Reverse
Merger is consummated, the Articles of Incorporation of COMSAT shall be amended
at the Effective Time to read in their entirety as set forth in Exhibit E hereto
---------
and shall be the Articles of Incorporation of the Surviving Corporation, and the
By-Laws of COMSAT as in effect at the Effective Time shall be the By-Laws of the
Surviving Corporation, each until amended in accordance with applicable Law.
SECTION 3.5. DIRECTORS. The directors of Acquisition Sub at the
Effective Time shall be the initial directors of the Surviving Corporation and
will hold office from the Effective Time until their respective successors are
duly elected or appointed and qualify in the manner provided in the Certificate
of Incorporation or Articles of Incorporation of the Surviving Corporation, as
the case may be, and the By-Laws of the Surviving Corporation, or as otherwise
provided by Law.
SECTION 3.6. OFFICERS. The officers of COMSAT at the Effective Time
shall be the initial officers of the Surviving Corporation and will hold office
from the Effective Time
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until their respective successors are duly elected or appointed and qualify
in the manner provided in the Certificate of Incorporation or Articles of
Incorporation of the Surviving Corporation, as the case may be, and the By-Laws
of the Surviving Corporation, or as otherwise provided by Law.
SECTION 3.7. EFFECT ON CAPITAL STOCK. At the Effective Time:
(a) Each share of COMSAT Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares of COMSAT Common
Stock held in the treasury of COMSAT, held by Offer Subsidiary, held by Lockheed
Martin, if any, and Dissenting Shares (as hereinafter defined), if any) shall,
by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive 0.5 shares of Lockheed Martin
common stock, par value $1 per share (the "LOCKHEED MARTIN COMMON STOCK") (as
subject to adjustment pursuant to Section 3.14 hereof, the "MERGER
CONSIDERATION"), issuable to the holder thereof upon the surrender of the
certificate formerly representing such share of COMSAT Common Stock (except as
provided in Section 6.13 hereof).
(b) Each share of COMSAT Common Stock held in the treasury of COMSAT,
each share of COMSAT Common Stock held by Offer Subsidiary, and each share of
COMSAT Common Stock held by Lockheed Martin, if any, immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, be cancelled and retired and cease to exist and no
consideration shall be received therefor; provided, that shares of COMSAT Common
--------
Stock held beneficially or of record by any plan, program or arrangement
sponsored or maintained for the benefit of employees of Lockheed Martin or
COMSAT or any of their respective Subsidiaries shall be deemed not to be held by
Lockheed Martin, Offer Subsidiary or COMSAT regardless of whether Lockheed
Martin, Offer Subsidiary or COMSAT has, directly or indirectly, the power to
vote or control the disposition of such shares of COMSAT Common Stock.
(c) In the case of the Forward Merger, each share of common stock, par
value $1.00 per share, of Acquisition Sub issued and outstanding immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof remain outstanding as one share of the
Surviving Corporation, or in the case of the Reverse Merger, be converted into
and exchangeable for one share of common stock of the Surviving Corporation.
SECTION 3.8. DISSENTING SHARES. Notwithstanding anything in this
Agreement to the contrary, shares of COMSAT Common Stock which are issued and
outstanding immediately prior to the Effective Time and which are held by
shareholders who have not voted such shares of COMSAT Common Stock in favor of
the Merger and shall have delivered a written demand for appraisal of such
shares of COMSAT Common Stock in the manner provided in Section 29-373 of the
DCBCA (the "DISSENTING SHARES") shall not be converted into or be exchangeable
for the right to receive the Merger Consideration, unless and until such holder
shall have failed to perfect or shall have effectively withdrawn or lost such
holder's right to
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appraisal and payment under the DCBCA. If such holder shall have so failed to
perfect or shall have effectively withdrawn or lost such right, such holder's
shares of COMSAT Common Stock shall thereupon be deemed to have been converted
into and to have become exchangeable for, at the Effective Time, the right to
receive the Merger Consideration.
SECTION 3.9. EXCHANGE OF STOCK.
(a) Prior to the Effective Time, Lockheed Martin shall designate a
bank or trust company reasonably acceptable to COMSAT to act as exchange agent
for the holders of the shares of COMSAT Common Stock in connection with the
Merger (the "EXCHANGE AGENT"). At the Effective Time, Lockheed Martin will
deposit with the Exchange Agent, in trust for the benefit of holders of shares
of COMSAT Common Stock, certificates representing the Lockheed Martin Common
Stock issuable pursuant to Section 3.7(a) hereof in exchange for outstanding
shares of COMSAT Common Stock. Lockheed Martin shall make available to the
Exchange Agent cash sufficient to pay cash in lieu of fractional shares pursuant
to Section 3.10 hereof and any dividends and other distributions pursuant to
Section 3.9(d) hereof. Any cash and certificates of Lockheed Martin Common
Stock deposited with the Exchange Agent shall hereinafter be referred to as the
"EXCHANGE FUND".
(b) Promptly after the Effective Time, the Exchange Agent shall mail
to each record holder, as of the Effective Time, of an outstanding certificate
or certificates which immediately prior to the Effective Time represented shares
of COMSAT Common Stock (the "CERTIFICATES") a form letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Exchange Agent) and instructions for effecting the surrender of such
Certificates in exchange for the applicable Merger Consideration in such form as
Lockheed Martin shall reasonably specify. Upon surrender to the Exchange Agent
of a Certificate, together with such letter of transmittal duly executed, and
any other required documents, the holder of such Certificate shall be entitled
to promptly receive in exchange therefor (A) one or more shares of Lockheed
Martin Common Stock representing, in the aggregate, the whole number of shares
that such holder has the right to receive pursuant to Section 3.7(a) hereof
(after taking into account all shares of COMSAT Common Stock then held by such
holder) and (B) a check in the amount equal to the cash that such holder has the
right to receive pursuant to the provisions of this Article III, including cash
in lieu of any fractional shares of Lockheed Martin Common Stock pursuant to
Section 3.10 hereof. No interest will be paid or will accrue on any cash
payable pursuant to Section 3.9(d) hereof or Section 3.10 hereof upon the
surrender of the Certificates. All distributions to holders of Certificates
shall be subject to any applicable federal, state, local and foreign tax
withholding, and such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of Certificates in respect of which
such deduction and withholding was made. If the Merger Consideration is to be
distributed to a Person (as defined below) other than the Person in whose name
the Certificate surrendered is registered, it shall be a condition of such
distribution that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer (including signature guarantees, if
required by the Surviving Corporation in its sole discretion) and that the
Person requesting such payment shall pay any transfer or other taxes required by
reason of the payment to a Person
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other than the registered holder of the Certificate surrendered or establish to
the satisfaction of the Surviving Corporation that such tax has been paid or is
not applicable. Until surrendered in accordance with the provisions of this
Section 3.9, each Certificate (other than Certificates representing shares of
COMSAT Common Stock held by Lockheed Martin or any Subsidiary of Lockheed
Martin, shares of COMSAT Common Stock held in the treasury of COMSAT or held by
any Subsidiary of COMSAT and Dissenting Shares) shall represent for all purposes
only the right to receive the Merger Consideration. The Surviving Corporation
shall pay all charges and expenses, including those of the Exchange Agent, in
connection with the distribution of the Merger Consideration. For purposes of
this Agreement, the term "PERSON" means any individual, firm, trust,
partnership, joint venture, association, corporation, limited liability company,
unincorporated organization, Governmental Authority (as hereinafter defined), or
other entity including, without limitation, the International Telecommunications
Satellite Organization ("INTELSAT") or the International Maritime Satellite
Organization ("INMARSAT").
(c) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of the shares of COMSAT Common Stock
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation, they
shall be cancelled and exchanged for the Merger Consideration in accordance with
the procedures set forth in this Section 3.9.
(d) No dividends or other distributions declared or made with respect
to shares of Lockheed Martin Common Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect
to the shares of Lockheed Martin Common Stock that such holder would be entitled
to receive upon surrender of such Certificate and no cash payment in lieu of
fractional shares of Lockheed Martin Common Stock shall be paid to any such
holder pursuant to Section 3.10 hereof until such holder shall surrender such
Certificate in accordance with Section 3.9(b) hereof. Subject to the effect of
applicable Laws, including, without limitation, Laws of escheat, following
surrender of any such Certificate, there shall be paid to such holder of shares
of Lockheed Martin Common Stock issuable in exchange therefor, without interest,
(a) promptly after the time of such surrender, the amount of any cash payable in
lieu of fractional shares of Lockheed Martin Common Stock to which such holder
is entitled pursuant to Section 3.10 hereof and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of Lockheed Martin Common Stock, and (b) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to such surrender and a payment
date subsequent to such surrender payable with respect to such shares of
Lockheed Martin Common Stock.
(e) All shares of Lockheed Martin Common Stock issued and cash paid
upon conversion of shares of COMSAT Common Stock in accordance with the terms of
this Article III (including any cash paid pursuant to Section 3.9(d) or Section
3.10 hereof) shall be deemed to have been issued or paid in full satisfaction of
all rights pertaining to the shares of COMSAT Common Stock.
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SECTION 3.10. NO FRACTIONAL SHARES OF LOCKHEED MARTIN COMMON STOCK.
(a) No certificates or scrip representing fractional shares of
Lockheed Martin Common Stock shall be issued upon the surrender for exchange of
Certificates and such fractional share interests will not be considered
deliverable shares under Section 3.7(a) hereof, and will not entitle the owner
thereof to vote or to have any rights of a shareholder of Lockheed Martin or a
holder of shares of Lockheed Martin Common Stock.
(b) Notwithstanding any other provision of this Agreement, each holder
of shares of COMSAT Common Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of Lockheed Martin
Common Stock (after taking into account all Certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an amount
equal to the product of (i) such fractional part of a share of Lockheed Martin
Common Stock multiplied by (ii) the closing price per share of Lockheed Martin
Common Stock reported on the NYSE Composite Tape on the last full trading day
prior to the Effective Time. As promptly as practicable after the determination
of the amount of cash, if any, to be paid to holders of COMSAT Common Stock with
respect to fractional interests, the Exchange Agent shall so notify Lockheed
Martin, and Lockheed Martin shall or shall cause the Surviving Corporation to
deposit such amount with the Exchange Agent and shall cause the Exchange Agent
to forward payments to such holders of fractional share interests subject to and
in accordance with the terms hereof.
SECTION 3.11. TERMINATION OF EXCHANGE FUND. Any portion of the
Exchange Fund which remains undistributed to the holders of Certificates for
twelve months after the Effective Time shall be delivered to the Surviving
Corporation or otherwise on the instruction of the Surviving Corporation, and
any holders of the Certificates who have not theretofore complied with this
Article III shall, subject to the effect of applicable Laws, including without
limitation, Laws of escheat, thereafter look only to the Surviving Corporation
and Lockheed Martin for the Merger Consideration with respect to the shares of
COMSAT Common Stock formerly represented thereby to which such holders are
entitled pursuant to Section 3.7 hereof and Section 3.9 hereof, any cash in lieu
of fractional shares of Lockheed Martin Common Stock to which such holders are
entitled pursuant to Section 3.10 hereof and any dividends or distributions with
respect to shares of Lockheed Martin Common Stock to which such holders are
entitled pursuant to Section 3.9(d) hereof. Any such portion of the Exchange
Fund remaining unclaimed by holders of shares of COMSAT Common Stock five years
after the Effective Time (or such earlier date immediately prior to such time as
such amounts would otherwise escheat to or become property of any Governmental
Authority (as defined below)) shall, to the extent permitted by Law, become the
property of the Surviving Corporation free and clear of any claims or interest
of any Person previously entitled thereto. For purposes of this Agreement, the
term "GOVERNMENTAL AUTHORITY" means any agency, bureau, commission, court,
department, officer, political subdivision, or other instrumentality of any
nation or government, any region, state, or other political subdivision thereof
whether federal, state, county or local, domestic or foreign (excluding INTELSAT
or Inmarsat), or any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining
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to government, and any Person owned or controlled through stock or capital
ownership or otherwise by any of the foregoing.
SECTION 3.12. NO LIABILITY. None of Lockheed Martin, Acquisition
Sub, COMSAT, the Surviving Corporation or the Exchange Agent shall be liable to
any Person in respect of any Merger Consideration from the Exchange Fund
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar Law.
SECTION 3.13. LOST CERTIFICATES. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such Person of a bond in
such reasonable amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent will deliver in exchange for such lost, stolen or destroyed
Certificate the applicable Merger Consideration with respect to the shares of
COMSAT Common Stock formerly represented thereby, any cash in lieu of fractional
shares of Lockheed Martin Common Stock, and unpaid dividends and distributions
on shares of Lockheed Martin Common Stock deliverable in respect thereof,
pursuant to this Agreement.
SECTION 3.14. CERTAIN ADJUSTMENTS. Without limiting any other
provision of this Agreement, if, between the date of this Agreement and the
Effective Time, the outstanding shares of Lockheed Martin Common Stock shall be
changed into a different number or a different class or series of shares by
reason of any reclassification, recapitalization, stock split, reverse stock
split, combination or exchange of shares or any other similar transaction, or
any dividend payable in stock or other securities shall be declared thereon with
a record date within such period, the Merger Consideration established pursuant
to the provisions of Section 3.7 hereof shall be adjusted accordingly to provide
to the holders of COMSAT Common Stock the same economic effect as contemplated
by this Agreement prior to such reclassification, recapitalization, stock split,
reverse stock split, combination, exchange or dividend.
SECTION 3.15. CONDITIONS TO CLOSING OF MERGER.
(a) The obligation of each party to effect the Merger is subject to
the satisfaction at or prior to the Effective Time of the following conditions:
(i) Offer Subsidiary shall have purchased Shares pursuant to the
Offer;
(ii) the Satellite Act, and other applicable Laws, shall have
been amended or repealed, and all applicable proceedings before the
Federal Communications Commission ("FCC") or other Governmental
Authority necessary to implement such amendment or repeal shall have
been completed to the extent necessary to permit the consummation of
the Merger as contemplated by the terms of this Agreement;
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(iii) any applicable waiting period related to the Merger under
the Antitrust Laws (as hereinafter defined) shall have terminated or
expired and all consents or approvals required under the Antitrust
Laws shall have been received;
(iv) the shares of Lockheed Martin Common Stock to be issued in
the Merger and such other shares to be reserved for issuance in
connection with the Merger shall have been approved upon official
notice of issuance for listing on the NYSE; and
(v) the Form S-4 (as hereinafter defined) shall have been
declared effective by the SEC under the Securities Act of 1933, as
amended, and all rules and regulations promulgated thereunder (the
"SECURITIES ACT"). No stop order suspending the effectiveness of the
Form S-4 shall have been issued by the SEC and no proceedings for that
purpose shall have been initiated or threatened by the SEC; and
(vi) the shareholders of COMSAT shall have approved the Merger
and this Agreement pursuant to Section 29-367 of the DCBCA.
(b) The obligations of Lockheed Martin and Acquisition Sub to effect
the Merger are further subject to the satisfaction at or prior to the Effective
Time of the following conditions:
(i) (A) after the date of this Agreement, there shall not have
been any change in existing Law or any new Law promulgated, enacted,
enforced or deemed applicable to COMSAT or to the transactions
contemplated by this Agreement nor (B) shall INTELSAT or Inmarsat have
adopted a plan for privatization, or have been privatized, in whole or
in part, in a manner or pursuant to terms and conditions (or, in the
case of an adopted plan, proposed terms and conditions), in the case
of either clause (A) or clause (B) that Lockheed Martin determines in
good faith (after consultation with COMSAT) would reasonably be
expected to have a Significant Adverse Effect(as defined below);
(ii) all consents and approvals from Governmental Authorities
(including the FCC) or any other Person required for the consummation
of the Merger as contemplated by the terms of this Agreement shall
have been granted, except where the failure to obtain such consent or
approval, individually or in the aggregate, would not reasonably be
expected to have a Significant Adverse Effect; and
(iii) since the date of this Agreement, there shall not have
occurred any event that has had or would reasonably be expected to
have a Significant Adverse Effect.
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For purposes of this Agreement, the term "SIGNIFICANT ADVERSE EFFECT" means a
Material Adverse Effect on COMSAT (as hereinafter defined, but including, for
purposes of determining whether there has been a Significant Adverse Effect, any
effects or changes arising out of, resulting from or relating to general
economic, financial or industry conditions) of such seriousness and significance
that a reasonable businessperson in similar circumstances would not proceed with
the Merger on the terms and conditions set forth in this Agreement.
COMSAT will furnish Lockheed Martin with such certificates and other
documents to evidence the fulfillment of the conditions set forth in this
Section 3.15(b) as Lockheed Martin may reasonably request.
(c) The obligation of each party to effect the Forward Merger is
further subject to the satisfaction at or prior to the Effective Time of the
following conditions and if any of the following conditions are not satisfied,
but the conditions set forth in Sections 3.15(a) and 3.15(b) are satisfied, the
Reverse Merger shall be effected:
(i) the aggregate fair market value of the shares of Lockheed
Martin Common Stock, deliverable pursuant to Section 3.7(a) hereof
upon consummation of the Forward Merger, based upon the most recent
closing price of such stock on the NYSE Composite Tape on the last
full trading day prior to the Effective Time (the "STOCK VALUE"),
would be at least 40% of the sum of (A) the Stock Value, (B) the
aggregate amount paid by Lockheed Martin to purchase Shares pursuant
to the Offer, (C) cash payable in respect of Dissenting Shares
(assuming for these purposes that the per share amount payable in
respect of Dissenting Shares is $50 per share), and (D) cash payable
in respect of fractional shares (assuming for these purposes that each
holder of record of COMSAT Common Stock as of the close of the last
trading day prior to the Effective Time is entitled to receive $50 in
respect of fractional share interests);
(ii) COMSAT shall have received from Skadden, Arps, Slate,
Meagher, & Flom LLP, counsel to COMSAT, a written opinion dated as of
the Closing Date, substantially in the form attached hereto as Exhibit
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F, based upon representations of COMSAT and Lockheed Martin (including
-
representations relating to any material transactions currently under
consideration by COMSAT and Lockheed Martin, respectively) contained
in tax certificates. Such representations shall be those that
customarily would be required in similar circumstances. The written
opinion shall be substantially to the effect that the Forward Merger
will be treated for U.S. federal income tax purposes as a
reorganization qualifying under the provision of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "CODE");
(iii) Lockheed Martin shall have received from King & Spalding,
counsel to Lockheed Martin, a written opinion dated as of the Closing
Date, substantially in the form attached hereto as Exhibit F, based
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upon representations of COMSAT and Lockheed Martin (including
representations relating to any material
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transactions currently under consideration by COMSAT and Lockheed
Martin, respectively) contained in tax certificates. Such
representations shall be those that customarily would be required in
similar circumstances. The written opinion shall be substantially to
the effect that the Forward Merger will be treated for U.S. federal
income tax purposes as a reorganization qualifying under the provision
of Section 368(a) of the Code; and
(iv) all required consents or approvals from Governmental
Authorities (including the FCC) or any other Person shall have been
obtained to permit the consummation of the Forward Merger, except
where the failure to obtain such consent or approval, individually or
in the aggregate, would not reasonably be expected to have a material
adverse effect on COMSAT's business.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COMSAT
Except as set forth in the disclosure schedule delivered prior to the
execution hereof to Lockheed Martin (the "COMSAT DISCLOSURE SCHEDULE") (each
section of which qualifies only the corresponding numbered representation and
warranty or covenant as specified therein), COMSAT represents and warrants to
Lockheed Martin and Acquisition Sub as follows:
SECTION 4.1. ORGANIZATION. Each of COMSAT and its Subsidiaries is a
corporation, limited liability company or limited partnership duly organized,
validly existing and in good standing under the Laws of the jurisdiction of its
organization or formation and has all requisite power and authority, as a
corporation, limited liability company or limited partnership, as the case may
be, to own, lease and operate its properties and to carry on its business as now
being conducted, except, in the case of Subsidiaries, where the failure to be so
organized, existing and in good standing or to have such power and authority
would not, either individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on COMSAT and except as set forth in Section 4.1
of the COMSAT Disclosure Schedule. For purposes of this Agreement, the term
"MATERIAL ADVERSE EFFECT" shall mean any change or effect that is materially
adverse to (i) the business, properties, operations, results of operations or
financial condition of the referenced Person and its Subsidiaries, taken as a
whole, other than any effects or changes arising out of, resulting from or
relating to general economic, financial or industry conditions or (ii) the
ability of any of the referenced Person and its Subsidiaries to perform its
obligations under this Agreement and the Carrier Acquisition Agreement. Each of
COMSAT and its Subsidiaries is duly qualified or licensed and in good standing
to do business in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except in such jurisdictions where the
failure to be so duly qualified or licensed and in good standing, either
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on COMSAT and except as set forth in Section 4.1 of the
COMSAT Disclosure Schedule. COMSAT has heretofore delivered or made available
to Lockheed Martin accurate and complete
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copies of the Articles of Incorporation and By-Laws (or other similar
organizational documents in the case of an entity other than a corporation), as
currently in effect, of COMSAT and each of its Subsidiaries. For purposes of
this Agreement, the term "LAWS" shall mean collectively, any law, rule,
regulation, statute, writ, ordinance, judgment, decision, decree, ruling, Order
(as hereinafter defined), award, injunction or other official action of any
Governmental Authority.
SECTION 4.2. AUTHORITY. COMSAT has full corporate power and
authority to execute and deliver each Transaction Agreement to which it is a
party and subject to the limitations of the Satellite Act, COMSAT's Articles of
Incorporation, and COMSAT's Bylaws to consummate the transactions contemplated
thereby. The execution and delivery of each such Transaction Agreement by
COMSAT and the consummation of the transactions contemplated thereby have been
duly and validly authorized by the Board of Directors of COMSAT and no other
corporate proceedings on the part of COMSAT are necessary to authorize any such
Transaction Agreement or to consummate the transactions contemplated thereby,
other than, with respect to the Merger, the approval of the Merger and this
Agreement by the shareholders of COMSAT and, with respect to the amendment to
COMSAT's Articles of Incorporation called for in the Shareholders Agreement (the
"AMENDMENT"), the approval thereof by the Board of Directors and shareholders of
COMSAT as contemplated by the Shareholders Agreement. This Agreement and each
other Transaction Agreement has been duly and validly executed and delivered by
COMSAT and constitutes the valid and binding agreement of COMSAT (and assuming
due and valid authorization, execution and delivery thereof by the other parties
thereto) enforceable against COMSAT in accordance with its terms, except to the
extent that enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar Laws, now or
hereafter in effect, relating to the creditors' rights generally and general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity). The approval of the Merger, this Agreement and
the Amendment by two-thirds of the votes entitled to be cast by all holders of
COMSAT Common Stock is the only vote of the holders of any class or series of
the capital stock of COMSAT required to approve any Transaction Agreement or the
transactions contemplated thereby. For purposes of this Agreement, the term
"SUBSIDIARY", when used with respect to any Person, means, (i) any corporation
or other entity of which securities or other ownership interests having ordinary
voting power to elect 50% or more of the board of directors or other persons
performing similar functions are at the time directly or indirectly owned by the
Person or (ii) a partnership, limited liability company, joint venture or
similar entity or arrangement however organized or constituted in which the
Person or a Subsidiary of the Person is, at the date of determination, a general
partner, limited partner or member, as the case may be, but only if the Person
or its Subsidiary is entitled at any time to receive 50% or more of the amounts
distributed or distributable by such partnership, limited liability company,
joint venture or other entity or pursuant to such arrangement to the partners or
members thereof or parties thereto, whether upon dissolution, termination or
otherwise.
SECTION 4.3. CONSENTS AND APPROVALS; NO VIOLATIONS. Except for any
applicable requirements of the Securities Act, the Exchange Act, Antitrust Laws,
the Communications Act of 1934, as amended, and all rules and regulations
promulgated thereunder (the "COMMUNICATIONS ACT") and the Satellite Act, the
filing and recordation of articles and/or a
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certificate of merger with respect to the Merger, as required by the DCBCA and
the DGCL, respectively, the filing with and approval of the NYSE and the SEC
with respect to the delisting and deregistering of the shares of COMSAT Common
Stock, such filings and approvals as may be required under the "takeover" or
"blue sky" Laws of various states or as disclosed in Section 4.3 of the COMSAT
Disclosure Schedule, neither the execution and delivery of this Agreement by
COMSAT nor the consummation by COMSAT of any transaction contemplated hereby
will (i) conflict with or result in any breach of any provision of the Articles
of Incorporation or By-Laws of COMSAT or the articles of incorporation or by-
laws of any of its Subsidiaries (other than those Subsidiaries which, either
individually or in the aggregate, would not be a "significant subsidiary" within
the meaning of Regulation S-X promulgated under the Securities Act) (each such
Subsidiary, other than those described in the preceding parenthetical, herein
called a "SIGNIFICANT SUBSIDIARY"), (ii) require on the part of COMSAT, such
Subsidiary or a Significant Subsidiary any filing with, or the obtaining of any
permit, authorization, consent or approval of, any Governmental Authority or any
other Person, (iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation, acceleration or payment, or to
the creation of any mortgage, deed of trust, lien (statutory or otherwise),
pledge, hypothecation, charge, deposit arrangement, preference, priority,
security interest, restriction or transfer or encumbrance of any kind
(including, without limitation, any conditional sale contract, any capitalized
lease or any financing lease having substantially the same economic effect as
the foregoing and the filing of or agreement to give any financing statement
under the Uniform Commercial Code or comparable Law of any jurisdiction to
evidence any of the foregoing) (collectively, "LIENS") under any of the terms,
conditions or provisions of any note, mortgage, indenture, other evidence of
indebtedness, guarantee, license, agreement or other contract, instrument or
obligation to which COMSAT or any of its Subsidiaries is a party or by which any
of them or any of their Assets may be bound (including, without limitation, the
COMSAT Contracts (as hereinafter defined)) or (iv) violate any Law applicable to
COMSAT or any of its Subsidiaries or any of their Assets (as defined below),
except for such requirements, defaults, rights or violations under clauses (ii),
(iii) and (iv) above (x) which, either individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect on COMSAT or (y)
which become applicable as a result of the business or activities in which
Lockheed Martin or Acquisition Sub is or proposes to be engaged (other than the
business or activities of COMSAT and its Subsidiaries, considered independently
of the ownership thereof by Lockheed Martin and Acquisition Sub) or as a result
of other facts or circumstances specific to Lockheed Martin or Acquisition Sub.
For purposes of this Agreement, the term "ASSETS" means all assets, of whatever
nature, tangible, intangible, real or personal.
SECTION 4.4. CAPITALIZATION.
(a) As of the close of business on September 11, 1998, the authorized
capital stock of COMSAT consisted of (i) 100,000,000 shares of COMSAT Common
Stock, of which 52,494,820 shares were issued and outstanding of which
52,475,862 shares were Series I Common Stock, inclusive of shares subject to
restrictions, and 18,958 shares were Series II Common Stock, and (ii) 5,000,000
shares of Preferred Stock, without par value ("COMSAT PREFERRED STOCK"), of
which no shares were issued and outstanding. Since the close of business
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on September 11, 1998 through the date hereof, no shares of Series II Common
Stock in addition to those set forth in the preceding sentence have been issued.
As of the close of business on September 11, 1998, (i) 3,562,415 shares of
COMSAT Common Stock were issuable upon the exercise of outstanding vested and
non-vested options (the "COMSAT STOCK OPTIONS") granted under COMSAT's stock
option plans (the "STOCK OPTION PLANS") and (ii) not more than 9,000 shares of
COMSAT Common Stock were issuable upon the exercise of other rights to acquire
shares of COMSAT Common Stock granted under other programs of COMSAT or any of
its Subsidiaries that afford to employees or directors of COMSAT and its
Subsidiaries the opportunity to acquire shares of COMSAT Common Stock, each as
amended (such programs together with the Stock Option Plans, the "COMSAT STOCK
PLANS"), copies of which have previously been delivered to Lockheed Martin.
Since the close of business on September 11, 1998, COMSAT has not granted any
COMSAT Stock Options, issued any other right to acquire shares of its capital
stock or granted any restricted shares or restricted share units of COMSAT
Common Stock under the COMSAT Stock Plans, or otherwise issued any shares of its
capital stock except (i) as permitted by this Agreement, (ii) as set forth in
Section 4.4(a) of the COMSAT Disclosure Schedule, (iii) upon exercise of the
COMSAT Stock Options or (iv) pursuant to a nondiscretionary grant under the
COMSAT Savings and Profit Sharing Plan, the COMSAT Employee Stock Purchase Plan,
or the COMSAT Investors Plus Plan in accordance with the current terms of such
Plan. Except as set forth above and as otherwise permitted in this Agreement,
there are not now, and at the Effective Time there will not be, any Equity
Securities of COMSAT issued or outstanding. For purposes of this Agreement, the
term "EQUITY SECURITIES" of a Person means the capital stock of the Person and
all other securities (whether or not issued by such Person but excluding any
exchange traded or privately granted options) convertible into or exchangeable
or exercisable for any shares of its capital stock, all rights or warrants to
subscribe for or to purchase, all options for the purchase of, and all calls,
commitments, agreements, arrangements, undertakings or claims of any character
relating to, any shares of its capital stock and any securities convertible into
or exchangeable or exercisable for any of the foregoing.
(b) All outstanding shares of capital stock of COMSAT are duly
authorized, validly issued, fully paid and nonassessable and are not subject to
preemptive rights.
(c) Except with respect to the outstanding shares of COMSAT Common
Stock and the COMSAT Stock Options, there are no outstanding bonds, debentures,
notes or other indebtedness or other securities of COMSAT having the right to
vote (or convertible into, or exchangeable for, securities having the right to
vote) on any matters on which shareholders of COMSAT may vote.
(d) Except as set forth in Section 4.4(d) of the COMSAT Disclosure
Schedule or with respect to the COMSAT Stock Options, the Shareholders
Agreement, the restrictions set forth at Sections 303 and 304 of the Satellite
Act (47 U.S.C. (S)(S)733 and 734), resolutions by the Board of Directors of
COMSAT (which currently restrict the exercise of voting rights with respect to
the voting of shares of COMSAT Common Stock held by a shareholder that is not an
Authorized Carrier in excess of five per centum (5%) of the issued and
outstanding COMSAT Common Stock) and the restriction pursuant to Section 5.02(e)
of COMSAT's Articles of
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Incorporation (which currently limits ownership of COMSAT stock by any
shareholder that is not an Authorized Carrier to ten per centum (10%) of the
issued and outstanding COMSAT Common Stock), there is no agreement or
arrangement restricting the voting or transfer of the Equity Securities of
COMSAT.
(e) Except as set forth in Section 4.4(e) of the COMSAT Disclosure
Schedule, there are no outstanding contractual obligations, commitments,
understandings or arrangements of COMSAT or any of its Subsidiaries to
repurchase, redeem or otherwise acquire, reacquire or make any payment in
respect of any Equity Securities of COMSAT or any of its Subsidiaries.
(f) Except as contemplated by the Registration Rights Agreement, there
are no agreements or arrangements to which COMSAT or any of its Subsidiaries is
a party pursuant to which COMSAT is required to register its Equity Securities
under the Securities Act.
SECTION 4.5. ABSENCE OF CERTAIN CHANGES. Except (i) as set forth in
Section 4.5 of the COMSAT Disclosure Schedule, (ii) as set forth in COMSAT's
Annual Report on Form 10-K for the year ended December 31, 1997 (the "COMSAT
FORM 10-K"), COMSAT's Quarterly Reports on Form 10-Q for the three month periods
ended March 31, 1998 and June 30, 1998, respectively, or any other document
filed prior to the date hereof pursuant to Section 13(a) or 15(d) of the
Exchange Act, or (iii) as contemplated by this Agreement, from June 30, 1998
until the date hereof, neither COMSAT nor any of its Subsidiaries has (x) taken
any of the prohibited actions set forth in Section 6.1 hereof, (y) suffered any
changes that, either individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on COMSAT or (z) conducted its
business or operations in any material respect other than in the ordinary course
of business.
SECTION 4.6. REPORTS. For the purposes of this Agreement, the
"COMSAT SEC DOCUMENTS" means each registration statement, report, proxy
statement or information statement of COMSAT prepared by it since January 1,
1996, in the form (including exhibits and any amendments thereto) filed with the
SEC. As of the respective filing dates, the COMSAT SEC Documents (i) complied as
to form in all material respects with the applicable requirements of the
Securities Act and the Exchange Act and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in the light of
the circumstances under which they were made, not misleading. Each of the
consolidated balance sheets included in or incorporated by reference into the
COMSAT SEC Documents (including the related notes and schedules) fairly presents
the consolidated financial position of COMSAT and its Subsidiaries as of its
date, and each of the consolidated statements of income, retained earnings and
cash flows included in or incorporated by reference into the COMSAT SEC
Documents (including any related notes and schedules) fairly presents the
results of operations, retained earnings or cash flows, as the case may be, of
COMSAT and its Subsidiaries for the periods set forth therein (subject, in the
case of unaudited statements, to normal year-end audit adjustments which would
not be material in amount or effect), in each case in accordance with United
States generally accepted accounting principles ("GAAP") consistently applied
during the periods involved, except as may be noted therein. None of COMSAT and
its Subsidiaries has any Liabilities (as defined below) required
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to be disclosed in a balance sheet of COMSAT or in the notes thereto prepared in
accordance with GAAP consistently applied except (a) Liabilities reflected on,
or reserved against in, a balance sheet of COMSAT or in the notes thereto, and
included in the COMSAT SEC Documents, (b) Liabilities incurred since June 30,
1998 in the ordinary course of business and (c) as set forth in Section 4.6 of
the COMSAT Disclosure Schedule. For purposes of this Agreement, the term
"LIABILITIES" means all debts, claims, actions, demands, rights, costs,
expenses, liabilities, losses, damages, commitments and obligations (in each
case whether fixed, contingent or absolute, accrued or not accrued, that would
be required by GAAP to be reflected in financial statements of COMSAT or
disclosed in the notes thereto).
SECTION 4.7. NO DEFAULT. Except as set forth in Section 4.7 of the
COMSAT Disclosure Schedule, neither COMSAT nor any of its Subsidiaries is in
default or violation (and no event has occurred which with notice or the lapse
of time or both would constitute a default or violation) of any term, condition
or provision of (i) its articles of incorporation or by-laws (or other similar
organizational documents in the case of an entity other than corporation), (ii)
any note, mortgage, indenture other evidence of indebtedness, guarantee,
license, agreement or other contract, instrument or contractual obligation to
which COMSAT or any of its Subsidiaries is now a party or by which they or any
of their Assets may be bound, or (iii) any Law applicable to COMSAT or any of
its Subsidiaries, except for defaults or violations under clause (i), clause
(ii) and clause (iii) above that, (A) in the aggregate would not reasonably be
expected to have a Material Adverse Effect on COMSAT or (B) become applicable as
a result of the business or activities in which Lockheed Martin or Acquisition
Sub is or proposes to be engaged (other than the business or activities of
COMSAT and its Subsidiaries, considered independently of the ownership thereof
by Lockheed Martin and Acquisition Sub) or as a result of any other facts or
circumstances specific to Lockheed Martin or Acquisition Sub.
SECTION 4.8. LITIGATION; COMPLIANCE WITH LAW.
(a) Except as set forth in Section 4.8(a) of the COMSAT Disclosure
Schedule, as of the date hereof, there are no actions, suits, claims,
proceedings or investigations pending or, to the knowledge of COMSAT,
threatened, involving COMSAT or any of its Subsidiaries or any of their
respective Assets (or any Person whose liability therefrom may have been
retained or assumed by COMSAT or any of its Subsidiaries either contractually or
by operation of law), by or before any court, Governmental Authority or by any
other Person that, either individually or in the aggregate, if determined
adversely to COMSAT or such Subsidiary, would reasonably be expected to have a
Material Adverse Effect on COMSAT.
(b) Except as disclosed by COMSAT in COMSAT SEC Documents filed since
January 1, 1998 (the "RECENT SEC DOCUMENTS") or as set forth in Section 4.8(b)
of the COMSAT Disclosure Schedule, COMSAT and its Subsidiaries are now being
and, to the knowledge of COMSAT, since January 1, 1994 have been operated in
substantial compliance with all Laws, except for violations that, either
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on COMSAT.
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SECTION 4.9. EMPLOYEE BENEFIT PLANS; ERISA.
(a) Except as set forth in Section 4.9(a) of the COMSAT Disclosure
Schedule, (i) each "employee benefit plan" (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and all
other employee benefit, bonus, incentive, stock option (or other equity-based),
severance, change in control, welfare (including post-retirement medical and
life insurance) and fringe benefit plans (whether or not subject to ERISA)
maintained or sponsored by COMSAT or its Subsidiaries or any trade or business,
whether or not incorporated, that would be deemed a "single employer" within the
meaning of Section 4001 of ERISA (an "ERISA AFFILIATE"), for the benefit of any
employee or former employee of COMSAT or any of its ERISA Affiliates (the
"PLANS") is, and has been, operated in all material respects in accordance with
its terms and in substantial compliance (including the making of filings with
Governmental Authorities) with all applicable Laws, including, without
limitation, ERISA and the applicable provisions of the Code, (ii) each of the
Plans intended to be "qualified" within the meaning of Section 401(a) of the
Code has been determined by the Internal Revenue Service (the "IRS") to be so
qualified and is not under audit by the IRS or the Department of Labor or the
subject of IRS review under the IRS Employee Plans Compliance Resolution System
and COMSAT knows of no fact or set of circumstances that is reasonably likely to
adversely affect such qualification, (iii) no material withdrawal liability with
respect to any "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA)
would be incurred by COMSAT and its ERISA Affiliates in the event of a
withdrawal from such plan, (iv) no "reportable event", as such term is defined
in Section 4043(c) of ERISA (for which the 30-day notice requirement to the
Pension Benefit Guaranty Corporation ("PBGC") has not been waived), has occurred
with respect to any Plan that is subject to Title IV of ERISA, and (v) there are
no material pending or, to the knowledge of COMSAT, threatened claims (other
than routine claims for benefits) by, on behalf of or against any of the Plans
or any trusts related thereto. Set forth in Section 4.9(a) of the COMSAT
Disclosure Schedule is a list of all Plans. A true and complete copy of each of
the Plans and, if applicable, the summary plan description, any summary of
material modifications, the most recent Form 5500, and the most recently issued
IRS determination letter and actuarial report with respect to each of the Plans
has previously been provided to Lockheed Martin and Acquisition Sub.
(b) (i) No Plan has incurred an "Accumulated Funding Deficiency" (as
defined in Section 302 of ERISA or Section 412 of the Code), whether or not
waived, (ii) neither COMSAT nor any ERISA Affiliate has incurred any Liability
under Title IV of ERISA except for required premium payments to the PBGC, which
payments have been made when due, and no events have occurred which are
reasonably likely to give rise to any Liability of COMSAT or an ERISA Affiliate
under Title IV of ERISA or which could reasonably be anticipated to result in
any claims being made against Lockheed Martin or its affiliates by the PBGC,
(iii) no amendment has been adopted which would require the posting of security
in accordance with Section 401(a)(29) of the Code, and (iv) COMSAT has not
incurred any material withdrawal liability (including any contingent or
secondary withdrawal liability) within the meaning of Section 4201 and 4204 of
ERISA to any multiemployer plan (within the meaning of Section 4001(a)(3) of
ERISA) which has not been satisfied in full.
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(c) Except as set forth in Section 4.9(c) of the COMSAT Disclosure
Schedule, with respect to each Plan that is subject to Title IV of ERISA or that
provides post-retirement life or medical insurance or other post-employment
benefits (other than continuation coverage pursuant to Section 4980B(f) of the
Code or Sections 601 to 606 of ERISA) (i) COMSAT has provided to Acquisition Sub
a complete copy of the most recent actuarial valuation report prepared for such
Plan, (ii) the assets and liabilities in respect of the accrued benefits as set
forth in the most recent actuarial valuation report prepared by the Plan's
actuary fairly present the funded status of such Plan in all material respects,
and (iii) since the date of such valuation report there has been no material
adverse change in the funded status of any such Plan.
(d) Neither COMSAT nor any ERISA Affiliate has failed to make any
contribution or payment to any Plan or multiemployer plan which in either case
has resulted or could result in the imposition of a Lien or the posting of a
bond or other security under ERISA or the Code.
(e) Except as set forth in Section 4.9(e) of the COMSAT Disclosure
Schedule or as expressly provided for in this Agreement, the consummation of the
transactions contemplated by this Agreement will not (i) entitle any current or
former employee, officer or director of COMSAT or any Subsidiary to severance
pay, unemployment compensation or any other payment, (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due any such
employee, officer or director or (iii) violate any provision of any Plan
document.
(f) Except as set forth in Section 4.9(f) of the COMSAT Disclosure
Schedule, COMSAT has reserved the right to amend or terminate the Plans
according to the terms of the Plans and with respect to any Plan that has been
amended or terminated within the five year period preceding the date of this
Agreement, such amendment or termination was permitted by the terms of the Plan.
SECTION 4.10. INTELLECTUAL PROPERTY; YEAR 2000.
(a) To the knowledge of COMSAT, COMSAT and its Subsidiaries do not now
and have not in the past used Intellectual Property in the conduct of their
respective businesses which conflicts with or infringes upon any proprietary
rights of others except where such conflict or infringement, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect on COMSAT. For purposes of this Agreement, the term "INTELLECTUAL
PROPERTY" means trademarks, trade names, service marks, service names, mark
registrations, logos, assumed names, copyright registrations, patents and all
applications therefor and all other similar proprietary rights.
(b) As described in Section 4.10(b) of the COMSAT Disclosure Schedule,
COMSAT has implemented a program that is designed to ensure that prior to
December 31, 1999, all of the computer software programs, databases and
compilations, computer firmware, computer hardware (whether general or special
purpose), and other similar or related items of automated, computerized, and/or
software system(s) that are to be used or relied on by
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COMSAT or any of its Subsidiaries in the conduct of their respective businesses
will not malfunction, will not cease to function, will not generate incorrect
data, and will not provide incorrect results when processing, providing, and/or
receiving date-related data into and between the twentieth and twenty-first
centuries. The program includes consideration of the status of the major
vendors and suppliers of COMSAT and its Subsidiaries and of the trustees of
employee benefit plans as defined in ERISA Section 3(3) maintained or sponsored
by COMSAT or its Subsidiaries with respect to this issue.
SECTION 4.11. CERTAIN CONTRACTS AND ARRANGEMENTS.
(a) COMSAT has delivered or otherwise made available (or will make
available) to Lockheed Martin true, correct and complete copies of all contracts
and agreements (and all amendments, modifications and supplements thereto and
all side letters to which COMSAT is a party affecting the obligations of any
party thereunder) to which COMSAT or any of its Subsidiaries is a party or by
which any of their Assets are bound that are material to the business or Assets
of COMSAT and its Subsidiaries taken as a whole, including, without limitation,
all: (i) employment, consulting, non-competition, severance, golden parachute or
indemnification contracts with past or present directors, officers or employees
(including, without limitation, any contract to which COMSAT is a party
involving employees of COMSAT); (ii) contracts granting a right of first refusal
or first negotiation; (iii) partnership or joint venture agreements; (iv)
agreements for the acquisition, sale or lease of material Assets of COMSAT (by
merger, purchase or sale of Assets or stock or otherwise); (v) contracts or
agreements with any Governmental Authority or INTELSAT or Inmarsat; (vi)
contracts or arrangements limiting or restraining COMSAT, any of COMSAT's
Subsidiaries or any successor thereto from engaging or competing in any
business; and (vii) all commitments and agreements to enter into any of the
foregoing (collectively, the "COMSAT CONTRACTS").
(b) Except as set forth in Section 4.11(b) of the COMSAT Disclosure
Schedule:
(i) to the knowledge of COMSAT, there is no default under any
COMSAT Contract either by COMSAT or any of its Subsidiaries or, by any
other party thereto, and no event has occurred that with the lapse of
time or the giving of notice or both would constitute a default
thereunder by COMSAT or any of its Subsidiaries or, to the knowledge
of COMSAT, any other party, except for defaults or events that, either
individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect on COMSAT; and
(ii) no party to any such COMSAT Contract has given notice to
COMSAT of or made a claim against COMSAT with respect to any breach or
default thereunder, except for defaults or breaches that, either
individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect on COMSAT.
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(c) Section 4.11(c) of the COMSAT Disclosure Schedule sets forth a
list of each material contract to which COMSAT or any of its Subsidiaries is a
party or may be bound and under the terms of which any of the rights or
obligations of COMSAT or its Subsidiaries will be modified or altered
(including, without limitation, any acceleration of rights or obligations
thereunder pursuant to the terms of any such contract, agreement or arrangement)
as a result of the transactions contemplated by this Agreement.
SECTION 4.12. TAXES. Except as otherwise disclosed in Section 4.12
of the COMSAT Disclosure Schedule and except for those matters which, either
individually or in the aggregate, would not reasonably be expected to result in
a Material Adverse Effect on COMSAT:
(a) COMSAT and each of its Subsidiaries have filed (or have had filed
on their behalf) all Tax Returns required by applicable Law to be filed by any
of them;
(b) COMSAT and each of its Subsidiaries have paid (or have had paid on
their behalf) all Taxes due, and have established (or have had established on
their behalf and for their sole benefit and recourse) an adequate accrual (in
accordance with GAAP) for the payment of all other Taxes;
(c) there are no Liens for any Taxes upon the Assets of COMSAT or any
of its Subsidiaries, other than statutory Liens for Taxes not yet due and
payable and Liens for real estate Taxes being contested in good faith;
(d) no Audit is pending with respect to any Taxes due from COMSAT or
any Subsidiary. There are no outstanding waivers extending the statutory period
of limitation relating to the payment of Taxes due from COMSAT or any Subsidiary
for any taxable period ending prior to the expiration of the Offer which are
expected to be outstanding as of the expiration of the Offer;
(e) neither COMSAT nor any of its Subsidiaries is a party to, is bound
by, or has any obligation under, a Tax sharing contract or other agreement or
arrangement for the allocation, apportionment, sharing, indemnification, or
payment of Taxes;
(f) neither COMSAT nor any of its Subsidiaries has made an election
under Section 341(f) of the Code;
(g) the statute of limitations for all Tax Returns of COMSAT and each
of its Subsidiaries for all years through 1993 have expired for all federal,
California, Maryland and Connecticut Tax purposes, or such Tax Returns have been
subject to a final Audit;
(h) neither COMSAT nor any of its Subsidiaries has received any
written notice of deficiency, assessment or adjustment from the IRS or any other
Governmental Authority responsible for the administration of any Taxes that has
not been fully paid or finally settled, and any such deficiency, adjustment or
assessment shown on such schedule is being
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contested in good faith through appropriate proceedings and adequate reserves
have been established on COMSAT's financial statements therefor. To the
knowledge of COMSAT, there are no indications of any other deficiencies,
assessments or adjustments with respect to COMSAT or any of its Subsidiaries;
and
(i) neither COMSAT nor any of its Subsidiaries is a party to any
agreement, contract or other arrangement that would result, separately or in the
aggregate, in the requirement to pay any "excess parachute payments" within the
meaning of Section 280G of the Code or any gross-up in connection with such an
agreement, contract or arrangement.
(j) For purposes of this Agreement, capitalized terms have the
following meaning:
(i) "AUDIT" means any audit, assessment or other examination of
Taxes or Tax Returns by the IRS or any other Governmental Authority
responsible for the administration of any Taxes, proceeding or appeal of
such proceeding relating to Taxes.
(ii) "TAXES" means all federal, state, local and foreign taxes,
and other assessments of a similar nature (whether imposed directly or
through withholding) including, but not limited to income, excise,
property, sales, use (or any similar taxes), gains, transfer, franchise,
payroll, value-added, withholding, Social Security, business license fees,
customs, duties and other taxes, assessments, charges, or other fees
imposed by a Governmental Authority, including any interest, additions to
tax, or penalties applicable thereto.
(iii) "TAX RETURNS" shall mean all federal, state, local and
foreign tax returns, declarations, statements, reports, schedules, forms
and information returns and any amended Tax Return relating to Taxes.
SECTION 4.13. GOVERNMENTAL AUTHORIZATIONS. Each of COMSAT and
its Subsidiaries is in possession of all licenses, permits, franchises,
certificates, consents, approvals and other authorizations from appropriate
Governmental Authorities (including the FCC) necessary for COMSAT or any of its
Subsidiaries to own, lease and operate its properties or to carry on their
respective businesses as they are now being conducted ("GOVERNMENTAL
AUTHORIZATIONS"), and all such Governmental Authorizations are valid and in full
force and effect, except where the failure to have any of the Governmental
Authorizations, either individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on COMSAT. No suspension or
termination of any material Governmental Authorization is pending or, to the
knowledge of COMSAT, threatened, except for suspensions or terminations which,
either individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect on COMSAT and except as set forth in Section 4.13
of the COMSAT Disclosure Schedule. Neither COMSAT nor any of its Subsidiaries
is in conflict with, or in default or violation of, any material Governmental
Authorization except for conflicts, defaults, or violations which, either
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on COMSAT.
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SECTION 4.14. ENVIRONMENTAL MATTERS. Except as set forth in
Section 4.14 of the COMSAT Disclosure Schedule, COMSAT and each of its
Subsidiaries are in material compliance with all applicable federal, state and
local Laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata) (collectively, "ENVIRONMENTAL LAWS"),
except for instances of noncompliance that, either individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
COMSAT. Such compliance includes, but is not limited to, the possession by
COMSAT and its Subsidiaries of all material permits and other Governmental
Authorizations required under applicable Environmental Laws, and compliance with
the terms and conditions thereof. Except as set forth in Section 4.14 of the
COMSAT Disclosure Schedule, neither COMSAT nor any of its Subsidiaries has
received written notice of, or to the knowledge of COMSAT, is the subject of,
any actions, causes of action, claims, investigations, demands or notices by any
Person alleging liability under or noncompliance with any Environmental Law
("ENVIRONMENTAL CLAIMS") that, either individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect on COMSAT. To the
knowledge of COMSAT, there are no circumstances that are reasonably likely to
prevent or interfere with such material compliance in the future.
SECTION 4.15. BROKERAGE FEES AND COMMISSIONS. Except for
Donaldson, Lufkin & Jenrette Securities Corporation, no Person is entitled to
receive from COMSAT or any of its Subsidiaries any investment banking, brokerage
or finder's fee or fees for financial consulting or advisory services in
connection with this Agreement or any of the transactions contemplated hereby.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF LOCKHEED MARTIN AND ACQUISITION SUB
Lockheed Martin and Acquisition Sub represent and warrant to COMSAT as
follows:
SECTION 5.1. ORGANIZATION. Each of Lockheed Martin, Acquisition
Sub and Offer Subsidiary is a corporation or limited liability company, as the
case may be, duly organized, validly existing and in good standing under the
Laws of the jurisdiction of its incorporation or formation, as the case may be,
and has all requisite corporate or limited liability company power and
authority, as the case may be, to own, lease and operate its properties and to
carry on its business as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power and authority
would not, in the aggregate, reasonably be expected to have a Material Adverse
Effect on Lockheed Martin.
SECTION 5.2. AUTHORITY. Each of Lockheed Martin, Acquisition Sub
and Offer Subsidiary has full corporate or limited liability company power and
authority, as the case may
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be, to execute and deliver each Transaction Agreement to which it is a party and
to consummate the transactions contemplated thereby. The execution and delivery
of each such Transaction Agreement and the consummation of the transactions
contemplated thereby have been duly and validly authorized by the Boards of
Directors of Lockheed Martin or Acquisition Sub, as the case may be, and by
Lockheed Martin as the sole member of Offer Subsidiary and the sole stockholder
of Acquisition Sub; and no other corporate or limited liability company
proceedings on the part of Lockheed Martin, Acquisition Sub or Offer Subsidiary,
as the case may be, are necessary to authorize any such Transaction Agreement or
to consummate the transactions contemplated thereby. This Agreement and each
such other Transaction Agreement has been duly and validly executed and
delivered by Lockheed Martin, Acquisition Sub or Offer Subsidiary, as the case
may be, and constitutes the valid and binding agreement of Lockheed Martin,
Acquisition Sub or Offer Subsidiary, as the case may be, (and assuming due and
valid authorization, execution and delivery thereof by the other parties
thereto) enforceable against Lockheed Martin, Acquisition Sub or Offer
Subsidiary, as the case may be, in accordance with its terms, except to the
extent that enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar Laws, now or
hereafter in effect, relating to creditors' rights generally and general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).
SECTION 5.3. CONSENTS AND APPROVALS; NO VIOLATIONS. Except for
any applicable requirements of the Securities Act, the Exchange Act, Antitrust
Laws, the Communications Act, the Satellite Act, the NYSE, the filing and
recordation of articles and/or a certificate of merger with respect to the
Merger as required by the DCBCA and the DGCL, respectively, any filings required
by the Investment Canada Act, such filings and approvals as may be required
under the "takeover" or "blue sky" Laws of various states, or as contemplated by
Section 6.19 hereof or otherwise by this Agreement, neither the execution and
delivery of this Agreement or the Carrier Acquisition Agreement by Lockheed
Martin, Acquisition Sub or Offer Subsidiary, as the case may be, nor the
consummation by Lockheed Martin, Acquisition Sub or Offer Subsidiary, as the
case may be, of any transaction contemplated hereby and thereby will (i)
conflict with or result in any breach of any provision of the charter or by-laws
of Lockheed Martin or Acquisition Sub, or the limited liability company
agreement or certificate of formation of Offer Subsidiary, as the case may be,
(ii) require on the part of Lockheed Martin, Acquisition Sub or Offer Subsidiary
any filing with, or the obtaining of any permit, authorization, consent or
approval of, any Governmental Authority or any other Person, (iii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation, acceleration or payment, or to the creation of a Lien) under any
of the terms, conditions or provisions of any note, mortgage, indenture, other
evidence of indebtedness, guarantee, license, agreement or other contract,
instrument or obligation to which Lockheed Martin or any of its Subsidiaries is
a party or by which any of them or any of their Assets may be bound, or (iv)
violate any Law applicable to Lockheed Martin or any of its Subsidiaries or any
of their Assets, except for such requirements, defaults, rights or violations
under clauses (ii), (iii) and (iv) above that would not reasonably be expected
to have a Material Adverse Effect on Lockheed Martin.
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SECTION 5.4. CAPITALIZATION.
(a) As of the close of business on September 11, 1998, the authorized
capital stock of Lockheed Martin consisted of (i) 1,500,000,000 shares of
Lockheed Martin Common Stock, of which 195,848,551 shares were issued and
outstanding, (ii) 50,000,000 shares of Series Preferred Stock, par value $1.00
per share of which no shares were issued and outstanding ("LOCKHEED MARTIN
SERIES PREFERRED STOCK") and (iii) 20,000,000 shares of Series A preferred
stock, par value $1.00 per share ("LOCKHEED MARTIN PREFERRED STOCK"), of which
no shares of any class or series were issued and outstanding. As of the close
of business on September 11, 1998, 12,023,408 shares of Lockheed Martin Common
Stock were issuable upon the exercise of outstanding vested and non-vested
options and other rights to acquire shares of Lockheed Martin Common Stock
("LOCKHEED MARTIN STOCK OPTIONS") granted under any stock option plan, program,
employee stock purchase plan, employment agreement or similar arrangement of
Lockheed Martin or any Subsidiaries, each as amended (the "LOCKHEED MARTIN STOCK
PLANS").
(b) All outstanding shares of capital stock of Lockheed Martin are,
and all shares of Lockheed Martin Common Stock issuable pursuant to this
Agreement when issued, will be, duly authorized, validly issued, fully paid and
nonassessable and are not subject to preemptive rights.
(c) Except with respect to the outstanding shares of Lockheed Martin
Common Stock and the Lockheed Martin Stock Options, there are no outstanding
bonds, debentures, notes or other indebtedness or other securities of Lockheed
Martin having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which shareholders of
Lockheed Martin may vote.
(d) Except with respect to the Lockheed Martin Stock Options, there
are no outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which Lockheed Martin or
any of its Subsidiaries is a party or by which any them is bound obligating
Lockheed Martin or any of its Subsidiaries to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of capital stock or other
Equity Securities of Lockheed Martin or any of its Subsidiaries or obligating
Lockheed Martin or any of its Subsidiaries to issue, grant, extend or enter into
any such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking.
SECTION 5.5. ABSENCE OF CERTAIN CHANGES. Except (i) as set forth
in Lockheed Martin's Annual Report on Form 10-K for the year ended December 31,
1997 (the "LOCKHEED MARTIN FORM 10-K"), Lockheed Martin's Quarterly Reports on
Form 10-Q for the three month periods ended March 31, 1998 and June 30, 1998,
respectively, or any other document filed prior to the date hereof pursuant to
Section 13(a) or 15(d) of the Exchange Act, or (ii) as contemplated by this
Agreement, from June 30, 1998 until the date hereof, neither Lockheed Martin nor
any of its Subsidiaries has suffered any changes that, either individually or in
the aggregate, would reasonably be expected to have a Material Adverse Effect on
Lockheed Martin.
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SECTION 5.6. REPORTS. For the purposes of this Agreement, the
"LOCKHEED MARTIN SEC DOCUMENTS" means each registration statement, report, proxy
statement or information statement of Lockheed Martin prepared by it since
January 1, 1996, in the form (including exhibits and any amendments thereto)
filed with the SEC. As of the respective filing dates, the Lockheed Martin SEC
Documents (i) complied as to form in all material respects with the applicable
requirements of the Securities Act and the Exchange Act and (ii) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
Each of the consolidated balance sheets included in or incorporated by reference
into the Lockheed Martin SEC Documents (including the related notes and
schedules) fairly presents the consolidated financial position of Lockheed
Martin and its Subsidiaries as of its date, and each of the consolidated
statements of income, retained earnings and cash flows included in or
incorporated by reference into the Lockheed Martin SEC Documents (including any
related notes and schedules) fairly presents the results of operations, retained
earnings or cash flows, as the case may be, of Lockheed Martin and its
Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments which would not be
material in amount or effect), in each case in accordance with GAAP consistently
applied during the periods involved, except as may be noted therein. None of
Lockheed Martin and its Subsidiaries has any Liabilities required to be
disclosed in a balance sheet of Lockheed Martin or in the notes thereto prepared
in accordance with GAAP consistently applied except (a) Liabilities reflected
on, or reserved against in, a balance sheet of Lockheed Martin or in the notes
thereto, and included in the Lockheed Martin SEC Documents and (b) Liabilities
incurred since June 30, 1998 in the ordinary course of business.
SECTION 5.7. OPINION OF FINANCIAL ADVISOR. Bear, Stearns & Co.
Inc. has delivered to the Board of Directors of Lockheed Martin its opinion
that, as of the date hereof, the terms of this Agreement are fair to the holders
of Lockheed Martin Common Stock from a financial point of view.
SECTION 5.8. BROKERS. Except for Bear, Stearns & Co. Inc., no
Person is entitled to receive from Lockheed Martin or any of its Subsidiaries
any investment banking, brokerage or finder's fee or fees for financial
consulting or advisory services in connection with this Agreement or the
transactions contemplated hereby.
ARTICLE VI
COVENANTS
SECTION 6.1. CONDUCT OF BUSINESS OF COMSAT. Except (i) as
contemplated by this Agreement, (ii) as set forth in Section 6.1A of the COMSAT
Disclosure Schedule, or (iii) as otherwise permitted by Sections 6.1(a)-(q) of
this Agreement, during the period from the date of this Agreement to the
Effective Time, unless Lockheed Martin has consented thereto in writing (which
consent shall not be unreasonably withheld or delayed), COMSAT shall, and shall
cause each of its Subsidiaries to, (x) conduct its operations in the ordinary
course, (y) use
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commercially reasonable efforts to preserve intact its business organization and
goodwill and maintain satisfactory relationships with those Persons having
business relationships with them, and (z) use commercially reasonable efforts to
keep available the services of its officers and employees. Without limiting the
generality of and in addition to the foregoing, and except as otherwise
contemplated by this Agreement or as set forth in Section 6.1A of the COMSAT
Disclosure Schedule, prior to the time specified in the preceding sentence,
unless Lockheed Martin has consented thereto in writing (which consent shall not
be unreasonably withheld or delayed), COMSAT and its Subsidiaries:
(a) except as required to give effect to changes in Law, shall not
amend their respective articles of incorporation or by-laws or other comparable
governing instruments in a manner that would adversely affect the consummation
of the transactions contemplated by, or otherwise adversely affect the rights of
Lockheed Martin or its Subsidiaries under, any Transaction Agreement;
(b) except as set forth in Section 6.1(b) of the COMSAT Disclosure
Schedule, shall not, and shall not permit any of its Subsidiaries to, issue any
shares of their capital stock or Equity Securities (except by COMSAT as
permitted by this Agreement, in connection with the COMSAT Stock Options that
are outstanding on the date of this Agreement or which may hereafter be granted
as permitted by this Agreement under COMSAT Stock Plans or shares of COMSAT
Common Stock pursuant to nondiscretionary grants under the current terms of any
existing Plan), or grant, confer or award any options, appreciation rights,
warrants, conversion rights, restricted stock, stock units, performance shares
or other rights, not existing on the date hereof, with respect to any shares of
its capital stock or other Equity Securities of COMSAT or its Subsidiaries
except that, during the twelve-month period beginning upon the date hereof and
ending on the first anniversary hereof and during each subsequent twelve-month
period ending upon subsequent anniversaries hereof, COMSAT may grant COMSAT
Stock Options to acquire up to the number of shares of COMSAT Common Stock as is
equal to 1.5% of the number of issued and outstanding shares of COMSAT Common
Stock as of the end of the preceding fiscal year pursuant to the continued
operation of the COMSAT Stock Plans, and up to 200,000 shares of COMSAT Common
Stock during each calendar year beginning after the date of this Agreement
pursuant to the continued operation of the COMSAT Employee Stock Purchase Plan,
all in the ordinary course of business and consistent with past practice, or
effect any stock split or otherwise change its capitalization;
(c) except as set forth in Section 6.1(c) of the COMSAT Disclosure
Schedule, shall not, and shall not permit any of its Subsidiaries to, (i)
declare, set aside or pay any dividend or make any other distribution or payment
with respect to any shares of its capital stock or other ownership interests
(other than regular quarterly cash dividends not to exceed $0.05 per share of
COMSAT Common Stock and dividends and distributions from Subsidiaries of COMSAT
to COMSAT or another of its Subsidiaries) or (ii) directly or indirectly redeem,
purchase or otherwise acquire any shares of its capital stock or capital stock
of any of its Subsidiaries, or make any commitment for any such action;
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(d) shall not pledge or otherwise encumber shares of capital stock of
COMSAT or any of its Subsidiaries;
(e) except (i) as disclosed in Section 6.1(e) of the COMSAT Disclosure
Schedule, (ii) as required by Law (including any amendment required to maintain
the qualification of any Plan intended to be "qualified" under Section 401(a) of
the Code) or (iii) as contemplated by this Agreement, shall not (A) except in
the ordinary course of business and consistent with past practice, enter into or
amend any employment or similar agreements or arrangements with any of its
directors or executive officers, (B) amend or otherwise change the terms of the
Plans in any manner which would constitute a material change in Plan design or
materially increase the cost of a Plan, including, without limitation, amend any
employment, severance or similar agreements or arrangements in existence on the
date hereof, (C) adopt any new Plans, programs or arrangements or any severance
or similar agreements or arrangements, or (D) except in the ordinary course of
business and consistent with past practice, increase any compensation, bonus or
other benefits payable to any current or former director or executive officer;
(f) except as set forth in Section 6.1(f) of the COMSAT Disclosure
Schedule, shall not transfer, sell, lease, license or dispose of any material
lines of business, Subsidiaries, divisions, operating units or facilities (other
than facilities currently closed or currently proposed to be closed) outside the
ordinary course of business or enter into any material commitment or transaction
outside the ordinary course of business;
(g) except as set forth in Section 6.1(g) of the COMSAT Disclosure
Schedule, shall not, and shall not permit any of its Subsidiaries to, authorize,
propose or announce an intention to authorize or propose to another Person, or
enter into an agreement with respect to, any merger, consolidation or business
combination, any acquisition of Assets or Equity Securities (other than the
purchase of Assets in the ordinary course of business), any disposition of
Assets or Equity Securities (other than the disposition of Assets or Equity
Securities in the ordinary course of business) or any release or relinquishment
of any contract rights in which, in any such case, the aggregate consideration
is in excess of $5 million for any individual transaction or $20 million for all
of such transactions in any one year period or which would materially adversely
affect the ability of COMSAT or any of its Subsidiaries to consummate any of the
transactions contemplated by this Agreement. For purposes of this Section
6.1(g), Section 6.1(i), Section 6.1(j)(ii) and Section 6.1(l) only, any actions
taken by COMSAT to preserve substantially (or to increase or decrease such
interest by no more than 2.0% in any fiscal year) its existing ownership
interest in INTELSAT or Inmarsat in connection with (A) annual share
redeterminations and adjustments or (B) pursuant to capital calls approved by
the governing bodies of INTELSAT or Inmarsat in accordance with their charter
documents, shall be deemed to be in the ordinary course of COMSAT's business;
(h) except as set forth in Section 6.1(h) of the COMSAT Disclosure
Schedule, shall not make any material Tax election other than in the ordinary
course of business and consistent with past practice, or settle or compromise
any Tax Liability in excess of $3 million arising from or in connection with any
single issue;
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(i) shall not make or agree to make any capital expenditures other
than (i) expenditures in the ordinary course of business, (ii) capital
expenditures that are consistent with COMSAT's strategic business plans (the
"COMSAT BUSINESS PLANS") and (iii) additional capital expenditures not in excess
of $5 million;
(j) except as set forth in Section 6.1(j) of the COMSAT Disclosure
Schedule, except in the ordinary course of business and except as consistent
with the COMSAT Business Plans, shall not, and shall not permit any of its
Subsidiaries to, (i) incur, create, assume or otherwise become liable for
borrowed money or assume, guarantee, endorse or otherwise become responsible or
liable for the obligations of any other Person (other than COMSAT and its
Subsidiaries) in excess of $5 million per occurrence and $20 million in the
aggregate or (ii) make any loans or advances to any other Person (other than
COMSAT and its Subsidiaries) in excess of $5 million per occurrence and $20
million in the aggregate;
(k) except as set forth in Section 6.1(k) of the COMSAT Disclosure
Schedule, or as required by Law or GAAP, shall not effect any material change in
any of its methods of accounting in effect as of December 31, 1997;
(l) except as provided in the Shareholders Agreement, shall not
impose limitations not already in existence on the date hereof, not imposed on
other shareholders of COMSAT, on the enjoyment by any of Lockheed Martin and its
Subsidiaries of the legal rights generally enjoyed by shareholders of COMSAT;
(m) except as set forth in Section 6.1(m) of the COMSAT Disclosure
Schedule, shall not pay, discharge or satisfy any material Liabilities, other
than the payment, discharge or satisfaction of any such Liability (i) reflected
or reserved against in, or contemplated by, the financial statements (or the
notes thereto) of COMSAT and its Subsidiaries, (ii) incurred in the ordinary
course of business or (iii) which is legally required to be paid, discharged or
satisfied;
(n) shall not adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
material reorganization of COMSAT or any plan of merger or consolidation of any
of its Subsidiaries in which such Subsidiary is not the surviving entity;
(o) shall not, and shall not permit any of its Subsidiaries to take
any action which would make any representation or warranty of COMSAT contained
herein untrue or incorrect in any material respect as of the Effective Time;
(p) shall not fail to take reasonable efforts to cause the Merger to
constitute a reorganization within the meaning of Section 368(a) of the Code;
and
(q) shall not enter into a legally binding commitment with respect to,
or any agreement to take, any of the foregoing actions.
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SECTION 6.2. INTELSAT AND INMARSAT PRIVATIZATIONS. Any actions taken
pursuant to U.S. Government instruction and any actions taken in good faith by
COMSAT or its Subsidiaries in connection with the planned privatizations of
INTELSAT or Inmarsat shall not be considered a breach of the first sentence of
Section 6.1 hereof or, to the extent applicable, of subsections 6.1(f), (g),
(h), (i), (j), (k) or (m) discharge of liabilities. Notwithstanding the
foregoing, other than as provided in Section 6.1A of the COMSAT Disclosure
Schedule or pursuant to the Existing INTELSAT Documents, the Existing Inmarsat
Documents, the Inmarsat Restructuring Documents or the New Skies Documents,
COMSAT shall not:
(a) sell, transfer, assign or dispose of or agree to sell, transfer,
assign or dispose of the INTELSAT Interests or the Inmarsat Interests
(including, without limitation, by entering into any options with respect
thereto);
(b) enter into any voting rights, proxy or other agreement with
respect to the voting of any of the INTELSAT Interests or the Inmarsat
Interests that would be binding on Lockheed Martin, COMSAT or their
respective Subsidiaries following the Merger;
(c) enter into any lock-up, standstill or other similar agreement (a
"LOCK-UP AGREEMENT") with respect to the INTELSAT Interests or the Inmarsat
Interests that would be binding on Lockheed Martin, COMSAT or their
respective Subsidiaries following the Merger; provided that COMSAT or its
Subsidiaries may enter into a Lock-Up Agreement in connection with an
initial public offering by INTELSAT, Inmarsat or New Skies Satellites,
N.V., on terms that are usual and customary to those entered into by
directors, affiliates or significant shareholders in similar transactions;
or
(d) take any other action or omit to take any action (including by
way of votes in the INTELSAT Board of Governors or Meeting of Signatories,
or the Inmarsat Council, in either case except to the extent instructed to
the contrary by the United States Government, pursuant to the Satellite
Act) which would reasonably be expected to materially impair the economic
value of or any of the rights associated with the INTELSAT Interests or the
Inmarsat Interests; provided, that COMSAT shall not be required to force a
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vote to be held on a matter in any of the foregoing bodies where consistent
with past practice such decision would be decided by consensus rather than
a vote.
(e) For purposes of this Agreement, capitalized terms have the
following meaning:
(i) "ICO" shall mean ICO Global Communications (Holdings)
Limited.
(ii) "INMARSAT CONVENTION" shall mean the Convention on the
International Maritime Satellite Organization (Inmarsat) which entered
into force on July 16, 1979, last amended by amendments thereto which
entered into force on June 26, 1997.
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(iii) "INMARSAT EXISTING DOCUMENTS" shall mean the Inmarsat
Convention, the Operating Agreement on Inmarsat which entered into
force on July 16, 1979, as last amended by amendments thereto which
entered into force on June 26, 1997, the Headquarters Agreement
Between Inmarsat and the government of the United Kingdom, Great
Britain and Northern Ireland which entered into force on February 25,
1980, and all existing policies and procedures approved by the
Inmarsat Council pursuant to the foregoing.
(iv) "INMARSAT INTERESTS" shall mean the Inmarsat Investment
Share owned by COMSAT (or all of the shares of Inmarsat PLC received
by COMSAT in lieu thereof pursuant to the Inmarsat Privatization) and
all rights and obligations associated therewith, including, prior to
the Inmarsat Privatization, COMSAT's rights as an Inmarsat Signatory
(as defined in the Inmarsat Convention).
(v) "INMARSAT INVESTMENT SHARE" shall mean an investment share
described in the Inmarsat Operating Agreement.
(vi) "INMARSAT PRIVATIZATION" shall mean the restructuring of
Inmarsat contemplated by the Inmarsat Restructuring Documents.
(vii) "INMARSAT RESTRUCTURING DOCUMENTS" shall mean, in each
case substantially in the form of the draft made available by the
General Counsel to the Inmarsat parties as of August 26, 1998, the
Master Transition Agreement, to be entered into between Inmarsat and
Inmarsat PLC, together with (a) the following documents that are
defined in such Master Transition Agreement: the Business Transfer
Agreement, the LESO Agreement, the License Agreement, the New
Memorandum and Articles of Association, the Public Services Agreement,
the Shareholders' Agreement and the Trust Deeds and (b) the Memoranda
and Articles of Association of Inmarsat One Limited, Inmarsat Two
Company, Inmarsat Three Limited and Inmarsat Limited and each as
subsequently amended in accordance with the decisions of the Inmarsat
Council.
(viii) "INTELSAT EXISTING DOCUMENTS" shall mean the Agreement
Relating to the International Telecommunications Satellite
Organization (INTELSAT) (the "INTELSAT AGREEMENT") which entered into
force on February 12, 1973, the Operating Agreement Relating to the
International Telecommunications Satellite Organization (INTELSAT)
(the "INTELSAT OPERATING AGREEMENT") which entered into force on
February 12, 1973, and the Headquarters Agreement between the
Government of the United States of America and INTELSAT which entered
into force on November 24, 1976, and all existing policies and
procedures approved by the INTELSAT Board of Governors pursuant to the
foregoing.
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(ix) "INTELSAT INTERESTS" shall mean the INTELSAT Investment
Share owned by COMSAT, any ownership or other interests received by
COMSAT relating to any entity created pursuant to any partial or full
privatization of INTELSAT (including New Skies Satellites, N.V.), any
ownership or other interests received by COMSAT relating to any other
entity created pursuant to the full or partial privatization of
INTELSAT, and in each case all rights and obligations associated
therewith, including, prior to the full privatization of INTELSAT,
COMSAT's rights as an INTELSAT Signatory (as defined in the INTELSAT
Agreement).
(x) "INTELSAT INVESTMENT SHARE" shall mean an investment share
described in the INTELSAT Operating Agreement.
(xi) "NEW SKIES DOCUMENTS" shall mean, in each case, in
substantially the same form of the draft contained in the Report of
the New INTELSAT 2000 Working Part to the Twenty-Second Assembly of
Parties, AP-22-7E S/3/98, 24 February 1998; the Draft Trust Agreement,
the Ensured Capacity Rights (ECR) Contract, the Draft Satellite
Operational Services Contract, the Draft Transition Services
Agreement, the Draft INC Subscription Agreement, the INC Articles of
Association, the Leaseback Equalization Arrangements/Transponder
Leasing Agreement, along with the Record of Decisions of the Twenty-
Second (Extraordinary) Meeting of the INTELSAT Assembly of Parties,
AP-22-3E FINAL S/3/98, 30-31 March 1998 and each as subsequently
amended in accordance with the decisions of the INTELSAT Assembly of
Parties.
SECTION 6.3. CONDUCT OF BUSINESS OF LOCKHEED MARTIN. Except as
otherwise contemplated by this Agreement, during the period from the date of
this Agreement to the Effective Time, unless COMSAT has consented thereto in
writing (which consent shall not be unreasonably withheld or delayed), Lockheed
Martin shall not and shall cause each of its Subsidiaries not to:
(a) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other material
reorganization of Lockheed Martin;
(b) take any action which would make any representation or warranty of
Lockheed Martin contained herein untrue or incorrect as of the Effective Time;
(c) fail to take reasonable efforts to cause the Merger to constitute
a reorganization within the meaning of Section 368(a) of the Code; and
(d) enter into a legally binding commitment with respect to, or any
agreement to take, any of the foregoing actions.
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SECTION 6.4. NO SOLICITATION.
(a) COMSAT shall, and shall cause its Subsidiaries and their
respective officers, directors, employees, consultants, investment bankers,
accountants, attorneys and other advisors, representatives and agents
(collectively, "COMSAT REPRESENTATIVES") to immediately cease any discussions or
negotiations with any Person that may be ongoing with respect to any Acquisition
Proposal (as defined below). COMSAT shall not, nor shall it permit any of its
Subsidiaries to, nor shall it authorize or permit any COMSAT Representative to,
directly or indirectly, (i) solicit or initiate, or knowingly encourage the
submission of, any Acquisition Proposal or (ii) participate in any discussions
or negotiations regarding, or furnish to any Person (other than Lockheed Martin
or its representatives or affiliates) any information, that may reasonably be
expected to lead to, an Acquisition Proposal; provided, however, that if, prior
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to the COMSAT Shareholders Meeting, the Board of Directors of COMSAT determines
in good faith, based upon advice of independent counsel, that it is necessary to
do so in order to comply with its fiduciary duties to COMSAT's shareholders
under applicable Law, the Board of Directors of COMSAT may permit COMSAT in
response to an Acquisition Proposal that was not solicited by COMSAT or its
officers, directors or employees (x) to furnish information (including any non-
public information) with respect to COMSAT (including its Subsidiaries) and
afford access to its properties, books and records pursuant to a confidentiality
agreement designed to reasonably protect the confidentiality of such
information, and (y) to participate in discussions or negotiations regarding
such Acquisition Proposal. For purposes of this Agreement, the term
"ACQUISITION PROPOSAL" means any proposal or offer from any Person (other than
Lockheed Martin or its representatives or affiliates) to acquire, directly or
indirectly, in one or more transactions, Assets (including, without limitation,
the capital stock of Subsidiaries) of COMSAT or any of its Subsidiaries having
an aggregate value equal to more than 10% of the market capitalization of
COMSAT, any tender offer or exchange offer that if consummated would result in
any Person beneficially owning more than 10% of any class of Equity Securities
of COMSAT, any merger, consolidation, business combination, sale of all or
substantially all the Assets, recapitalization, liquidation, dissolution or
similar transaction involving COMSAT, other than the transactions contemplated
by this Agreement; provided that no transaction specified in Section 6.1A of the
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COMSAT Disclosure Schedule shall be deemed to be an Acquisition Proposal.
(b) Except as set forth in this Section 6.4, neither the Board of
Directors of COMSAT nor any committee thereof shall (i) withdraw, modify or
materially qualify (or publicly propose to withdraw, modify or materially
qualify) its approval or recommendation of the Offer, the Merger or this
Agreement, (ii) approve or recommend, or publicly propose to approve or
recommend, any Acquisition Proposal or (iii) enter, or publicly propose to
enter, into any agreement with respect to any Acquisition Proposal.
Notwithstanding the foregoing, in the event that, prior to the COMSAT
Shareholders Meeting, the Board of Directors of COMSAT determines in good faith,
based upon advice of independent counsel, that it is necessary to do so in order
to comply with its fiduciary duties to COMSAT's shareholders under applicable
Law, the Board of Directors of COMSAT may terminate this Agreement pursuant to
Section 7.1(d)(ii) hereof solely in order to concurrently enter into a
definitive agreement to effect a Superior Proposal. For purposes of this
Agreement, the term "SUPERIOR PROPOSAL" means any bona fide
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proposal or offer from one or more Persons (other than Lockheed Martin and its
affiliates) to acquire, directly or indirectly, in one or more transactions for
consideration consisting of cash and/or securities, more than 50% of the shares
of COMSAT Common Stock then outstanding or all or substantially all the Assets
of COMSAT and its Subsidiaries taken as a whole, and otherwise on terms which
the Board of Directors of COMSAT determines in its good faith judgment (based on
the advice of a financial advisor of nationally recognized reputation) to be
more favorable to the holders of COMSAT Common Stock than are the Offer and the
Merger and for which financing, to the extent required, is then committed or
which, in the good faith judgment of the Board of Directors of COMSAT (based on
the advice of a financial advisor of nationally recognized reputation), is
reasonably capable of being financed by such Person.
(c) In addition to the obligations of COMSAT set forth in paragraphs
(a) and (b) of this Section 6.4, COMSAT shall promptly advise Lockheed Martin
orally and in writing of COMSAT's receipt of any Acquisition Proposal, any
request for information or an inquiry that could lead to or is otherwise related
to any Acquisition Proposal, the identity of the Person making such request or
Acquisition Proposal and the material terms of any such Acquisition Proposal.
COMSAT shall keep Lockheed Martin fully informed of the status and terms
(including amendments) of any such request or Acquisition Proposal, unless the
Board of Directors determines in good faith, based upon advice of independent
counsel, that it is necessary not to do so in order to comply with its fiduciary
duties to COMSAT's shareholders under applicable Law.
(d) Nothing contained in this Section 6.4 shall prohibit COMSAT from
taking and disclosing to its shareholders a position contemplated by Rule 14e-
2(a) promulgated under the Exchange Act or issuing a communication meeting the
requirements of Rule 14d-9(e) promulgated under the Exchange Act; provided,
--------
however, neither COMSAT nor its Board of Directors nor any committee thereof
- -------
shall, except as permitted by Section 6.4(b) hereof, withdraw, modify or
materially qualify, or publicly propose to withdraw, modify or materially
qualify, its position with respect to the Offer, the Merger or this Agreement or
to approve or recommend, or publicly propose to approve or recommend, an
Acquisition Proposal.
SECTION 6.5. PREPARATION OF PROXY STATEMENT; COMSAT SHAREHOLDERS
MEETING.
(a) As promptly as practicable following the date hereof, Lockheed
Martin shall, in cooperation with COMSAT, prepare and file with the SEC
preliminary proxy materials which shall constitute the Proxy
Statement/Prospectus in connection with the Merger (such proxy
statement/prospectus, and any amendments or supplements thereto, the "PROXY
STATEMENT/PROSPECTUS") and a registration statement on Form S-4 with respect to
the issuance of Lockheed Martin Common Stock in the Merger (the "FORM S-4"),
together with any other materials required to be filed with the SEC in
connection with the Merger. The Proxy Statement/Prospectus will be included in
the Form S-4 as Lockheed Martin's prospectus. The Form S-4 and the Proxy
Statement/Prospectus shall comply as to form in all material respects with the
applicable provisions of the Securities Act and the Exchange Act. Each of
Lockheed Martin and COMSAT shall use all reasonable efforts to have the Form S-4
cleared by the SEC as promptly as practicable after filing with the SEC and to
keep the Form S-4 effective as long
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as is necessary to consummate the Merger. Lockheed Martin shall, as promptly as
practicable after receipt thereof, provide copies of any written comments
received from the SEC with respect to the Proxy Statement/Prospectus to COMSAT
and advise COMSAT of any oral comments with respect to the Proxy
Statement/Prospectus received from the SEC. None of the information supplied or
to be supplied by Lockheed Martin in writing specifically for inclusion or
incorporation by reference in the Proxy Statement/Prospectus and each amendment
or supplement thereto, at the time of mailing thereof and at the time of the
COMSAT Shareholders Meeting, will contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. None of the information supplied or to be supplied by
COMSAT in writing specifically for inclusion or incorporation by reference in
the Proxy Statement/Prospectus and each amendment or supplement thereto, at the
time of mailing thereof and at the time of the COMSAT Shareholders Meeting, will
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Lockheed
Martin shall advise COMSAT in writing, promptly after it receives notice
thereof, of the time when the Form S-4 has become effective or any supplement or
amendment thereto has been filed, the issuance of any stop order, the suspension
of the qualification of the Lockheed Martin Common Stock issuable in connection
with the Merger for offering or sale in any jurisdiction, or any request by the
SEC for amendment of the Proxy Statement/Prospectus or the Form S-4 or comments
thereon and responses thereto or requests by the SEC for additional information.
Lockheed Martin shall provide COMSAT with a reasonable opportunity to review and
comment on any amendment or supplement to the Proxy Statement/Prospectus prior
to filing such with the SEC, and shall provide COMSAT with a copy of all such
filings made with the SEC. No amendment or supplement to the information
supplied by COMSAT for inclusion in the Proxy Statement/Prospectus shall be made
without the approval of COMSAT, which approval shall not be unreasonably
withheld or delayed.
(b) Subject to Sections 6.4 and 7.1(d)(ii) hereof, COMSAT shall, at
such time as determined by Lockheed Martin after consultation with COMSAT, duly
call, give notice of, convene, hold, postpone, adjourn and reconvene a meeting
or meetings of its shareholders (the "COMSAT SHAREHOLDERS MEETING") for the
purpose of considering and taking action with respect to the Merger and this
Agreement, shall take reasonable efforts to solicit the adoption of this
Agreement by its shareholders (including, but not limited to, employing the
services of a proxy solicitation firm), and the Board of Directors of COMSAT
shall recommend adoption of the Merger and this Agreement by the shareholders of
COMSAT. Without limiting the generality of the foregoing but subject to its
rights pursuant to Sections 6.4 and 7.1(d)(ii) hereof, the obligations of COMSAT
to duly call, give notice of, convene, hold, postpone, adjourn and reconvene the
COMSAT Shareholders Meeting pursuant to the first sentence of this Section
6.5(b) shall not be affected by the commencement, public proposal, public
disclosure or communication to COMSAT of any Acquisition Proposal.
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SECTION 6.6. ACCESS TO INFORMATION.
(a) Between the date of this Agreement and the Effective Time, upon
reasonable notice and at reasonable times, and subject to any access,
disclosure, copying or other limitations imposed by applicable Law or any of the
contracts of COMSAT and its Subsidiaries, COMSAT shall give Lockheed Martin,
Acquisition Sub and their authorized representatives reasonable access to all
offices and other facilities and to all books and records of it and its
Subsidiaries and to employees of COMSAT and its Subsidiaries, and will permit
Lockheed Martin, Acquisition Sub or their authorized representatives, as the
case may be, to make such inspections as it or they may reasonably require, and
shall cause its officers and those of its Subsidiaries to furnish Lockheed
Martin, Acquisition Sub and their authorized representatives with such financial
and operating data and other information with respect to any of COMSAT and its
Subsidiaries as Lockheed Martin, Acquisition Sub or their authorized
representatives, as the case may be, may from time to time reasonably request;
provided that to the extent that access, disclosure or copying of any of the
- --------
foregoing is limited by applicable Law or contract, COMSAT shall take reasonable
efforts to provide a summary of such information to Lockheed Martin within the
limits of applicable Law or contract. Lockheed Martin, Acquisition Sub and
their authorized representatives shall conduct all such inspections in a manner
which shall minimize any disruptions of the business and operations of COMSAT
and its Subsidiaries.
(b) Lockheed Martin, Acquisition Sub and COMSAT agree that each of the
Confidentiality Agreements (as hereinafter defined), other than Sections 3 and 7
thereof, shall remain binding and in full force and effect.
SECTION 6.7. REASONABLE EFFORTS. Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things reasonably necessary, proper or advisable under
applicable Law to consummate and make effective the transactions contemplated by
this Agreement (including, without limitation, (i) cooperating in the
preparation and filing of the Offer Documents, the Schedule 14D-9, the Proxy
Statement/Prospectus, the Form S-4 and any amendments to any thereof, (ii)
taking of all action reasonably necessary, proper or advisable to secure any
necessary consents or waivers under existing debt obligations of COMSAT and its
Subsidiaries or amend the notes, indentures or agreements relating thereto to
the extent required by such notes, indentures or agreements or redeem or
repurchase such debt obligations, (iii) contesting any pending legal proceeding
relating to any transaction contemplated by this Agreement and (iv) executing
any additional instruments necessary to consummate the transactions contemplated
hereby). In case at any time after the Effective Time any further action is
necessary to carry out the purposes of this Agreement or the Carrier Acquisition
Agreement, the proper officers and directors of each party hereto shall use all
reasonable efforts to take all such necessary action.
SECTION 6.8. LISTING APPLICATION. Lockheed Martin shall prepare
and submit to the NYSE a listing application covering the shares of Lockheed
Martin Common Stock issuable in the Merger and shall use commercially reasonable
efforts to obtain, prior to the Effective
38
<PAGE>
Time, approval for the listing of such Lockheed Martin Common Stock, subject to
official notice of issuance.
SECTION 6.9. CONSENTS AND APPROVALS.
(a) In furtherance of and not in limitation of the agreements of the
parties contained in Section 6.7 hereof, the parties shall each cooperate and
use its respective reasonable efforts to promptly seek the amendment or repeal
of the Satellite Act and other applicable Laws, including any regulations of the
FCC or other Governmental Authority, or the applicable provisions thereof, that
would prohibit or limit the ability of Lockheed Martin to (x) acquire and own
all of the Equity Securities of COMSAT, (y) appoint all of the officers and
directors of COMSAT following the Merger, or (z) consummate the transactions
contemplated by this Agreement.
(b) In furtherance of and not in limitation of the agreements of the
parties contained in Section 6.7 hereof, the parties shall each cooperate and
use its respective reasonable efforts to promptly make all filings and obtain
all consents and approvals of Governmental Authorities (including, without
limitation, the FCC) and other Persons necessary to consummate the transactions
contemplated by this Agreement including, without limitation, to permit Lockheed
Martin and Offer Subsidiary to consummate the Carrier Acquisition, to cause
Offer Subsidiary to become an Authorized Carrier and to consummate the Offer and
the Merger. Each of the parties hereto will furnish to the other parties such
necessary information and reasonable assistance as such other Persons may
reasonably request in connection with the foregoing.
(c) In furtherance of and not in limitation of the agreements of the
parties contained in Section 6.7 hereof, the parties shall each (i) take
promptly all actions necessary to make the filings required of such party or any
of their affiliates under the applicable Antitrust Laws, (ii) comply at the
earliest practicable date with any request for additional information or
documentary material received by such party or any of their affiliates from the
Federal Trade Commission or the Antitrust Division of the Department of Justice
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR ACT") or other Governmental Authority pursuant to Antitrust Laws, and
(iii) cooperate with the other parties hereto in connection with any filings
under applicable Antitrust Laws and in connection with resolving any
investigation or other inquiry concerning any transaction contemplated by this
Agreement commenced by any of the Federal Trade Commission, the Antitrust
Division of the Department of Justice, state attorneys general, or other
Governmental Authorities. For purposes of this Agreement, the term "ANTITRUST
LAWS" means the Sherman Act, as amended, the Clayton Act, as amended, the HSR
Act, the Federal Trade Commission Act, as amended, EC Merger Regulations and all
other federal, state and foreign Laws that are designed or intended to prohibit,
restrict or regulate actions having the purpose or effect of monopolization or
restraint of trade. For purposes of this Agreement, "EC MERGER REGULATIONS"
mean Council Regulation (EEC) No. 4064/89 of December 21, 1989 on the Control of
Concentrations Between Undertakings, OJ (1989) L 395/1 and the regulations and
decisions of the Council or Commission of the European Community (the "CCEC") or
other organs of the European Union or European Community implementing such
regulations.
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(d) In furtherance of and not in limitation of the agreements of the
parties contained in Section 6.7 hereof the parties shall each use all
reasonable efforts to resolve such objections, if any, as may be asserted under
any Antitrust Law or any other applicable Law, with respect to any transaction
contemplated by this Agreement. If any administrative, judicial or legislative
action or proceeding is initiated (or threatened to be initiated) or any other
action is taken by any Person challenging any transaction contemplated by this
Agreement as violative of any Antitrust Law or any other applicable Law, the
parties shall each cooperate to contest and resist any such action or
proceeding, and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction, ruling, decision, finding or other order (whether
temporary, preliminary or permanent) (any such decree, judgment, injunction,
ruling, decision, finding or other order is hereafter referred to as an "ORDER")
or other official action or decision of any Governmental Authority that is in
effect and that restricts, prevents or prohibits consummation of any transaction
contemplated by this Agreement, including, without limitation, by pursuing all
reasonable avenues of administrative and judicial appeal.
(e) Notwithstanding anything in this Agreement to the contrary:
(i) In no event shall any of Lockheed Martin and its Subsidiaries
be required to agree to hold separate or to divest any of their respective
businesses or Assets, or agree to any other restriction or condition with
respect to the acquisition or ownership of any of their respective
businesses or Assets or the conduct or operation of any of their respective
businesses or Assets, or following the consummation of the Offer or the
Effective Time, of COMSAT or any of its Subsidiaries, as may be required
(i) by any applicable Governmental Authority (including, without
limitation, the Federal Trade Commission, the Antitrust Division of the
Department of Justice or any state attorney general) in order to resolve
such objections as such Governmental Authority may have to such
transactions under any Antitrust Law, or (ii) by any domestic or foreign
court or other tribunal, in any action or proceeding brought by any Person
challenging such transactions as violative of any Antitrust Law, in order
to avoid the entry of, or to effect the dissolution, vacating, lifting,
altering or reversal of, any Order that has the effect of restricting,
preventing or prohibiting the consummation of any transaction contemplated
by this Agreement, if the Board of Directors of Lockheed Martin determines
in good faith that any such agreement to hold separate or to divest or
agreement to other restriction or condition is not in the best interests of
Lockheed Martin.
(ii) Except for seeking review by the full FCC of any FCC staff
decision denying any application to permit Lockheed Martin or Offer
Subsidiary to consummate the Carrier Acquisition, to cause Offer Subsidiary
to become an Authorized Carrier or to consummate the Offer, Lockheed Martin
shall not be required to undertake or continue any contest or resistance of
an action or proceeding or take any other action, in each case of the type
referred to in Section 6.7 hereof (including, but not limited to, Section
6.7(iii) hereof) or Section 6.9 hereof (including, but not limited to,
Section 6.9(d) hereof) if, after taking into account advice of independent
counsel with respect to relevant matters, including, without limitation,
the likely outcome of the action or proceeding, the timing thereof and the
likely costs related thereto, the Board of Directors of Lockheed
40
<PAGE>
Martin determines in good faith that undertaking or continuing any such
contest or resistance or taking any such other action is not in the best
interests of Lockheed Martin.
(f) Each of COMSAT, Lockheed Martin and Acquisition Sub shall promptly
inform the other parties of any material communication received by such party
from the Federal Trade Commission, the Antitrust Division of the Department of
Justice, the FCC or any other Governmental Authority or INTELSAT or Inmarsat
regarding any transaction contemplated by this Agreement, along with copies of
any written communications received with respect thereto and written summaries
of any oral communications with respect thereto.
SECTION 6.10. PUBLIC ANNOUNCEMENTS. The initial press release
relating to this Agreement shall be a joint press release and thereafter COMSAT,
Lockheed Martin and Acquisition Sub shall consult with each other before issuing
any press release or otherwise making any public statements with respect to any
transaction contemplated by this Agreement and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by Law or by obligations pursuant to any listing agreement with
any securities exchange; provided that the statements included in any such press
release or the public statement made in compliance with this Section 6.10 may be
published, reiterated or restated, in whole or in part, without the necessity of
further complying with this Section 6.10.
SECTION 6.11. NOTIFICATION. COMSAT shall give prompt notice to
Lockheed Martin and Lockheed Martin shall give prompt notice to COMSAT, in each
case, after it has actually become aware, of (i) any representation or warranty
made by it contained in this Agreement that is qualified as to materiality
becoming untrue or inaccurate in any respect or any such representation or
warranty that is not so qualified becoming untrue or inaccurate in any material
respect or (ii) the failure by it to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement; provided, however, that no such notification shall
-------- -------
affect the representations, warranties, covenants or agreements of the parties
or the conditions to the obligations of the parties under this Agreement.
SECTION 6.12. CERTAIN LITIGATION. The parties shall cooperate in
the defense of any litigation commenced after the date hereof against either
party or any of their respective directors by any shareholder of COMSAT or
Lockheed Martin relating to any transaction contemplated by this Agreement and
shall not settle any such litigation without the prior written consent of the
other party. In addition, subject to its rights under Section 6.4 hereof,
COMSAT shall not voluntarily cooperate with any other Person that may hereafter
seek to restrain or prohibit or otherwise oppose any transaction contemplated by
this Agreement and shall cooperate with Lockheed Martin and Acquisition Sub to
resist any such effort to restrain or prohibit or otherwise oppose such
transaction.
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SECTION 6.13. EMPLOYEE AND BENEFIT MATTERS; STOCK OPTIONS AND AWARDS.
(a) Stock Options and Awards. Except as provided in Section 6.13(b)
------------------------
hereof, as of the Effective Time, Lockheed Martin shall assume all COMSAT Stock
Plans and the COMSAT Stock Options. Each COMSAT Stock Option outstanding at the
Effective Time shall be deemed to constitute an option to acquire, on the same
terms and conditions, mutatis mutandis, as were applicable under such COMSAT
------- --------
Stock Option prior to the Effective Time, (i) the number of shares of Lockheed
Martin Common Stock as the holder of such COMSAT Stock Option would have been
entitled to receive pursuant to the Merger had such holder exercised such COMSAT
Stock Option in full immediately prior to the Effective Time (not taking into
account whether or not such option was in fact then exercisable), (ii) at a
price per share equal to (x) the aggregate exercise price for COMSAT Common
Stock otherwise purchasable pursuant to such COMSAT Stock Option divided by (y)
the number of shares of Lockheed Martin Common Stock deemed purchasable pursuant
to such assumed COMSAT Stock Option, provided that the number of shares of
--------
Lockheed Martin Common Stock that may be purchased upon exercise of any such
Lockheed Martin Stock Option shall not include any fractional share and, upon
exercise of any such Lockheed Martin Stock Option, a cash payment shall be made
for any fractional share based on the last sale price per share of Lockheed
Martin Common Stock on the trading day immediately preceding the date of
exercise. COMSAT shall use its reasonable efforts to provide, on or prior to
the Effective Time, a written acknowledgement of each holder of a COMSAT Stock
Option that such COMSAT Stock Option from and after the Effective Time will be
exercisable for shares of Lockheed Martin Common Stock as provided herein,
provided that COMSAT need not do so if Lockheed Martin determines to its
- --------
reasonable satisfaction that the terms of such COMSAT Stock Option or COMSAT
Stock Plan provides that, after giving effect to any permitted action by the
COMSAT board of directors or committee thereof, from and after the Effective
Time, such COMSAT Stock Option shall be exercisable only for shares of Lockheed
Martin Common Stock and not for shares of common stock of the Surviving
Corporation or any other Person. COMSAT shall amend each other Plan, agreement
or arrangement that provides benefits or payments by reference to the price of
COMSAT Common Stock, other than the COMSAT Stock Option Plans, to provide that
as of and after the Effective Time, the payments or benefits shall be measured
by reference to the price of Lockheed Martin Common Stock, determined in like
manner to the adjustments prescribed above with respect to the exercise price of
COMSAT Stock Options and the number of shares of COMSAT Common Stock into which
COMSAT Stock Options are exercisable. In respect of each COMSAT Stock Option to
be converted into options or rights to acquire Lockheed Martin Common Stock,
Lockheed Martin shall file as soon as practicable after the Effective Time with
the SEC, and keep current the effectiveness of, a registration statement on Form
S-8 or other appropriate form for as long as such options or rights remain
outstanding (and maintain the current status of the prospectus with respect
thereto). Lockheed Martin agrees to reserve for issuance a number of shares of
Lockheed Martin Common Stock equal to the number of shares of Lockheed Martin
Common Stock issuable under the COMSAT Stock Options.
(b) Employee Stock Purchase Plan. COMSAT shall terminate each
----------------------------
employee stock purchase plan COMSAT maintains for its or any of its
Subsidiaries' employees no later than the Effective Time.
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(c) Change in Control. COMSAT shall cause to be amended each of the
-----------------
Plans listed in Section 6.13(c) of the COMSAT Disclosure Schedule and/or the
Board of Directors of COMSAT shall adopt a resolution to provide that (i) for
purposes of the Plans listed in Section 6.13(c)(1) of the COMSAT Disclosure
Schedule, neither the execution of this Agreement, the consummation of the
transactions contemplated by this Agreement nor approval of this Agreement or
the transactions contemplated hereby by the Board of Directors or shareholders
of COMSAT shall be a "Change in Control" of COMSAT (or any similar triggering
event resulting in the acceleration or other change in the terms of benefits
payable under the Plans); and (ii) for the purposes of the Plans listed in
Section 6.13(c)(2) of the COMSAT Disclosure Schedule, a "Change in Control" of
COMSAT (or any similar triggering event resulting in the acceleration or other
change in the terms of benefits payable under the Plans) shall occur at the
Effective Time.
(d) Service Credit. Following the Effective Time, Lockheed Martin
--------------
shall, or shall cause the Surviving Corporation, to recognize the service of
current or former employees of COMSAT and any of its Subsidiaries (the "COMSAT
EMPLOYEES") for purposes of participation, eligibility and vesting under any
benefit Plan (including eligibility for benefit levels under any severance,
retiree medical or vacation pay plans to the extent based on length of service)
in which such employees may then be eligible to participate, except to the
extent that such service was not taken into account under the comparable Plan
immediately prior to the Effective Time. A COMSAT Employee who has accrued but
unused vacation time under a Plan at the Effective Time shall retain such
accrued but unused vacation after the Effective Time.
(e) Pre-Existing Condition Limitations; Deductibles. With respect to
-----------------------------------------------
any Plans of Lockheed Martin in which the COMSAT Employees participate effective
as of the Effective Time, Lockheed Martin shall, or shall cause the Surviving
Corporation to: (i) not impose any requirements under the Plans more onerous
than those currently in effect with respect to pre-existing condition
limitations or exclusions and waiting periods with respect to eligibility and
participation applicable to COMSAT Employees, and (ii) recognize credit toward
satisfying any applicable co-payment, deductible expense requirement, out-of-
pocket expense limit and maximum lifetime benefit limits of each COMSAT Employee
or their eligible dependents as and to the extent any payment would have been
previously recognized under the applicable COMSAT welfare benefit Plans prior to
the Effective Time.
(f) Assumption of Plans. As of the Effective Time, Lockheed Martin
-------------------
shall assume and shall cause the Surviving Corporation to assume in accordance
with their terms all Plans and agreements listed in Section 6.13(f) of the
COMSAT Disclosure Schedule.
(g) Benefit Continuation. For a period of at least one year following
--------------------
the Effective Time, Lockheed Martin shall, or shall cause the Surviving
Corporation to, provide each COMSAT Employee with qualified plan and employee
welfare plan benefits (other than plans provided exclusively to management)
which are comparable in the aggregate to the qualified plan and welfare plan
benefits (other than plans provided exclusively to management) provided to such
COMSAT Employee immediately prior to the Effective Time.
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SECTION 6.14. NO RESTRICTIONS. COMSAT shall not intentionally take
any action, or omit to take any action, if the result of such action or omission
could reasonably be expected to result in any restriction or limitation on the
ability of Lockheed Martin or its Subsidiaries to vote any of the Shares
purchased by any of Lockheed Martin and its Subsidiaries in the Offer.
SECTION 6.15. ADVICE OF CHANGES. COMSAT shall cause its senior
officers to use reasonable efforts to promptly advise Lockheed Martin of any
change or occurrence that would reasonably be expected to have a Material
Adverse Effect on COMSAT and, to the extent permitted by Law, to meet from time
to time with Lockheed Martin's senior officers to discuss COMSAT's business.
SECTION 6.16. INDEMNIFICATION.
(a) From and after the Effective Time, Lockheed Martin shall cause the
Surviving Corporation to indemnify, defend and hold harmless the present and
former officers, directors, employees and agents of COMSAT and its Subsidiaries
(the "INDEMNIFIED PARTIES") against all losses, claims, damages, expenses or
liabilities arising out of or related to actions or omissions or alleged actions
or omissions occurring at or prior to the Effective Time to the same extent and
on the same terms and conditions (including with respect to advancement of
expenses) provided for in COMSAT's Articles of Incorporation and By-Laws and
agreements in effect on the date hereof (to the extent consistent with
applicable Law as of the Effective Time), which provisions will survive the
Merger and continue in full force and effect after the Effective Time, in each
case consistent with Applicable Law. Without limiting the foregoing, (i)
Lockheed Martin shall, and shall cause the Surviving Corporation to,
periodically advance expenses (including attorneys' fees) as incurred by an
Indemnified Party with respect to the foregoing to the extent required under
COMSAT's Articles of Incorporation and Bylaws in effect on the date hereof (to
the extent consistent with applicable Law) and (ii) any determination required
to be made with respect to whether an Indemnified Party shall be entitled to
indemnification shall, if requested by such Indemnified Party, be made by
independent legal counsel selected by the Surviving Corporation and reasonably
satisfactory to such Indemnified Party. Lockheed Martin hereby guarantees the
obligation of the Surviving Corporation provided for under this Section 6.16(a).
(b) For a period of six years after the Effective Time, Lockheed
Martin shall use reasonable efforts to cause to be maintained in effect the
current policies of directors and officers liability insurance maintained by
COMSAT (provided that Lockheed Martin may substitute therefor policies with
reputable and financially sound carriers of at least the same coverage and
amounts containing terms and conditions which are no less advantageous in the
aggregate) with respect to claims arising from or related to facts or events
which occurred at or before the Effective Time; provided, that Lockheed Martin
--------
shall not be obligated to make annual premium payments for such insurance to the
extent such premiums exceed 150% of the annual premiums paid as of the date
hereof by COMSAT for such insurance (the "MAXIMUM AMOUNT"). If the amount of
the annual premiums necessary to maintain or procure such insurance coverage
exceeds the Maximum Amount, Lockheed Martin and the Surviving
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Corporation shall maintain the most advantageous policies of directors, and
officers' insurance obtainable for an annual premium equal to the Maximum
Amount.
(c) The provisions of this Section 6.16 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and his or her representatives.
SECTION 6.17. NO CONTROL. Prior to the Effective Time, Lockheed
Martin shall not and shall not permit any of its Subsidiaries to, directly or
indirectly, control, supervise or direct, or attempt to control, supervise or
direct, the operations of COMSAT or of any common carrier activities or licensed
facilities authorized by the FCC, in contravention of applicable Law; those
operations, including complete control and supervision of common carrier
activities, FCC-licensed facilities, employees and policies shall be the sole
responsibility of COMSAT and its Subsidiaries.
SECTION 6.18. ACCOUNTANT'S LETTERS. Each of COMSAT and Lockheed
Martin shall use all reasonable efforts to cause to be delivered to the other
party two letters from its independent public accountants, one dated the date on
which the Form S-4 shall become effective and one dated the Closing Date, each
addressed to COMSAT and Lockheed Martin, in form and substance reasonably
satisfactory to the other party and customary in scope and substance for comfort
letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
SECTION 6.19. NORTH AMERICAN NUMBERING PLAN. COMSAT acknowledges
that an affiliate of Lockheed Martin is party to a contract pursuant to which it
acts as administrator of the North American Numbering Plan. Lockheed Martin
shall take such actions as are necessary so that the existence of the
aforementioned contract does not prevent or delay consummation of the Offer or
the Merger.
SECTION 6.20. AFFILIATE LETTERS. On or prior to the date of the
COMSAT Shareholders Meeting, COMSAT will deliver to Lockheed Martin a letter
identifying all Persons who may be deemed to be "affiliates" of COMSAT for
purposes of Rule 145 under the Securities Act as of the date of the COMSAT
Shareholders Meeting (the "COMSAT AFFILIATE LETTER"). On or prior to the
Closing Date, COMSAT will use all reasonable efforts to cause each Person
identified as an "affiliate" in the COMSAT Affiliate Letter to deliver a written
agreement acknowledging the restrictions on affiliates under Rule 145 under the
Securities Act.
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
SECTION 7.1. TERMINATION. This Agreement may be terminated and
the Offer and the Merger may be abandoned at any time (notwithstanding approval
of the Merger by the shareholders of COMSAT) prior to the Effective Time:
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(a) by mutual written consent of COMSAT and Lockheed Martin;
(b) by COMSAT or Lockheed Martin if any court of competent
jurisdiction in the United States of America or other United States Governmental
Authority shall have issued a final Order or taken any other final action
restraining, enjoining or otherwise prohibiting the consummation of the Offer or
the Merger and such Order or other action is or shall have become nonappealable;
(c) by Lockheed Martin if, due to an occurrence or circumstance which
would result in a failure to satisfy any of the conditions set forth in Exhibit
-------
A hereto, Lockheed Martin shall have (i) failed to commence the Offer within the
- -
time required by Regulation 14D under the Exchange Act, (ii) terminated the
Offer without the purchase of any Shares thereunder or (iii) failed to accept
for payment and pay for Shares pursuant to the Offer prior to the one year
anniversary of the date hereof; provided that Lockheed Martin may not terminate
--------
pursuant to this Section 7.1(c) if Lockheed Martin is in material breach of this
Agreement;
(d) by COMSAT if (i) there shall not have occurred a material breach
of any representation, warranty, covenant or agreement of COMSAT or any of its
Subsidiaries contained in this Agreement and Lockheed Martin shall have (A)
failed to commence the Offer within the time required by Regulation 14D under
the Exchange Act, (B) terminated the Offer without the purchase of any Shares
thereunder or (C) failed to accept for payment and pay for Shares pursuant to
the Offer on or prior to the one year anniversary of the date hereof or (ii)
prior to the purchase of Shares pursuant to the Offer, the Board of Directors of
COMSAT or any committee thereof shall have (A) determined that an Acquisition
Proposal is a Superior Proposal, and approved a definitive agreement to effect
such Superior Proposal and directed the authorized officers of COMSAT to execute
and deliver such definitive agreement concurrently with the effectiveness of the
termination of this Agreement pursuant to this Section 7.1(d)(ii) or (B) adopted
any resolution to effect any of the foregoing; provided, that such termination
--------
under this clause (ii) shall not be effective until payment of the fee required
by Section 7.3(a) hereof;
(e) by Lockheed Martin prior to the purchase of Shares pursuant to the
Offer, if (i) there shall have occurred a breach of any representation or
warranty of COMSAT or its Subsidiaries contained in this Agreement that would
reasonably be expected to have a Material Adverse Effect on COMSAT or would
reasonably be expected to materially adversely affect (or materially delay) the
consummation of the Offer, (ii) there shall have occurred a breach of any
covenant or agreement of COMSAT or its Subsidiaries contained in this Agreement
that has or would reasonably be expected to have a Material Adverse Effect on
COMSAT or that would reasonably be expected to materially adversely affect (or
materially delay) the consummation of the Offer, which shall not have been cured
prior to the earlier of (A) 10 days following notice of such breach and (B) two
business days prior to the date on which the Offer expires, (iii) the Board of
Directors of COMSAT or any committee thereof shall have (A) determined that an
Acquisition Proposal is a Superior Proposal, (B) withdrawn, modified or
materially qualified (including by amendment of the Schedule 14D-9) in a manner
adverse to Lockheed Martin or Acquisition Sub its approval or recommendation of
the Offer, the Merger or this Agreement, (C) recommended to COMSAT's
shareholders another Acquisition Proposal, (D) adopted any
46
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resolution to effect any of the foregoing, or (iv) the Minimum Condition shall
not have been satisfied upon the expiration of the Offer and at or prior to such
time a Person or group (other than Lockheed Martin or Acquisition Sub) shall
have commenced, publicly proposed or publicly disclosed an Acquisition Proposal;
(f) by COMSAT prior to the purchase of Shares pursuant to the Offer,
if (i) there shall have occurred a breach of any representation or warranty of
Lockheed Martin or Acquisition Sub contained in this Agreement that would
reasonably be expected to materially adversely affect (or materially delay) the
consummation of the Offer or (ii) there shall have occurred a material breach of
any covenant or agreement of Lockheed Martin or Acquisition Sub contained in
this Agreement that would reasonably be expected to materially adversely affect
(or materially delay) the consummation of the Offer which shall not have been
cured prior to the earlier of (A) 10 days following notice of such breach and
(B) two business days prior to the date on which the Offer expires;
(g) by Lockheed Martin or COMSAT if the shareholders of COMSAT shall
not have approved the Merger and this Agreement at the COMSAT Shareholders
Meeting, including any postponement or adjournment thereof, on or before the one
year anniversary of the date hereof;
(h) by COMSAT or Lockheed Martin if (i) there shall not have occurred
a material breach of any representation, warranty, covenant or agreement of such
party contained in this Agreement and (ii) the Effective Time shall not have
occurred on or before the two year anniversary of the date hereof;
SECTION 7.2. EFFECT OF TERMINATION. In the event of the termination
and abandonment of this Agreement pursuant to Section 7.1 hereof, this Agreement
shall forthwith become void and have no effect, without any Liability on the
part of any party hereto or its affiliates, directors, officers or shareholders,
other than the provisions of this Section 7.2 and Sections 6.6(b), 7.3, 8.2,
8.11 and 8.12 hereof. Nothing contained in this Section 7.2 shall relieve any
party from Liability for any willful breach of this Agreement.
SECTION 7.3. FEES AND EXPENSES.
(a) If any of the following shall occur:
(i) COMSAT or Lockheed Martin terminates this Agreement pursuant
to Section 7.1(e)(iv) or Section 7.1(g) and, within 12 months thereafter,
COMSAT or any of its Subsidiaries enters into an agreement with respect to
an Acquisition Proposal, or an Acquisition Proposal is consummated,
involving any Person or affiliate, or any group in which such Person (or
any affiliate thereof, or any group in which such Person or affiliate is a
member) (A) with whom COMSAT or any COMSAT Representative had discussions
with respect to an Acquisition Proposal, (B) to whom COMSAT or any COMSAT
Representative furnished information with respect to an Acquisition
Proposal or (C) who had commenced, publicly proposed or publicly disclosed
an Acquisition
47
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Proposal or expressed to COMSAT an interest in an Acquisition Proposal, in
the case of each of clauses (A), (B) and (C) after the date hereof and
prior to such termination; or
(ii) COMSAT terminates this Agreement pursuant to Section
7.1(d)(ii) hereof;
then, in each case, COMSAT shall pay to Lockheed Martin, within one business day
following the execution and delivery of such agreement or such occurrence, as
the case may be, or simultaneously with such determination pursuant to Section
7.1(d)(ii) hereof, a fee, in cash, of $75 million (the "TERMINATION FEE");
provided, that COMSAT in no event shall be obligated to pay more than one such
- --------
Termination Fee with respect to all such agreements and occurrences and such
termination.
(b) Except as specifically provided in this Section 7.3(b) or the
Registration Rights Agreement, each party shall bear its own expenses incurred
in connection with the transactions contemplated by the Transaction Agreements,
including, without limitation, out-of-pocket costs, and fees and expenses of
investment bankers, finders, brokers, agents, representatives, counsel and
accountants as well as fees and expenses incident to the negotiation,
preparation and execution of the Transaction Agreements and related
documentation, preparation of filings and consents with Governmental Authorities
and other Persons, and any litigation resulting from the execution of the
Transaction Agreements; provided, that in the event the Termination Fee becomes
--------
payable, COMSAT shall, upon the receipt of documentation in form reasonably
satisfactory to COMSAT, promptly reimburse Lockheed Martin and its Subsidiaries
in cash in immediately available funds, for any of the foregoing expenses of
Lockheed Martin or its Subsidiaries, up to $5.0 million in the aggregate.
(c) Notwithstanding anything to the contrary contained in this
Agreement, upon payment by COMSAT in full of the amounts referred to in Sections
7.3(a) and 7.3(b) hereof, COMSAT shall be released from all Liability hereunder,
including any Liability for any claims by Lockheed Martin, Acquisition Sub or
any of their affiliates based upon or arising out of any breach of this
Agreement.
(d) The agreements contained in this Section 7.3 are an integral part
of the transactions contemplated by this Agreement and constitute liquidated
damages and not a penalty. In the event of any dispute as to whether any fee or
other amount due under this Section 7.3 is due and payable, the prevailing party
shall be entitled to receive from the other party the reasonable costs and
expenses (including reasonable legal fees and expenses) in connection with any
action, including the filing of any lawsuit or other legal action, relating to
such dispute. Interest shall be paid on the amount any unpaid fee at the
publicly announced prime rate of Citibank, N.A. from the date such fee was
required to be paid.
SECTION 7.4. AMENDMENT. This Agreement may be amended by action
taken by COMSAT, Lockheed Martin and Acquisition Sub at any time before or after
approval of the Merger and this Agreement by the shareholders of COMSAT, if any;
provided that after the date
- --------
48
<PAGE>
of approval of the Merger and this Agreement by the shareholders of COMSAT, no
amendment shall be made which decreases the amount or changes the form of the
Merger Consideration or which adversely affects the rights of COMSAT's
shareholders hereunder without the approval of such shareholders. This
Agreement may not be amended except by an instrument in writing signed on behalf
of the parties.
SECTION 7.5. EXTENSION; WAIVER. At any time prior to the
Effective Time, the parties may (i) extend the time for the performance of any
of the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties of the other parties
contained herein or in any document, certificate or writing delivered pursuant
hereto or (iii) waive compliance with any of the agreements or conditions of the
other parties hereto contained herein; provided that after the date of approval
--------
of the Merger and this Agreement by the shareholders of COMSAT, no extensions or
waivers shall be made which adversely affect the rights of COMSAT's shareholders
hereunder without the approval of such shareholders. Any agreement on the part
of any party to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. SURVIVAL. The representations, warranties,
covenants and agreements made herein shall not survive beyond the Effective
Time; provided, that the covenants and agreements contained in Section 6.16
--------
hereof shall survive beyond the Effective Time without limitation.
SECTION 8.2. ENTIRE AGREEMENT. Except for the Confidentiality
Agreements dated as of August 5, 1997 between Lockheed Martin and COMSAT (the
"CONFIDENTIALITY AGREEMENTS"), which shall continue in full force and effect
other than Sections 3 and 7 thereof (which are superseded hereby), the
Transaction Agreements (including the schedules and exhibits and the agreements
and other documents referred to therein) embody the entire agreement and
understanding of the parties, and supersede all prior agreements or
understandings, with respect to the subject matters thereof.
SECTION 8.3. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of Delaware
except for internal corporate matters, which shall be governed by the Laws of
the respective parties' jurisdictions of incorporation.
SECTION 8.4. NOTICES. In any case where any notice or other
communication is required or permitted to be given hereunder (including, without
limitation, any change in the information set forth in this Section 8.4), such
notice or communication shall be in writing and (i) personally delivered, (ii)
sent by postage prepaid certified or registered mail, return receipt requested,
(iii) sent by recognized overnight courier, or (iv) transmitted by telecopier,
with a
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<PAGE>
copy sent by postage prepaid certified or registered mail, return receipt
requested, or by recognized overnight courier, as follows:
(a) If to the Lockheed Martin or Acquisition Sub, to:
Lockheed Martin Corporation
6801 Rockledge Drive
Bethesda, Maryland 20817
Telephone: (301) 897-6000
Telecopy: (301) 897-6791
Attention: General Counsel
with a copy to:
O'Melveny & Myers LLP
555 13th Street, N.W., Suite 500W
Washington, D.C. 20004-1109
Telephone: (202) 383-5300
Telecopy: (202) 383-5414
Attention: David G. Litt, Esq.
(b) If to COMSAT, to:
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, Maryland 20817
Telephone: (301) 214-3000
Telecopy: (301) 214-7128
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telephone: (212) 735-3000
Telecopy: (212) 735-2000
Attention: Richard L. Easton, Esq.
SECTION 8.5. SUCCESSORS AND ASSIGNS; NO THIRD PARTY
BENEFICIARIES. This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of the parties and their respective successors and
permitted assigns, but neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any party (whether by operation of
Law or otherwise) without the prior written consent of the other party;
provided that Lockheed Martin may assign its rights and obligations hereunder
- --------
or those of Acquisition Sub
50
<PAGE>
to Lockheed Martin or any Subsidiary of Lockheed Martin, but in each case no
such assignment shall relieve Lockheed Martin or Acquisition Sub, of its
obligations hereunder. This Agreement shall be binding upon and inure solely to
the benefit of each party hereto, and except for Section 6.16 hereof nothing in
this Agreement, express or implied, is intended to or shall confer upon any
other Person any rights, benefits or remedies of any nature whatsoever under or
by reason of this Agreement.
SECTION 8.6. COUNTERPARTS. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if all signatures were on the same instrument.
SECTION 8.7. INTERPRETATION. Article and section headings in
this Agreement are included for the convenience of reference only and do not
constitute a part of this Agreement for any other purpose. References to
parties and articles and sections in this Agreement are references to the
parties to or the articles and sections of this Agreement, as the case may be,
unless the context shall require otherwise.
SECTION 8.8. SCHEDULES. The COMSAT Disclosure Schedule shall be
construed with and as an integral part of this Agreement to the same extent as
if the same had been set forth verbatim herein.
SECTION 8.9. LEGAL ENFORCEABILITY. Any provision of this
Agreement that is prohibited or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of the prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of the provision in any other
jurisdiction.
SECTION 8.10. NO WAIVERS; REMEDIES; SPECIFIC PERFORMANCE.
(a) No failure or delay by any party in exercising any right, power or
privilege under this Agreement shall operate as a waiver of such right, power or
privilege. A single or partial exercise of any right, power or privilege shall
not preclude any other or further exercise of such right, power or privilege or
the exercise of any other right, power or privilege. The rights and remedies
provided in this Agreement shall be cumulative and not exclusive of any rights
or remedies available at law or in equity.
(b) In view of the uniqueness of the agreements contained in this
Agreement and the transactions contemplated hereby and the fact that each party
would not have an adequate remedy at law for money damages in the event that any
obligation under this Agreement is not performed in accordance with its terms,
each party therefore agrees that the other parties to this Agreement shall be
entitled to specific enforcement of the terms of this Agreement in addition to
any other remedy to which any of them may be entitled, at law or in equity.
SECTION 8.11. EXCLUSIVE JURISDICTION. Each party (i) agrees that
any action with respect to this Agreement or transactions contemplated by this
Agreement shall be brought
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exclusively in the courts of the State of Delaware or of the United States of
America for the State of Delaware, (ii) accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of those courts, (iii)
irrevocably waives any objection, including, without limitation, any objection
to the laying of venue or based on the grounds of forum non conveniens, which it
----- --- ----------
may now or hereafter have to the bringing of any action in those jurisdictions;
provided, however, that each party may assert in an action in any other
- -------- -------
jurisdiction or venue each mandatory defense, third-party claim or similar claim
that, if not so asserted in such action, may not be asserted in an original
action in the courts referred to in clause (i) above. Lockheed Martin and
COMSAT each hereby appoints Corporation Trust Company as its agent for service
of process in the State of Delaware in connection with any such action.
SECTION 8.12. WAIVER OF JURY TRIAL. Each party waives any right
to a trial by jury in any action to enforce or defend any right under this
Agreement or any amendment, instrument, document or agreement delivered, or
which in the future may be delivered, in connection with this Agreement and
agrees that any action shall be tried before a court and not before a jury.
______________________
[The remainder of this page has been left blank intentionally.]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement and
Plan of Merger to be executed on its behalf by its officers thereunto duly
authorized, all as of the day and year first above written.
COMSAT CORPORATION
By: /s/ Betty C. Alewine
------------------------------
Name: Betty C. Alewine
Title: President and
Chief Executive Officer
LOCKHEED MARTIN CORPORATION
By: /s/ Vance D. Coffman
------------------------------
Name: Vance D. Coffman
Title: Chairman and
Chief Executive Officer
DENEB CORPORATION
By: /s/ John V. Sponyoe
------------------------------
Name: John V. Sponyoe
Title: Chief Executive Officer
53
<PAGE>
EXHIBIT A
CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, Lockheed Martin
shall not be required to accept for payment or pay for, and may delay the
acceptance for payment of (whether or not any Shares have theretofore been
accepted for payment), or the payment for, any Shares tendered, and may
terminate or extend the Offer and not accept for payment any Shares, if:
(i) immediately prior to the expiration of the Offer (as extended in
accordance with the terms of the Offer and the Merger Agreement), (A) any
applicable waiting period under the Antitrust Laws shall not have terminated or
expired and all consents or approvals required under the Antitrust Laws shall
not have been received, (B) fewer than one third (1/3) of the outstanding shares
of COMSAT Common Stock shall have been validly tendered and not withdrawn (the
"MINIMUM CONDITION"), (C) the shareholders of COMSAT shall not have approved the
Merger and this Agreement pursuant to Section 29-367 of the DCBCA, (D) Lockheed
Martin and Offer Subsidiary shall not have received all approvals of the FCC
necessary for them to consummate the Carrier Acquisition, (E) the Carrier
Acquisition shall not have been consummated, (F) Offer Subsidiary shall not have
been approved by the FCC to be an Authorized Carrier, (G) Offer Subsidiary shall
not have been authorized by the FCC to acquire the maximum number of shares of
COMSAT Common Stock to be purchased pursuant to the Offer (the affirmative
obligations of subsections (D)-(G) shall be referred to as the "AUTHORIZED
CARRIER CONDITIONS"), or (H) Lockheed Martin or its Subsidiaries shall not have
the right to vote any of the shares without restriction or limitation except as
expressly set forth in Section 303 of the Satellite Act (47 U.S.C. (S) 733); or
(ii) on or after the date of the Merger Agreement and prior to the
acceptance for payment of Shares, any of the following conditions exist:
(a) any of the representations or warranties of COMSAT contained
in the Merger Agreement shall not have been true and correct at the date
when made or (except for those representations and warranties made as of a
particular date which need only be true and correct as of such date) shall
cease to be true and correct (without giving effect to any limitation as to
"materiality" or "Material Adverse Effect" set forth therein) at any time
prior to consummation of the Offer, except for changes permitted by the
Merger Agreement and except where the failure to be so true and correct
would not, either individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect on COMSAT; provided, that if any such
--------
failure to be so true and correct (without giving effect to any limitation
as to "materiality" or "Material Adverse Effect" set forth therein) is
curable by COMSAT through the exercise of its reasonable efforts, then
Lockheed Martin may not terminate the Offer under this subsection (a) until
10 business days after written notice thereof has been given to COMSAT by
Lockheed Martin and unless at such time the matter has not been cured; or
A-1
<PAGE>
(b) COMSAT shall have breached any of its covenants or agreements
contained in the Merger Agreement, except for any such breaches that,
individually or in the aggregate, would not reasonably be expected to have
a Material Adverse Effect on COMSAT; provided that, if any such breach is
--------
curable by COMSAT through the exercise of its reasonable efforts, then
Lockheed Martin may not terminate the Offer under this subsection (b) until
10 business days after written notice thereof has been given to COMSAT by
Lockheed Martin and unless at such time the breach has not been cured; or
(c) (A) after the date of the Merger Agreement, there shall have
been any change in existing Law or any new Law promulgated, enacted,
enforced or deemed applicable to COMSAT or to the transactions contemplated
by the Merger Agreement or (B) INTELSAT or Inmarsat shall have adopted a
plan for privatization, or have been privatized, in whole or in part, in a
manner or pursuant to terms and conditions (or, in the case of an adopted
plan, proposed terms and conditions), in the case of either clause (A) or
clause (B) that Lockheed Martin determines in good faith (after
consultation with COMSAT) would reasonably be expected to have a Material
Adverse Effect on COMSAT; or
(d) any fact or circumstance exists or shall have occurred that
has or would reasonably be expected to have a Material Adverse Effect on
COMSAT; or
(e) there shall have occurred (i) any general suspension of
trading in securities on the NYSE (other than intra-day trading halts),
(ii) the declaration of a banking moratorium or any suspension of payments
in respect of banks in the United States of America (whether or not
mandatory), (iii) the commencement of a war, armed hostilities or other
international or national calamity directly or indirectly involving the
United States of America and that would reasonably be expected to have a
Material Adverse Effect on COMSAT or would reasonably be expected to
materially adversely affect (or materially delay) the consummation of the
Offer, (iv) any limitation or proposed limitation (whether or not
mandatory) by any Governmental Authority or other instrumentality of the
United States of America that materially adversely affects generally the
extension of credit by banks or other financial institutions, or (v) in the
case of any of the situations described in clauses (i) through (iv)
inclusive, existing at the date of the commencement of the Offer, a
material acceleration, escalation or worsening thereof; or
(f) (i) there shall have been a decline in the Standard & Poor's
500 Index of at least 27% from the date hereof through any given day (a
"MEASUREMENT DATE") prior to the termination or expiration of the Offer,
and (ii) the Standard & Poor's 500 Index shall also be at least 27% lower
than on the date hereof on the earlier of (A) the close of trading on the
next trading date at least 30 calendar days from such Measurement Date, and
(B) the close of trading on the trading date immediately prior to the date
on which the Offer Closing Time would otherwise occur, but for the failure
of this condition; or
A-2
<PAGE>
(g) prior to the purchase of Shares pursuant to the Offer, the
Board of Directors of COMSAT shall have (1) recommended an Acquisition
Proposal that is a Superior Proposal, (2) withdrawn, modified or materially
qualified (including by amendment of the Schedule 14D-9) in a manner
adverse to Lockheed Martin its approval or recommendation of the Offer, the
Merger or the Merger Agreement, (3) recommended to COMSAT's shareholders
another offer, or (4) adopted any resolution to effect any of the foregoing
which, in the sole judgment of Lockheed Martin in any such case, and
regardless of the circumstances (including any action or omission by
Lockheed Martin) giving rise to any such condition, makes it inadvisable to
proceed with such acceptance for payment; or
(h) the Merger Agreement shall have been terminated in accordance
with its terms.
The foregoing conditions are for the sole benefit of Lockheed Martin
and may be asserted by Lockheed Martin regardless of the circumstances giving
rise to such conditions, or may be waived by Lockheed Martin in whole or in part
at any time and from time to time in its sole discretion.
A-3
<PAGE>
SHAREHOLDERS AGREEMENT
SHAREHOLDERS AGREEMENT (this "AGREEMENT") dated as of September 18,
1998 between COMSAT CORPORATION, a District of Columbia corporation ("COMSAT")
and LOCKHEED MARTIN CORPORATION, a Maryland corporation ("LOCKHEED MARTIN").
Terms not otherwise defined herein have the respective meanings
assigned in the Merger Agreement (as defined below).
RECITALS
A. Pursuant to an Agreement and Plan of Merger dated as of
September 18, 1998 (as amended or modified from time to time, the "MERGER
AGREEMENT"), among COMSAT, Lockheed Martin and Deneb Corporation, a Delaware
corporation and a wholly-owned subsidiary of Lockheed Martin ("ACQUISITION
SUB"), Lockheed Martin, acting through a wholly-owned single member Delaware
limited liability company ("OFFER SUBSIDIARY"), has agreed to commence an offer
to purchase for cash (the "OFFER") shares of COMSAT's common stock, without par
value (the "COMSAT COMMON STOCK"). The shares of COMSAT Common Stock to be
acquired by Offer Subsidiary in the Offer are hereinafter referred to as the
"SHARES".
B. In order to induce each other to enter into the Merger Agreement,
COMSAT and Lockheed Martin have agreed to enter into this Agreement concurrent
therewith.
AGREEMENT
The parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 The following terms have the following meanings:
(a) "BENEFICIAL OWNERSHIP" or similar terms has the meaning assigned
to the term "beneficial ownership" in Section 13(d) of the Exchange Act.
(b) "EXPIRATION DATE" has the meaning stated in Section 5.1.
(c) "GROUP" has the meaning given such term in Section 13(d)(3) of
the Exchange Act and the related rules and regulations.
<PAGE>
(d) "MERGER TERMINATION DATE" means the date upon which the Merger
Agreement is terminated prior to the Effective Time pursuant to Section 7.1
thereof.
(e) "OFFER CLOSING DATE" means the date on which Offer Subsidiary
acquires Shares pursuant to the Offer.
ARTICLE II
COMSAT COVENANTS
SECTION 2.1 BOARD OF DIRECTORS. Promptly after the Offer Closing
------------------
Date but in any event within thirty (30) days thereafter and from time to time
thereafter, COMSAT shall take all actions necessary to cause (i) the election as
directors of COMSAT of three individuals selected by Lockheed Martin
(collectively, the "LOCKHEED MARTIN DESIGNEES"), (ii) the appointment of a
Lockheed Martin Designee as a member of the Committee on Audit, Corporate
Responsibility and Ethics, the Committee on Compensation and Management
Development, the Finance Committee, the Nominating and Corporate Governance
Committee, the Committee on Research and International Matters and the Strategic
Planning Committee (or committees having similar functions) of COMSAT's Board of
Directors (collectively, the "COMMITTEES"), and (iii) if any such Lockheed
Martin Designee shall cease to be a director for any reason, the filling of the
vacancy resulting thereby with an individual selected by Lockheed Martin (such
individual thereafter being a Lockheed Martin Designee). Any Lockheed Martin
officer or employee serving as a director of COMSAT will be deemed a Lockheed
Martin Designee. Notwithstanding the foregoing, with respect to any election of
directors at any meeting of shareholders of COMSAT that occurs after the Offer
Closing Date, COMSAT shall be deemed to have satisfied its obligations under
clause (i) of the foregoing sentence if the three Lockheed Martin Designees are
included on COMSAT's slate of nominees for election at such meeting of
shareholders. COMSAT further agrees not to amend or repeal the provisions of
Section 3.08 of COMSAT's by-laws permitting any three directors to call a
special meeting of the board of directors.
SECTION 2.2 RESTRICTIONS ON COMSAT.
-----------------------
From the Merger Termination Date to the Expiration Date, unless
Lockheed Martin has consented thereto in writing (such consent not to be
unreasonably withheld or delayed), COMSAT:
(a) shall not amend its Articles of Incorporation or By-laws in a
manner that would adversely affect the rights of Lockheed Martin or its
Subsidiaries under this Agreement or the Registration Rights Agreement; and
(b) shall not impose limitations (not already in existence on the
date hereof), not imposed on other shareholders of COMSAT, on the enjoyment by
any of Lockheed Martin and its Subsidiaries of the legal rights generally
enjoyed by shareholders of COMSAT.
2
<PAGE>
SECTION 2.3 ACCESS TO INFORMATION.
---------------------
From the Offer Closing Date to the Expiration Date, COMSAT shall:
(a) promptly furnish to Lockheed Martin all information that is
required by GAAP to enable Lockheed Martin to account for its investment in
COMSAT under the equity method. To the extent reasonably requested by Lockheed
Martin, COMSAT shall, and shall cause its employees, independent public
accountants and other representatives to, provide information regarding COMSAT
to, and otherwise cooperate with, Lockheed Martin and the representatives of
Lockheed Martin so as to enable Lockheed Martin to prepare financial statements
in accordance with GAAP; and
(b) upon the request of Lockheed Martin from time to time, promptly
disclose to Lockheed Martin the number of shares of COMSAT Common Stock issued
and outstanding on a date not more than 5 days prior to the date of such request
and the number of shares of COMSAT Common Stock subject to issuance upon the
conversion, exercise or exchange of Equity Securities of COMSAT outstanding on
such date.
SECTION 2.4 AMENDMENT TO ARTICLES OF INCORPORATION REGARDING
------------------------------------------------
DISPOSITION OF SHARES. COMSAT shall cause its Board of Directors, at a meeting
- ---------------------
duly called and held within thirty days of a request by Lockheed Martin, to duly
adopt resolutions (i) to approve an amendment to COMSAT's Articles of
Incorporation to eliminate the transfer restrictions set forth in Section 503(c)
of COMSAT's Articles of Incorporation (the "AMENDMENT") (and any corresponding
changes to COMSAT's by-laws), which approval shall constitute approval of the
Amendment by the Board of Directors of COMSAT for purposes of Section 29-354 of
the DCBCA, (ii) to direct that the Amendment be submitted to a vote of the
shareholders of COMSAT, which direction shall constitute the direction required
by Section 29-354 of the DCBCA, and (iii) to recommend approval of the Amendment
by the shareholders of COMSAT, which approval, if obtained, will constitute
approval of the Amendment by such shareholders for purposes of Section 29-354 of
the DCBCA. COMSAT shall, at such time or times as determined by Lockheed Martin
(after consultation with COMSAT), duly call, give notice of, convene, hold,
postpone, adjourn and reconvene a meeting or meetings of its shareholders (which
shall be the next regularly scheduled annual meeting of shareholders, if such
meeting is to be held within 120 days of the request by Lockheed Martin) for the
purpose of considering and taking action with respect to the Amendment and
otherwise use its reasonable efforts to secure the adoption and implementation
of the Amendment, and the Board of Directors of COMSAT shall recommend adoption
of the Amendment by the shareholders of COMSAT.
3
<PAGE>
ARTICLE III
LOCKHEED MARTIN PURCHASE AND SALE RESTRICTIONS
SECTION 3.1 LOCKHEED MARTIN PURCHASE RESTRICTIONS.
-------------------------------------
(a) Other than pursuant to the transactions contemplated by the
Merger Agreement, Lockheed Martin shall not, and shall not cause or permit its
affiliates or any Group including Lockheed Martin or any of its affiliates to,
acquire shares of COMSAT Common Stock, which when combined with shares of COMSAT
Common Stock then owned by Lockheed Martin and its Subsidiaries, after giving
effect to the Offer, would result in Lockheed Martin beneficially owning more
than 49% of the shares of COMSAT Common Stock then issued and outstanding,
except pursuant to a transaction or series of transactions at prices and on
terms approved by the Board of Directors of COMSAT and pursuant to which
Lockheed Martin or its Subsidiaries propose to acquire all of the issued and
outstanding COMSAT Common Stock not owned by Lockheed Martin or its
Subsidiaries.
(b) Nothing in this Section 3.1 shall require Lockheed Martin or its
Subsidiaries to transfer any shares of COMSAT Common Stock if the aggregate
percentage ownership of Lockheed Martin and its Subsidiaries is increased as a
result of any action taken by COMSAT or its Subsidiaries including, without
limitation, by reason of any reclassification, recapitalization, stock split,
reverse stock split, combination or exchange of shares, redemption, repurchase
or cancellation of shares or any other similar transaction.
SECTION 3.2 LOCKHEED MARTIN SALE RESTRICTIONS.
---------------------------------
(a) Lockheed Martin shall not, and shall not cause or permit its
affiliates or any Group including Lockheed Martin or any of its wholly-owned
Subsidiaries to sell, transfer, assign, pledge, hypothecate or otherwise dispose
of the beneficial ownership of shares of COMSAT Common Stock (any such act, a
"TRANSFER") except in compliance with all applicable requirements of Law and
upon the receipt of necessary approvals of any Governmental Authority.
(b) Other than a Transfer which has been approved by the Board of
Directors of COMSAT, Lockheed Martin shall not, and shall not cause or permit
its Subsidiaries or any Group including Lockheed Martin or any of its
Subsidiaries to Transfer any Shares, other than in one or more of the following
transactions:
(i) each Transfer in a bona fide public offering of COMSAT
Common Stock pursuant to a registration statement effective under the Securities
Act;
(ii) each Transfer in a bona fide open market "brokers'
transaction" as permitted by the provisions of Rule 144 (or any successor
provision) under the Securities Act;
4
<PAGE>
(iii) each Transfer in a block to any Person or Group, other than
a direct, substantial competitor with the core business of COMSAT, of a number
of Shares comprising 5% or more, but less than 10%, of the shares of COMSAT
Common Stock then issued and outstanding; provided, however, that no more than
-----------------
two such block Transfers shall be permitted;
(iv) each Transfer in a block to any Person or Group, other than
a direct, substantial competitor with the core business of COMSAT, of a number
of Shares comprising less than 5% of the shares of COMSAT Common Stock then
issued and outstanding; and
(v) each Transfer pursuant to a tender or exchange offer for
outstanding shares of COMSAT Common Stock made by any Person which the Board of
Directors of COMSAT does not oppose.
(c) Subject to Section 3.2(a), nothing in this Agreement shall
prevent Lockheed Martin and its wholly-owned Subsidiaries from Transferring any
Shares to and among each other, provided that any such transferee shall agree in
writing to be bound hereby.
SECTION 3.3 OTHER RESTRICTIONS. From the Merger Termination Date
------------------
until the Expiration Date, neither Lockheed Martin nor any of its Subsidiaries
shall, without the approval of the board of directors of COMSAT, (i) take any
actions with respect to an acquisition proposal involving COMSAT that would
require COMSAT to make a public announcement, (ii) make any public comment or
proposal with respect to any acquisition proposal involving COMSAT, (iii) become
a member of a Group (other than a Group comprised solely of Lockheed Martin and
its Subsidiaries), (iv) solicit proxies or initiate, propose or become a
participant in a solicitation (as such terms are defined in Regulation 14A under
the Exchange Act) with respect to COMSAT in opposition to any matter which has
been recommended by the Board of Directors of COMSAT or in favor of any matter
which has not been approved by the Board of Directors of COMSAT, or (v) enter
into any discussions, negotiations, arrangements or understandings with any
third party with respect to any of the foregoing.
SECTION 3.4 NO CONTROL. Lockheed Martin shall not and shall not
----------
permit any of its Subsidiaries to, directly or indirectly, control, supervise or
direct, or attempt to control, supervise or direct, the operations of COMSAT or
of any common carrier activities or licensed facilities authorized by the FCC,
in contravention of applicable Law.
5
<PAGE>
ARTICLE IV
RESTRICTIONS ON SHARES
SECTION 4.1 LEGENDS.
-------
(a) Except as provided to the contrary in this Section 4.1, from the
Offer Closing Date and for so long thereafter as this Agreement remains in
effect, each instrument or certificate evidencing or representing Shares, and
any instrument or certificate issued in exchange therefor or upon conversion,
exercise or transfer thereof, shall bear a legend substantially to the following
effect, mutatis mutandis:
------- --------
"The shares of Common Stock represented by this certificate are
subject to the restrictions stated in a Shareholders Agreement dated as of
September 18, 1998, a copy of which is on file at the office of the Secretary of
COMSAT."
(b) In connection with the transfer of any Shares to any Person
(other than any affiliate or any Group including Lockheed Martin or any of its
Subsidiaries or affiliates), and in any event from and after the date on which
this Agreement terminates pursuant to Article V, COMSAT shall, as soon as
practicable following the receipt by COMSAT of any instruments or certificates
evidencing or representing Shares and bearing the legend stated in Section
4.1(a), and in any event within 2 business days following the date of such
receipt, issue and deliver to the record owner of such Shares, or to its
registered transferee, instruments or certificates evidencing or representing
such Shares without such legend.
ARTICLE V
TERMINATION
SECTION 5.1 TERMINATION. This Agreement shall terminate upon the
-----------
first to occur (the "EXPIRATION DATE") of (i) the consummation of the Merger,
(ii) if the Offer Closing Date does not occur prior to the termination of the
Merger Agreement, the Merger Termination Date, or (iii) if the Offer Closing
Date occurs and, thereafter, the Merger Agreement is terminated without the
Merger having been consummated, then the earlier of (A) the fifth anniversary of
the Merger Termination Date, and (B) the date upon which Lockheed Martin
beneficially owns less than 10% of the shares of capital stock of COMSAT then
issued and outstanding.
6
<PAGE>
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 NOTICES. All notices and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given (and
shall be deemed to have been duly received if so given) if (i) personally
delivered, (ii) sent by postage prepaid certified or registered mail, return
receipt requested, (iii) sent by recognized overnight courier, or (iv)
transmitted by telecopier, with a copy sent by postage prepaid certified or
registered mail, return receipt requested, or by recognized overnight courier
addressed to the respective parties as set forth in Section 8.4 of the Merger
Agreement.
SECTION 6.2 NO WAIVERS; REMEDIES; SPECIFIC PERFORMANCE.
------------------------------------------
(a) No failure or delay by any party in exercising any right, power
or privilege under this Agreement shall operate as a waiver of such right, power
or privilege. A single or partial exercise of any right, power or privilege
shall not preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. The rights and
remedies provided in this Agreement shall be cumulative and not exclusive of any
rights or remedies available at law or in equity.
(b) In view of the uniqueness of the agreements contained in this
Agreement and the transactions contemplated hereby and the fact that each party
would not have an adequate remedy at law for money damages in the event that any
obligations under this Agreement is not performed in accordance with its terms,
each party therefore agrees that the other parties to this Agreement shall be
entitled to specific enforcement of the terms of this Agreement in addition to
any other remedy to which any of them may be entitled, at law or in equity.
SECTION 6.3 AMENDMENTS, ETC. No amendment, modification,
---------------
termination or waiver of any provision of this Agreement, and no consent to any
departure by a party to this Agreement from any provision of this Agreement,
shall be effective unless it shall be in writing and signed and delivered by the
other party to this Agreement, and then it shall be effective only in the
specific instance and for the specific purpose for which it is given.
SECTION 6.4 SUCCESSORS AND ASSIGNS.
----------------------
(a) No party may assign its rights or delegate its obligations under
this Agreement without the prior written consent of the other party; provided
--------
that Lockheed Martin may assign, in its sole discretion, its rights and
obligations hereunder to any of its wholly-owned Subsidiaries. Any assignment
or delegation in contravention of this Section 6.4 shall be void ab initio, and
-- ------
any such delegation shall not relieve the delegating party of any of its
obligations under this Agreement.
7
<PAGE>
(b) The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties to this Agreement and their respective permitted
successors and assigns.
SECTION 6.5 GOVERNING LAW. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the State of Delaware except
for COMSAT internal corporate matters, which shall be governed by the Laws of
the jurisdiction of incorporation of COMSAT. All rights and obligations of the
parties shall be in addition to and not in limitation of those provided by
applicable law.
SECTION 6.6 COUNTERPARTS. This Agreement may be signed in any
------------
number of counterparts, each of which shall be an original, with the same effect
as if all signatures were on the same instrument.
SECTION 6.7 SEVERABILITY OF PROVISIONS. Any provision of this
--------------------------
Agreement that is prohibited or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of the prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of the provision in any other
jurisdiction.
SECTION 6.8 HEADINGS AND REFERENCES. Section headings in this
-----------------------
Agreement are included for the convenience of reference only and do not
constitute a part of this Agreement for any other purpose. References to
parties and sections in this Agreement are references to the parties to or the
sections of this Agreement, as the case may be, unless the context shall require
otherwise.
SECTION 6.9 ENTIRE AGREEMENT. This Agreement embodies the entire
----------------
agreement and understanding of the parties and supersedes all prior agreements
or understandings with respect to the subject matters of this Agreement.
SECTION 6.10 SURVIVAL. Except as otherwise specifically provided in
--------
this Agreement, each representation, warranty or covenant of each party
contained in to this Agreement shall remain in full force and effect,
notwithstanding any investigation or notice to the contrary or any waiver by the
other party of a related condition precedent to the performance by such other
party of an obligation under this Agreement.
SECTION 6.11 EXCLUSIVE JURISDICTION. Each party (i) agrees that any
----------------------
action with respect to this Agreement or transactions contemplated by this
Agreement shall be brought exclusively in the courts of the State of Delaware or
of the United States of America for the State of Delaware, (ii) accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of those courts, (iii) irrevocably waives any objection, including,
without limitation, any objection to the laying of venue or based on the grounds
of forum non conveniens, which it may now or hereafter have to the bringing of
----- --- ----------
any action in those jurisdictions; provided, however, that each party may assert
-------- -------
in an action in any other jurisdiction or venue each mandatory defense, third-
party claim or similar claim that, if not so asserted in
8
<PAGE>
such action, may not be asserted in an original action in the courts referred to
in clause (i) above. Lockheed Martin and COMSAT each hereby appoints
Corporation Trust Company as its agent for service of process in the State of
Delaware in connection with any such action.
SECTION 6.12 WAIVER OF JURY TRIAL. Each party waives any right to a
--------------------
trial by jury in any action to enforce or defend any right under this Agreement
or any amendment, instrument, document or agreement delivered, or which in the
future may be delivered, in connection with this Agreement and agrees that any
action shall be tried before a court and not before a jury.
______________________
[The remainder of this page has been left blank intentionally.]
9
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Shareholders
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the day and year first above written.
COMSAT CORPORATION
By: /s/ Allen E. Flower
------------------------------------
Name: Allen E. Flower
Title: Vice President and
Chief Financial Officer
LOCKHEED MARTIN CORPORATION
By: /s/ Vance D. Coffman
------------------------------------
Name: Vance D. Coffman
Title: Chairman and
Chief Executive Officer
10
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") dated as of September
18, 1998, between COMSAT CORPORATION, a District of Columbia corporation
("COMSAT") and LOCKHEED MARTIN CORPORATION, a Maryland corporation (collectively
with its subsidiaries, "LOCKHEED MARTIN").
Terms not otherwise defined herein have the meanings stated in the
Merger Agreement (as defined below).
RECITALS
A. Pursuant to an Agreement and Plan of Merger dated as of September
18, 1998 (as amended or modified from time to time, the "MERGER AGREEMENT"),
among COMSAT, Lockheed Martin, and Deneb Corporation, a Delaware corporation and
a wholly-owned subsidiary of Lockheed Martin ("ACQUISITION SUB"), Lockheed
Martin, acting through a wholly-owned single member Delaware limited liability
company ("OFFER SUBSIDIARY"), will commence an offer to purchase for cash (the
"OFFER") shares (collectively, the "SHARES") of COMSAT's common stock, without
par value (the "COMSAT COMMON STOCK"). The Shares to be acquired in the Offer
are hereinafter referred to as the "REGISTRABLE SHARES."
B. In order to induce Lockheed Martin to enter into the Merger
Agreement, COMSAT and Lockheed Martin have agreed to enter into this Agreement
concurrent therewith.
AGREEMENT
The parties agree as follows:
SECTION 1. DEMAND REGISTRATION RIGHTS.
--------------------------
(a) From and after the date of termination of the Merger Agreement in
accordance with its terms, and assuming Offer Subsidiary acquired any
Registrable Shares pursuant to the Offer (the "COMMENCEMENT DATE"), on one or
more occasions when COMSAT shall have received a written request for
registration hereunder from Lockheed Martin, COMSAT shall, as expeditiously as
possible and in good faith, include in a Registration Statement in accordance
with the methods of distribution specified by Lockheed Martin, the number of
Registrable Shares (the "TRANSACTION REGISTRABLE SHARES") that Lockheed Martin
shall have requested that COMSAT register.
(b) If the requested registration pursuant to this Section 1 shall
involve an underwritten offering, (i) no other securities of COMSAT, including
securities to be offered for the account of COMSAT or any Person other than
Lockheed Martin, shall be included in the
<PAGE>
Registration Statement and (ii) Lockheed Martin shall select (with the consent
of COMSAT, not to be unreasonably withheld or delayed) the managing underwriter
in connection with the offering and any additional investment bankers and
managers to be used in connection with the offering.
(c) Notwithstanding anything herein to the contrary:
(i) COMSAT shall not be required to prepare and file pursuant to this
Section 1 a Registration Statement including less than 3,000,000
Registrable Shares in the aggregate (as such number of shares may be
equitably adjusted in the event of any change in the Registerable Shares by
reason of stock dividends, split-ups, reverse split-ups, mergers,
recapitalizations, subdivisions, conversions, exchanges of shares or the
like);
(ii) subject to the following clause (iii), COMSAT shall not be
required to prepare and file pursuant to this Section 1 more than five
Registration Statements;
(iii) if a requested registration pursuant to this Section 1 shall
involve an underwritten offering, and if the managing underwriter shall
advise COMSAT and Lockheed Martin in writing that, in its opinion, the
number of Transaction Registrable Shares proposed to be included in the
registration is so great as to adversely affect the offering, including the
price at which the Transaction Registrable Shares could be sold, COMSAT
will, upon the request of Lockheed Martin, include in the registration the
maximum number of Transaction Registrable Shares which it is so advised can
be sold without the adverse effect. Alternatively, Lockheed Martin may
notify COMSAT that Lockheed Martin has determined not to proceed with such
registration, in which case such registration shall not be counted toward
the total number of registrations allotted to Lockheed Martin under the
preceding clause (ii); and
(iv) an exercise of a request for registration under this Section 1
shall not count as the use of such right (A) if the Registration Statement
to which it relates is not declared effective by the SEC within 90 days of
the date such Registration Statement is first filed with the SEC, (B) if,
within 90 days after the registration relating to any such request has
become effective but before Lockheed Martin distributes the Transaction
Registrable Shares thereunder, such registration is interfered with by any
stop order, injunction or other order or requirement of the SEC or other
Governmental Authority for any reason and COMSAT fails to have such stop
order, injunction or other order or requirement removed, withdrawn or
resolved to the reasonable satisfaction of Lockheed Martin within 30 days,
or (C) if the Registration Statement and the Prospectus do not remain
effective or current for the period they are required to remain effective
or current hereunder; provided, that except as otherwise provided in the
--------
preceding clause (iii) such exercise shall count if such Registration
Statement is withdrawn because Lockheed Martin determines not to proceed
with such registration.
2
<PAGE>
SECTION 2. PIGGY-BACK REGISTRATION RIGHTS.
------------------------------
(a) If COMSAT shall determine to register or qualify by a registration
statement filed under the Securities Act and under any applicable state
securities Laws, any offering of any Equity Securities of COMSAT, other than an
offering with respect to which Lockheed Martin shall have requested a
registration pursuant to Section 1 hereof, COMSAT shall give notice of such
determination to Lockheed Martin. COMSAT shall, as expeditiously as possible
and in good faith, include in the registration statement the number of
Transaction Registrable Shares that Lockheed Martin shall have specified by
written notice received by COMSAT not later than 10 business days after COMSAT
shall have given such written notice to Lockheed Martin pursuant to this Section
2(a).
(b) Notwithstanding anything herein to the contrary:
(i) COMSAT shall not be required by this Section 2 to include any
Registrable Shares owned by Lockheed Martin in a registration statement on
Form S-4 or S-8 (or any successor form) or a registration statement filed
in connection with an exchange offer or other offering of securities solely
to the then existing shareholders of COMSAT; and
(ii) if a registration pursuant to this Section 2 involves an
underwritten offering, COMSAT or the Person initiating the registration
shall select the managing underwriter for the offering and any additional
investment bankers and managers to be used in connection with the offering,
and if the managing underwriter advises COMSAT in writing that, in its
opinion, the number of securities requested to be included in the
registration is so great as to adversely affect the offering, including the
price at which the securities could be sold, COMSAT will include in the
registration the maximum number of securities which it is so advised can be
sold without the adverse effect, allocated as follows:
(A) first, all securities proposed to be registered by COMSAT for
-----
its own account;
(B) second, all securities proposed to be registered by COMSAT
------
pursuant to the exercise by any Person other than Lockheed Martin of a
"demand" right requesting the registration of shares of COMSAT Common Stock
in accordance with an agreement entered into prior to the date of execution
of the Merger Agreement substantially similar to the provisions of Section
1 hereof; and
(C) third, all other securities (including Transaction
-----
Registrable Shares) duly requested to be included in the registration,
allocated pro rata among Lockheed Martin and such other Persons on the
basis of the relative number of securities that each such Person has duly
requested to be included in the registration.
3
<PAGE>
(c) From and after the date of this Agreement, COMSAT shall not,
without the prior written consent of Lockheed Martin, enter into any agreement
with any holder or prospective holder of any Equity Securities of COMSAT giving
such holder or prospective holder any registration rights, including without
limitation "piggyback" registration rights, the terms of which are inconsistent
with the registration rights granted to Lockheed Martin hereunder.
SECTION 3. REGISTRATION PROVISIONS. With respect to each
-----------------------
registration pursuant to this Agreement:
(a) Notwithstanding anything herein to the contrary, COMSAT shall not
be required to include in any registration any of the Registrable Shares owned
by Lockheed Martin (i) if COMSAT shall deliver to Lockheed Martin an opinion,
satisfactory in form, scope and substance to Lockheed Martin and addressed to
Lockheed Martin by legal counsel satisfactory to Lockheed Martin to the effect
that the distribution of such Registrable Shares proposed by Lockheed Martin is
(1) not required to be registered under the Securities Act and (2) is not
subject to any limitations imposed by COMSAT's Articles of Incorporation and By-
Laws or (ii) if Lockheed Martin or any underwriter of such Registrable Shares
shall fail to furnish to COMSAT the information in respect of the distribution
of the shares that is required under this Agreement to be furnished by Lockheed
Martin or the underwriter to COMSAT.
(b) COMSAT shall make available for inspection by Lockheed Martin,
each underwriter of Transaction Registrable Shares and Lockheed Martin's
accountants, counsel and other representatives, all financial and other records,
pertinent corporate documents and properties of COMSAT as shall be reasonably
necessary to enable them to exercise their due diligence responsibility in
connection with each registration of Transaction Registrable Shares, and shall
cause COMSAT's officers, directors and employees to supply all information
reasonably requested by any such Person in connection with such registration;
provided that records and documents which COMSAT determines, in good faith,
- --------
after consultation with its counsel to be confidential and which it notifies
such Persons are confidential shall not be disclosed to them, except in each
case to the extent that (i) the disclosure of such records or documents is
necessary to avoid or correct a misstatement or omission in the Registration
Statement, (ii) the disclosure of such records or documents to a Governmental
Authority having jurisdiction over such Person is necessary or (iii) the
disclosure of such records or documents may otherwise be required by applicable
Laws, subpoena, or the order of any Governmental Authority. Lockheed Martin
shall, and shall cause its accountants, counsel and other representatives to,
after determining that disclosure of any records or documents may be necessary
in the circumstances referenced in the proviso to the preceding sentence, give
notice to COMSAT, and allow COMSAT, at COMSAT's expense, to undertake
appropriate action to prevent disclosure of any such records or documents deemed
confidential.
(c) Lockheed Martin shall furnish, and shall cause each underwriter of
Transaction Registrable Shares to be distributed pursuant to the registration to
furnish, to COMSAT in writing promptly upon the request of COMSAT the additional
information
4
<PAGE>
regarding Lockheed Martin or the underwriter, the contemplated distribution of
the Transaction Registrable Shares and the other information regarding the
proposed distribution by Lockheed Martin and the underwriter that shall be
required in connection with the proposed distribution by the applicable
securities Laws of the United States of America and the states thereof in which
the Transaction Registrable Shares are contemplated to be distributed. The
information furnished by Lockheed Martin or any underwriter shall be certified
by Lockheed Martin or the underwriter, as the case may be, and shall be stated
to be specifically for use in connection with the registration.
(d) COMSAT shall prepare and file with the SEC the Registration
Statement, including the Prospectus, and each amendment thereof or supplement
thereto, under the Securities Act and as required under any applicable state
securities Laws, on a form that is then required or available for use by COMSAT
to permit Lockheed Martin, upon the effective date of the Registration
Statement, to use the Prospectus in connection with the contemplated
distribution by Lockheed Martin of the Transaction Registrable Shares requested
to be so registered. A registration pursuant to Section 1 hereof shall be
effected pursuant to Rule 415 (or any similar provision then in force) under the
Securities Act if the manner of distribution contemplated by Lockheed Martin
shall include an offering on a delayed or continuous basis. COMSAT shall
furnish to Lockheed Martin drafts of the Registration Statement and the
Prospectus and each amendment thereof or supplement thereto for its timely
review and comment prior to the filing thereof with the SEC. If the
registration shall have been initiated solely by COMSAT or shall not have been
initiated by Lockheed Martin, COMSAT shall not be obligated to prosecute the
registration, and may withdraw the Registration Statement at any time prior to
the effectiveness thereof, if COMSAT shall determine in good faith not to
proceed with the offering of securities included in the Registration Statement.
In all other cases, COMSAT shall use its reasonable efforts to cause the
Registration Statement to become effective and, as soon as practicable after the
effectiveness thereof, shall deliver to Lockheed Martin evidence of the
effectiveness and as many copies of the Prospectus and each amendment thereof or
supplement thereto as Lockheed Martin may reasonably request. COMSAT consents
to the use by Lockheed Martin of each Prospectus and each amendment thereof and
supplement thereto in connection with the distribution, in accordance with this
Agreement, of the Transaction Registrable Shares. In addition, if necessary for
resale by Lockheed Martin, COMSAT shall qualify or register in such states as
may be reasonably requested by Lockheed Martin; provided that COMSAT shall not
--------
be obligated to file any general consent to service of process or to qualify as
a foreign corporation in any state in which it is not subject to process or
qualified as of the date of the request. COMSAT shall advise Lockheed Martin in
writing, promptly after the occurrence of any of the following, (i) the filing
of the Registration Statement or any Prospectus, or any amendment thereof or
supplement thereto, with the SEC, (ii) the effectiveness of the Registration
Statement and any post-effective amendment thereto, (iii) the receipt by COMSAT
of any communication from the SEC with respect to the Registration Statement or
the Prospectus, or any amendment thereof or supplement thereto, including,
without limitation, any stop order suspending the effectiveness thereof, any
comments with respect thereto and any requests for amendments or supplements (in
which case COMSAT shall promptly provide Lockheed Martin with copies of any
written communications received with respect thereto and
5
<PAGE>
written summaries of any oral communications with respect thereto) and (iv) the
receipt by COMSAT of any notification with respect to the suspension of the
qualification of Transaction Registrable Shares for sale in any jurisdiction or
the initiation or threatening of any proceeding for such purpose.
(e) COMSAT shall use its reasonable efforts to cause the Registration
Statement and the Prospectus to remain effective or current, as the case may be,
including the filing of necessary amendments, post-effective amendments and
supplements, and shall furnish copies of such amendments, post-effective
amendments and supplements to Lockheed Martin, so as to permit Lockheed Martin
to distribute the Transaction Registrable Shares in the manner of distribution
during the contemplated period of distribution, but in no event longer than 90
days from the effective date of the Registration Statement; provided that the
--------
period shall be increased by the number of days that Lockheed Martin shall have
been required by Section 4 hereof to refrain from disposing of the Transaction
Registrable Shares. During such contemplated period of distribution, COMSAT
shall comply with the provisions of the Securities Act applicable to it with
respect to the disposition of all Transaction Registrable Shares that shall have
been included in the Registration Statement in accordance with the contemplated
manner of disposition by Lockheed Martin set forth in the Registration
Statement, the Prospectus or the supplement, as the case may be. COMSAT shall
notify Lockheed Martin, at any time when a Prospectus with respect to the
Transaction Registrable Shares is required to be delivered under the Securities
Act, when COMSAT becomes aware of the happening of any event as a result of
which the Prospectus (as then in effect) contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
therein (in the case of the Prospectus or any preliminary prospectus, in light
of the circumstances under which they were made) not misleading and, as promptly
as practicable thereafter, prepare and file with the SEC an amendment or
supplement to the Registration Statement or the Prospectus so that, as
thereafter delivered to the purchasers of such Transaction Registrable Shares,
such Prospectus will not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. COMSAT shall make
every reasonable effort to obtain the withdrawal of any order suspending the
effectiveness of the Registration Statement at the earliest possible moment.
Notwithstanding anything in the foregoing to the contrary, if, in the opinion of
counsel for COMSAT, there shall have arisen any legal impediment to the offer of
the Transaction Registrable Shares made by the Prospectus or if any legal action
or administrative proceeding shall have been instituted or threatened or any
other claim shall have been made relating to the offer made by the Prospectus or
against any of the parties involved in the offer, COMSAT may at any time upon
written notice to Lockheed Martin (i) terminate the effectiveness of the
Registration Statement or (ii) withdraw from the Registration Statement the
Transaction Registrable Shares; provided that, (A) if the registration was
--------
requested under Section 1 hereof it shall not count as the use of such right
unless all securities registered thereunder are sold and (B) if the registration
was requested under Section 1 hereof, COMSAT shall pay, in addition to the
expenses set forth in Section 5 hereof, any expenses incurred by Lockheed Martin
in connection with such registration.
6
<PAGE>
(f) If requested by Lockheed Martin or an underwriter of Transaction
Registrable Shares, COMSAT shall as promptly as practicable prepare and file
with the SEC an amendment or supplement to the Registration Statement or the
Prospectus containing such information as required by Law to be set forth
therein as Lockheed Martin or the underwriter requests to be included therein,
including, without limitation, information with respect to the Transaction
Registrable Shares being sold by Lockheed Martin to the underwriter, the
purchase price being paid therefor by such underwriter and other terms of the
underwritten offering of the Transaction Registrable Shares to be sold in such
offering.
(g) Lockheed Martin shall report to COMSAT distributions made by
Lockheed Martin of Transaction Registrable Shares pursuant to the Prospectus
and, upon written notice by COMSAT that an event has occurred as a result of
which an amendment or supplement to the Registration Statement or the Prospectus
is required, Lockheed Martin shall cease further distributions pursuant to the
Prospectus until notified by COMSAT of the effectiveness of the amendment or
supplement. Lockheed Martin shall distribute Transaction Registrable Shares
only in accordance with the manner of distribution contemplated by the
Prospectus with respect to the Transaction Registrable Shares. Lockheed Martin,
by participating in a registration pursuant to this Agreement, acknowledges that
the remedies of COMSAT at Law for failure by Lockheed Martin to comply with the
undertaking contained in this paragraph (g) would be inadequate and that the
failure would not be adequately compensable in damages and would cause
irreparable harm to COMSAT, and therefore agrees that undertakings made by
Lockheed Martin in this paragraph (g) may be specifically enforced.
(h) If the registration is made pursuant to Section 2 hereof and the
registration involves an underwritten offering, in whole or in part, COMSAT may
require the Transaction Registrable Shares to be included in such underwriting
on the same terms and conditions as shall be applicable to the other securities
being sold through underwriters in the registration. In that event, Lockheed
Martin shall be a party to the related underwriting agreement.
(i) If the registration involves an underwritten offering, (i) at the
request of Lockheed Martin or COMSAT, COMSAT and Lockheed Martin shall enter
into an appropriate underwriting agreement with respect to the Transaction
Registrable Shares containing terms and provisions customary in agreements of
that nature, including, without limitation, provisions with respect to
indemnification and contribution of underwriters substantially the same as those
set forth in Section 6 hereof, (ii) COMSAT shall make such representations and
warranties, and deliver such certificates with respect thereto, to Lockheed
Martin and each underwriter of such Transaction Registrable Shares, and in each
case in such form, substance and scope, as are customarily made by issuers to
underwriters in primary underwritten offerings, (iii) COMSAT shall obtain and
deliver to Lockheed Martin and each underwriter opinions of counsel to COMSAT
and updates thereof (which counsel and opinions (in form, substance and scope)
shall be reasonably satisfactory to the managing underwriter in such offering)
addressed to Lockheed Martin and such underwriters with respect to matters
customarily covered by such opinions requested in underwritten offerings and
such other matters as may reasonably be requested by Lockheed Martin or such
underwriters, (iv) COMSAT shall obtain and deliver to Lockheed
7
<PAGE>
Martin and each underwriter "cold comfort" letters and updates thereof from the
independent certified public accountants of COMSAT (and, if necessary, any other
independent certified public accountants of any Subsidiary of COMSAT or of any
business of COMSAT for which financial statements and financial data are, or
required to be, included in the Registration Statement), addressed to Lockheed
Martin and such underwriters, in customary form and substance, with respect to
matters customarily covered by "cold comfort" letters in connection with primary
underwritten offerings, (v) COMSAT shall enter into such agreements and take
such other actions as Lockheed Martin on advice of the underwriters, or the
underwriters may reasonably request in order to expedite or facilitate the
disposition of such Registrable Shares, including, without limitation, making
members of senior management available for, preparing for, and participating in,
such number of "road shows," investor conference calls and all such other
customary selling efforts as Lockheed Martin on advice of the underwriters, or
the underwriters shall reasonably request in order to expedite or facilitate the
disposition of such Registrable Shares and (vi) COMSAT shall prepare or obtain,
and deliver to Lockheed Martin and the underwriters, such other documents as may
reasonably be requested by Lockheed Martin or such underwriters.
(j) Prior to sales of such Transaction Registrable Shares, COMSAT
shall cooperate with Lockheed Martin and each underwriter of Transaction
Registrable Shares to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing the Transaction
Registrable Shares to be sold under the Registration Statement, and to enable
such Transaction Registrable Shares to be in such denominations and registered
in such names as Lockheed Martin or the underwriter may request.
(k) COMSAT shall use its best efforts to comply with all applicable
rules and regulations of the SEC, and make available to its securityholders, as
soon as reasonably practicable, an earnings statement covering the period of at
least twelve months, but not more than eighteen months, beginning with the first
calendar month after the effective date of the Registration Statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act.
(l) COMSAT shall take all action required to cause the Transaction
Registrable Shares to be listed on each national securities exchange on which
the COMSAT Common Stock shall then be listed, if any, or to be qualified for
inclusion in the NASDAQ/National Market System, if the COMSAT Common Stock is
then so qualified, and in each case if the listing or inclusion of the
Transaction Registrable Shares is then permitted under the rules of such
national securities exchange or the NASD, as the case may be.
(m) For the purposes of this Agreement, the following terms shall have
the following meanings:
(i) "PROSPECTUS" means (A) the prospectus relating to the Transaction
Registrable Shares included in a Registration Statement, (B) if a
prospectus relating to the Transaction Registrable Shares shall be filed
with the SEC pursuant to Rule 424 (or
8
<PAGE>
any similar provision then in force) under the Securities Act, such
prospectus, and (C) in the event of any amendment or supplement to the
prospectus after the effective date of the Registration Statement, then
from and after the effectiveness of the amendment or the filing with the
SEC of the supplement, the prospectus as so amended or supplemented;
(ii) "REGISTRATION STATEMENT" means (A) a registration statement filed
by COMSAT in accordance with Section 3(d) hereof, including exhibits and
financial statements thereto, in the form in which it shall become
effective, the documents incorporated by reference therein pursuant to Item
12 of Form S-3 (or any similar provision or forms then in force) under the
Securities Act and information deemed to be a part of such registration
statement pursuant to paragraph (b) of Rule 430A (or any similar provision
then in force) and (B) in the event of any amendment thereto after the
effective date of the registration statement, then from and after the
effectiveness of the amendment, the registration statement as so amended;
and
(iii) information "CONTAINED", "INCLUDED" or "STATED" in a
Registration Statement or a Prospectus (or other references of like import)
includes information incorporated by reference.
SECTION 4. BLACKOUT PROVISIONS.
-------------------
(a) Subject to the provisions of paragraph (b) below, by delivery of
written notice to Lockheed Martin, stating which one or more of the
circumstances in paragraph (b) below shall apply to Lockheed Martin, COMSAT may
postpone effecting a registration under this Agreement pursuant to this Section
4 or require Lockheed Martin to refrain from otherwise disposing of any
Registrable Shares (whether pursuant to Rule 144 or 144A under the Securities
Act or otherwise), for a reasonable period specified in the notice but not
exceeding two 90 day periods in any 12 month period (which periods may not be
extended or renewed); provided, that if COMSAT postpones effecting a
--------
registration hereunder pursuant to clause (i) of paragraph (b) below, then the
next such blackout period shall not commence until COMSAT has effected the
registration so postponed and the Registrable Shares registered thereunder have
been distributed and if COMSAT requires Lockheed Martin to refrain from
otherwise disposing of any Registrable Shares, then the next such blackout
period shall not come until 90 days after the expiration of the previous such
period.
(b) COMSAT may postpone effecting a registration or apply to Lockheed
Martin any of the limitations specified in paragraph (a) above only if (i) an
investment banking firm of recognized national standing shall advise COMSAT in
writing that effecting the registration or the disposition by Lockheed Martin of
Registrable Shares would materially and adversely affect an offering of Equity
Securities of COMSAT the preparation of which had then been commenced or (ii)
COMSAT is in possession of material non-public information the disclosure of
which during the period specified in such notice COMSAT reasonably believes in
good faith would not be in the best interests of COMSAT.
9
<PAGE>
SECTION 5. EXPENSES.
---------
(a) In connection with the registration of Transaction Registrable
Shares pursuant to this Agreement, whether or not any related Registration
Statement shall become effective (except in connection with a registration under
Section 1 where such registration is withdrawn because Lockheed Martin
determines not to proceed with such registration for any reason other than
pursuant to Section 1(c)(iii)), COMSAT shall bear all expenses of the following:
(i) preparing, printing and filing each Registration Statement and
Prospectus and each qualification or notice required to be filed under
federal and state securities Laws or the rules and regulations of the
National Association of Securities Dealers, Inc. (the "NASD") in connection
with a registration pursuant to Section 1 hereof;
(ii) furnishing to Lockheed Martin one executed copy of the related
Registration Statement and the number of copies of the related Prospectus
that may be required by Section 3(e) hereof to be so furnished, together
with a like number of copies of each amendment, post-effective amendment or
supplement;
(iii) performing its obligations under Section 3(e) hereof;
(iv) printing and issuing share certificates, including the transfer
agent's fees, in connection with each distribution so registered;
(v) preparing audited financial statements required by the
Securities Act to be included in the Registration Statement and preparing
audited financial statements for use in connection with the registration
other than audited financial statements required by the Securities Act;
(vi) internal and out-of-pocket expenses of COMSAT and its employees
(including, without limitation, all salaries and expenses of its officers
and employees performing legal or accounting duties);
(vii) listing of the Registrable Shares on national securities
exchanges or inclusion of the Registrable Shares on the NASDAQ/National
Market System; and
(viii) fees and expenses of any special experts retained by COMSAT in
connection with the registration.
(b) Lockheed Martin shall bear all other expenses incident to the
distribution by Lockheed Martin of the Registrable Shares owned by it in
connection with a registration pursuant to this Agreement, including without
limitation the selling expenses of Lockheed Martin, commissions, underwriting
discounts, insurance, fees of counsel for Lockheed Martin and its underwriters.
10
<PAGE>
SECTION 6. INDEMNIFICATION
---------------
(a) COMSAT shall indemnify and hold harmless Lockheed Martin, each
underwriter of Transaction Registrable Shares to be distributed pursuant to a
registration pursuant to this Agreement, the officers, directors, employees and
agents of Lockheed Martin and the underwriter and each Person, if any, who
controls Lockheed Martin or the underwriter within the meaning of Section 15 (or
any successor provision) of the Securities Act, and their respective successors,
against all claims, losses, damages and liabilities to third parties (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in the Registration Statement or
the Prospectus or other document incident thereto or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall reimburse
Lockheed Martin and each other Person indemnified pursuant to this Section 6(a)
for any legal and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action;
provided that COMSAT shall not be liable in any case to the extent that any such
- --------
claim, loss, damage or liability arises out of or is based upon:
(i) any untrue statement or omission based upon written
information furnished to COMSAT by Lockheed Martin or the underwriter of such
Transaction Registrable Shares specifically for use in the Registration
Statement or the Prospectus, or
(ii) Lockheed Martin's failure to comply with any Prospectus
delivery requirements.
(b) Lockheed Martin, by participating in a registration pursuant to
this Agreement, thereby agrees to indemnify and to hold harmless COMSAT and its
officers, directors, employees, agents and the underwriter and each Person, if
any, who controls any of them within the meaning of Section 15 (or any successor
provision) of the Securities Act, and their respective successors, against all
claims, losses, damages and liabilities to third parties (or actions in respect
thereof) arising out of or based upon:
(i) any untrue statement (or alleged untrue statement) of a
material fact contained in the Registration Statement or the Prospectus or
other document incident thereto or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, or
(ii) Lockheed Martin's failure to comply with any Prospectus
delivery requirements,
and shall reimburse COMSAT and each other Person indemnified pursuant to this
Section 6(b) for any legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action; provided that this Section 6(b) shall apply only with
--------
respect to claims, losses, damages and liabilities arising out of or based upon
11
<PAGE>
the matters set forth at clause (i) above if (and only to the extent that) the
statement or omission was made in reliance upon and in conformity with
information furnished to COMSAT in writing by Lockheed Martin specifically for
use in the Registration Statement or the Prospectus.
(c) If any action or proceeding (including any governmental
investigation or inquiry) shall be brought, asserted or threatened against any
Person indemnified under this Section 6, the indemnified Person shall promptly
notify the indemnifying Person in writing, and the indemnifying Person shall
assume the defense of the action or proceeding, including the employment of
counsel reasonably satisfactory to the indemnified Person and the payment of all
expenses. The indemnified Person shall have the right to employ separate
counsel in any action or proceeding and to participate in the defense of the
action or proceeding, but the fees and expenses of that counsel shall be at the
expense of the indemnified Person unless:
(i) the indemnifying Person shall have agreed to pay those fees and
expenses; or
(ii) the indemnifying Person shall have failed to assume the defense
of the action or proceeding or shall have failed to employ counsel
reasonably satisfactory to the indemnified Person in the action or
proceeding; or
(iii) the named parties to the action or proceeding (including any
impleaded parties) include both the indemnified Person and the indemnifying
Person, and the indemnified Person shall have been advised by counsel that
there may be one or more legal defenses available to the indemnified Person
that are different from or additional to those available to the
indemnifying Person (in which case, if the indemnified Person notifies the
indemnifying Person in writing that it elects to employ separate counsel at
the expense of the indemnifying Person, the indemnifying Person shall not
have the right to assume the defense of such action or proceeding on behalf
of the indemnified Person; it being understood, however, that the
indemnifying Person shall not, in connection with any one action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys at any time for the
indemnified Person, which firm shall be designated in writing by the
indemnified Person).
The indemnifying Person shall not be liable for any settlement of any action or
proceeding effected without its written consent, but if settled with its written
consent, or if there be a final judgment for the plaintiff in any such action or
proceeding, the indemnifying Person shall indemnify and hold harmless the
indemnified Person from and against any loss or liability by reason of the
settlement or judgment.
(d) If the indemnification provided for in this Section 6 is
unavailable to an indemnified Person (other than by reason of exceptions
provided in this Section 6) in respect of losses, claims, damages, liabilities
or expenses referred to in this Section 6, then each applicable
12
<PAGE>
indemnifying Person, in lieu of indemnifying the indemnified Person, shall
contribute to the amount paid or payable by the indemnified Person as a result
of the losses, claims, damages, liabilities or expenses in such proportion as is
appropriate to reflect the relative fault of the indemnifying Person on the one
hand and of the indemnified Person on the other in connection with the
statements or omissions which resulted in the losses, claims, damages,
liabilities or expenses as well as any other relevant equitable considerations.
The relative fault of the indemnifying Person on the one hand and of the
indemnified Person on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnifying Person or by the indemnified Person and by these
Persons' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The parties agree that it would
not be just and equitable if contribution pursuant to this Section 6(d) were
determined by pro rata allocation or by any other method of allocation that does
not take into account the equitable considerations referred to in the
immediately preceding sentence. The amount paid or payable by a Person as a
result of the losses, claims, damages, liabilities and expenses shall be deemed
to include any legal or other fees or expenses reasonably incurred by the Person
in connection with investigating or defending any action or claim.
Notwithstanding the foregoing, neither Lockheed Martin nor any underwriter of
Transaction Registrable Shares shall be required to contribute any amount in
excess of the amount by which (i) in the case of Lockheed Martin, the net
proceeds received by Lockheed Martin from the sale of Transaction Registrable
Shares or (ii) in the case of the underwriter, the total price at which such
Transaction Registrable Shares purchased by it and distributed to the public
were offered to the public exceeds, in any such case, the amount of any damages
that Lockheed Martin or such underwriter, as the case may be, has otherwise been
required to pay by reason of any untrue or alleged untrue statement or omission.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who is not guilty of such fraudulent misrepresentation.
(e) Lockheed Martin shall cause each underwriter of any Transaction
Registrable Shares to be distributed pursuant to a registration pursuant to
Section 1 hereof to agree in writing on terms reasonably satisfactory to COMSAT
to indemnify and to hold harmless COMSAT and its officers and directors and each
Person, if any, who controls any of them within the meaning of Section 15 (or
any successors provision) of the Securities Act, and their respective
successors, against all claims, losses, damages and liabilities to third parties
(or actions in respect thereof) arising out of or based upon:
(i) any untrue statement (or alleged untrue statement) of a
material fact contained in the Registration Statement or the Prospectus or
other document incident thereto or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, or
(ii) such underwriter's failure to comply with applicable
Prospectus delivery requirements,
13
<PAGE>
and shall reimburse COMSAT and each other Person indemnified pursuant to this
Section 6(e) for any legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action; provided that the agreement shall apply only with respect
--------
to claims, losses, damages and liabilities arising out of or based upon the
matters set forth at clause (i) above if (and only to the extent that) the
statement or omission was made in reliance upon and in conformity with
information furnished to COMSAT in writing by such underwriter specifically for
use in the Registration Statement or the Prospectus.
SECTION 7. EXEMPT SALES. COMSAT shall make all filings with the SEC
------------
required by paragraph (c) of Rule 144 (or any similar provision then in force)
under the Securities Act to permit the sale of Registrable Shares by any holder
thereof (other than an Affiliate of COMSAT) to satisfy the conditions of Rule
144 (or any similar provision then in force). COMSAT shall, promptly upon the
written request of the holder of Registrable Shares, deliver to such holder a
written statement as to whether COMSAT has complied with all such filing
requirements.
SECTION 8. MERGER, CONSOLIDATION, EXCHANGE, ETC. In the event,
------------------------------------
directly or indirectly, (1) COMSAT shall merge with and into, or consolidate
with, or consummate a share exchange with, any other Person, or (2) any Person
shall merge with and into, or consolidate with COMSAT and COMSAT shall be the
surviving corporation of such merger or consolidation and, in connection with
such merger or consolidation, all or part of the Registrable Shares shall be
changed into or exchanged for stock or other securities of any other Person,
then, in each such case, proper provision shall be made so that such other
Person shall be bound by the provisions of this Agreement and the term "COMSAT"
shall thereafter be deemed to refer to such other Person.
SECTION 9. NOTICES. All notices and other communications hereunder
-------
shall be in writing and shall be deemed to have been duly given (and shall be
deemed to have been duly received if so given) if (i) personally delivered, (ii)
sent by postage prepaid certified or registered mail, return receipt requested,
(iii) sent by recognized overnight courier, or (iv) transmitted by telecopier,
with a copy sent by postage prepaid certified or registered mail, return receipt
requested, or by recognized overnight courier addressed to the respective
parties as set forth in Section 8.4 of the Merger Agreement.
SECTION 10. NO WAIVERS; REMEDIES. No failure or delay by any party
--------------------
in exercising any right, power or privilege under this Agreement shall operate
as a waiver of such right, power or privilege. A single or partial exercise of
any right, power or privilege shall not preclude any other or further exercise
of such right, power or privilege or the exercise of any other right, power or
privilege. The rights and remedies provided in this Agreement shall be
cumulative and not exclusive of any rights or remedies available at law or in
equity.
SECTION 11. AMENDMENTS, ETC. No amendment, modification,
---------------
termination or waiver of any provision of this Agreement, and no consent to any
departure by a party to this Agreement from any provision of this Agreement,
shall be effective unless it shall be in writing
14
<PAGE>
and signed and delivered by the other party to this Agreement, and then it shall
be effective only in the specific instance and for the specific purpose for
which it is given.
SECTION 12. SUCCESSORS AND ASSIGNS. The provisions of this
----------------------
Agreement shall be binding upon and inure to the benefit of the parties to this
Agreement and their respective successors and assigns.
SECTION 13. GOVERNING LAW. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the State of Delaware. All
rights and obligations of the parties shall be in addition to and not in
limitation of those provided by applicable law.
SECTION 14. COUNTERPARTS. This Agreement may be signed in any
------------
number of counterparts, each of which shall be an original, with the same effect
as if all signatures were on the same instrument.
SECTION 15. SEVERABILITY OF PROVISIONS. Any provision of this
--------------------------
Agreement that is prohibited or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of the prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of the provision in any other
jurisdiction.
SECTION 16. HEADINGS AND REFERENCES. Section headings in this
-----------------------
Agreement are included for the convenience of reference only and do not
constitute a part of this Agreement for any other purpose. References to
parties and sections in this Agreement are references to the parties to or the
sections of this Agreement, as the case may be, unless the context shall require
otherwise.
SECTION 17. ENTIRE AGREEMENT. This Agreement embodies the entire
----------------
agreement and understanding of the parties and supersedes all prior agreements
or understandings with respect to the subject matters of this Agreement.
SECTION 18. SURVIVAL. Except as otherwise specifically provided in
--------
this Agreement, each representation, warranty or covenant of each party
contained in to this Agreement shall remain in full force and effect,
notwithstanding any investigation or notice to the contrary or any waiver by the
other party of a related condition precedent to the performance by such other
party of an obligation under this Agreement.
SECTION 19. EXCLUSIVE JURISDICTION. Each party (i) agrees that any
----------------------
action with respect to this Agreement or transactions contemplated by this
Agreement shall be brought exclusively in the courts of the State of Delaware or
of the United States of America for the State of Delaware, (ii) accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of those courts, (iii) irrevocably waives any objection, including,
without limitation, any objection to the laying of venue or based on the grounds
of forum non
----- ---
15
<PAGE>
conveniens, which it may now or hereafter have to the bringing of any action in
- ----------
those jurisdictions; provided, however, that each party may assert in an action
-------- -------
in any other jurisdiction or venue each mandatory defense, third-party claim or
similar claim that, if not so asserted in such action, may not be asserted in an
original action in the courts referred to in clause (i) above. Lockheed Martin
and COMSAT each hereby appoints Corporation Trust Company as its agent for
service of process in the State of Delaware in connection with any such action.
SECTION 20. WAIVER OF JURY TRIAL. Each party waives any right to a
--------------------
trial by jury in any action to enforce or defend any right under this Agreement
or any amendment, instrument, document or agreement delivered, or which in the
future may be delivered, in connection with this Agreement and agrees that any
action shall be tried before a court and not before a jury.
SECTION 21. NON-RECOURSE. No recourse under this Agreement shall
------------
be had against any "controlling person" (within the meaning of Section 20 of the
Exchange Act) of Lockheed Martin or COMSAT or the respective shareholders,
directors, officers, employees, agents and affiliates of Lockheed Martin or
COMSAT or such controlling persons, whether by the enforcement of any assessment
or by any legal or equitable proceeding, or by virtue of any Law, it being
expressly agreed and acknowledged that no personal liability whatsoever shall
attach to, be imposed on or otherwise be incurred by such controlling person,
shareholder, director, officer, employee, agent or affiliate, as such, for any
obligations of Lockheed Martin or COMSAT, as the case may be, under this
Agreement or for any claim based on, in respect of or by reason of such
obligations or their creation.
______________________
[The remainder of this page has been left blank intentionally.]
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IN WITNESS WHEREOF, each of the parties has caused this Registration Rights
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the day and year first above written.
COMSAT CORPORATION
By: /s/ Allen E. Flower
-------------------
Name: Allen E. Flower
Title: Vice President and
Chief Financial Officer
LOCKHEED MARTIN CORPORATION
By: /s/ Vance D. Coffman
--------------------
Name: Vance D. Coffman
Title: Chairman and
Chief Executive Officer
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CARRIER ACQUISITION AGREEMENT
AGREEMENT OF MERGER (this "AGREEMENT") dated as of September 18, 1998
by and among COMSAT CORPORATION, a District of Columbia corporation ("COMSAT"),
and LOCKHEED MARTIN CORPORATION, a Maryland corporation ("LOCKHEED MARTIN"),
REGULUS, LLC, a Delaware limited liability company and a wholly-owned subsidiary
of Lockheed Martin ("OFFER SUBSIDIARY"), and COMSAT GOVERNMENT SYSTEMS, INC., a
Delaware corporation and a wholly-owned subsidiary of COMSAT ("COMSAT CARRIER
SUBSIDIARY").
Terms not otherwise defined herein have the meanings stated in the
Merger Agreement (as defined below).
RECITALS
A. Pursuant to an Agreement and Plan of Merger dated as of September
18, 1998 (as amended or modified from time to time, the "MERGER AGREEMENT"),
among COMSAT, Lockheed Martin, and Deneb Corporation, a Delaware corporation and
a wholly-owned subsidiary of Lockheed Martin ("ACQUISITION SUB"), Lockheed
Martin, acting through Offer Subsidiary, has agreed to commence an offer to
purchase for cash up to approximately 49% of the issued and outstanding shares
of COMSAT's common stock, without par value (the "SHARES").
B. COMSAT is the record and beneficial owner of 1,000 shares of
common stock, par value $1.00 per share of COMSAT Carrier Subsidiary (the
"COMSAT CARRIER SUBSIDIARY COMMON STOCK"), representing all of the issued and
outstanding capital stock of COMSAT Carrier Subsidiary.
C. In order to facilitate the transactions contemplated by the Merger
Agreement, the parties desire to consummate the Carrier Subsidiary Merger (as
hereinafter defined) on the terms and conditions hereinafter set forth.
AGREEMENT
The parties agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1 DEFINITIONS. The following terms have the following
-----------
meanings:
(a) "ACTION" means any action, complaint, counterclaim, investigation,
petition, suit or other proceeding, whether civil or criminal, in law or in
equity, or before any arbitrator or Governmental Authority.
(b) "BANDWIDTH MANAGEMENT ASSETS" means the monies paid or to be paid
by the U.S. Government to COMSAT Carrier Subsidiary for the implementation,
installation and system design of the Bandwidth Management Centers in
Clarksburg, Maryland and Lanstuhl, Germany under the DISA/DITCO Contract (as
hereinafter defined) (corresponding to Part B, subCLINs 0029AJ, 0029AS, and
0029AY of such contract), but excluding any monies to be paid for operations and
maintenance thereof or U.S. Government options for additional Bandwidth
Management Centers under the DISA/DITCO Contract that have not been exercised as
of the Operative Time (as hereinafter defined).
(c) "BANDWIDTH MANAGEMENT LIABILITIES" means liabilities arising under
the DISA/DITCO Contract to implement, install and provide system design services
for the Bandwidth Management Centers in Clarksburg, Maryland and Lanstuhl,
Germany (corresponding to Part B, subCLINs 0029AJ, 0029AS, and 0029AY of such
contract), but excluding obligations to provide operations and maintenance
services or other obligations that may arise upon the exercise by the U.S.
Government of options for additional Bandwidth Management Centers under the
DISA/DITCO Contract that have not been exercised as of the Operative Time.
(d) "COMMON CARRIER" means a common carrier within the meaning of 47
U.S.C. (S) 153(10) and the relevant implementing FCC regulations.
(e) "COMSAT CARRIER SUBSIDIARY BUSINESS" means the telecommunications
business of COMSAT Carrier Subsidiary as a Common Carrier in connection with the
performance by COMSAT Carrier Subsidiary under the DISA/DITCO Contract.
(f) "COMSAT RSI" means the Delaware corporation formerly known as
COMSAT RSI, Inc., which prior to the COMSAT RSI Novation (as hereinafter
defined) is a party to the DISA/DITCO Contract.
(g) "COMSAT RSI NOVATION" means the conveyance, transfer, assignment,
assumption and novation by all parties to the DISA/DITCO Contract of COMSAT
RSI's rights, claims, benefits, obligations and liabilities under the DISA/DITCO
Contract to COMSAT Carrier Subsidiary.
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(h) "COMSAT RSI SUBCONTRACT" means the subcontract dated May 29, 1998
between COMSAT Carrier Subsidiary and the Global Communication Systems division
of COMSAT RSI as the same has been or is amended, modified or waived from time
to time, pursuant to which COMSAT RSI will complete construction of additional
"Bandwidth Management Centers" as required by the DISA/DITCO Contract.
(i) "COMSAT CARRIER SUBSIDIARY CONTRACTS" means the DISA/DITCO
Contract, the COMSAT RSI Subcontract, and all other contracts or agreements (and
all amendments, modifications and supplements thereto) to which COMSAT Carrier
Subsidiary is a party or by which any of its Assets are bound that are material
to its business or Assets.
(j) "DISA/DITCO CONTRACT" means (i) contract no. DCA200-95-D-0079
dated as of July 17, 1995 between the U.S. Defense Information Systems
Agency/DITCO and COMSAT RSI, as the same has been or is amended, modified or
waived from time to time and (ii) all purchase orders, subcontracts and other
contracts relating thereto between COMSAT RSI and the U.S. Government, as the
same have been or are amended, modified or waived from time to time.
(k) "DISA/DITCO CONTRACT NOVATION" means the conveyance, transfer,
assignment, assumption and novation by all parties to the DISA/DITCO Contract of
COMSAT Carrier Subsidiary's rights, claims, benefits, obligations and
liabilities under the DISA/DITCO Contract to Offer Subsidiary, pursuant to
instruments reasonably satisfactory in form and substance to COMSAT Carrier
Subsidiary and Offer Subsidiary.
(l) "EXCLUDED LIABILITIES" means any and all Liabilities of COMSAT
Carrier Subsidiary or any other Person other than the Transferred Liabilities
(as hereinafter defined).
(m) "INDEMNIFIABLE CLAIM" means any Loss for or against which any
party is entitled to indemnity under this Agreement.
(n) "INDEMNIFIED PARTY" means a party entitled to indemnity under this
Agreement.
(o) "INDEMNIFYING PARTY" means a party obligated to provide indemnity
under this Agreement.
(p) "LOSS" means any Action, cost, damage, disbursement, expense,
liability, including any liability for Taxes, loss, deficiency, obligation,
penalty or settlement of any kind or nature, whether foreseeable or
unforeseeable, including, but not limited to, interest or other carrying costs,
penalties, legal, accounting and other professional fees and expenses incurred
in the investigation, collection, prosecution and defense of claims and amounts
paid in settlement, that may be imposed on or otherwise incurred or suffered by
the specified Person.
(q) "TRANSFERRED LIABILITIES" means (i) Liabilities arising under,
accruing or relating to periods, events or circumstances after the CSM Closing
Date (as hereinafter defined)
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which arise under, relate to or are in connection with the COMSAT Carrier
Subsidiary Business, or the ownership, use, possession, enjoyment or operation
thereof, and (ii) liabilities reflected on the statement of Net Assets Sold (as
hereinafter defined) as of the CSM Closing Date as finally determined pursuant
to Section 2.7 hereof; provided, however, that Transferred Liabilities shall not
-------- -------
include (a) any cause of action or claim arising or accruing on or before the
CSM Closing Date regardless of whether an Action thereon was commenced before or
after the CSM Closing Date, (b) any liability for Taxes, whether Taxes of COMSAT
Carrier Subsidiary or any other Person with respect to which COMSAT Carrier
Subsidiary may be liable by Law (including, without limitation, Treasury
Regulation (S) 1.1502-6), contract, or otherwise, relating to or attributable to
its Assets or the operation of its businesses for any taxable period, or portion
thereof, ending on or before the CSM Closing Date, including Taxes attributable
to the Carrier Subsidiary Merger, or (c) any Liabilities transferred by COMSAT
Carrier Subsidiary or cancelled pursuant to Sections 4.5, 4.6 or 4.7 hereof.
ARTICLE II
THE CARRIER SUBSIDIARY MERGER
SECTION 2.1 THE CARRIER SUBSIDIARY MERGER. Upon the terms and
-----------------------------
subject to the conditions hereof, and in accordance with the Delaware General
Corporation Law (the "DGCL") and the Delaware Limited Liability Company Act (the
"DLLCA" and, collectively with the DGCL, the "DELAWARE CODE"), at the Operative
Time (as hereinafter defined) COMSAT Carrier Subsidiary shall be merged with and
into Offer Subsidiary (the "CARRIER SUBSIDIARY MERGER") as soon as practicable
following the satisfaction or waiver of the conditions set forth in Article V
hereof or on such other date as the parties hereto may agree. At the Operative
Time, the separate existence of COMSAT Carrier Subsidiary shall cease and Offer
Subsidiary shall continue as the surviving entity under the name "COMSAT
Government Systems, LLC" (the "SURVIVING ENTITY").
SECTION 2.2 OPERATIVE TIME; CLOSING. The Carrier Subsidiary Merger
-----------------------
shall be consummated by filing with the Secretary of State of the State of
Delaware a certificate of merger, executed and filed in accordance with the
Delaware Code (the time the Carrier Subsidiary Merger becomes effective being
referred to as the "OPERATIVE TIME"). The Carrier Subsidiary Merger shall be
effective upon the latest to occur of (i) the acceptance for filing of the
certificate of merger by the Secretary of State of the State of Delaware
pursuant to the Delaware Code and (ii) the time, if any, specified as the
effective time of the Carrier Subsidiary Merger in the certificate of merger
filed in accordance with the Delaware Code. Prior to the filings referred to in
this Section 2.2, a closing (the "CSM CLOSING") will be held at the offices of
O'Melveny & Myers LLP, 555 13th Street, N.W., Suite 500 West, Washington, D.C.
20004-1109 (or such other place as the parties may agree), for the purpose of
confirming all of the foregoing no later than the date that is ten (10) business
days after satisfaction or waiver of all the conditions set forth in Article VI
hereof, but in any event prior to the Offer Closing Time (the date of the CSM
Closing herein referred to as the "CSM CLOSING DATE").
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SECTION 2.3 EFFECTS OF THE CARRIER SUBSIDIARY MERGER. The Carrier
----------------------------------------
Subsidiary Merger shall have the effects set forth in the Delaware Code. As of
the Operative Time, the Surviving Entity shall be a wholly-owned Subsidiary of
Lockheed Martin.
SECTION 2.4 CERTIFICATE OF FORMATION AND LIMITED LIABILITY COMPANY
------------------------------------------------------
AGREEMENT. The Certificate of Formation and Limited Liability Company Agreement
- ---------
of Offer Subsidiary, each as in effect at the Operative Time, shall be the
Certificate of Formation and Limited Liability Company Agreement of the
Surviving Entity, until amended in accordance with applicable Law, except that
Article FIRST of the Certificate of Formation shall be amended so that it reads
in its entirety as follows: "The name of the limited liability company is COMSAT
Government Systems, LLC".
SECTION 2.5 OFFICERS. The officers of Offer Subsidiary at the
--------
Operative Time shall be the initial officers of the Surviving Entity and will
hold office from the Operative Time until their respective successors are duly
elected or appointed and qualify in the manner provided in the Certificate of
Formation and the Limited Liability Company Agreement of the Surviving Entity,
or as otherwise provided by Law.
SECTION 2.6 EFFECT ON CAPITAL STOCK. At the Operative Time:
-----------------------
(a) All of the shares of COMSAT Carrier Subsidiary Common Stock issued
and outstanding immediately prior to the Operative Time shall, by virtue of the
Carrier Subsidiary Merger and without any action on the part of COMSAT, be
converted into the right to receive an aggregate of $3,987,000 in cash (the
"ESTIMATED PURCHASE PRICE") subject to adjustment as provided in this Section
2.6 (as so adjusted, the "PURCHASE PRICE") upon the surrender of the certificate
formerly representing such shares of COMSAT Carrier Subsidiary Common Stock
together with a stock power duly endorsed in blank. The Purchase Price shall be
obtained by adjusting the Estimated Purchase Price, dollar for dollar, to the
extent that the Net Assets Sold (as defined below) as of the CSM Closing Date
are less than or greater than $3,987,000.
As used herein, "NET ASSETS SOLD" means, as of any date, the book
value of the current assets (excluding cash) minus the current liabilities of
COMSAT Carrier Subsidiary, in each case as shown on COMSAT Carrier Subsidiary's
books as of such date, calculated in accordance with GAAP consistently applied,
and in each case after deducting (i) any Assets or Liabilities that are to be
transferred to or assumed by another Person pursuant to Sections 4.5 or 4.6
hereof, and (ii) any intercompany balances to be cancelled pursuant to Section
4.7.
(b) Each limited liability company interest of Offer Subsidiary issued
and outstanding immediately prior to the Operative Time shall by virtue of the
Carrier Subsidiary Merger and without any action on the part of the holder
thereof remain outstanding.
SECTION 2.7 DELIVERY OF PURCHASE PRICE. Subject to the terms and
--------------------------
conditions set forth herein, at the CSM Closing, COMSAT shall, upon the
surrender of certificate(s) formerly representing all of the issued and
outstanding shares of COMSAT Carrier Subsidiary
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Common Stock as of the CSM Closing Date together with stock powers duly endorsed
in blank, receive the Estimated Purchase Price in immediately available funds by
wire transfer to an account designated by COMSAT in a written notice delivered
to Lockheed Martin at least two days prior to the CSM Closing.
Not later than 20 business days following the CSM Closing Date, COMSAT
and Lockheed Martin shall jointly prepare and agree upon a statement of Net
Assets Sold as of the CSM Closing Date, together with a supporting calculation
thereof. If COMSAT and Lockheed Martin are unable to agree upon the contents of
such statement within such period, then each shall propose a statement of Net
Assets Sold and set forth any areas of disagreement. COMSAT and Lockheed Martin
shall jointly appoint a nationally recognized accounting firm acceptable to both
of them (or if they cannot agree on such selection, select a national (big-five)
accounting firm by lot after eliminating their respective independent auditors)
(in either case, the "AUDITORS") and shall direct the Auditors to conduct, as
promptly as practicable, a review of the Net Assets Sold as of the CSM Closing
Date, as such firm believes necessary to resolve any areas of disagreement and
to prepare a statement of Net Assets Sold as of the CSM Closing Date. The
statement of Net Assets Sold as of the CSM Closing Date, as agreed upon by
Lockheed Martin and COMSAT, or, if no agreement is reached, as prepared by the
Auditors, and the Purchase Price as calculated therein, shall be final and
binding on the parties. The fees and expenses of the Auditors shall be shared
equally by Lockheed Martin and COMSAT.
Within five business days following final determination of the
Purchase Price, in the event that the Purchase Price exceeds the Estimated
Purchase Price, Lockheed Martin shall pay to COMSAT by wire transfer in
immediately available funds an amount equal to such excess plus interest thereon
from the CSM Closing Date to the date of such payment at an interest rate per
annum (the "AGREED RATE") equal to the rate of interest established from time to
time by Citibank, N.A. as its "prime" rate, or, if such rate is no longer
established or published, a comparable interest rate, in each case calculated on
the basis of actual days elapsed and a 365-day year, and in the event that the
Estimated Purchase Price exceeds the Purchase Price, COMSAT shall pay to
Lockheed Martin by wire transfer in immediately available funds an amount equal
to such excess plus interest thereon from the CSM Closing Date to the date of
such payment at the Agreed Rate.
SECTION 2.8 PAYMENT OF TAXES. COMSAT shall pay all sales, use,
----------------
transfer, income, stock transfer and other similar Taxes imposed in connection
with the Carrier Subsidiary Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF COMSAT AND COMSAT
---------------------------------------------------
CARRIER SUBSIDIARY. COMSAT and COMSAT Carrier Subsidiary, jointly and severally
- ------------------
represent and warrant to Lockheed Martin and Offer Subsidiary, that:
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(a) Organization. COMSAT Carrier Subsidiary is a corporation, duly
------------
organized, validly existing and in good standing under the Laws of the State of
Delaware and has all requisite power and authority, as a corporation, to own,
lease and operate its properties and to carry on its business as now being
conducted.
(b) Authority. Each of COMSAT and COMSAT Carrier Subsidiary has full
---------
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by COMSAT and COMSAT Carrier Subsidiary and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
the Board of Directors of COMSAT and COMSAT Carrier Subsidiary and by COMSAT, as
the sole shareholder of COMSAT Carrier Subsidiary, and no other corporate
proceedings on the part of COMSAT or COMSAT Carrier Subsidiary are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by COMSAT and
COMSAT Carrier Subsidiary and constitutes the valid and binding agreement of
COMSAT and COMSAT Carrier Subsidiary (and assuming due and valid authorization,
execution and delivery thereof by the other parties hereto) enforceable against
them, in accordance with its terms, except to the extent that enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar Laws, now or hereafter in effect,
relating to the creditors' rights generally and general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or in
equity).
(c) Consents and Approvals; No Violations. Except for any applicable
-------------------------------------
requirements of the Communications Act and the Antitrust Laws, the filing and
recordation of the certificate of merger with respect to the Carrier Subsidiary
Merger as required by the Delaware Code and the receipt of the COMSAT RSI
Novation and the DISA/DITCO Contract Novation, neither the execution and
delivery of this Agreement by COMSAT or COMSAT Carrier Subsidiary nor the
consummation by COMSAT or COMSAT Carrier Subsidiary, of any transaction
contemplated hereby will (i) conflict with or result in any breach of any
provision of its Articles of Incorporation or Certificate of Incorporation, as
the case may be, or its By-Laws, (ii) require any filing with, or the obtaining
of any material permit, authorization, consent or approval of, any Governmental
Authority or any other Person, (iii) result in a material violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
material default (or give rise to any right of termination, amendment,
cancellation, acceleration or payment, or to the creation of a Lien) under any
of the terms, conditions or provisions of any note, mortgage, indenture, other
evidence of indebtedness, guarantee, license, or, to the knowledge of COMSAT,
other material agreement, instrument or obligation to which COMSAT Carrier
Subsidiary is a party or by which it or any of its material Assets may be bound
or (iv) violate in any material respect any material Law applicable to COMSAT
Carrier Subsidiary or any of its Assets.
(d) Capitalization.
--------------
(i) The authorized capital stock of COMSAT Carrier Subsidiary
consists of 1,000 shares of COMSAT Carrier Subsidiary Common Stock, all of which
are owned
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of record and beneficially by COMSAT. Except as set forth above, (x) there are
not now, and at the Operative Time there will not be, any Equity Securities of
COMSAT Carrier Subsidiary issued or outstanding, and (y) there are no
outstanding bonds, debentures, notes or other indebtedness or other securities
of COMSAT Carrier Subsidiary having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
stockholders of COMSAT Carrier Subsidiary may vote.
(ii) All outstanding shares of COMSAT Carrier Subsidiary Common
Stock are, duly authorized, validly issued, fully paid and nonassessable and are
not subject to preemptive rights.
(iii) There is no agreement or arrangement restricting the voting
or transfer of the Equity Securities of COMSAT Carrier Subsidiary.
(iv) COMSAT Carrier Subsidiary does not have any Subsidiaries.
(e) Contracts.
---------
(i) To the knowledge of COMSAT, there is no default under any
COMSAT Carrier Subsidiary Contract either by COMSAT Carrier Subsidiary or by any
other party thereto, and no event has occurred that with the lapse of time or
the giving of notice or both would constitute a default thereunder by COMSAT
Carrier Subsidiary or any other party, except for defaults or events that,
either individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect on COMSAT Carrier Subsidiary.
(ii) To the knowledge of COMSAT, no party to any such COMSAT
Carrier Subsidiary Contract has given notice to COMSAT or COMSAT Carrier
Subsidiary of or made a claim against COMSAT or COMSAT Carrier Subsidiary with
respect to any breach or default thereunder, except for defaults or breaches
that, either individually or in the aggregate, would not reasonably be expected
to have Material Adverse Effect on COMSAT Carrier Subsidiary.
(iii) To the knowledge of COMSAT and except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar Laws, now or hereafter in effect, relating to the
creditors' rights generally and general principles of equity, the COMSAT Carrier
Subsidiary Contracts are valid and binding against COMSAT Carrier Subsidiary and
any other party thereto except to the extent that enforceability of the
DISA/DITCO Contract may be limited by (A) the unfunded support of the DISA/DITCO
Contract or program to which the DISA/DITCO Contract relates, and (B) the right
of the U.S. Government to terminate the DISA/DITCO Contract for convenience.
(iv) To the knowledge of COMSAT, no payment has been made by
COMSAT Carrier Subsidiary or any Person authorized to act on its behalf, to any
Person in connection with the DISA/DITCO Contract, in violation of applicable
procurement Laws or in
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violation of (or requiring disclosure pursuant to) the Foreign Corrupt Practices
Act or other Laws.
(v) To the knowledge of COMSAT, with respect to the DISA/DITCO
Contract, as of the date hereof: (A) COMSAT Carrier Subsidiary has complied in
all material respects with all terms and conditions thereof, including all
clauses, provisions and requirements incorporated expressly, by reference or by
operation of Law therein; (B) COMSAT Carrier Subsidiary has complied in all
material respects with all requirements of all applicable Laws or agreements
pertaining thereto; (C) there exist no material outstanding claims, requests for
equitable adjustment or other contractual action for relief against COMSAT
Carrier Subsidiary, either by the U.S. Government or by any prime contractor,
subcontractor, vendor or other Person, and (D) there exist no material disputes
between COMSAT Carrier Subsidiary and the U.S. Government under the Contract
Disputes Act or any other federal Law or between COMSAT Carrier Subsidiary and
any prime contractor, subcontractor, vendor or other Person.
(f) Governmental Authorizations. To the knowledge of COMSAT, COMSAT
---------------------------
Carrier Subsidiary is in possession of all material licenses, permits,
franchises, certificates, consents, approvals and other authorizations from
appropriate Governmental Authorities (including the FCC) necessary for COMSAT
Carrier Subsidiary to own, lease and operate its properties or to carry on the
COMSAT Carrier Subsidiary Business as it is now being conducted ("GOVERNMENTAL
AUTHORIZATIONS"), and all such Governmental Authorizations are valid and in full
force and effect. Earth Station Licenses Call Signs E960186 and E960187 and a
Section 214 Authorization to provide international common carrier services on a
resale basis comprise all of the material Governmental Authorizations held by
COMSAT Carrier Subsidiary and there are no pending applications submitted to any
Governmental Authority by COMSAT Carrier Subsidiary for additional Governmental
Authorizations.
(g) Financial Statements. COMSAT has delivered to Lockheed Martin
--------------------
copies of the unaudited balance sheet and income statement at and for the six
months ended June 30, 1998 for COMSAT Carrier Subsidiary (the "COMSAT CARRIER
SUBSIDIARY FINANCIAL STATEMENTS"). Each of the COMSAT Carrier Subsidiary
Financial Statements is consistent in all material respects with the books and
records of COMSAT Carrier Subsidiary (which, in turn, are accurate and complete
in all material respects) and fairly presents COMSAT Carrier Subsidiary's
financial condition, Assets and liabilities as of such date and the results of
operations for the period then ended in accordance with GAAP, subject to normal
year-end adjustments which are not expected to be material in amount and the
absence of footnotes thereto.
(h) Liabilities. To the knowledge of COMSAT, except for Liabilities
-----------
and obligations incurred in the ordinary course of business and consistent with
past practice since June 30, 1998, from June 30, 1998 until the date hereof
COMSAT Carrier Subsidiary has not incurred any material Liabilities that would
be required to be reflected or reserved against in a balance sheet of COMSAT
Carrier Subsidiary prepared in accordance with GAAP as applied in preparing the
balance sheet of COMSAT Carrier Subsidiary as of June 30, 1998.
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(i) Sufficiency of Assets. COMSAT Carrier Subsidiary owns or,
---------------------
pursuant to the COMSAT Carrier Subsidiary Contracts has or, subject to the
execution of the agreement contemplated by Section 4.6 hereof, will have, the
right to use, all material Assets necessary for the conduct of the COMSAT
Carrier Subsidiary Business in the manner conducted as of the date of this
Agreement and sufficient to permit Surviving Entity to carry on the COMSAT
Carrier Subsidiary Business as currently conducted.
Notwithstanding any other provision of this Section 3.1, Lockheed
Martin and Offer Subsidiary acknowledge that the COMSAT RSI Novation and the
DISA/DITCO Contract Novation have yet to be obtained, and agree that none of the
foregoing representations and warranties shall be deemed breached to the extent
that the failure of such representation to be true and correct results from the
lack of the COMSAT RSI Novation or the DISA/DITCO Contract Novation.
SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF LOCKHEED MARTIN AND
-----------------------------------------------------
OFFER SUBSIDIARY. Lockheed Martin and Offer Subsidiary, jointly and severally
- ----------------
represent and warrant to COMSAT and COMSAT Carrier Subsidiary, that:
(a) Organization. Offer Subsidiary is a limited liability company,
------------
duly organized, validly existing and in good standing under the Laws of the
State of Delaware and has all requisite power and authority, as a limited
liability company, to own, lease and operate its properties and to carry on its
business as now being conducted.
(b) Authority. Each of Lockheed Martin and Offer Subsidiary has full
---------
power and authority as a corporation or limited liability company, as the case
may be, to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Lockheed
Martin and Offer Subsidiary and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors of Lockheed Martin and by Lockheed Martin as the sole member of Offer
Subsidiary, and no other corporate proceedings on the part of Lockheed Martin or
limited liability company proceedings on the part of Offer Subsidiary, are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Lockheed Martin and Offer Subsidiary and constitutes the valid and
binding agreement of Lockheed Martin and Offer Subsidiary (and assuming due and
valid authorization, execution and delivery thereof by the other parties hereto)
enforceable against them, in accordance with its terms, except to the extent
that enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar Laws, now or
hereafter in effect, relating to the creditors' rights generally and general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).
(c) Consents and Approvals; No Violations. Except for any applicable
-------------------------------------
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requirements of the Communications Act and the Antitrust Laws, the filing and
recordation of the certificate of merger with respect to the Carrier Subsidiary
Merger as required by the Delaware Code and the receipt of the DISA/DITCO
Contract Novation, neither the execution and delivery of this Agreement by
Lockheed Martin or Offer Subsidiary nor the consummation by Lockheed Martin or
Offer Subsidiary, of any transaction contemplated hereby will (i) conflict with
or result in any breach of any provision of its charter or Certificate of
Formation, as the case may be, or its By-Laws or Limited Liability Company
Agreement, as the case may be, (ii) require any filing with, or the obtaining of
any material permit, authorization, consent or approval of, any Governmental
Authority or any other Person, (iii) result in a material violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
material default (or give rise to any right of termination, amendment,
cancellation, acceleration or payment, or to the creation of a Lien) under any
of the terms, conditions or provisions of any note, mortgage, indenture, other
evidence of indebtedness, guarantee, license, agreement or other material
contract, instrument or obligation to which Offer Subsidiary is a party or by
which it or any of its material Assets may be bound or (iv) violate in any
material respects any material Law applicable to Offer Subsidiary or any of its
Assets.
ARTICLE IV
COVENANTS
SECTION 4.1 NOVATION. Lockheed Martin and Offer Subsidiary shall
--------
cooperate with COMSAT and COMSAT Carrier Subsidiary to promptly obtain the
COMSAT RSI Novation and the DISA/DITCO Contract Novation and all required
security clearances and shall execute the novation agreements and other
documents required by the U.S. Government in connection with the same. In the
event that the DISA/DITCO Contract Novation is not accomplished by the CSM
Closing Date, then this Agreement, to the extent permitted by Law, shall
constitute the full and equitable assignment by COMSAT Carrier Subsidiary to
Offer Subsidiary of all of COMSAT Carrier Subsidiary's right, title and interest
in and to the DISA/DITCO Contract and Offer Subsidiary shall be deemed COMSAT
Carrier Subsidiary's agent for the purpose of discharging COMSAT Carrier
Subsidiary's obligations under the DISA/DITCO Contract and COMSAT Carrier
Subsidiary shall take all necessary actions to provide Offer Subsidiary with the
benefits of the DISA/DITCO Contract.
SECTION 4.2 EMPLOYEE MATTERS.
----------------
(a) Effective as of the CSM Closing Date, Lockheed Martin shall offer
employment to the employees of the COMSAT Carrier Subsidiary Business as of the
CSM Closing Date (the "COMSAT CARRIER EMPLOYEES"). The Lockheed Martin job
offers will be at the same rate of pay as each such COMSAT Carrier Employee was
earning prior to the CSM Closing Date. COMSAT shall be and shall remain
responsible for any wages and benefits owed to and the claims of any other
employee or former employee of COMSAT Carrier Subsidiary who is not a COMSAT
Carrier Employee as of the CSM Closing Date, whether arising before or after the
CSM Closing Date.
11
<PAGE>
(b) Effective as of the CSM Closing Date, each COMSAT Carrier Employee
shall cease participation in, and accrual under, any employee benefit plan or
program sponsored or maintained by COMSAT and shall commence participation in
employee benefit plans and programs maintained by Lockheed Martin for employees
employed in comparable positions at Lockheed Martin. COMSAT shall be
responsible for any claims incurred on or prior to the CSM Closing Date that are
based on COMSAT's benefit plans and programs or arise out of the terms and
conditions of a COMSAT Carrier Employee's employment at COMSAT and Lockheed
Martin shall be responsible for any claims incurred after the CSM Closing Date
that are based on Lockheed Martin's benefit plans and programs or arise out of
the terms and conditions of a COMSAT Carrier Employee's employment at Lockheed
Martin. Lockheed Martin shall cause the benefit plans and programs covering the
COMSAT Carrier Employees to recognize the service with COMSAT of such COMSAT
Carrier Employees for purposes of participation, eligibility and vesting
(including eligibility for benefit levels under any severance or retiree medical
or vacation pay plans to the extent based on length of service) in which such
employees may then be eligible to participate, except to the extent that such
service was not taken into account under the comparable employee benefit plan
immediately prior to the CSM Closing Date. A COMSAT Carrier Employee who has
accrued but unused vacation under a COMSAT vacation program as of the CSM
Closing Date shall retain such accrued but unused vacation time after the CSM
Closing Date.
(c) With respect to any plans in which COMSAT Carrier Employees
participate effective as of the CSM Closing Date, Lockheed Martin shall (i) not
impose any requirements under the plans more onerous than those currently in
effect with respect to the pre-existing condition limitations or exclusions and
waiting periods with respect to eligibility and participation applicable to
COMSAT Carrier Employees; and (ii) recognize and credit payments toward any
applicable co-payment, deductible expense requirement, out-of-pocket expense
limit and maximum lifetime benefit limits of each COMSAT Carrier Employee and
their eligible dependents as and to the extent any payment would have been
previously recognized under the applicable COMSAT welfare benefit plans prior to
the CSM Closing Date.
SECTION 4.3 [Intentionally Omitted].
SECTION 4.4 INDEMNIFICATION BY COMSAT. From and after the Operative
-------------------------
Time, COMSAT agrees to indemnify, defend, protect and hold harmless Lockheed
Martin and its present and former directors, officers, employees, affiliates,
agents, successors and assigns from and against any and all Losses suffered or
incurred by such Indemnified Party, directly or indirectly, as a result of, or
based upon or arising from the Excluded Liabilities.
SECTION 4.5 TRANSFER OF ASSETS AND LIABILITIES. COMSAT shall, and
----------------------------------
shall cause COMSAT Carrier Subsidiary to, take all actions necessary to cause
all of the Assets and Liabilities of COMSAT Carrier Subsidiary, including cash
on COMSAT Carrier Subsidiary's balance sheet as of the CSM Closing Date, but
excluding those Assets and Liabilities related to or used in connection with the
COMSAT Carrier Subsidiary Business, to be transferred to and assumed by another
Person prior to the Operative Time.
SECTION 4.6 BANDWIDTH MANAGEMENT SUBCONTRACT. COMSAT shall, and
--------------------------------
shall cause COMSAT Carrier Subsidiary to, take all actions necessary to cause
the Bandwidth
12
<PAGE>
Management Assets and the Bandwidth Management Liabilities to be transferred to
and assumed by COMSAT prior to the Operative Time. At the CSM Closing, COMSAT
and Offer Subsidiary shall execute a mutually acceptable subcontract pursuant to
which COMSAT shall become Offer Subsidiary's subcontractor for the purpose of
performing the obligations under the DISA/DITCO Contract for the implementation,
installation and system design of the Bandwidth Management Centers in
Clarksburg, Maryland and Lanstuhl, Germany under the DISA/DITCO Contract
(corresponding to Part B, subCLINs 0029AJ, 0029AS, and 0029AY of such Contract),
but excluding any operations and maintenance thereof or U.S. Government options
for additional bandwidth management centers under the DISA/DITCO Contract that
have not been exercised as of the Operative Time. The subcontract will contain a
provision pursuant to which Offer Subsidiary will agree to order from COMSAT
RSI, and provide the deliverables so ordered to COMSAT, under the COMSAT RSI
Subcontract, at COMSAT's cost if requested by COMSAT.
SECTION 4.7 INTERCOMPANY BALANCES. Immediately prior to the
---------------------
Operative Time, COMSAT and COMSAT Carrier Subsidiary shall cause any
intercompany balances between COMSAT Carrier Subsidiary, on the one hand, and
COMSAT or any of its other Subsidiaries, on the other hand, to be cancelled,
other than liabilities of COMSAT Carrier Subsidiary related to any fees of
COMSAT or any of its other Subsidiaries for services provided to COMSAT Carrier
Subsidiary in the ordinary course of business.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS
SECTION 5.1 CONDITIONS PRECEDENT TO OBLIGATIONS. The obligation of
-----------------------------------
each party to effect the CSM Closing is subject to the satisfaction at or prior
to the CSM Closing of the following conditions:
(a) any waiting period applicable to the Carrier Subsidiary Merger
under the Antitrust Laws shall have terminated or expired and all consents or
approvals required under the Antitrust Laws shall have been received;
(b) the Offer and the Merger Agreement shall not have been terminated;
and
(c) all consents and approvals from Governmental Authorities
(including the FCC) required for the consummation of the Carrier Subsidiary
Merger and for the acquisition and ownership by Offer Subsidiary of shares of
COMSAT Common Stock purchased pursuant to the Offer, as contemplated by the
terms of this Agreement and the Merger Agreement, including, without limitation,
the Authorized Carrier Conditions (other than the consummation of the
transactions contemplated hereby), shall have been granted.
13
<PAGE>
ARTICLE VI
TERMINATION
SECTION 6.1 TERMINATION. This Agreement may be terminated and the
-----------
Carrier Subsidiary Merger may be abandoned at any time prior to the CSM Closing:
(a) by mutual written consent of COMSAT and Lockheed Martin; or
(b) automatically if the Merger Agreement shall have been terminated
in accordance with its terms.
SECTION 6.2. EFFECT OF TERMINATION. In the event of the termination
---------------------
and abandonment of this Agreement pursuant to Section 6.1 hereof, this Agreement
shall forthwith become void and have no effect, without any Liability on the
part of any party hereto or its affiliates, directors, officers or shareholders,
other than the provisions of this Section 6.2 and Section 6.3. Nothing contained
in this Section 6.2 shall relieve any party from Liability for any breach of
this Agreement.
SECTION 6.3. FEES AND EXPENSES. Except as specifically provided in
-----------------
this Agreement, each party shall bear its own expenses incurred in connection
with the transactions contemplated by this Agreement, including, without
limitation, the preparation, execution and performance of this Agreement and the
transactions contemplated thereby, and all fees and expenses of investment
bankers, finders, brokers, agents, representatives, counsel and accountants.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 NOTICES. All notices and other communications hereunder
-------
shall be in writing and shall be deemed to have been duly given (and shall be
deemed to have been duly received if so given) if (i) personally delivered, (ii)
sent by postage prepaid certified or registered mail, return receipt requested,
(iii) sent by recognized overnight courier, or (iv) transmitted by telecopier,
with a copy sent by postage prepaid certified or registered mail, return receipt
requested, or by recognized overnight courier, if addressed to Lockheed Martin
and COMSAT at the addresses set forth in Section 8.4 of the Merger Agreement and
if addressed to Offer Subsidiary or COMSAT Carrier Subsidiary, c/o Lockheed
Martin and COMSAT, respectively, at the addresses set forth in Section 8.4 of
the Merger Agreement.
14
<PAGE>
SECTION 7.2 NO WAIVERS; REMEDIES. No failure or delay by any party
--------------------
in exercising any right, power or privilege under this Agreement shall operate
as a waiver of such right, power or privilege. A single or partial exercise of
any right, power or privilege shall not preclude any other or further exercise
of such right, power or privilege or the exercise of any other right, power or
privilege. The rights and remedies provided in this Agreement shall be
cumulative and not exclusive of any rights or remedies available at law or in
equity.
SECTION 7.3 AMENDMENTS, ETC. No amendment, modification, termination
---------------
or waiver of any provision of this Agreement, and no consent to any departure by
a party to this Agreement from any provision of this Agreement, shall be
effective unless it shall be in writing and signed and delivered by the other
party to this Agreement, and then it shall be effective only in the specific
instance and for the specific purpose for which it is given.
SECTION 7.4 SUCCESSORS AND ASSIGNS, NO THIRD PARTY BENEFICIARIES.
----------------------------------------------------
The provisions of this Agreement shall be binding upon and inure to the benefit
of the parties and their respective successors and assigns. Except for Section
4.4 hereof, nothing in this Agreement, express or implied, is intended to or
shall confer upon any other Person any rights, benefits or remedies of any other
nature whatsoever under or by reason of this Agreement.
SECTION 7.5 SURVIVAL. Except as otherwise specifically provided in
--------
this Agreement, each representation, warranty or covenant of each party
contained in to this Agreement shall remain in full force and effect,
notwithstanding any investigation or notice to the contrary or any waiver by the
other party of a related condition precedent to the performance by such other
party of an obligation under this Agreement.
SECTION 7.6 ENTIRE AGREEMENT. This Agreement and the Merger
----------------
Agreement embody the entire agreement and understanding of the parties and
supersede all prior agreements or understandings with respect to the subject
matters of this Agreement.
SECTION 7.7 EXCLUSIVE JURISDICTION. Each party (i) agrees that any
----------------------
Action with respect to this Agreement or transactions contemplated by this
Agreement shall be brought exclusively in the courts of the State of Delaware or
of the United States of America for the State of Delaware, (ii) accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of those courts, (iii) irrevocably waives any objection, including,
without limitation, any objection to the laying of venue or based on the grounds
of forum non conveniens, which it may now or hereafter have to the bringing of
----- --- ----------
any Action in those jurisdictions; provided, however, that each party may assert
-------- -------
in an Action in any other jurisdiction or venue each mandatory defense, third-
party claim or similar claim that, if not so asserted in such Action, may not be
asserted in an original Action in the courts referred to in clause (i) above.
Lockheed Martin and COMSAT each hereby appoints Corporation Trust Company as its
agent for service of process in the State of Delaware.
SECTION 7.8 WAIVER OF JURY TRIAL. Each party waives any right to a
--------------------
trial by jury in any Action to enforce or defend any right under this Agreement
or any amendment, instrument, document or agreement delivered, or which in the
future may be delivered, in
15
<PAGE>
connection with this Agreement and agrees that any Action shall be tried before
a court and not before a jury.
SECTION 7.9 GOVERNING LAW. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the State of Delaware. All
rights and obligations of the parties shall be in addition to and not in
limitation of those provided by applicable law.
SECTION 7.10 COUNTERPARTS. This Agreement may be signed in any
------------
number of counterparts, each of which shall be an original, with the same effect
as if all signatures were on the same instrument.
SECTION 7.11 HEADINGS AND REFERENCES. Section headings in this
-----------------------
Agreement are included for the convenience of reference only and do not
constitute a part of this Agreement for any other purpose. References to
parties and sections in this Agreement are references to the parties to or the
sections of this Agreement, as the case may be, unless the context shall require
otherwise.
SECTION 7.12 FURTHER ASSURANCES. Subject to the provisions in
------------------
Section 6.9(e) of the Merger Agreement, each of the parties shall at the request
of any other party do and perform or cause to be done and performed all such
further acts and furnish, execute and deliver such other instruments and
documents as the requesting party shall reasonably require to consummate the
transactions contemplated by this Agreement.
-----------------------------
[The remainder of this page has been left blank intentionally.]
16
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Carrier
Acquisition Agreement to be executed on its behalf by its officers thereunto
duly authorized, all as of the day and year first above written.
COMSAT CORPORATION
By: /s/ Allen E. Flower
----------------------
Name: Allen E. Flower
Title: Vice President and
Chief Financial Officer
COMSAT GOVERNMENT SYSTEMS, INC.
By: /s/ John H. Mattingly
-----------------------
Name: John H. Mattingly
Title: President
LOCKHEED MARTIN CORPORATION
By: /s/ Vance D. Coffman
-----------------------
Name: Vance D. Coffman
Title: Chairman and
Chief Executive Officer
REGULUS, LLC
By: /s/ John V. Sponyoe
----------------------
Name: John V. Sponyoe
Title: Chief Executive Officer
17
<PAGE>
EXHIBIT 6
As of September 18, 1998
Board of Directors
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, MD 20817
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the stockholders of COMSAT Corporation (the "Company") of the
Consideration (as defined below) to be received by such stockholders pursuant
to the terms of the Agreement and Plan of Merger, dated as of September 18,
1998 (the "Agreement"), among Lockheed Martin Corporation ("Lockheed Martin"),
DENEB Corporation ("DENEB"), a wholly owned subsidiary of Lockheed Martin, and
the Company, pursuant to which the Company will be merged with and into DENEB
(or, if certain conditions in the Agreement are not satisfied, DENEB will be
merged with and into the Company) (the "Merger").
Pursuant to the Agreement, Lockheed Martin, through a wholly owned, single
member Delaware limited liability company ("Offer Subsidiary"), will commence
a cash tender offer (the "Tender Offer") for up to the number of shares of the
Company's common stock, without par value (the "Company Common Stock"), that
is equal to the remainder of (i) 49% of the number of shares of Company Common
Stock outstanding at the close of business on the date of purchase pursuant to
the Tender Offer minus (ii) the number of shares of Company Common Stock then
owned of record by "authorized carriers" (as defined in the Communications
Satellite Act of 1962, as amended) as evidenced by issuance of shares of
Series II Company Common Stock minus (iii) the number of shares of Company
Common Stock with respect to which written demand shall have been made and not
withdrawn under the District of Columbia Business Corporation Act ("Dissenting
Shares"), at a price of not less than $45.50 per share, net to the seller in
cash (the "Tender Offer Consideration").
Pursuant to the Agreement, subsequent to the Tender Offer and subject to the
satisfaction of the conditions contained in the Agreement, the Company shall
be merged with and into DENEB (or, if certain conditions in the Agreement are
not satisfied, DENEB shall be merged with and into the Company) and each share
of Company Common Stock issued and outstanding (other than shares of Company
Common Stock held in the treasury of the Company, held by Offer Subsidiary,
held by Lockheed Martin, if any, and Dissenting Shares) shall, by virtue of
the Merger and without any action on the part of the holder thereof, be
converted into the right to receive 0.5 (the "Exchange Ratio") shares of
Lockheed Martin Common Stock, par value $1 per share (the "Lockheed Martin
Common Stock") (the "Merger Consideration"). The Tender Offer Consideration
and the Merger Consideration are collectively referred to as the
"Consideration" and the Tender Offer and the Merger are collectively referred
to as the "Transaction".
In arriving at our opinion, we have reviewed the drafts dated Septmeber 18,
1998 of the Agreement and the exhibits thereto. We also have reviewed
financial and other information that was publicly available or furnished to us
by the Company and Lockheed Martin, including information provided during
discussions with their respective managements. Included in the information
provided during discussions with the Company's management were certain
financial projections of the Company for the period beginning January 1, 1998
and ending December 31, 2002 prepared by the management of the Company. In
addition, we have compared certain financial and securities data of the
Company with various other companies whose securities are traded in public
markets, reviewed the historical stock prices and trading volumes of the
respective common stocks of the Company and Lockheed Martin, reviewed prices
and premiums paid in certain other business combinations and conducted such
other financial studies, analyses and investigations as we deemed appropriate
for purposes of this opinion. We were not requested to, nor did we, solicit
the interest of any other party in acquiring the Company.
A-1
<PAGE>
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available
to us from public sources, that was provided to us by the Company and Lockheed
Martin or their respective representatives, or that was otherwise reviewed by
us. With respect to the financial projections supplied to us, we have assumed
that they have been reasonably prepared on the basis reflecting the best
currently available estimates and judgments of the management of the Company
as to the future operating and financial performance of the Company. We have
not assumed any responsibility for making any independent evaluation of any
assets or liabilities of either the Company or Lockheed Martin or for making
any independent verification of any of the information reviewed by us. We have
also assumed that the Tender Offer and the Merger and the other transactions
contemplated by the Agreement will be consummated as described in the
Agreement. We have relied as to certain legal matters on advice of counsel to
the Company.
Our opinion is necessarily based on economic, market, regulatory, financial
and other conditions as they exist on, and on the information made available
to us as of, the date of this letter. It should be understood that, although
subsequent developments may affect this opinion, we do not have any obligation
to update, revise or reaffirm this opinion. We are expressing no opinion
herein as to the prices at which Lockheed Martin Common Stock will actually
trade at any time. Our opinion does not address the relative merits of the
Transaction and the other business strategies being considered by the
Company's Board of Directors, nor does it address the Board's decision to
proceed with the Transaction. Our opinion does not constitute a recommendation
to any stockholder as to how such stockholder should vote on the proposed
transaction.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of
businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. DLJ has
performed investment banking and other services for the Company in the past
and has received customary compensation for such services.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that, as of the date hereof, the Consideration to be received
by the stockholders of the Company pursuant to the Agreement is fair to such
stockholders from a financial point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Douglas V. Brown
----------------------------------
Douglas V. Brown
Managing Director
A-2
<PAGE>
[LETTERHEAD OF COMSAT CORPORATION APPEARS HERE]
September 25, 1998
To the Shareholders of
COMSAT Corporation:
We are pleased to inform you that COMSAT Corporation entered into an
Agreement and Plan of Merger with Lockheed Martin Corporation on September 18,
1998 (the "Merger Agreement"). Pursuant to the Merger Agreement, a wholly-owned
subsidiary of Lockheed Martin has today commenced a tender offer (the "Offer")
to purchase up to 49% of COMSAT's common stock for $45.50 per share in cash.
The Offer is conditioned upon a minimum of one-third of the total number of
COMSAT's outstanding shares being tendered in the Offer, the approval of the
Merger Agreement by COMSAT's shareholders, certain regulatory approvals and
other matters. Per the Merger Agreement, following the Offer, COMSAT will be
merged with another wholly-owned subsidiary of Lockheed Martin (the "Merger").
All shares not purchased in the Offer (other than shares held by Lockheed
Martin and its affiliates or by dissenting shareholders) will be converted into
the right to receive 0.5 shares of Lockheed Martin common stock in the Merger.
The Merger is subject to certain conditions, including the amendment or repeal
of the Communications Satellite Act of 1962.
YOUR BOARD OF DIRECTORS HAS BY A UNANIMOUS VOTE (EXCLUDING FOUR DIRECTORS WHO
EITHER WERE ABSENT OR RECUSED THEMSELVES) APPROVED THE OFFER, THE MERGER AND
THE MERGER AGREEMENT AND HAS DETERMINED THAT THE TERMS OF EACH ARE CONSISTENT
WITH, AND IN FURTHERANCE OF, THE LONG-TERM BUSINESS STRATEGY OF THE COMPANY AND
ARE FAIR TO COMSAT'S SHAREHOLDERS. THE BOARD RECOMMENDS THAT THE COMPANY'S
SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors described in the attached Schedule 14D-9
that is being filed today with the Securities and Exchange Commission,
including, among other things, the opinion of Donaldson, Lufkin & Jenrette
Securities Corporation, the Company's financial advisor, that, as of the date
of such opinion, the consideration to be received by the Company's shareholders
pursuant to the Merger Agreement is fair to such shareholders from a financial
point of view.
In addition to the attached Schedule 14D-9 relating to the Offer, also
enclosed is the Offer to Purchase, dated September 25, 1998, of the Lockheed
Martin subsidiary which is making the Offer, together with related materials,
including a Letter of Transmittal to be used for tendering your Shares. These
documents set forth the terms and conditions of the Offer and the Merger and
provide instructions as to how to tender your Shares. We urge you to read the
enclosed materials carefully.
Sincerely,
/s/ Edwin I. Colodny /s/ Betty C. Alewine
Edwin I. Colodny Betty C. Alewine
Chairman of the Board President and Chief Executive Officer
<PAGE>
EXHIBIT 8
NEWS RELEASE
LOCKHEED MARTIN - COMSAT TO COMBINE
Action Boosts Worldwide Competition,
Benefit Users of Global Telecommunications Services
BETHESDA, Maryland, September 20, 1998 - The boards of directors of Lockheed
Martin Corporation (NYSE:LMT) and COMSAT Corporation (NYSE:CQ) jointly announced
today their two companies have entered into a definitive merger agreement
providing for the combination of COMSAT with Lockheed Martin in a two-phase
transaction valued at approximately $2.7 billion. Upon completion of the
transaction, COMSAT will become an integral element of Lockheed Martin Global
Telecommunications, a wholly owned subsidiary recently formed to provide
satellite network-based solutions and develop terrestrial networking
technologies for corporate and government customers worldwide.
In the first phase of the transaction, Lockheed Martin within five business days
will begin a cash tender offer to purchase up to 49% of the outstanding common
stock of COMSAT, at a price of $45.50 per share in cash, with an estimated value
of $1.3 billion. The tender offer will be made only pursuant to definitive
offering materials to be filed with the Securities & Exchange Commission and
mailed to all COMSAT shareholders. Lockheed Martin ancicipates funding the
tender offer through monetization of a portion of its portfolio of equity
securities, depending on market conditions at the time of the close of the
tender offer.
This tender offer will be subject to certain conditions, including approval by
COMSAT shareholders, Federal Communications Commission (FCC) approval of a
merger of a common carrier subsidiary of COMSAT into a Lockheed Martin
subsidiary, and FCC designation of that Lockheed Martin subsidiary as an
"authorized carrier" under the 1962 Communications Satellite Act. The companies
anticipate the approval process will take approximately six to nine months.
The transaction's second phase, the merger of a second Lockheed Martin
subsidiary and COMSAT, is contingent upon the satisfaction of certain
conditions, including enactment of federal legislation to remove the existing
restrictions on authorized carrier ownership of COMSAT voting stock. Legislation
addressing the ownership cap already has been introduced in Congress. This
merger will be accomplished by an exchange of Lockheed Martin common stock for
COMSAT common stock at a ratio of 0.5. This phase of the transaction is valued
at approximately $1.4 billion, based on recent market prices for Lockheed Martin
common stock.
Vance Coffman, Lockheed Martin chairman and CEO, said, "This initiative will
unite two advanced-technology companies with complementary capabilities in the
commercial, space-based telecommunications industry. The new subsidiary will
benefit communications users in the United States and around the world by
creating a dynamic new global competitor. Ultimately, it is anticipated that
Lockheed Martin Global Telecommunications will access the public equity
markets."
Based in Bethesda, Maryland, COMSAT focuses on two lines of business:
international satellite
<PAGE>
communications services and digital networking services and technology. COMSAT
is the U.S. signatory to the International Telecommunications Satellite
Organization (INTELSAT), a 143-member nation organization that serves more than
180 countries, and the International Mobile Satellite Organization (Inmarsat),
which provides mobile satellite communications worldwide, and is the largest
provider of space segment capacity in these organizations.
COMSAT offers voice, data and video transmission services for its customers,
which include telecommunications carriers, private-network providers,
multinational corporations, the U.S. government and a variety of broadcasting
organizations. COMSAT's digital networking services business operates in 11
countries, and provides its customers in rapidly growing international markets
with start-to-finish networking solutions. COSMAT employs some 1,700 people.
COSMAT's president and chief executive officer, Betty C. Alewine, said, "This
agreement gives value to our shareholders, offers opportunities for our
employees and adds competition to the marketplace. Working together, Lockheed
Martin and COSMAT will meet the exploding demand for broadband, Internet and
virtual private network services. Today, COSMAT has found a partner that shares
its vision for the future of privatized international telecommunications. Our
partnership will expand competition in this market to the benefit of customers
and the industry."
Lockheed Martin's new Global Telecommunications subsidiary comprises Lockheed
Martin Intersputnik, a joint venture between Lockheed Martin and Moscow-based
Intersputnik that is scheduled to deploy its first satellite early in 1999;
AstrolinkTM System, a Lockheed Martin strategic venture that will provide global
interactive multimedia services using next-generation broadband satellite
technology; Communications Systems, which markets commercial satellite
communications systems capabilities, including network engineering and systems
integration expertise; and Lockheed Martin's joint venture with GE Americom that
is scheduled to launch a satellite next year that will service broadcasters in
the Asia-Pacific region.
John V. Sponyoe, Lockheed Martin Global Telecommunications' chief executive
officer, said "This combination accelerates the momentum of Global
Telecommunications in its evolution into an enterprise well-positioned to
quickly become a premier global communications network service provider, a
market expected to grow from some $50 billion today to $120 billion by the year
2002.
"Our combined space-based infrastructure will enable us to deliver uniform
global coverage and capabilities for Internet and network service providers,
broadcasters and multi-national corporations - literally any time and anywhere.
"Just as importantly, Lockheed Martin Global Telecommunications and COMSAT are
committed to achieving timely, pro-competitive privatization of INTELSAT and
Immarsat," Sponyoe said.
Bear, Stearns & Co., Inc., is financial advisor to Lockheed Martin, will act as
dealer manager in connection with the tender offer, and also rendered a fairness
opinion. Donaldson, Lufkin & Jenrette Securities Corporation is financial
advisor to COMSAT and rendered a fairness opinion to COMSAT's board of
directors.
Headquartered in Bethesda, Maryland, Lockheed Martin is a highly diversified
enterprise principally engaged in the research, design, development, manufacture
and integration of advanced-technology systems, products and services. The
Corporation's primary businesses span space, telecommunications, electronics,
information and services, aeronautics, energy and systems integration. Employing
approximately 170,000 people worldwide, Lockheed Martin had 1997 sales
surpassing $28 billion.
###
<PAGE>
COMSAT Corporation Affairs, 301/214-3442
Investors: Lockheed Martin Investor Relations, 301/897-6584
or 6455
COMSAT Investor Relations: 301/214-3244
NOTE: Statements which are not historical facts are forward-looking statements
made pursuant to the safe harbor provision of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially from
anticipated results including the assumption that the combination is
consummated, effects of government budgets and requirements, economic
conditions, competitive environment, timing of awards and contracts; the outcome
of contingencies including litigation and environmental remediation, and program
performance in addition to other factors not listed. See in this regard the
Corporations' filings with the Securities and Exchange Commission. The
Corporations do not undertake any obligation to publicly release any revisions
to forward looking statements to reflect events or circumstances or changes in
expectations after the date of this press release or the occurrence of
anticipated events.
<PAGE>
Exhibit 9
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
-----------------------------------------
This AMENDED AND RESTATED AGREEMENT is made as of July 19, 1996, and
amended as of May 16, 1997 and July 18, 1997, by and between COMSAT Corporation
("COMSAT"), a District of Columbia corporation, and Betty C. Alewine, a resident
of the Commonwealth of Virginia (the "Executive").
WHEREAS, the COMSAT Board of Directors (the "Board") elected the Executive
as President and Chief Executive Officer and a member of the Board (a
"Director") on July 19, 1996;
WHEREAS, the Board believes it to be in the best interests of COMSAT to
enter into this Agreement to ensure the Executive's continuing services to
COMSAT; and
WHEREAS, COMSAT desires to continue to employ the Executive as President
and Chief Executive Officer of COMSAT, and the Executive desires to continue
such employment, on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
made herein, and intending to be legally bound hereby, COMSAT and the Executive
agree as follows:
1. Employment; Duties.
------------------
(a) Employment and Employment Period. COMSAT shall employ the
--------------------------------
Executive to serve as President and Chief Executive Officer of COMSAT or any
successor entity for a period (the "Employment Period") commencing on July 19,
1996 (the "Effective Date") and continuing thereafter for successive three-year
terms from each successive day thereafter until July 19, 2003 unless terminated
in accordance with the provisions of this Agreement. Notwithstanding the
foregoing, COMSAT may appoint another person to serve as President during the
Employment Period. In that event, the Executive's title shall become Chief
Executive Officer and the President shall report to the Executive in her
capacity as Chief Executive Officer. The appointment of a President shall not
be deemed to constitute "Good Reason" for purposes of Section 5 of this
Agreement. Each 12-month period ending on the anniversary date of the Effective
Date is sometimes referred to herein as a "year of the Employment Period."
(b) Offices, Duties and Responsibilities. The Executive shall report
------------------------------------
directly and solely to the Board. Throughout the Employment Period, COMSAT
shall cause Executive to be nominated and recommended for election as a Director
at each meeting of COMSAT shareholders at which directors are to be elected and
to be included as a recommended nominee for election in any proxy provided to
shareholders in connection with such
<PAGE>
meeting. The Executive's offices initially shall be located at COMSAT's present
headquarters in Bethesda, Maryland. The Executive shall have all duties and
authority customarily accorded a chief executive officer, including, without
limitation, the lead responsibility with full autonomy, subject to the customary
authority and direction of the Board, to manage the overall business and
operations of COMSAT. All employees of COMSAT shall report, directly or
indirectly, to the Executive, and the Executive shall have the authority to hire
and fire all such employees within established budget parameters, provided that
--------
the Board shall approve (i) any salary actions (including hiring decisions) for
employees of COMSAT which result in an annual salary in excess of the amount
established by the Board from time to time, but in no event less than $100,000,
and (ii) any bonuses to be awarded to employees of COMSAT under the COMSAT
Annual Incentive Plan (the "AIP") or any other bonuses to be awarded in excess
of the amount established by the Board from time to time. The Executive's
management of COMSAT shall be (x) in accordance with the policies of the Board
and COMSAT's Policies and Procedures, both as in effect from time to time, and
(y) within the limits of an annual budget for COMSAT which shall be approved by
the Board at least 30 days before the beginning of the fiscal year to which such
budget relates. If the Executive proposes the expenditure of any amounts which
exceed the applicable annual budgets for COMSAT, such excess amounts shall not
be committed to Executive's authority unless and until specifically authorized
and approved by the Board.
(c) Devotion to Interests of COMSAT. During the Employment Period,
-------------------------------
the Executive shall devote her best efforts and full business time and attention
to the performance of her duties hereunder. Notwithstanding the foregoing, the
Executive shall be entitled to serve on the boards of directors of non-profit
organizations and, commencing on the second anniversary of the Effective Date,
the boards of directors of for-profit organizations that do not compete with
COMSAT. Prior to joining any boards of directors in addition to those on which
she is serving as of the Effective Date, the Executive shall consult with the
Board to confirm that such memberships shall not unreasonably or materially
interfere with the performance of her duties hereunder. In addition, the
Executive may speak and write independently, if such activity does not conflict
with the best interests of COMSAT. The Executive may keep all fees and other
monies paid for such outside board memberships and activities in accordance with
COMSAT corporate policy.
2. Compensation and Fringe Benefits.
--------------------------------
(a) Base Compensation. COMSAT shall pay the
-----------------
Executive a base salary ("Base Salary") during the Employment Period with
payments made in installments in accordance with COMSAT's regular practice for
compensating executive personnel, provided that in no event shall such payments
--------
be made less frequently than twice per month. The Base Salary for the first
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<PAGE>
year of the Employment Period shall be $450,000. Effective on July 19, 1997,
the Base Salary shall be increased to $500,000. Thereafter, the Base Salary for
the Executive shall be reviewed for increases each subsequent year during the
Employment Period commencing the third year of the Employment Period. Any
further Base Salary increases shall be approved by the Board in its sole
discretion.
(b) Bonus Compensation. The Executive will be eligible to receive
------------------
bonuses ("Annual Bonus") during the Employment Period under the AIP in
accordance with the following parameters: (i) the target bonus for each year
during the Employment Period shall be 70% of Base Salary for achieving 100% of
the target level for the performance measures; and (ii) the performance
measures, the relative weight to be accorded each performance measure and the
amount of bonus payable in relation to the target bonus for achieving more or
less than 100% of the target level for the performance measures shall be
determined for each year during the Employment Period by the Committee on
Compensation and Management Development of the Board (the "Compensation
Committee") after consultation with the Executive. As part of the consultation
process set forth in the preceding sentence, the Executive shall prepare before
the end of each fiscal year ending during the Employment Period a business plan
for COMSAT with respect to at least the following three-year period. The Board
shall consider and approve such plans on an annual basis, subject to such
modifications as are otherwise consistent with this Agreement, and each fiscal
year the current plan shall be considered by the Compensation Committee as the
basis for establishing the bonus standards for such year with such reasonable
modifications as the Compensation Committee may reasonably determine and which
are consistent with this Agreement.
(c) Fringe Benefits. The Executive shall continue to be entitled to
---------------
the fringe benefits for COMSAT senior executives which she enjoyed immediately
prior to the Effective Date, including (i) participation in the COMSAT Directors
and Executives Deferred Compensation Plan, the COMSAT Split Dollar Insurance
Plan, the COMSAT Educational Grant Program, the COMSAT Retirement Plan, the
COMSAT Savings and Profit-Sharing Plan, the COMSAT 1995 Key Employee Stock Plan
(the "Stock Plan"), the COMSAT Employee Stock Purchase Plan, the COMSAT health
and disability insurance programs and the COMSAT financial planning program,
(ii) an annual physical examination by a physician of her choice in the
Washington, D.C. metropolitan area at COMSAT's expense, and (iii) reimbursement
of reasonable expenses incurred in connection with travel and entertainment
related to COMSAT's business and affairs. The Executive also shall be entitled
to such additional fringe benefits as are made available to COMSAT senior
executives during the Employment Period on a most favored nations basis. The
Executive further shall be entitled to reimbursement of the Executive's
reasonable legal fees and costs incurred in connection with the negotiation and
execution of this
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<PAGE>
Agreement, subject to a cap of $12,000. COMSAT reserves the right to modify or
terminate from time to time the fringe benefits provided to the senior
management group.
(d) Stock Options. On October 17, 1996 (the "Grant Date"), COMSAT
-------------
shall grant to the Executive non-statutory stock options (the "Options") under
the Stock Plan to purchase 150,000 shares of COMSAT's common stock, without par
value ("Common Stock"), at a purchase price equal to the average of the high and
low selling price of the Common Stock as reported under New York Stock Exchange-
Composite Transactions on the Grant Date. The Options shall carry a term of ten
years and shall be exercisable by the Executive in accordance with the following
schedule: (i) 25% of the Options on and after the first anniversary of the
Grant Date; (ii) an additional 25% of the Options on and after the second
anniversary of the Grant Date; and (iii) the remaining 50% of the Options on and
after the third anniversary of the Grant Date. The Options shall be represented
by a stock option agreement in the form customarily used by COMSAT for such
agreements which shall contain appropriate terms consistent with the provisions
of this Agreement. During the Employment Period, the Executive may be granted
additional non-statutory stock options as determined by the Compensation
Committee in its sole discretion.
(e) RSAs. On February 20, 1997, COMSAT shall grant to the Executive
----
20,000 Restricted Stock Awards ("RSAs") under the Stock Plan. Such RSAs shall
vest in accordance with (i) the performance standards for the two-year
performance period following the date of grant which are adopted by the
Compensation Committee for RSAs granted generally on such date, and (ii) the
following schedule thereafter for the portion of such RSAs which are earned
during the performance period: (x) 20% of such portion on and after February
20, 2000; (y) an additional 40% of such portion on and after February 20, 2001;
and (z) the remaining 40% of such portion on and after February 20, 2002.
(f) RSUs. On the Grant Date, COMSAT shall grant to the Executive
----
5,000 Restricted Stock Units ("RSUs") under the Stock Plan. Such RSUs shall
entitle the Executive to receive "dividend equivalents" (when and in the same
amounts as dividends are paid on the Common Stock) as provided under the Stock
Plan, and shall vest three (3) years from the Grant Date if the Executive is
still employed by COMSAT at such time.
(g) SERP. The Executive shall continue to participate in the COMSAT
----
Insurance and Retirement Plan for Executives (the "SERP"). Any future
amendments or changes to the SERP which provide for a reduction, deferral or
elimination of benefits payable to participants in the SERP shall expressly not
apply to the Executive unless the Executive consents otherwise.
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<PAGE>
3. Trade Secrets; Return of Documents and Property.
-----------------------------------------------
(a) Executive acknowledges that during the course of her employment
she will receive secret, confidential and proprietary information ("Trade
Secrets") of COMSAT and of other companies with which COMSAT does business on a
confidential basis and that Executive will create and develop Trade Secrets for
the benefit of COMSAT. Trade Secrets shall include, without limitation, matters
of a technical nature, such as scientific and engineering secrets, "know-how,"
formulae, secret processes or machines, inventions and computer programs
(including documentation of such programs), and matters of a business nature,
such as customer data and proprietary information about costs, profits, markets,
sales and customer databases, and other information of a similar nature to the
extent not available to the public, and plans for future development. All Trade
Secrets disclosed to or created by Executive shall be deemed to be the exclusive
property of COMSAT (as the context may require). Executive acknowledges that
Trade Secrets have economic value to COMSAT due to the fact that Trade Secrets
are not generally known to the public or the trade and that the unauthorized use
or disclosure of Trade Secrets is likely to be detrimental to the interests of
COMSAT and its subsidiaries. Executive therefore agrees to hold in strict
confidence and not to disclose to any third party any Trade Secret acquired or
created or developed by Executive during the term of this Agreement except (i)
when Executive uses or discloses any Trade Secret in the proper course of the
Executive's rendition of services to COMSAT hereunder, (ii) when such Trade
Secret becomes public knowledge other than through a breach of this Agreement,
or (iii) when Executive is required to disclose any Trade Secret pursuant to any
valid legal process. The Executive shall notify COMSAT immediately of any such
legal process in order to enable COMSAT to contest such legal process's
validity. After termination of this Agreement, the Executive shall not use or
otherwise disclose Trade Secrets unless such information (x) becomes public
knowledge other than through a breach of this Agreement, (y) is disclosed to the
Executive by a third party who is entitled to receive and disclose such Trade
Secret, or (z) is required to be disclosed pursuant to any valid legal process,
in which case the Executive shall notify COMSAT immediately of any such legal
process in order to enable COMSAT to contest such legal process's validity.
(b) Upon the effective date of notice of the Executive's or COMSAT's
election to terminate this Agreement, or at any time upon the request of COMSAT,
the Executive (or her heirs or personal representatives) shall deliver to COMSAT
(i) all documents and materials containing or otherwise relating to Trade
Secrets or other information relating to COMSAT's business and affairs, and (ii)
all documents, materials and other property belonging to COMSAT, which in either
case are in the possession or under the control of the Executive (or her heirs
or personal representatives). The Executive shall be entitled to keep her
personal records (including Rolodex) relating to COMSAT's
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<PAGE>
business and affairs except to the extent those contain documents or materials
described in clause (i) of the preceding sentence.
4. Discoveries and Works. All discoveries and works made or conceived by
---------------------
the Executive during her employment by COMSAT pursuant to this Agreement,
jointly or with others, that relate to COMSAT's activities ("Discoveries and
Works") shall be owned by COMSAT. Discoveries and Works shall include, without
limitation, inventions, computer programs (including documentation of such
programs), technical improvements, processes, drawings and works of authorship.
The Executive shall (a) promptly notify, make full disclosure to, and execute
and deliver any documents requested by, COMSAT to evidence or better assure
title to such Discoveries and Works in COMSAT, (b) assist COMSAT in obtaining or
maintaining for itself at its own expense United States and foreign patents,
copyrights, trade secret protection or other protection of any and all such
Discoveries and Works, and (c) promptly execute, whether during her employment
by COMSAT or thereafter, all applications or other endorsements necessary or
appropriate to maintain patents and other rights for COMSAT and to protect their
title thereto. Any Discoveries and Works which, within six months after the
termination of the Executive's employment by COMSAT, are made, disclosed,
reduced to a tangible or written form or description, or are reduced to practice
by the Executive and which pertain to work performed by the Executive while with
COMSAT shall, as between the Executive and COMSAT, be presumed to have been made
during the Executive's employment by COMSAT.
5. Termination. This Agreement shall remain in effect during the
-----------
Employment Period, and this Agreement and Executive's employment with COMSAT may
be terminated only as follows:
(a) By the Executive at any time upon forty-five (45) days advance
written notice to COMSAT for "Good Reason" (as defined below). In such event or
if the Executive's employment is terminated by COMSAT without "cause" (as
defined below), the Executive shall be entitled to receive the following
benefits until the earlier of (i) three (3) years from the effective date of
such termination, or (ii) the later of (A) July 19, 2003 or (B) one year from
such effective date: (i) her then current Base Salary; (ii) an Annual Bonus
equal to seventy percent (70%) of her then current Base Salary; and (iii) all
other benefits provided pursuant to Sections 2(c), (d), (e), (f) and (g) of this
Agreement, which shall be deemed to vest fully and immediately if subject to
vesting. The Executive shall have no obligation to seek other employment in the
event of her termination pursuant to this paragraph (a), and any such employment
shall not mitigate COMSAT's obligations hereunder.
"Good Reason" shall mean any of the following: (I) any substantial
reduction (except in connection with the termination of her employment
voluntarily by the Executive or by COMSAT for "cause" as defined below) by
COMSAT, without the Executive's
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<PAGE>
express written consent, of her responsibilities as President and Chief
Executive Officer of COMSAT; (II) any change in the reporting structure set
forth in Section 1(b) above; (III) any reduction in Executive's title; (IV) any
relocation of the Executive's offices outside the Washington, D.C. metropolitan
area by COMSAT without the Executive's express written consent prior to the
third anniversary of the Effective Date; (V) any material default of the
provisions of Section 2 of this Agreement which continues for twenty (20)
business days following COMSAT's receipt of written notice from the Executive
specifying the manner in which COMSAT is in default of such provisions; (VI) the
Executive is not reelected to or is removed from the Board; or (VII) any officer
superior to the Executive is appointed by COMSAT.
(b) By COMSAT at any time upon ten (10) days written notice to the
Executive, and after an opportunity to discuss such decision with the Board, for
"cause." For purposes of this Agreement, COMSAT shall have "cause" to terminate
the Executive's employment hereunder upon (i) the continued and deliberate
failure of the Executive to perform her material duties, in a manner
substantially consistent with the manner reasonably prescribed by the Board and
in accordance with the terms of this Agreement (other than any such failure
resulting from her incapacity due to physical or mental illness), which failure
continues for twenty (20) business days following the Executive's receipt of
written notice from the Board specifying the manner in which the Executive is in
default of her duties, (ii) the engaging by the Executive in intentional serious
misconduct that is materially and demonstrably injurious to COMSAT or its
reputation, which misconduct, if it is reasonably capable of being cured, is not
cured by the Executive within twenty (20) business days following the
Executive's receipt of written notice from the Board specifying the serious
misconduct engaged in by the Executive, (iii) the conviction of the Executive of
commission of a felony involving a crime of moral turpitude, whether or not such
felony was committed in connection with COMSAT's business, or (iv) any material
breach by the Executive of Section 8 hereof, which breach, if it is reasonably
capable of being cured, is not cured by the Executive within twenty (20)
business days following the Executive's receipt of written notice from the Board
specifying the breach of Section 8 by the Executive. If COMSAT shall terminate
the Executive's employment for "cause," COMSAT, in full satisfaction of all of
COMSAT's obligations under this Agreement and in respect of the termination of
the Executive's employment with COMSAT, shall pay the Executive her Base Salary
and all other compensation, benefits and reimbursement through the date of
termination of her employment.
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<PAGE>
(c) If, prior to the expiration or termination of the Employment
Period, the Executive shall have been unable to perform substantially her duties
by reason of disability or impairment of health for at least six consecutive
calendar months, COMSAT shall have the right to terminate this Agreement by
giving sixty (60) days written notice to the Executive to that effect, but only
if at the time such notice is given such disability or impairment is still
continuing. Following the expiration of the notice period, the Employment
Period shall terminate with the payment of the Executive's Base Salary for the
month in which notice is given and a prorated Annual Bonus through such month.
In the event of a dispute as to whether the Executive is disabled within the
meaning of this paragraph (a), or the duration of any disability, either party
may request a medical examination of the Executive by a doctor appointed by the
Chief of Staff of a hospital selected by mutual agreement of the parties, or as
the parties may otherwise agree, and the written medical opinion of such doctor
shall be conclusive and binding upon the parties as to whether the Executive has
become disabled and the date when such disability arose. The cost of any such
medical examinations shall be borne by COMSAT. In no event shall this Agreement
terminate before COMSAT's long-term disability benefits under applicable plans
become payable to the Executive.
(d) If, prior to the expiration or termination of the Employment
Period, the Executive shall die, COMSAT shall pay to the Executive's estate her
Base Salary and a prorated Annual Bonus through the end of the month in which
the Executive's death occurred, at which time the Employment Period shall
terminate without further notice.
(e) If either the Executive or COMSAT elects not to renew the
Executive's employment with COMSAT at the end of the Employment Period, the
Executive shall be entitled to receive payments under the SERP beginning on
August 1, 2003, the first day of the month after the end of such period,
calculated in accordance with the provisions of the plan based on the
Executive's retirement on that date, provided that the Board reserves the
--------
discretion to waive the applicable early retirement reduction under the plan in
such event. If the Executive's employment with COMSAT under this Agreement is
terminated either by the Executive for Good Reason or by COMSAT without "cause,"
the Executive shall be entitled to receive payments under the SERP beginning on
June 1, 2003, the first day of the month after the Executive's 55th birthday,
calculated in accordance with the provisions of the plan as if the Executive
retired on that date, provided that the Board reserves the discretion to waive
--------
the applicable early retirement reduction under the plan in such event.
6. Change of Control.
-----------------
(a) In the event that the Board in its sole discretion determines that
repeal of the ownership restrictions on COMSAT
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<PAGE>
capital stock in the Communications Satellite Act of 1962 is reasonably
imminent, the parties shall negotiate in good faith to adopt a "change of
control" provision applicable to this Agreement which shall set forth (i) the
events that shall constitute a "change of control" for this purpose, (ii) the
consequences under this Agreement if such a "change of control" occurs and (iii)
such other terms and conditions as the parties shall mutually agree to.
(b) Any "change of control" provisions adopted by COMSAT applicable to
any COMSAT benefits plans which provide for the accelerated vesting and/or
payment of any benefits for its senior executives shall apply to the Executive
to the same extent as other COMSAT senior executives on a most favored nations
basis with respect to the benefits affected by such COMSAT provisions.
(c) If a change of control (as defined for purposes of COMSAT's
benefit plans) occurs during the Employment Period, the change of control shall
not adversely affect any of the Executive's rights under this Agreement, and
this Agreement shall continue in effect according to its terms. In the event of
a change of control, the Executive shall be entitled to vesting and payment of
benefits according to the terms of this Agreement or COMSAT's applicable plans,
whichever is more favorable.
7. Certain Additional Payments.
---------------------------
(a) Notwithstanding anything in this Agreement to the contrary, in the
event that it shall be determined that any payment or benefit to the Executive,
whether pursuant to the terms of this Agreement or otherwise (a "Payment"),
would constitute an "excess parachute payment" within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended (the "Code"), the
Executive shall be paid an additional amount (a "Gross-Up Payment") such that
the net amount retained by the Executive after deduction of any excise tax
imposed under Section 4999 of the Code, and any federal, state and local income
and employment taxes and excise tax, including any interest and penalties with
respect thereto, imposed upon the Gross-Up Payment shall be equal to the
Payment. For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income tax and employment taxes at the
highest marginal rate of federal income and employment taxation in the calendar
year in which the Gross-Up Payment is to be made and state and local income
taxes at the highest marginal rate of taxation in the state and locality of the
Executive's residence on the date the Payment is made, net of the reduction in
federal income taxes that the Executive may obtain from the deduction of such
state and local income taxes.
(b) All determinations to be made under this Section 7 shall be made
by COMSAT's independent public accountant immediately prior to the date the
Payment is made (the "Accounting Firm"), which firm shall provide its
determinations
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and any supporting calculations and workpapers both to COMSAT and the Executive
within 10 days of such date. Any such determination by the Accounting Firm shall
be binding upon COMSAT and the Executive. Within five days after receipt of the
Accounting Firm's determination, COMSAT shall pay to the Executive the Gross-Up
Payment determined by the Accounting Firm.
(c) In the event that upon any audit by the Internal Revenue Service,
or by a state or local taxing authority, of a Payment or Gross-Up Payment, a
change is finally determined to be required in the amount of taxes paid by the
Executive, appropriate adjustments shall be made under this Section such that
the net amount which is payable to the Executive after taking into account the
provisions of Section 4999 of the Code and any interest and penalties shall
reflect the intent of the parties as expressed in paragraph (a) above, in the
manner determined by the Accounting Firm. The Executive shall notify COMSAT in
writing of any claim by the Internal Revenue Service that, if successful, would
require the payment by COMSAT of a Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than ten business days after the
Executive is informed in writing of such claim and shall apprise COMSAT of the
nature of such claim and the date on which such claim is requested to be paid.
The Executive shall not pay such claim prior to the expiration of the 30-day
period following the date on which it gives such notice to COMSAT (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due). If COMSAT notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall: (i) give COMSAT any information reasonably requested by COMSAT relating
to such claim; (ii) take such action in connection with contesting such claim as
COMSAT shall reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an
attorney reasonably selected by COMSAT; (iii) cooperate with COMSAT in good
faith in order effectively to contest such claim; and (iv) permit COMSAT to
participate in any proceedings relating to such claim; provided, however, that
-------- -------
COMSAT shall bear and pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis, for any excise
tax or income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this Section 7, COMSAT shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forgo any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as COMSAT
shall determine.
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COMSAT's control of the contest shall be limited to issues with respect to which
a Gross-Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
(d) All of the fees and expenses of the Accounting Firm in performing
the determinations referred to in paragraphs (b) and (c) above shall be borne
solely by COMSAT. COMSAT agrees to indemnify and hold harmless the Accounting
Firm from any and all claims, damages and expenses resulting from or relating to
its determinations pursuant to paragraphs (b) and (c) above, except for claims,
damages or expenses resulting from the gross negligence or willful misconduct of
the Accounting Firm.
8. Non-Competition.
---------------
(a) As an inducement for COMSAT to enter into this Agreement, the
Executive agrees that for a period commencing as of the Effective Date and
running through the earlier of (i) the end of the Employment Period if the
Executive remains employed by COMSAT for the entire Employment Period or (ii)
one year following termination of the Executive's employment by COMSAT for
"cause" as defined in Section 5(b) hereof, or by the Executive for any reason
(other than Good Reason, in which case the provisions of this paragraph (a)
shall not apply) (the "Non-Competition Period"), the Executive shall not,
without the prior written consent of the Board, engage or participate, directly
or indirectly, as principal, agent, employee, employer, consultant, stockholder,
partner or in any other individual capacity whatsoever, in the conduct or
management of, or own any stock or any other equity investment in or debt of,
any business which is competitive with any business conducted by COMSAT.
For the purpose of this Agreement, a business shall be considered to
be competitive with any business of COMSAT only if such business is engaged in
providing services or products (i) comparable to or competitive with (A) any
service or product currently provided by COMSAT during the Employment Period;
(B) any service or product which evolves from or results from enhancements in
the ordinary course during the Non-Competition Period to the services or
products provided by COMSAT as of the date hereof or during the Employment
Period; or (C) any future service or product of COMSAT as to which the Executive
materially and substantially participated in the development or enhancement, and
(ii) to customers, distributors or clients of the type served by COMSAT during
the Non-Competition Period.
(b) Non-Solicitation of Employees. During the Non-Competition Period,
-----------------------------
the Executive will not (for her own benefit or for the benefit of any person or
entity other than COMSAT) solicit, or assist any person or entity other than
COMSAT to solicit, any officer, director, executive or employee (other than
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an administrative or clerical employee) of COMSAT to leave his or her
employment.
(c) Reasonableness; Interpretation. The Executive acknowledges and
------------------------------
agrees, solely for purposes of determining the enforceability of this Section 8
(and not for purposes of determining the amount of money damages or for any
other reason), that (i) the markets served by COMSAT are national and
international and are not dependent on the geographic location of executive
personnel or the businesses by which they are employed; (ii) the length of the
Non-Competition Period is linked to the term of the Employment Period and the
severance benefit provided for in Section 5(a); and (iii) the above covenants
are manifestly reasonable on their face, and the parties expressly agree that
such restrictions have been designed to be reasonable and no greater than is
required for the protection of COMSAT. In the event that the covenants in this
Section 8 shall be determined by any court of competent jurisdiction in any
action to be unenforceable by reason of their extending for too great a period
of time or over too great a geographical area or by reason of their being too
extensive in any other respect, they shall be interpreted to extend only over
the maximum period of time for which they may be enforceable, and/or over the
maximum geographical area as to which they may be enforceable and/or to the
maximum extent in all other respects as to which they may be enforceable, all as
determined by such court in such action.
(d) Investment. Nothing in this Agreement shall be deemed to prohibit
----------
the Executive from owning equity or debt investments in any corporation,
partnership or other entity which is competitive with COMSAT, provided that such
--------
investments (i) are passive investments and constitute five percent (5%) or less
of the outstanding equity securities of such an entity the equity securities of
which are traded on a national securities exchange or other public market, or
(ii) are approved by the Board.
9. Indemnification; Liability Insurance. The Executive shall be entitled
------------------------------------
to indemnification and coverage under COMSAT's liability insurance policy for
directors and officers to the same extent as other directors and officers of
COMSAT. In addition, the Executive shall be indemnified to the maximum extent
permitted by law of the jurisdiction in which COMSAT is incorporated, as it may
be amended from time to time.
10. Enforcement.
-----------
(a) The Executive acknowledges that a breach of the covenants or
provisions contained in Sections 3, 4 and 8 of this Agreement will cause
irreparable damage to COMSAT, the exact amount of which will be difficult to
ascertain, and that the remedies at law for any such breach will be inadequate.
Accordingly, the Executive agrees that if the Executive breaches or threatens to
breach any of the covenants or provisions
-12-
<PAGE>
contained in Sections 3, 4 and 8 of this Agreement, in addition to any other
remedy which may be available at law or in equity, COMSAT shall be entitled to
seek specific performance and injunctive relief in a court of competent
jurisdiction after notice and a hearing.
(b) The parties expressly agree that any litigation directly or
indirectly arising out of or relating to this Agreement, including an action
brought by COMSAT pursuant to paragraph (a) of this Section 10, shall be brought
in a court of competent jurisdiction in the State of Maryland.
11. Severability. Should any provision of this Agreement be determined to
------------
be unenforceable or prohibited by any applicable law, such provision shall be
ineffective to the extent, and only to the extent, of such unenforceability or
prohibition without invalidating the balance of such provision or any other
provision of this Agreement, and any such unenforceability or prohibition in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
12. Assignment. The Executive's rights and obligations under this
----------
Agreement shall not be assignable by the Executive. COMSAT's rights and
obligations under this Agreement shall not be assignable by COMSAT except as
incident to the transfer, by merger or otherwise, of all or substantially all of
the business of COMSAT. In the event of any such assignment by COMSAT, all
rights of COMSAT hereunder shall inure to the benefit of the assignee, provided
--------
that all references herein to COMSAT shall be deemed to refer with equal force
and effect to any corporate or other successor of COMSAT.
13. Notices. All notices and other communications which are required or
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may be given under this Agreement shall be in writing and shall be deemed to
have been duly given when received if personally delivered; when transmitted if
transmitted by telecopy, electronic or digital transmission method, provided
that in such case it shall also be sent by certified or registered mail, return
receipt requested; the day after it is sent, if sent for next day delivery to a
domestic address by recognized overnight delivery service (e.g., Federal
----
Express); and upon receipt, if sent by certified or registered mail, return
receipt requested. Unless otherwise changed by notice, in each case notice
shall be sent to:
If to Executive, addressed to:
Betty C. Alewine
1742 Creek Crossing Road
Vienna, Virginia 22182
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<PAGE>
With a copy (not constituting notice) to:
Williams & Connolly
725 Twelfth Street, N.W.
Washington, DC 20005
Attention: Robert B. Barnett, Esq.
Telecopier No.: (202) 434-5029
If to COMSAT, addressed to:
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, MD 20817
Attention: Vice President, Human Resources
and Organization Development
Telecopier No.: (301) 214-7134
With a copy (not constituting notice) to:
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, MD 20817
Attention: Robert N. Davis, Jr.
Telecopier No.: (301) 214-7128
14. Miscellaneous. This Agreement constitutes the entire agreement, and
-------------
supersedes all prior agreements, of the parties hereto relating to the subject
matter hereof, and there are no written or oral terms or representations made by
either party other than those contained herein. No amendment, supplement,
modification or waiver of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. The validity, interpretation,
performance and enforcement of the Agreement shall be governed by the laws of
the State of Maryland without giving effect to conflicts of laws principles
thereof. The headings contained herein are for reference purposes only and
shall not in any way affect the meaning or interpretation of this Agreement.
The waiver by any party of a breach of any term or condition of this Agreement
by the other party shall not operate as nor be construed as a waiver of any
subsequent breach thereof or a waiver of a breach of any other term or condition
of this Agreement. This Agreement may be signed in two (2) or more
counterparts, each of which shall constitute an original but all of which
together shall form only a single instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
July 18, 1997.
/s/ Betty C. Alewine
---------------------------------------
Betty C. Alewine, Executive
COMSAT Corporation
By: /s/ Edwin I. Colodny
-----------------------------------
Edwin I. Colodny, Chairman
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<PAGE>
Exhibit 10
AMENDMENT TO
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made as
of September 18, 1998, by and between COMSAT Corporation ("COMSAT"), a District
of Columbia corporation, and Betty C. Alewine, a resident of the Commonwealth of
Virginia (the "Executive"). All capitalized terms used and not otherwise
defined herein shall have the meanings ascribed to such terms in the Employment
Agreement (as defined below).
WHEREAS, COMSAT and the Executive have entered into that certain
Amended and Restated Employment Agreement, dated as of July 19, 1996, and
amended as of May 16, 1997 and July 18, 1997 (the "Employment Agreement");
WHEREAS, COMSAT and the Executive reserved the right to amend the
Employment Agreement pursuant to the terms thereof; and
WHEREAS, COMSAT and the Executive desire to amend the Employment
Agreement, on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements made herein, and intending to be legally bound hereby, COMSAT and the
Executive agree as follows:
1. THE FIRST SENTENCE OF SECTION 1(A) OF THE EMPLOYMENT AGREEMENT IS HEREBY
AMENDED AND RESTATED IN ITS ENTIRETY AS SET FORTH BELOW:
"COMSAT shall employ the Executive to serve as President and Chief
Executive Officer of COMSAT or any successor entity for a period (the
"Employment Period") commencing on July 19, 1996 (the "Effective Date") and
continuing thereafter for successive three-year terms from each successive day
thereafter until July 19, 2003, unless terminated in accordance with the
provisions of this Agreement; provided, however, that upon the occurrence of a
Change in Control (as defined below), the Employment Period shall automatically
end on the third anniversary of the date of such Change in Control."
2. A NEW SECTION 2.1, AS SET FORTH BELOW, IS HEREBY ADDED TO THE EMPLOYMENT
AGREEMENT IMMEDIATELY FOLLOWING SECTION 2 THEREOF:
"2.1 Retention Bonuses.
-----------------
(a) Definitions. For purposes of this Agreement, the following terms
shall have the meanings indicated below:
(1) "Closing Date" shall mean the date of the closing of the Lockheed
Merger.
<PAGE>
(2) "Closing Bonus" shall mean a bonus payable pursuant to Section
2.1(b) below.
(3) "Drop Dead Date" shall mean the earlier of (i) the date of the
termination of the Lockheed Merger pursuant to the Lockheed Merger
Agreement, or (ii) the date of the second anniversary of the Signing Date.
(4) "Eighteen Month Anniversary Date" shall mean the date which is
eighteen months after the Closing Date.
(5) "Lockheed Merger" shall mean the proposed merger of COMSAT and
Lockheed Martin Corporation ("Lockheed") pursuant to the Lockheed Merger
Agreement.
(6) "Lockheed Merger Agreement" shall mean that certain Agreement and
Plan of Merger, dated as of September 18, 1998, among COMSAT, Lockheed and
Deneb Corporation.
(7) "Post-Closing Bonus" shall mean a bonus payable pursuant to
Section 2.1(c) below.
(8) "Signing Date" shall mean the date of the signing of the Lockheed
Merger Agreement.
(b) Closing Bonus. Subject to subsection (e) of this Section 2.1, if the
Executive is continuously employed by COMSAT from the Signing Date through the
Closing Date (or, if the Closing Date has not occurred as of the Drop Dead Date,
through the Drop Dead Date) and the Executive has not received or delivered a
notice of termination on or before the Closing Date (or, if the Closing Date has
not occurred as of the Drop Dead Date, on or before the Drop Dead Date), the
Executive shall receive a Closing Bonus in an amount to be determined as
follows: if the Closing Date occurs prior to the Drop Dead Date or if the
Closing Date has not occurred as of the Drop Dead Date, the amount of such
Closing Bonus shall be equal to one hundred and fifty percent (150%) of the sum
(such sum, the Executive's "Closing Date Total Cash Compensation") of (i) the
Executive's Base Salary as in effect on the Closing Date (or the Drop Dead Date,
if applicable) or, if higher, as in effect immediately prior to the Signing
Date, and (ii) the Executive's targeted Annual Bonus (assuming that all target
levels and performance measures are achieved to the maximum extent) under
COMSAT's Annual Incentive Plan for the year in which the Closing Date (or the
Drop Dead Date, if applicable) occurs or, if higher, the year in which the
Signing Date occurs.
(c) Post-Closing Bonus. Subject to subsection (e) of this Section 2.1, if
the Executive is continuously employed by COMSAT from the Signing Date through
the Eighteen Month Anniversary Date and the Executive has not received or
delivered a notice of termination on or
2
<PAGE>
before the Eighteen Month Anniversary Date, the Executive shall receive a Post-
Closing Bonus in an amount equal to one hundred percent (100%) of the sum of (i)
the Executive Base Salary as in effect on the Eighteen Month Anniversary Date
or, if higher, as in effect immediately prior to the Signing Date, and (ii) the
Executive's targeted Annual Bonus (assuming that all target levels and
performance measures are achieved to the maximum extent) under COMSAT's Annual
Incentive Plan for the year in which the Eighteen Month Anniversary Date occurs
or, if higher, the year in which the Signing Date occurs.
(d) Payment of Bonuses. Payment of the Executive's Closing Bonus will be
made as soon as practicable (but in no event more than thirty (30) days) after
the Closing Date or, if the Closing Date has not occurred as of the Drop Dead
Date, as soon as practicable (but in no event more than thirty (30) days) after
the Drop Dead Date. Payment of the Executive's Post-Closing Bonus will be made
as soon as practicable (but in no event more than thirty (30) days) after the
Eighteen Month Anniversary Date.
(e) Termination of Employment.
(1) Subject to paragraphs (2), (3) and (4) of this Section 2.1(e), in
order to receive a Closing Bonus or a Post-Closing Bonus, as the case may
be, the Executive must be employed by COMSAT on the Closing Date, the Drop
Dead Date, or the Eighteen Month Anniversary Date, as the case may be
(each, a "Determination Date"), and neither the Company nor the Executive
shall have delivered notice of termination of employment on or before the
applicable Determination Date. Notwithstanding any other provisions of this
Agreement to the contrary, if the Executive incurs a termination of
employment by COMSAT for Cause or by the Executive without Good Reason, the
Executive shall forfeit all rights to receive any bonus payments that have
not yet become payable to the Executive under this Section 2.1.
(2) If, on or before the Closing Date (or, if the Closing Date has
not occurred as of the Drop Dead Date, on or before the Drop Dead Date),
the Executive incurs a termination of employment (i) by COMSAT other than
for Cause (as defined below) or (ii) by the Executive for Good Reason (as
defined below), the Executive shall be entitled to receive a payment equal
to the amount of the Closing Bonus to which she would have been entitled
under this Section 2.1 had she remained continuously employed by COMSAT
through the Closing Date or the Drop Dead Date, as applicable, payable in
accordance with Section 2.1(d) above; provided, however, that for purposes
of this paragraph (2), any and all such amounts shall be calculated based
on (a) the Executive's Base Salary as in effect immediately prior to
termination or, if higher, as in effect immediately prior to the Signing
Date, and (b) her targeted Annual Bonus (assuming that all target levels
and performance measures are achieved to the maximum extent) for the year
in which such termination occurs or, if higher, the year in which the
Signing Date occurs. In the event of such termination, the Executive shall
forfeit all rights to receive the Post-Closing Bonus which has not yet
become payable to the Executive under this Section 2.1.
3
<PAGE>
(3) If, during the period commencing on the day after the Closing
Date and ending on the Eighteen Month Anniversary Date, the Executive
incurs a termination of employment (i) by COMSAT other than for Cause or
(ii) by the Executive for Good Reason, the Executive shall be entitled to
receive a payment equal to the amount of the Post-Closing Bonus to which
she would have been entitled under this Section 2.1 had she remained
continuously employed by COMSAT through the Eighteen Month Anniversary
Date; provided, however, that for purposes of this paragraph (3), any and
all such amounts shall be calculated based on (a) the Executive's Base
Salary as in effect immediately prior to termination or, if higher, as in
effect immediately prior to the Signing Date or the Closing Date (whichever
is greater), and (b) her targeted Annual Bonus (assuming that all target
levels and performance measures are achieved to the maximum extent) for the
year in which such termination occurs or, if higher, the year in which the
Signing Date or the Closing Date occurs (whichever is greater). Payment of
any amounts payable under this paragraph (3) will be made as soon as
practicable (but in no event more than thirty (30) days) after the date of
the Executive's termination of employment. In the event of such
termination, the Executive shall forfeit all rights to receive the Post-
Closing Bonus which the Executive would have been entitled to under this
Section 2.1 had the Executive remained continuously employed by COMSAT
through the Eighteen Month Anniversary Date. Notwithstanding the
foregoing, within the thirty (30) day period immediately following the
Closing Date, the Executive and Lockheed shall negotiate in good faith to
reach an agreement regarding the terms and conditions of the Executive's
employment following the Closing Date. In the event that the Executive and
Lockheed are unable to reach such an agreement and the Executive's
employment is terminated either by the Executive or COMSAT within such
thirty (30) day period, the Executive shall forfeit all rights to receive
her Post-Closing Bonus under this paragraph (3). The failure to reach such
an agreement or the Executive's termination within such thirty (30) day
period shall not otherwise affect any other rights of the Executive under
this Agreement.
(4) If, on or before the Closing Date (or, if the Closing Date has
not occurred as of the Drop Dead Date, on or before the Drop Dead Date),
the Executive incurs a termination of employment by reason of the
Executive's death or disability, the Executive shall be entitled to receive
a payment equal to the amount of the Closing Bonus to which she would have
been entitled hereunder had she remained continuously employed by COMSAT
through the Closing Date or the Drop Dead Date, as applicable, payable in
accordance with Section 2.1(d) above. If during the period commencing on
the day after the Closing Date and ending on the Eighteen Month Anniversary
Date, the Executive incurs a termination of employment by reason of the
Executive's death or disability, the Executive shall be entitled to receive
a payment equal to the amount of the Post-Closing Bonus to which she would
have been entitled hereunder had she remained continuously employed by
COMSAT through the Eighteen Month Anniversary Date, payable as soon as
practicable (but in no event more than thirty (30) days) after the date of
the Executive's termination. Notwithstanding the foregoing, any and all
amounts payable under this
4
<PAGE>
paragraph (4) shall be calculated based on (a) the Executive's Base Salary
as in effect immediately prior to termination, and (b) her targeted Annual
Bonus (assuming that all target levels and performance measures are
achieved to the maximum extent) for the year in which such termination
occurs. In the event of such termination, the Executive shall forfeit all
rights to receive any payments that have not yet become payable to the
Executive under Section 2.1 of this Agreement.
(f) Effectiveness. Notwithstanding anything contained herein, this
Section 2.1 shall be effective as of the Signing Date. If the Closing Date has
not occurred as of the Drop Dead Date, this Section 2.1 shall thereupon
automatically terminate and be of no further force and effect, provided that all
obligations accrued by the Executive prior to such termination of this Section
2.1 must be satisfied in full in accordance with the terms hereof."
3. SECTION 5(A) OF THE EMPLOYMENT AGREEMENT IS HEREBY AMENDED BY ADDING THE
FOLLOWING NEW PARAGRAPH AT THE END OF SUCH SECTION 5(A):
"Notwithstanding anything contained herein, the Executive shall be entitled
to the benefits and payments, if any, under this Section 5(a) only in the event
that the termination of the Executive's employment which gives rise to such
payments occurs prior to a Change in Control."
4. SECTION 5(E) OF THE EMPLOYMENT AGREEMENT IS HEREBY AMENDED AND RESTATED IN
ITS ENTIRETY AS SET FORTH BELOW:
"(e) If either the Executive or COMSAT elects not to renew the Executive's
employment with COMSAT at the end of the Employment Period, the Executive shall
be entitled to receive payments under the SERP beginning on August 1, 2003 (the
first day of the month after the end of such period), calculated in accordance
with the provisions of the SERP based on the Executive's retirement on that date
(i.e., without any reduction pursuant to Section 7.1(a) of the SERP), provided
--------
that the Board reserves the discretion to waive the applicable early retirement
reduction under the plan in such event. If the Executive's employment with
COMSAT under this Agreement is terminated either by the Executive for Good
Reason or by COMSAT without "cause," the Executive shall be entitled to receive
payments under the SERP beginning on June 1, 2003 (the first day of the month
after the Executive's 55th birthday), calculated in accordance with the
provisions of the SERP as if the Executive retired on that date (i.e., without
any reduction pursuant to Section 7.1(a) of the SERP), provided that the Board
--------
reserves the discretion to waive the applicable early retirement reduction under
the plan in such event."
5. SECTION 6 OF THE EMPLOYMENT AGREEMENT IS HEREBY AMENDED AND RESTATED IN ITS
ENTIRETY AS SET FORTH BELOW:
"6. Termination After Change in Control.
-----------------------------------
(a) Definitions. For purposes of this Agreement, the following terms
shall have the meanings indicated below:
5
<PAGE>
(1) A "Change in Control" of COMSAT shall be deemed to have occurred
upon the happening of any one of the following events:
(i) the acquisition by any Person (as defined below) of
Beneficial Ownership (as defined below) of fifty percent (50%) or more
of the combined voting power of the then outstanding voting securities
of COMSAT. For purposes of this Agreement, (A) the term "Person"
shall have the meaning set forth in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as modified and
used in Sections 13(d) and 14(d) thereof, except that such term shall
not include (I) COMSAT or any of its subsidiaries, (II) a trustee or
other fiduciary holding securities under an employee benefit plan of
COMSAT or any of its Affiliates (as defined in Rule 12b-2 promulgated
under Section 12 of the Exchange Act), (III) an underwriter
temporarily holding securities pursuant to an offering of such
securities, or (IV) a corporation owned, directly or indirectly, by
the stockholders of COMSAT in substantially the same proportions as
their ownership of stock of COMSAT; and (B) the term "Beneficial
Ownership" shall have the meaning set forth in Rule 13d-3 under the
Exchange Act (and the terms "Beneficial Ownership" and "Beneficially
Owned" shall have correlative meanings); or
(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 COMSAT 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; or
(iii) approval by the shareholders of COMSAT of a merger, share
exchange, swap, consolidation, recapitalization or other business
combination involving COMSAT and any other corporation or entity (a
"Transaction"), the effect of which would result in the combined
voting securities of COMSAT 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 COMSAT, or of
any surviving entity of, or parent entity following, the Transaction,
immediately after the effectiveness of the Transaction; or
(iv) approval by the shareholders of COMSAT of (A) a complete
liquidation or dissolution of COMSAT, or (B) the sale or disposition
by COMSAT of all or substantially all of its assets other than to a
corporation or
6
<PAGE>
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 by all or
substantially all of the individuals and entities who were the
Beneficial Owners of the voting securities of COMSAT 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) above 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 this Agreement; provided, further, that,
notwithstanding the foregoing, with respect to the Lockheed Merger, the
following provisions shall apply: (a) the signing of the Lockheed Merger
Agreement shall not constitute a Change in Control for purposes of this
Agreement, (b) the approval by the Board or COMSAT's shareholders of the
Lockheed Merger or the Lockheed Merger Agreement shall not constitute a
Change in Control for purposes of this Agreement, (c) the commencement or
the closing of the tender offer by Lockheed to purchase shares of COMSAT's
common stock as contemplated by the Lockheed Merger Agreement shall not
constitute a Change in Control for purposes of this Agreement, (d) the
acquisition by Lockheed or Regulus, LLC of COMSAT Government Systems, Inc.
shall not constitute a Change in Control for purposes of this Agreement,
and (e) upon the closing of the Lockheed Merger, a Change in Control of
COMSAT shall be deemed to have occurred for purposes of this Agreement.
(2) "Benefits Continuation Period" shall mean the period beginning on
the date of the Executive's termination of employment and ending on the
expiration of the Employment Period.
(3) "Protected Period" shall mean the period beginning on the date of
a Change in Control and ending on the last day of the Employment Period.
(4) "COMSAT" shall mean COMSAT Corporation, a District of Columbia
corporation, and, except in determining under paragraph (1) of this Section
6(a) whether or not any Change in Control of COMSAT has occurred, shall
include any successor to its business and/or assets.
(b) If a Change in Control of COMSAT occurs and the Executive's
employment is terminated during the Protected Period (A) by COMSAT other than
for Cause or disability, or (B) by the Executive for Good Reason, then, in lieu
of any other severance payments or
7
<PAGE>
severance benefits payable to the Executive under Section 5(a) hereof, COMSAT
shall pay the Executive the amounts, and provide the Executive with the
benefits, described below.
(1) The Executive shall be entitled to receive the following amounts
during the Benefits Continuation Period: (i) the Executive's Base Salary as
in effect immediately prior to the date of the Executive's termination of
employment or, if higher, as in effect immediately prior to the Change in
Control, and (ii) the Executive's targeted Annual Bonus (assuming that all
target levels and performance measures are achieved to the maximum extent)
for the year in which such date of termination occurs or, if higher, the
year in which the Change in Control occurs. The payments set forth in this
Section 6(b)(1) shall be made in accordance with COMSAT's regular practice
for compensating executive personnel actively at work, provided that in no
event shall such payments be made less frequently than twice per month;
(2) During the Benefits Continuation Period, COMSAT shall provide the
Executive and her dependents with life, disability, accident and health
insurance benefits substantially similar to those provided to the Executive
and her dependents immediately prior to the date of the Executive's
termination of employment or the date of the Change in Control, whichever
is more favorable to the Executive; provided, however, that such benefits
shall be provided on substantially the same terms and conditions and at the
same cost to the Executive as in effect immediately prior to such date of
termination or the date of the Change in Control, whichever is more
favorable to the Executive; provided, further, that if the Executive
becomes reemployed with another employer and is eligible to receive such
benefits under another employer's plans, COMSAT's obligations under this
Section 6(b)(2) shall be reduced to the extent that comparable benefits are
actually received by the Executive during the Benefits Continuation Period,
and any such benefits actually received by the Executive shall be reported
to COMSAT. In the event that the Executive is ineligible under the terms
of COMSAT's benefit plans to continue to be so covered, COMSAT shall
provide the Executive with substantially equivalent coverage through other
sources or will provide the Executive with a lump sum payment (determined
on a present value basis using the interest rate provided in section
1274(b)(2)(B) of the Code on the date of termination) in such amount that,
after all taxes on that amount, shall be equal to the cost to the Executive
of providing himself or herself such benefit coverage. At the termination
of the benefits coverage under the second preceding sentence, the Executive
and her dependents shall be entitled to continuation coverage pursuant to
section 4980B of the Code, sections 601-608 of the Employee Retirement
Income Security Act of 1974, as amended, and under any other applicable
law, to the extent required by such laws, as if the Executive had
terminated employment with COMSAT on the date such benefits coverage
terminates;
(3) COMSAT shall pay to the Executive any earned but unpaid portion
of the Executive's Base Salary as of the date of the Executive's
termination as in effect immediately prior to such date of termination is
given, plus all other amounts to which
8
<PAGE>
the Executive is entitled under any compensation plan or practice of COMSAT
at the time such payments are due;
(4) As of the date of the Executive's termination of employment, the
Executive shall be fully vested in her accrued benefits under the SERP and
the Executive's benefits shall be determined and shall be payable pursuant
to the terms of the SERP, subject to the following provisions,
notwithstanding any provision of the SERP to the contrary: (i) the
Executive's benefits shall be calculated without any reduction pursuant to
Section 7.1(a) or 5.2(b) of the SERP, (ii) the Executive's Benefits
Continuation Period shall be taken into account for the purpose of
determining the Executive's "Highest Average Earnings Period" under the
SERP, and the amounts payable to the Executive with respect to such periods
pursuant to Section 6(b)(1) shall constitute "Earnings" for such purposes,
provided that such amounts shall be treated as paid at the time such
amounts would have been paid had the Executive remained in the employ of
COMSAT through the end of the Employment Period; and
(5) COMSAT shall pay the Executive any Gross-Up Payment in accordance
with the provisions of Section 7 hereof.
(c) COMSAT shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of COMSAT to expressly assume this Agreement and all
obligations of COMSAT hereunder in the same manner and to the same extent that
COMSAT would be so obligated if no such succession had taken place. Failure of
COMSAT to obtain such assumption prior to the effectiveness of any such
succession shall entitle the Executive to terminate her employment and receive
compensation from COMSAT in the same amount and on the same terms to which the
Executive would be entitled hereunder if she terminates her employment for Good
Reason during the Protected Period, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the date of the Executive's termination of employment.
(d) Notwithstanding anything contained in this Agreement, nothing in this
Section 6 shall in any way affect or create any implication with respect to any
of the provisions of this Agreement as they apply to the Executive's employment
(or termination of employment) prior to a Change in Control.
6. A NEW SECTION 6.1, AS SET FORTH BELOW, IS HEREBY ADDED TO THE EMPLOYMENT
AGREEMENT IMMEDIATELY FOLLOWING SECTION 6 THEREOF:
"6.1 Additional SERP Enhancement.
----------------------------
Notwithstanding anything contained herein, if a Change in Control of COMSAT
occurs and (i) if the Executive and Lockheed shall have negotiated in good faith
during the thirty (30) day period immediately following the Closing Date to
reach an agreement regarding the terms
9
<PAGE>
and conditions of the Executive's employment following the Closing Date and the
Executive and Lockheed shall have been unable to reach such an agreement and
there is a termination of the Executive's employment with COMSAT either by the
Executive or COMSAT or (ii) if the Executive continues to be employed hereunder
until the expiration of the Employment Period, then in either event (i) or (ii)
the Executive shall be entitled to receive enhanced SERP benefits under Section
6(b)(4) of this Agreement.
7. THIS AMENDMENT SHALL BE AND IS HEREBY INCORPORATED IN AND FORMS A PART OF
THE EMPLOYMENT AGREEMENT.
8. THIS AMENDMENT SHALL BE EFFECTIVE AS OF SEPTEMBER 18, 1998.
9. EXCEPT AS SET FORTH HEREIN, THE EMPLOYMENT AGREEMENT SHALL REMAIN IN FULL
FORCE AND EFFECT.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to
Amended and Restated Employment Agreement as of September 18, 1998.
/s/ Betty C. Alewine
-----------------------------------
Betty C. Alewine, Executive
COMSAT Corporation
By: /s/ Robert G. Schwartz
-------------------------------
Robert G. Schwartz, Director
11
<PAGE>
Exhibit 11
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED AGREEMENT is made as of April 18, 1997, and
amended as of July 18, 1997, by and between COMSAT Corporation ("COMSAT"), a
District of Columbia corporation, and Allen Flower, a resident of the
Commonwealth of Virginia (the "Executive").
WHEREAS, the Executive serves as Vice President and Chief Financial Officer
of COMSAT;
WHEREAS, the Board of Directors of COMSAT (the "Board") believes it to be
in the best interests of COMSAT to enter into this Agreement to ensure the
Executive's continuing services to COMSAT; and
WHEREAS, COMSAT desires to continue to employ the Executive as Vice
President and Chief Financial Officer of COMSAT, and the Executive desires to
continue such employment, on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
made herein, and intending to be legally bound hereby, COMSAT and the Executive
agree as follows:
1. Employment; Duties.
------------------
(a) Employment and Employment Period. COMSAT shall employ the
--------------------------------
Executive to serve as Vice President and Chief Financial Officer of COMSAT or
any successor entity for a period (the "Employment Period") commencing on April
18, 1997 (the "Effective Date") and continuing thereafter until April 17, 2000
unless terminated in accordance with the provisions of this Agreement. Each 12-
month period ending on the anniversary date of the Effective Date is referred to
herein as a "year of the Employment Period."
(b) Offices, Duties and Responsibilities. The Executive shall
------------------------------------
report to the Chief Executive Officer of COMSAT. The Executive's offices
initially shall be located at COMSAT's present headquarters in Bethesda,
Maryland. The Executive shall have all duties and authority customarily accorded
a Vice President and Chief Financial Officer.
(c) Devotion to Interests of COMSAT. During the Employment
-------------------------------
Period, the Executive shall devote his best efforts and full business time and
attention to the performance of his duties hereunder. Notwithstanding the
foregoing, the Executive shall be entitled to undertake outside activities (e.g.
----
charitable, educational, personal interests, and board of directors memberships)
that do not compete with COMSAT and do not unreasonably or materially interfere
with the performance of his duties hereunder as reasonably determined by the
Chief Executive Officer in consultation with the Executive.
<PAGE>
2. Compensation and Fringe Benefits.
--------------------------------
(a) Base Compensation. COMSAT shall pay the Executive a base
-----------------
salary ("Base Salary") during the Employment Period, with payments made in
installments in accordance with COMSAT's regular practice for compensating
executive personnel, provided that in no event shall such payments be made less
frequently than twice per month. The initial annual Base Salary shall be
$210,000. Thereafter, the Base Salary for the Executive shall be reviewed for
increases annually during the Employment Period, consistent with COMSAT's normal
review process. Any Base Salary increases shall be approved by the Board in its
sole discretion.
(b) Bonus Compensation. The Executive will be eligible to
------------------
receive bonuses ("Annual Bonus") during the Employment Period under the Annual
Incentive Plan (the "AIP") in accordance with the following parameters: (i) the
target bonus for each year during the Employment Period shall be 50% of Base
Salary for achieving 100% of the target level for the performance measures and
(ii) the performance measures, the relative weight to be accorded each
performance measure and the amount of bonus payable in relation to the target
bonus for achieving more or less than 100% of the target level for the
performance measures shall be determined for each year during the Employment
Period by the Committee on Compensation and Management Development of the Board
(the "Compensation Committee").
(c) Fringe Benefits. The Executive shall be entitled to the
---------------
fringe benefits in effect for COMSAT senior executives from time to time,
including (i) participation in the COMSAT Directors and Executives Deferred
Compensation Plan, the COMSAT Split Dollar Insurance Plan, the COMSAT
Educational Grant Program, the COMSAT Retirement Plan, the COMSAT Savings and
Profit-Sharing Plan, the COMSAT 1995 Key Employee Stock Plan, the COMSAT
Employee Stock Purchase Plan, the COMSAT health and disability insurance
programs and the COMSAT financial planning program and (ii) reimbursement of
reasonable expenses incurred in connection with travel and entertainment related
to COMSAT's business and affairs. The Executive also shall be entitled to such
other or additional fringe benefits as are made available to COMSAT senior
executives during the Employment Period. COMSAT reserves the right to modify or
terminate at any time the fringe benefits provided to the senior management
group.
(d) SERP. The Executive shall continue to participate in the
----
COMSAT Insurance and Retirement Plan for Executives (the "SERP"). Any future
amendments or changes to the SERP which provide for a reduction, deferral or
elimination of benefits payable to participants in the SERP shall expressly not
apply to the Executive unless the Executive consents otherwise.
(e) Legal Expenses. The Executive shall be entitled to
--------------
reimbursement of the Executive's reasonable legal fees and costs incurred in
connection with the negotiation and execution of this Agreement, subject to a
maximum reimbursement of $5,000.
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<PAGE>
3. Trade Secrets; Return of Documents and Property.
-----------------------------------------------
(a) The Executive acknowledges that during the course of his
employment he will receive secret, confidential and proprietary information
("Trade Secrets") of COMSAT and of other companies with which COMSAT does
business on a confidential basis and that the Executive will create and develop
Trade Secrets for the benefit of COMSAT. Trade Secrets shall include, without
limitation, matters of a technical nature, such as scientific and engineering
secrets, "know-how," formulae, secret processes or machines, inventions and
computer programs (including documentation of such programs), and matters of a
business nature, such as customer data and proprietary information about costs,
profits, markets, sales and customer databases, and other information of a
similar nature to the extent not available to the public, and plans for future
development. All Trade Secrets disclosed to or created by the Executive shall
be deemed to be the exclusive property of COMSAT. The Executive acknowledges
that Trade Secrets have economic value to COMSAT due to the fact that Trade
Secrets are not generally known to the public or the trade and that the
unauthorized use or disclosure of Trade Secrets is likely to be detrimental to
the interests of COMSAT and its subsidiaries. The Executive therefore agrees to
hold in strict confidence and not to disclose to any third party any Trade
Secret acquired or created or developed by the Executive during the term of this
Agreement except (i) when the Executive uses or discloses any Trade Secret in
the proper course of the Executive's rendition of services to COMSAT hereunder,
(ii) when such Trade Secret becomes public knowledge other than through a breach
of this Agreement, or (iii) when the Executive is required to disclose any Trade
Secret pursuant to any valid legal process. The Executive shall notify COMSAT
immediately of any such legal process in order to enable COMSAT to contest such
legal process's validity. After termination of this Agreement, the Executive
shall not use or otherwise disclose Trade Secrets unless such information (x)
becomes public knowledge other than through a breach of this Agreement, (y) is
disclosed to the Executive by a third party who is entitled to receive and
disclose such Trade Secret, or (z) is required to be disclosed pursuant to any
valid legal process, in which case the Executive shall notify COMSAT immediately
of any such legal process in order to enable COMSAT to contest such legal
process's validity.
(b) Upon the effective date of notice of the Executive's or
COMSAT's election to terminate this Agreement, or at any time upon the request
of COMSAT, the Executive (or his heirs or personal representatives) shall
deliver to COMSAT (i) all documents and materials containing or otherwise
relating to Trade Secrets or other information relating to COMSAT's business and
affairs, and (ii) all documents, materials and other property belonging to
COMSAT, which in either case are in the possession or under the control of the
Executive (or his heirs or personal representatives). The Executive shall be
entitled to keep his personal records (including Rolodex) relating to COMSAT's
business and affairs except to the extent those contain documents or materials
described in clause (i) of the preceding sentence.
4. Discoveries and Works. All discoveries and works made or conceived
---------------------
by the Executive during his employment by COMSAT pursuant to this Agreement,
jointly or with others, that relate to COMSAT's activities ("Discoveries and
Works") shall be owned by
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<PAGE>
COMSAT. Discoveries and Works shall include, without limitation, inventions,
computer programs (including documentation of such programs), technical
improvements, processes, drawings and works of authorship. The Executive shall
(a) promptly notify, make full disclosure to, and execute and deliver any
documents requested by, COMSAT to evidence or better assure title to such
Discoveries and Works in COMSAT, (b) assist COMSAT in obtaining or maintain for
itself at its own expense United States and foreign patents, copyrights, trade
secret protection or other protection of any and all such Discoveries and Works,
and promptly execute, whether during his employment by COMSAT or thereafter, all
applications or other endorsements necessary or appropriate to maintain patents
and other rights for COMSAT and to protect its title thereto. Any Discoveries
and Works which, within six months after the termination of the Executive's
employment by COMSAT, are made, disclosed, reduced to a tangible or written form
or description, or are reduced to practice by the Executive and which pertain to
work performed by the Executive while with COMSAT shall, as between the
Executive and COMSAT, be presumed to have been made during the Executive's
employment by COMSAT.
5. Termination. This Agreement shall remain in effect during the
-----------
Employment Period, and this Agreement and Executive's employment with COMSAT may
be terminated only as follows:
(a) The Executive's employment may be terminated by the
Executive at any time upon 45 days advance written notice to COMSAT for "Good
Reason" (as defined below). In such event, or if the Executive's employment is
terminated by COMSAT without "Cause" (as defined below), the Executive shall be
entitled to receive the following benefits until the later of (x) one year after
the date of the Executive's termination of employment or (y) April 17, 2000:
(i) The Executive's Base Salary in effect at the date of
termination;
(ii) An Annual Bonus equal to 50% of his then current Base
Salary; and
(iii) All benefits provided pursuant to Sections 2(c) and (d) of
this Agreement, which shall be deemed to vest fully and immediately if subject
to vesting; provided, however, that in the event COMSAT is precluded from
providing coverage under any such benefit plan by applicable law or regulation,
COMSAT may provide the Executive with a payment equal to the cost of such
coverage without regard to tax effect. The foregoing benefits shall be
calculated in accordance with the provisions of the applicable plans as if the
Executive had retired on his date of termination, provided that the Board
reserves the discretion to waive the applicable early retirement reduction under
the SERP in such event.
(b) "Good Reason" shall mean the occurrence of any of the
following (other than for "Cause"), without the Executive's express written
consent: (i) the assignment to the Executive of duties inconsistent with the
Executive's status as an executive officer of COMSAT or a substantial reduction
by COMSAT of the Executive's responsibilities as an executive officer of COMSAT;
(ii) any relocation of the Executive's offices outside the Washington, D.C.
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<PAGE>
metropolitan area by COMSAT prior to the third anniversary of the Effective
Date; or (iii) any material default of the provisions of Section 2 of this
Agreement which continues for 20 business days following COMSAT's receipt of
written notice from the Executive specifying the manner in which COMSAT is in
default of such provisions. In order for the Executive to terminate employment
for "Good Reason," the Executive must give COMSAT written notice of his
termination of employment for "Good Reason," stating the basis for the
termination, within 90 days after the Executive learns of the occurrence of the
event constituting "Good Reason."
(c) The Executive's employment may be terminated by COMSAT for
Cause at any time upon ten days written notice to the Executive, and after
giving the Executive an opportunity to discuss such decision with the Board. For
purposes of this Agreement, COMSAT shall have "Cause" to terminate the
Executive's employment hereunder upon (i) the continued and deliberate failure
of the Executive to perform his material duties, in a manner substantially
consistent with the manner reasonably prescribed by the Board and in accordance
with the terms of this Agreement (other than any such failure resulting from his
incapacity due to physical or mental illness), which failure continues for 20
business days following the Executive's receipt of written notice from the Board
specifying the manner in which the Executive is in default of his duties, (ii)
the engaging by the Executive in intentional serious misconduct that is
materially and demonstrably injurious to COMSAT or its reputation, which
misconduct, if it is reasonably capable of being cured, is not cured by the
Executive within 20 business days following the Executive's receipt of written
notice from the Board specifying the serious misconduct engaged in by the
Executive, (iii) the conviction of the Executive of commission of a felony,
whether or not such felony was committed in connection with COMSAT's business,
or (iv) any material breach by the Executive of Section 10 hereof, which breach,
if it is reasonably capable of being cured, is not cured by the Executive within
20 business days following the Executive's receipt of written notice from the
Board specifying the breach of Section 10 by the Executive. If COMSAT shall
terminate the Executive's employment for "Cause," COMSAT, in full satisfaction
of all of COMSAT's obligations under this Agreement and in respect of the
termination of the Executive's employment with COMSAT, shall pay the Executive
his Base Salary and any other compensation, benefits and reimbursements due him
under COMSAT plans through the date of termination of his employment.
(d) If, prior to the expiration or termination of the Employment
Period, the Executive shall have been unable to perform substantially his duties
by reason of disability or impairment of health for at least six consecutive
calendar months, COMSAT shall have the right to terminate this Agreement by
giving 60 days written notice to the Executive to that effect, but only if at
the time such notice is given such disability or impairment is still continuing.
Following the expiration of the notice period, the Employment Period shall
terminate with the payment of the Executive's Base Salary for the month in which
notice is given and a prorated Annual Bonus through such month. In the event of
a dispute as to whether the Executive is disabled within the meaning of this
Section 5(d), or the duration of any disability, either party may request a
medical examination of the Executive by a doctor appointed by the Chief of Staff
of a hospital selected by mutual agreement of the parties, or as the parties may
otherwise agree,
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<PAGE>
and the written medical opinion of such doctor shall be conclusive and binding
upon the parties as to whether the Executive has become disabled and the date
when such disability arose. The cost of any such medical examinations shall be
borne by COMSAT. In no event shall this Agreement terminate before COMSAT's
long-term disability benefits under applicable plans become payable to the
Executive.
(e) If, prior to the expiration or termination of the Employment
Period, the Executive shall die, COMSAT shall pay to the Executive's estate his
Base Salary and a prorated Annual Bonus through the end of the month in which
the Executive's death occurred, at which time the Employment Period shall
terminate without further notice.
(f) If COMSAT elects not to renew the Executive's employment
with COMSAT at the end of the Employment Period and the Executive terminates
employment at the end of the Employment Period, the Executive shall be entitled
to receive the payments described in Section 5(a)(i), (ii) and (iii) for the
period beginning on the date of the Executive's termination of employment and
ending one year after the Executive's termination of employment.
(g) If either the Executive or COMSAT elects not to renew the
Executive's employment with COMSAT at the end of the Employment Period, the
Executive shall be entitled to receive payments under the SERP beginning on May
1, 2000 (the first day of the month after the end of such period), calculated in
accordance with the provisions of the SERP based on the Executive's retirement
on that date, provided that the Board reserves the discretion to waive the
applicable early retirement reduction under the SERP in such event. If the
Executive's employment with COMSAT under this Agreement is terminated either by
the Executive for Good Reason or by COMSAT without Cause before the Executive
attains age 55, the Executive shall be entitled to receive payments under the
SERP beginning on December 1, 1998 (the first day of the month after the
Executive's 55th birthday), calculated in accordance with the provisions of the
SERP as if the Executive retired on that date, provided that the Board reserves
the discretion to waive the applicable early retirement reduction under the SERP
in such event. If the Executive dies before payments begin under the SERP, the
Executive's surviving spouse, if any, shall receive under the SERP a $200,000
lump sum death benefit, plus annual benefit payments for a ten year period equal
to 50% of the Executive's accrued benefit under the SERP, according to the terms
of the SERP. The provisions of this Section 5(g) shall be administered
consistent with the terms of the SERP.
(h) If the Executive voluntarily terminates employment with
COMSAT, such termination shall not be considered a breach of this Agreement by
the Executive and shall not adversely affect the Executive's right to receive
such benefits as may be payable to the Executive on account of his termination
of employment under applicable COMSAT plans. The Executive shall remain
obligated to comply with the provisions of Sections 3, 4, 10 and 12 of this
Agreement.
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<PAGE>
6. Change of Control. If a change of control (as defined for purposes
-----------------
of COMSAT's benefit plans) occurs during the Employment Term, the change of
control shall not adversely affect any of the Executive's rights under this
Agreement, and this Agreement shall continue in effect according to its terms.
In the event of a change of control, the Executive shall be entitled to vesting
and payment of benefits according to the terms of this Agreement or COMSAT's
applicable plans, whichever is more favorable.
7. Certain Additional Payments.
---------------------------
(a) Notwithstanding anything in this Agreement to the contrary,
in the event that it shall be determined that any payment or benefit to the
Executive, whether pursuant to the terms of this Agreement or otherwise (a
"Payment"), would constitute an "excess parachute payment" within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), the
Executive shall be paid an additional amount (a "Gross-Up Payment") such that
the net amount retained by the Executive after deduction of any excise tax
imposed under Section 4999 of the Code, and any federal, state and local income
and employment taxes and excise tax, including any interest and penalties with
respect thereto, imposed upon the Gross-Up Payment shall be equal to the
Payment. For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income tax and employment taxes at the
highest marginal rate of federal income and employment taxation in the calendar
year in which the Gross-Up Payment is to be made and state and local income
taxes at the highest marginal rate of taxation in the state and locality of the
Executive's residence on the date the Payment is made, net of the reduction in
federal income taxes that the Executive may obtain from the deduction of such
state and local income taxes.
(b) All determinations to be made under this Section 7 shall be made
by COMSAT's independent public accountant immediately prior to the date the
Payment is made (the "Accounting Firm"), which firm shall provide its
determinations and any supporting calculations and workpapers both to COMSAT and
the Executive within 10 days of such date. Any such determination by the
Accounting Firm shall be binding upon COMSAT and the Executive. Within five days
after receipt of the Accounting Firm's determination, COMSAT shall pay to the
Executive the Gross-Up Payment determined by the Accounting Firm.
(c) In the event that upon any audit by the Internal Revenue Service,
or by a state or local taxing authority, of a Payment or Gross-Up Payment, a
change is finally determined to be required in the amount of taxes paid by the
Executive, appropriate adjustments shall be made under this Section such that
the net amount which is payable to the Executive after taking into account the
provisions of Section 4999 of the Code and any interest and penalties shall
reflect the intent of the parties as expressed in paragraph (a) above, in the
manner determined by the Accounting Firm. The Executive shall notify COMSAT in
writing of any claim by the Internal Revenue Service that, if successful, would
require the payment by COMSAT of a Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than ten business days after the
Executive is informed in writing of such claim and shall apprise COMSAT of the
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<PAGE>
nature of such claim and the date on which such claim is requested to be paid.
The Executive shall not pay such claim prior to the expiration of the 30-day
period following the date on which it gives such notice to COMSAT (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due). If COMSAT notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall: (i) give COMSAT any information reasonably requested by COMSAT relating
to such claim; (ii) take such action in connection with contesting such claim as
COMSAT shall reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an
attorney reasonably selected by COMSAT; (iii) cooperate with COMSAT in good
faith in order effectively to contest such claim; and (iv) permit COMSAT to
participate in any proceedings relating to such claim; provided, however, that
-------- -------
COMSAT shall bear and pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis, for any excise
tax or income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this Section 7, COMSAT shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forgo any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as COMSAT
shall determine. COMSAT's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.
(d) All of the fees and expenses of the Accounting Firm in
performing the determinations referred to in paragraphs (b) and (c) above shall
be borne solely by COMSAT. COMSAT agrees to indemnify and hold harmless the
Accounting Firm from any and all claims, damages and expenses resulting from or
relating to its determinations pursuant to paragraphs (b) and (c) above, except
for claims, damages or expenses resulting from the gross negligence or willful
misconduct of the Accounting Firm.
8. Survivorship. The respective rights and obligations of the parties
------------
hereunder shall survive any termination of the Executive's employment and the
Employment Term to the extent necessary to the intended preservation of such
rights and obligations.
9. Mitigation and No Offsets. The Executive shall not be required to
-------------------------
mitigate the amount of any payment or benefit provided for in this Agreement by
seeking other employment or otherwise and there shall be no offset against
amounts due the Executive under this Agreement on account of any remuneration
attributable to any subsequent employment that he may obtain. COMSAT's
obligations to make payments under this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including,
without
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<PAGE>
limitation, any set-off, counterclaim, recoupment, defense or other right which
COMSAT may have against the Executive or others.
10. Non-Competition.
---------------
(a) Non-Competition Agreement. As an inducement for COMSAT to
-------------------------
enter into this Agreement, the Executive agrees that, during the Non-Competition
Period (as defined below), the Executive shall not, without the prior written
consent of the Board, engage or participate, directly or indirectly, as
principal, agent, employee, employer, consultant, stockholder, partner or in any
other individual capacity whatsoever, in the conduct or management of, or own
any stock or any other equity investment in or debt of, any business which is
competitive with any business conducted by COMSAT. The Non-Competition Period
is the period commencing as of the Effective Date and running through the date
that is one year following the date on which the Executive's employment with
COMSAT terminates for any reason.
(b) Competitive Business. For the purpose of this Agreement, a
--------------------
business shall be considered to be competitive with any business of COMSAT only
if such business is engaged in providing services or products (i) comparable to
or competitive with (A) any service or product currently provided by COMSAT
during the Employment Period; (B) any service or product which evolves from or
results from enhancements in the ordinary course during the Non-Competition
Period to the services or products provided by COMSAT as of the date hereof or
during the Employment Period; or (C) any future service or product of COMSAT as
to which the Executive materially and substantially participated in the
development or enhancement, and (ii) to customers, distributors or clients of
the type served by COMSAT during the Non-Competition Period.
(c) Non-Solicitation of Employees. During the Non-Competition
-----------------------------
Period, the Executive will not (for his own benefit or for the benefit of any
person or entity other than COMSAT) solicit, or assist any person or entity
other than COMSAT to solicit, any officer, director, executive or employee
(other than an administrative or clerical employee) of COMSAT to leave his or
her employment.
(d) Reasonableness; Interpretation. The Executive acknowledges
------------------------------
and agrees, solely for purposes of determining the enforceability of this
Section 10 (and not for purposes of determining the amount of money damages or
for any other reason), that (i) the markets served by COMSAT are national and
international and are not dependent on the geographic location of executive
personnel or the businesses by which they are employed; (ii) the length of the
Non-Competition Period is linked to the term of the Employment Period; and (iii)
the above covenants are manifestly reasonable on their face, and the parties
expressly agree that such restrictions have been designed to be reasonable and
no greater than is required for the protection of COMSAT. In the event that the
covenants in this Section 10 shall be determined by any court of competent
jurisdiction in any action to be unenforceable by reason of their extending for
too
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<PAGE>
great a period of time or over too great a geographical area or by reason of
their being too extensive in any other respect, they shall be interpreted to
extend only over the maximum period of time for which they may be enforceable,
and/or over the maximum geographical area as to which they may be enforceable
and/or to the maximum extent in all other respects as to which they may be
enforceable, all as determined by such court in such action.
(e) Investment. Nothing in this Agreement shall be deemed to
----------
prohibit the Executive from owning equity or debt investments in any
corporation, partnership or other entity which is competitive with COMSAT,
provided that such investments (i) are passive investments and constitute five
percent or less of the outstanding equity securities of such an entity the
equity securities of which are traded on a national securities exchange or other
public market, or (ii) are approved by the Board.
11. Indemnification; Liability Insurance. The Executive shall be
------------------------------------
entitled to indemnification and coverage under COMSAT's liability insurance
policy for officers to the same extent as other officers of COMSAT. In
addition, the Executive shall be indemnified to the maximum extent permitted by
law of the jurisdiction in which COMSAT is incorporated, as it may be amended
from time to time.
12. Enforcement.
-----------
(a) The Executive acknowledges that a breach of the covenants or
provisions contained in Sections 3, 4 and 10 of this Agreement will cause
irreparable damage to COMSAT, the exact amount of which will be difficult to
ascertain, and that the remedies at law for any such breach will be inadequate.
Accordingly, the Executive agrees that if the Executive breaches or threatens to
breach any of the covenants or provisions contained in Sections 3, 4 and 10 of
this Agreement, in addition to any other remedy which may be available at law or
in equity, COMSAT shall be entitled to seek specific performance and injunctive
relief in a court of competent jurisdiction after notice and a hearing.
(b) The parties expressly agree that any litigation directly or
indirectly arising out of or relating to this Agreement, including an action
brought by COMSAT pursuant to this Section 12, shall be brought in a court of
competent jurisdiction in the State of Maryland.
13. Expenses of Enforcing the Agreement. If the Executive brings an
-----------------------------------
action to enforce any of the obligations of COMSAT under this Agreement and
prevails on any material issue, COMSAT shall pay the Executive on demand the
amount necessary to reimburse the Executive in full for all reasonable expenses
(including reasonable attorneys' fees and legal expenses) incurred by the
Executive in enforcing the obligations of COMSAT under this Agreement.
14. Severability. Should any provision of this Agreement be determined
------------
to be unenforceable or prohibited by any applicable law, such provision shall be
ineffective to the extent, and only to the extent, of such unenforceability or
prohibition without invalidating the
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<PAGE>
balance of such provision or any other provision of this Agreement, and any such
unenforceability or prohibition in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
15. Assignment. The Executive's rights and obligations under this
----------
Agreement shall not be assignable by the Executive. COMSAT's rights and
obligations under this Agreement shall not be assignable by COMSAT except as
incident to the transfer, by merger or otherwise, of all or substantially all of
the business of COMSAT. In the event of any such assignment by COMSAT, all
rights of COMSAT hereunder shall inure to the benefit of the assignee, provided
that all references herein to COMSAT shall be deemed to refer with equal force
and effect to any corporate or other successor of COMSAT.
16. Notices. All notices and other communications which are required or
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may be given under this Agreement shall be in writing and shall be deemed to
have been duly given when received if personally delivered; when transmitted if
transmitted by telecopy, electronic or digital transmission method, provided
that in such case it shall also be sent by certified or registered mail, return
receipt requested; the day after it is sent, if sent for next day delivery to a
domestic address by recognized overnight delivery service (e.g., Federal
----
Express); and upon receipt, if sent by certified or registered mail, return
receipt requested. Unless otherwise changed by notice, in each case notice
shall be sent to:
If to the Executive, addressed to:
Allen E. Flower
3601 N. Lincoln Street
Arlington, Virginia 22207
With a copy (not constituting notice) to:
Joseph E. Bachelder, Esquire
780 Third Avenue
New York, N.Y. 10017
If to COMSAT, addressed to:
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, MD 20817
Attention: Betty C. Alewine
Telecopier No.: (301) 214-7134
-11-
<PAGE>
With a copy (not constituting notice) to:
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, MD 20817
Attention: Robert N. Davis, Jr.
Telecopier No.: (301) 214-7128
17. Miscellaneous. This Agreement constitutes the entire agreement, and
-------------
supersedes all prior agreements, of the parties hereto relating to the subject
matter hereof, and there are no written or oral terms or representations made by
either party other than those contained herein. No amendment, supplement,
modification or waiver of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. The validity, interpretation,
performance and enforcement of the Agreement shall be governed by the laws of
the State of Maryland without giving effect to conflicts of laws principles
thereof. The headings contained herein are for reference purposes only and
shall not in any way affect the meaning or interpretation of this Agreement.
The waiver by any party of a breach of any term or condition of this Agreement
by the other party shall not operate as nor be construed as a waiver of any
subsequent breach thereof or a waiver of a breach of any other term or condition
of this Agreement. This Agreement may be signed in two or more counterparts,
each of which shall constitute an original but all of which together shall form
only a single instrument.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
July 18, 1997.
/s/ A. E. Flower
----------------------------------------
Allen Flower, Executive
COMSAT Corporation
By: /s/ Betty C. Alewine
-------------------------------------
Betty C. Alewine
President and Chief Executive Officer
-13-
<PAGE>
Exhibit 12
AMENDMENT TO
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made as of
September 18, 1998, by and between COMSAT Corporation ("COMSAT"), a District of
Columbia corporation, and Allen E. Flower, a resident of the Commonwealth of
Virginia (the "Executive"). All capitalized terms used and not otherwise
defined herein shall have the meanings ascribed to such terms in the Employment
Agreement (as defined below).
WHEREAS, COMSAT and the Executive have entered into that certain Amended
and Restated Employment Agreement, dated as of April 18, 1997, and amended as of
July 18, 1997 (the "Employment Agreement");
WHEREAS, COMSAT and the Executive reserved the right to amend the
Employment Agreement pursuant to the terms thereof; and
WHEREAS, COMSAT and the Executive desire to amend the Employment Agreement,
on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
made herein, and intending to be legally bound hereby, COMSAT and the Executive
agree as follows:
1. THE FIRST SENTENCE OF SECTION 1(A) OF THE EMPLOYMENT AGREEMENT IS HEREBY
AMENDED AND RESTATED IN ITS ENTIRETY AS SET FORTH BELOW:
"COMSAT shall employ the Executive to serve as Vice-President and Chief
Financial Officer of COMSAT or any successor entity for a period (the
"Employment Period") commencing on April 18, 1997 (the "Effective Date") and
continuing thereafter until April 17, 2002, unless terminated in accordance with
the provisions of this Agreement; provided, however, that upon the occurrence of
a Change in Control (as defined below), the Employment Period shall
automatically end on the third anniversary of the date of such Change in
Control."
2. A NEW SECTION 2.1, AS SET FORTH BELOW, IS HEREBY ADDED TO THE EMPLOYMENT
AGREEMENT IMMEDIATELY FOLLOWING SECTION 2 THEREOF:
"2.1 Retention Bonuses.
-----------------
(a) Definitions. For purposes of this Agreement, the following terms
shall have the meanings indicated below:
(1) "Closing Date" shall mean the date of the closing of the Lockheed
Merger.
<PAGE>
(2) "Closing Bonus" shall mean a bonus payable pursuant to Section
2.1(b) below.
(3) "Drop Dead Date" shall mean the earlier of (i) the date of the
termination of the Lockheed Merger pursuant to the Lockheed Merger
Agreement, or (ii) the date of the second anniversary of the Signing Date.
(4) "Eighteen Month Anniversary Date" shall mean the date which is
eighteen months after the Closing Date.
(5) "Lockheed Merger" shall mean the proposed merger of COMSAT and
Lockheed Martin Corporation ("Lockheed") pursuant to the Lockheed Merger
Agreement.
(6) "Lockheed Merger Agreement" shall mean that certain Agreement and
Plan of Merger, dated as of September 18, 1998, among COMSAT, Lockheed and
Deneb Corporation.
(7) "Post-Closing Bonus" shall mean a bonus payable pursuant to
Section 2.1(c) below.
(8) "Signing Date" shall mean the date of the signing of the Lockheed
Merger Agreement.
(b) Closing Bonus. Subject to subsection (e) of this Section 2.1, if the
Executive is continuously employed by COMSAT from the Signing Date through the
Closing Date (or, if the Closing Date has not occurred as of the Drop Dead Date,
through the Drop Dead Date) and the Executive has not received or delivered a
notice of termination on or before the Closing Date (or, if the Closing Date has
not occurred as of the Drop Dead Date, on or before the Drop Dead Date), the
Executive shall receive a Closing Bonus in an amount to be determined as
follows: if the Closing Date occurs prior to the Drop Dead Date or if the
Closing Date has not occurred as of the Drop Dead Date, the amount of such
Closing Bonus shall be equal to one hundred and fifty percent (150%) of the sum
(such sum, the Executive's "Closing Date Total Cash Compensation") of (i) the
Executive's Base Salary as in effect on the Closing Date (or the Drop Dead Date,
if applicable) or, if higher, as in effect immediately prior to the Signing
Date, and (ii) the Executive's targeted Annual Bonus (assuming that all target
levels and performance measures are achieved to the maximum extent) under
COMSAT's Annual Incentive Plan for the year in which the Closing Date (or the
Drop Dead Date, if applicable) occurs or, if higher, the year in which the
Signing Date occurs.
(c) Post-Closing Bonus. Subject to subsection (e) of this Section 2.1, if
the Executive is continuously employed by COMSAT from the Signing Date through
the Eighteen Month
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Anniversary Date and the Executive has not received or delivered a notice of
termination on or before the Eighteen Month Anniversary Date, the Executive
shall receive a Post-Closing Bonus in an amount equal to one hundred percent
(100%) of the sum of (i) the Executive Base Salary as in effect on the Eighteen
Month Anniversary Date or, if higher, as in effect immediately prior to the
Signing Date, and (ii) the Executive's targeted Annual Bonus (assuming that all
target levels and performance measures are achieved to the maximum extent) under
COMSAT's Annual Incentive Plan for the year in which the Eighteen Month
Anniversary Date occurs or, if higher, the year in which the Signing Date
occurs.
(d) Payment of Bonuses. Payment of the Executive's Closing Bonus will be
made as soon as practicable (but in no event more than thirty (30) days) after
the Closing Date or, if the Closing Date has not occurred as of the Drop Dead
Date, as soon as practicable (but in no event more than thirty (30) days) after
the Drop Dead Date. Payment of the Executive's Post-Closing Bonus will be made
as soon as practicable (but in no event more than thirty (30) days) after the
Eighteen Month Anniversary Date.
(e) Termination of Employment.
(1) Subject to paragraphs (2), (3) and (4) of this Section
2.1(e), in order to receive a Closing Bonus or a Post-Closing Bonus, as the
case may be, the Executive must be employed by COMSAT on the Closing Date,
the Drop Dead Date, or the Eighteen Month Anniversary Date, as the case may
be (each, a "Determination Date"), and neither the Company nor the
Executive shall have delivered notice of termination of employment on or
before the applicable Determination Date. Notwithstanding any other
provisions of this Agreement to the contrary, if the Executive incurs a
termination of employment by COMSAT for Cause or by the Executive without
Good Reason, the Executive shall forfeit all rights to receive any bonus
payments that have not yet become payable to the Executive under this
Section 2.1.
(2) If, on or before the Closing Date (or, if the Closing Date
has not occurred as of the Drop Dead Date, on or before the Drop Dead
Date), the Executive incurs a termination of employment (i) by COMSAT other
than for Cause (as defined below) or (ii) by the Executive for Good Reason
(as defined below), the Executive shall be entitled to receive a payment
equal to the amount of the Closing Bonus to which he would have been
entitled under this Section 2.1 had he remained continuously employed by
COMSAT through the Closing Date or the Drop Dead Date, as applicable,
payable in accordance with Section 2.1(d) above; provided, however, that
for purposes of this paragraph (2), any and all such amounts shall be
calculated based on (a) the Executive's Base Salary as in effect
immediately prior to termination or, if higher, as in effect immediately
prior to the Signing Date, and (b) his targeted Annual Bonus (assuming that
all target levels and performance measures are achieved to the maximum
extent) for the year in which such termination occurs or, if higher, the
year in which the Signing Date occurs. In the event of such termination,
the Executive shall forfeit all rights to receive
3
<PAGE>
the Post-Closing Bonus which has not yet become payable to the Executive
under this Section 2.1.
(3) If, during the period commencing on the day after the
Closing Date and ending on the Eighteen Month Anniversary Date, the
Executive incurs a termination of employment (i) by COMSAT other than for
Cause or (ii) by the Executive for Good Reason, the Executive shall be
entitled to receive a payment equal to the amount of the Post-Closing Bonus
to which he would have been entitled under this Section 2.1 had he remained
continuously employed by COMSAT through the Eighteen Month Anniversary
Date; provided, however, that for purposes of this paragraph (3), any and
all such amounts shall be calculated based on (a) the Executive's Base
Salary as in effect immediately prior to termination or, if higher, as in
effect immediately prior to the Signing Date or the Closing Date (whichever
is greater), and (b) his targeted Annual Bonus (assuming that all target
levels and performance measures are achieved to the maximum extent) for the
year in which such termination occurs or, if higher, the year in which the
Signing Date or the Closing Date occurs (whichever is greater). Payment of
any amounts payable under this paragraph (3) will be made as soon as
practicable (but in no event more than thirty (30) days) after the date of
the Executive's termination of employment. In the event of such
termination, the Executive shall forfeit all rights to receive the Post-
Closing Bonus to which the Executive would have been entitled under this
Section 2.1 had the Executive remained continuously employed by COMSAT
through the Eighteen Month Anniversary Date. Notwithstanding the foregoing,
within the thirty (30) day period immediately following the Closing Date,
the Executive and Lockheed shall negotiate in good faith to reach an
agreement regarding the terms and conditions of the Executive's employment
following the Closing Date. In the event that the Executive and Lockheed
are unable to reach such an agreement and the Executive's employment is
terminated either by the Executive or COMSAT within such thirty (30) day
period, the Executive shall forfeit all rights to receive his Post-Closing
Bonus under this paragraph (3). The failure to reach such an agreement or
the Executive's termination within such thirty (30) day period shall not
otherwise affect any other rights of the Executive under this Agreement.
(4) If, on or before the Closing Date (or, if the Closing Date
has not occurred as of the Drop Dead Date, on or before the Drop Dead
Date), the Executive incurs a termination of employment by reason of the
Executive's death or disability, the Executive shall be entitled to receive
a payment equal to the amount of the Closing Bonus to which he would have
been entitled hereunder had he remained continuously employed by COMSAT
through the Closing Date or the Drop Dead Date, as applicable, payable in
accordance with Section 2.1(d) above. If during the period commencing on
the day after the Closing Date and ending on the Eighteen Month Anniversary
Date, the Executive incurs a termination of employment by reason of the
Executive's death or disability, the Executive shall be entitled to receive
a payment equal to the amount of the Post-Closing Bonus to which he would
have been entitled hereunder had he remained continuously
4
<PAGE>
employed by COMSAT through the Eighteen Month Anniversary Date, payable as
soon as practicable (but in no event more than thirty (30) days) after the
date of the Executive's termination. Notwithstanding the foregoing, any and
all amounts payable under this paragraph (4) shall be calculated based on
(a) the Executive's Base Salary as in effect immediately prior to
termination, and (b) his targeted Annual Bonus (assuming that all target
levels and performance measures are achieved to the maximum extent) for the
year in which such termination occurs. In the event of such termination,
the Executive shall forfeit all rights to receive any payments that have
not yet become payable to the Executive under Section 2.1 of this
Agreement.
(f) Effectiveness. Notwithstanding anything contained herein, this
Section 2.1 shall be effective as of the Signing Date. If the Closing Date has
not occurred as of the Drop Dead Date, this Section 2.1 shall thereupon
automatically terminate and be of no further force and effect, provided that all
obligations accrued by the Executive prior to such termination of this Section
2.1 must be satisfied in full in accordance with the terms hereof."
3. SECTION 5(A) OF THE EMPLOYMENT AGREEMENT IS HEREBY AMENDED BY ADDING THE
FOLLOWING NEW PARAGRAPH AT THE END OF SUCH SECTION 5(A):
"Notwithstanding anything contained herein, the Executive shall be entitled
to the benefits and payments, if any, under this Section 5(a) only in the event
that the termination of the Executive's employment which gives rise to such
payments occurs prior to a Change in Control."
4. SECTION 5(G) OF THE EMPLOYMENT AGREEMENT IS HEREBY AMENDED AND RESTATED IN
ITS ENTIRETY AS SET FORTH BELOW:
"(g) If either the Executive or COMSAT elects not to renew the Executive's
employment with COMSAT at the end of the Employment Period, the Executive shall
be entitled to receive payments under the SERP beginning on May 1, 2002 (the
first day of the month after the end of such period), calculated in accordance
with the provisions of the SERP based on the Executive's retirement on that date
(i.e., without any reduction pursuant to Section 7.1(a) of the SERP), provided
--------
that the Board reserves the discretion to waive the applicable early retirement
reduction under the SERP in such event. If the Executive's employment with
COMSAT under this Agreement is terminated either by the Executive for Good
Reason or by COMSAT without Cause before the Executive attains age 55, the
Executive shall be entitled to receive payments under the SERP beginning on
December 1, 1998 (the first day of the month after the Executive's 55th
birthday), calculated in accordance with the provisions of the SERP as if the
Executive retired on that date (i.e., without any reduction pursuant to Section
7.1(a) of the SERP), provided that the Board reserves the discretion to waive
--------
the applicable early retirement reduction under the SERP in such event. If the
Executive dies before payments begin under the SERP, the Executive's surviving
spouse, if any, shall receive under the SERP a $200,000 lump sum death benefit,
plus annual benefit payments for a ten year period equal to 50% of the
Executive's
5
<PAGE>
accrued benefit under the SERP, according to the terms of the SERP. The
provisions of this Section 5(g) shall be administered consistent with the terms
of the SERP."
5. SECTION 6 OF THE EMPLOYMENT AGREEMENT IS HEREBY AMENDED AND RESTATED IN ITS
ENTIRETY AS SET FORTH BELOW:
"6. Termination After Change in Control.
-----------------------------------
(a) Definitions. For purposes of this Agreement, the following terms
shall have the meanings indicated below:
(1) A "Change in Control" of COMSAT shall be deemed to have occurred
upon the happening of any one of the following events:
(i) the acquisition by any Person (as defined below) of
Beneficial Ownership (as defined below) of fifty percent (50%) or more
of the combined voting power of the then outstanding voting securities
of COMSAT. For purposes of this Agreement, (A) the term "Person"
shall have the meaning set forth in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as modified and
used in Sections 13(d) and 14(d) thereof, except that such term shall
not include (I) COMSAT or any of its subsidiaries, (II) a trustee or
other fiduciary holding securities under an employee benefit plan of
COMSAT or any of its Affiliates (as defined in Rule 12b-2 promulgated
under Section 12 of the Exchange Act), (III) an underwriter
temporarily holding securities pursuant to an offering of such
securities, or (IV) a corporation owned, directly or indirectly, by
the stockholders of COMSAT in substantially the same proportions as
their ownership of stock of COMSAT; and (B) the term "Beneficial
Ownership" shall have the meaning set forth in Rule 13d-3 under the
Exchange Act (and the terms "Beneficial Ownership" and "Beneficially
Owned" shall have correlative meanings); or
(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 COMSAT 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; or
6
<PAGE>
(iii) approval by the shareholders of COMSAT of a merger, share
exchange, swap, consolidation, recapitalization or other business
combination involving COMSAT and any other corporation or entity (a
"Transaction"), the effect of which would result in the combined
voting securities of COMSAT 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 COMSAT, or of
any surviving entity of, or parent entity following, the Transaction,
immediately after the effectiveness of the Transaction; or
(iv) approval by the shareholders of COMSAT of (A) a complete
liquidation or dissolution of COMSAT, or (B) the sale or disposition
by COMSAT 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
by all or substantially all of the individuals and entities who were
the Beneficial Owners of the voting securities of COMSAT 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) above 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 this Agreement; provided, further, that,
notwithstanding the foregoing, with respect to the Lockheed Merger, the
following provisions shall apply: (a) the signing of the Lockheed Merger
Agreement shall not constitute a Change in Control for purposes of this
Agreement, (b) the approval by the Board or COMSAT's shareholders of the
Lockheed Merger or the Lockheed Merger Agreement shall not constitute a
Change in Control for purposes of this Agreement, (c) the commencement or
the closing of the tender offer by Lockheed to purchase shares of COMSAT's
common stock as contemplated by the Lockheed Merger Agreement shall not
constitute a Change in Control for purposes of this Agreement, (d) the
acquisition by Lockheed or Regulus, LLC of COMSAT Government Systems, Inc.
shall not constitute a Change in Control for purposes of this Agreement,
and (e) upon the closing of the Lockheed Merger, a Change in Control of
COMSAT shall be deemed to have occurred for purposes of this Agreement.
(2) "Benefits Continuation Period" shall mean the period beginning on
the date of the Executive's termination of employment and ending on the
expiration of the Employment Period.
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<PAGE>
(3) "Protected Period" shall mean the period beginning on the date of
a Change in Control and ending on the last day of the Employment Period.
(4) "COMSAT" shall mean COMSAT Corporation, a District of Columbia
corporation, and, except in determining under paragraph (1) of this Section
6(a) whether or not any Change in Control of COMSAT has occurred, shall
include any successor to its business and/or assets.
(b) If a Change in Control of COMSAT occurs and the Executive's
employment is terminated during the Protected Period (A) by COMSAT other than
for Cause or disability, or (B) by the Executive for Good Reason, then, in lieu
of any other severance payments or severance benefits payable to the Executive
under Section 5(a) hereof, COMSAT shall pay the Executive the amounts, and
provide the Executive with the benefits, described below.
(1) The Executive shall be entitled to receive the following amounts
during the Benefits Continuation Period: (i) the Executive's Base Salary as
in effect immediately prior to the date of the Executive's termination of
employment or, if higher, as in effect immediately prior to the Change in
Control, and (ii) the Executive's targeted Annual Bonus (assuming that all
target levels and performance measures are achieved to the maximum extent)
for the year in which such date of termination occurs or, if higher, the
year in which the Change in Control occurs. The payments set forth in this
Section 6(b)(1) shall be made in accordance with COMSAT's regular practice
for compensating executive personnel actively at work, provided that in no
event shall such payments be made less frequently than twice per month;
(2) During the Benefits Continuation Period, COMSAT shall provide the
Executive and his dependents with life, disability, accident and health
insurance benefits substantially similar to those provided to the Executive
and his dependents immediately prior to the date of the Executive's
termination of employment or the date of the Change in Control, whichever
is more favorable to the Executive; provided, however, that such benefits
shall be provided on substantially the same terms and conditions and at the
same cost to the Executive as in effect immediately prior to such date of
termination or the date of the Change in Control, whichever is more
favorable to the Executive; provided, further, that if the Executive
becomes reemployed with another employer and is eligible to receive such
benefits under another employer's plans, COMSAT's obligations under this
Section 6(b)(2) shall be reduced to the extent that comparable benefits are
actually received by the Executive during the Benefits Continuation Period,
and any such benefits actually received by the Executive shall be reported
to COMSAT. In the event that the Executive is ineligible under the terms
of COMSAT's benefit plans to continue to be so covered, COMSAT shall
provide the Executive with substantially equivalent coverage through other
sources or will provide the Executive with a lump sum payment (determined
on a present value basis using the interest rate provided in section
8
<PAGE>
1274(b)(2)(B) of the Code on the date of termination) in such amount that,
after all taxes on that amount, shall be equal to the cost to the Executive
of providing himself or herself such benefit coverage. At the termination
of the benefits coverage under the second preceding sentence, the Executive
and his dependents shall be entitled to continuation coverage pursuant to
section 4980B of the Code, sections 601-608 of the Employee Retirement
Income Security Act of 1974, as amended, and under any other applicable
law, to the extent required by such laws, as if the Executive had
terminated employment with COMSAT on the date such benefits coverage
terminates;
(3) COMSAT shall pay to the Executive any earned but unpaid portion of
the Executive's Base Salary as of the date of the Executive's termination
as in effect immediately prior to such date of termination is given, plus
all other amounts to which the Executive is entitled under any compensation
plan or practice of COMSAT at the time such payments are due;
(4) As of the date of the Executive's termination of employment, the
Executive shall be fully vested in his accrued benefits under the SERP and
the Executive's benefits shall be determined and shall be payable pursuant
to the terms of the SERP, subject to the following provisions,
notwithstanding any provision of the SERP to the contrary: (i) the
Executive's benefits shall be calculated without any reduction pursuant to
Section 7.1(a) or 5.2(b) of the SERP, (ii) the Executive's Benefits
Continuation Period shall be taken into account for the purpose of
determining the Executive's "Highest Average Earnings Period" under the
SERP, and the amounts payable to the Executive with respect to such periods
pursuant to Section 6(b)(1) shall constitute "Earnings" for such purposes,
provided that such payments shall be treated as paid at the time such
amounts would have been paid had the Executive remained in the employ of
COMSAT through the end of the Employment Period; and
(5) COMSAT shall pay the Executive any Gross-Up Payment in accordance
with the provisions of Section 7 hereof.
(c) COMSAT shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of COMSAT to expressly assume this Agreement and all
obligations of COMSAT hereunder in the same manner and to the same extent that
COMSAT would be so obligated if no such succession had taken place. Failure of
COMSAT to obtain such assumption prior to the effectiveness of any such
succession shall entitle the Executive to terminate his employment and receive
compensation from COMSAT in the same amount and on the same terms to which the
Executive would be entitled hereunder if he terminates his employment for Good
Reason during the Protected Period, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the date of the Executive's termination of employment.
9
<PAGE>
(d) Notwithstanding anything contained in this Agreement, nothing in
this Section 6 shall in any way affect or create any implication with respect to
any of the provisions of this Agreement as they apply to the Executive's
employment (or termination of employment) prior to a Change in Control.
6. A NEW SECTION 6.1, AS SET FORTH BELOW, IS HEREBY ADDED TO THE
EMPLOYMENT AGREEMENT IMMEDIATELY FOLLOWING SECTION 6 THEREOF:
"6.1 Additional SERP Enhancement.
----------------------------
Notwithstanding anything contained herein, if a Change in Control of
COMSAT occurs and (i) if the Executive and Lockheed shall have negotiated in
good faith during the thirty (30) day period immediately following the Closing
Date to reach an agreement regarding the terms and conditions of the Executive's
employment following the Closing Date and the Executive and Lockheed shall have
been unable to reach such an agreement and there is a termination of the
Executive's employment with COMSAT either by the Executive or COMSAT or (ii) if
the Executive continues to be employed hereunder until the expiration of the
Employment Period, then in either event (i) or (ii) the Executive shall be
entitled to receive enhanced SERP benefits under Section 6(b)(4) of this
Agreement.
7. THIS AMENDMENT SHALL BE AND IS HEREBY INCORPORATED IN AND FORMS A PART
OF THE EMPLOYMENT AGREEMENT.
8. THIS AMENDMENT SHALL BE EFFECTIVE AS OF SEPTEMBER 18, 1998.
9. EXCEPT AS SET FORTH HEREIN, THE EMPLOYMENT AGREEMENT SHALL REMAIN IN
FULL FORCE AND EFFECT.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment to Amended and Restated Employment Agreement as of September 18, 1998.
/s/ Allen E. Flower
------------------------------------------
Allen E. Flower, Executive
COMSAT Corporation
By: /s/ Betty C. Alewine
----------------------------------
Betty C. Alewine
President and Chief Executive Officer
10
<PAGE>
Exhibit 13
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED AGREEMENT is made as of April 18, 1997, and
amended as of July 18, 1997, by and between COMSAT Corporation ("COMSAT"), a
District of Columbia corporation, and Warren Y. Zeger, a resident of the State
of Maryland (the "Executive").
WHEREAS, the Executive serves as Vice President, General Counsel and
Secretary of COMSAT;
WHEREAS, the Board of Directors of COMSAT (the "Board") believes it to be
in the best interests of COMSAT to enter into this Agreement to ensure the
Executive's continuing services to COMSAT; and
WHEREAS, COMSAT desires to continue to employ the Executive as Vice
President, General Counsel and Secretary of COMSAT, and the Executive desires to
continue such employment, on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
made herein, and intending to be legally bound hereby, COMSAT and the Executive
agree as follows:
1. Employment; Duties.
------------------
(a) Employment and Employment Period. COMSAT shall employ the
--------------------------------
Executive to serve as Vice President, General Counsel and Secretary of COMSAT or
any successor entity for a period (the "Employment Period") commencing on April
18, 1997 (the "Effective Date") and continuing thereafter until April 17, 2002
unless terminated in accordance with the provisions of this Agreement. Each 12-
month period ending on the anniversary date of the Effective Date is referred to
herein as a "year of the Employment Period."
(b) Offices, Duties and Responsibilities. The Executive shall report
------------------------------------
to the Chief Executive Officer of COMSAT. The Executive's offices initially
shall be located at COMSAT's present headquarters in Bethesda, Maryland. The
Executive shall have all duties and authority customarily accorded a Vice
President, General Counsel and Secretary.
(c) Devotion to Interests of COMSAT. During the Employment Period,
the Executive shall devote his best efforts and full business time and attention
to the performance of his duties hereunder. Notwithstanding the foregoing, the
Executive shall be entitled to undertake outside activities (e.g. charitable,
---
educational, personal interests, and board of directors memberships) that do not
compete with COMSAT and do not
<PAGE>
unreasonably or materially interfere with the performance of his duties
hereunder as reasonably determined by the Chief Executive Officer in
consultation with the Executive.
2. Compensation and Fringe Benefits.
--------------------------------
(a) Base Compensation. COMSAT shall pay the Executive a base salary
-----------------
("Base Salary") during the Employment Period, with payments made in installments
in accordance with COMSAT's regular practice for compensating executive
personnel, provided that in no event shall such payments be made less frequently
than twice per month. The initial annual Base Salary shall be $230,000.
Thereafter, the Base Salary for the Executive shall be reviewed for increases
annually during the Employment Period, consistent with COMSAT's normal review
process. Any Base Salary increases shall be approved by the Board in its sole
discretion.
(b) Bonus Compensation. The Executive will be eligible to receive
------------------
bonuses ("Annual Bonus") during the Employment Period under the Annual Incentive
Plan (the "AIP") in accordance with the following parameters: (i) the target
bonus for each year during the Employment Period shall be 50% of Base Salary for
achieving 100% of the target level for the performance measures and (ii) the
performance measures, the relative weight to be accorded each performance
measure and the amount of bonus payable in relation to the target bonus for
achieving more or less than 100% of the target level for the performance
measures shall be determined for each year during the Employment Period by the
Committee on Compensation and Management Development of the Board (the
"Compensation Committee").
(c) Fringe Benefits. The Executive shall be entitled to the fringe
---------------
benefits in effect for COMSAT senior executives from time to time, including (i)
participation in the COMSAT Directors and Executives Deferred Compensation Plan,
the COMSAT Split Dollar Insurance Plan, the COMSAT Educational Grant Program,
the COMSAT Retirement Plan, the COMSAT Savings and Profit-Sharing Plan, the
COMSAT 1995 Key Employee Stock Plan, the COMSAT Employee Stock Purchase Plan,
the COMSAT health and disability insurance programs and the COMSAT financial
planning program and (ii) reimbursement of reasonable expenses incurred in
connection with travel and entertainment related to COMSAT's business and
affairs. The Executive also shall be entitled to such other or additional
fringe benefits as are made available to COMSAT senior executives during the
Employment Period. COMSAT reserves the right to modify or terminate at any time
the fringe benefits provided to the senior management group.
(d) SERP. The Executive shall continue to participate in the COMSAT
----
Insurance and Retirement Plan for Executives (the "SERP"). Any future
amendments or changes to the SERP which provide for a reduction, deferral or
elimination of benefits payable to participants in the SERP shall expressly not
apply to the Executive unless the Executive consents otherwise.
-2-
<PAGE>
(e) Legal Expenses. The Executive shall be entitled to reimbursement
--------------
of the Executive's reasonable legal fees and costs incurred in connection with
the negotiation and execution of this Agreement, subject to a maximum
reimbursement of $5,000.
3. Trade Secrets; Return of Documents and Property.
-----------------------------------------------
(a) The Executive acknowledges that during the course of his
employment he will receive secret, confidential and proprietary information
("Trade Secrets") of COMSAT and of other companies with which COMSAT does
business on a confidential basis and that the Executive will create and develop
Trade Secrets for the benefit of COMSAT. Trade Secrets shall include, without
limitation, matters of a technical nature, such as scientific and engineering
secrets, "know-how," formulae, secret processes or machines, inventions and
computer programs (including documentation of such programs), and matters of a
business nature, such as customer data and proprietary information about costs,
profits, markets, sales and customer databases, and other information of a
similar nature to the extent not available to the public, and plans for future
development. All Trade Secrets disclosed to or created by the Executive shall be
deemed to be the exclusive property of COMSAT. The Executive acknowledges that
Trade Secrets have economic value to COMSAT due to the fact that Trade Secrets
are not generally known to the public or the trade and that the unauthorized use
or disclosure of Trade Secrets is likely to be detrimental to the interests of
COMSAT and its subsidiaries. The Executive therefore agrees to hold in strict
confidence and not to disclose to any third party any Trade Secret acquired or
created or developed by the Executive during the term of this Agreement except
(i) when the Executive uses or discloses any Trade Secret in the proper course
of the Executive's rendition of services to COMSAT hereunder, (ii) when such
Trade Secret becomes public knowledge other than through a breach of this
Agreement, or (iii) when the Executive is required to disclose any Trade Secret
pursuant to any valid legal process. The Executive shall notify COMSAT
immediately of any such legal process in order to enable COMSAT to contest such
legal process's validity. After termination of this Agreement, the Executive
shall not use or otherwise disclose Trade Secrets unless such information (x)
becomes public knowledge other than through a breach of this Agreement, (y) is
disclosed to the Executive by a third party who is entitled to receive and
disclose such Trade Secret, or (z) is required to be disclosed pursuant to any
valid legal process, in which case the Executive shall notify COMSAT immediately
of any such legal process in order to enable COMSAT to contest such legal
process's validity.
(b) Upon the effective date of notice of the Executive's or COMSAT's
election to terminate this Agreement, or at any time upon the request of COMSAT,
the Executive (or his heirs or personal representatives) shall deliver to COMSAT
(i) all documents and materials containing or otherwise relating to Trade
Secrets or other information relating to COMSAT's business and affairs, and (ii)
all documents, materials and other property belonging to COMSAT, which in either
case are in the possession or under the control of the Executive (or his heirs
or personal representatives). The Executive shall be entitled to keep his
personal records (including Rolodex) relating to
-3-
<PAGE>
COMSAT's business and affairs except to the extent those contain documents or
materials described in clause (i) of the preceding sentence.
4. Discoveries and Works. All discoveries and works made or conceived by
---------------------
the Executive during his employment by COMSAT pursuant to this Agreement,
jointly or with others, that relate to COMSAT's activities ("Discoveries and
Works") shall be owned by COMSAT. Discoveries and Works shall include, without
limitation, inventions, computer programs (including documentation of such
programs), technical improvements, processes, drawings and works of authorship.
The Executive shall (a) promptly notify, make full disclosure to, and execute
and deliver any documents requested by, COMSAT to evidence or better assure
title to such Discoveries and Works in COMSAT, (b) assist COMSAT in obtaining or
maintain for itself at its own expense United States and foreign patents,
copyrights, trade secret protection or other protection of any and all such
Discoveries and Works, and promptly execute, whether during his employment by
COMSAT or thereafter, all applications or other endorsements necessary or
appropriate to maintain patents and other rights for COMSAT and to protect its
title thereto. Any Discoveries and Works which, within six months after the
termination of the Executive's employment by COMSAT, are made, disclosed,
reduced to a tangible or written form or description, or are reduced to practice
by the Executive and which pertain to work performed by the Executive while with
COMSAT shall, as between the Executive and COMSAT, be presumed to have been made
during the Executive's employment by COMSAT.
5. Termination. This Agreement shall remain in effect during the Employment
-----------
Period, and this Agreement and Executive's employment with COMSAT may be
terminated only as follows:
(a) The Executive's employment may be terminated by the Executive at
any time upon 45 days advance written notice to COMSAT for "Good Reason" (as
defined below). In such event, or if the Executive's employment is terminated by
COMSAT without "Cause" (as defined below), the Executive shall be entitled to
receive the following benefits until April 17, 2002:
(i) The Executive's Base Salary in effect at the date of
termination;
(ii) An Annual Bonus equal to 50% of his then current Base Salary;
and
(iii) All benefits provided pursuant to Sections 2(c) and (d) of this
Agreement, which shall be deemed to vest fully and immediately if subject to
vesting; provided, however, that in the event COMSAT is precluded from providing
coverage under any such benefit plan by applicable law or regulation, COMSAT may
provide the Executive with a payment equal to the cost of such coverage without
regard to tax effect. The foregoing benefits shall be calculated in accordance
with the provisions of the applicable plans as if the Executive had retired on
his date of termination, provided that
-4-
<PAGE>
the Board reserves the discretion to waive the applicable early retirement
reduction under the SERP in such event.
(b) "Good Reason" shall mean the occurrence of any of the following
(other than for "Cause"), without the Executive's express written consent: (i)
the assignment to the Executive of duties inconsistent with the Executive's
status as an executive officer of COMSAT or a substantial reduction by COMSAT of
the Executive's responsibilities as an executive officer of COMSAT; (ii) any
relocation of the Executive's offices outside the Washington, D.C. metropolitan
area by COMSAT prior to the third anniversary of the Effective Date; or (iii)
any material default of the provisions of Section 2 of this Agreement which
continues for 20 business days following COMSAT's receipt of written notice from
the Executive specifying the manner in which COMSAT is in default of such
provisions. In order for the Executive to terminate employment for "Good
Reason," the Executive must give COMSAT written notice of his termination of
employment for "Good Reason," stating the basis for the termination, within 90
days after the Executive learns of the occurrence of the event constituting
"Good Reason."
(c) The Executive's employment may be terminated by COMSAT for Cause
at any time upon 10 days written notice to the Executive, and after giving the
Executive an opportunity to discuss such decision with the Board. For purposes
of this Agreement, COMSAT shall have "Cause" to terminate the Executive's
employment hereunder upon (i) the continued and deliberate failure of the
Executive to perform his material duties, in a manner substantially consistent
with the manner reasonably prescribed by the Board and in accordance with the
terms of this Agreement (other than any such failure resulting from his
incapacity due to physical or mental illness), which failure continues for 20
business days following the Executive's receipt of written notice from the Board
specifying the manner in which the Executive is in default of his duties, (ii)
the engaging by the Executive in intentional serious misconduct that is
materially and demonstrably injurious to COMSAT or its reputation, which
misconduct, if it is reasonably capable of being cured, is not cured by the
Executive within 20 business days following the Executive's receipt of written
notice from the Board specifying the serious misconduct engaged in by the
Executive, (iii) the conviction of the Executive of commission of a felony,
whether or not such felony was committed in connection with COMSAT's business,
or (iv) any material breach by the Executive of Section 10 hereof, which breach,
if it is reasonably capable of being cured, is not cured by the Executive within
20 business days following the Executive's receipt of written notice from the
Board specifying the breach of Section 10 by the Executive. If COMSAT shall
terminate the Executive's employment for "Cause," COMSAT, in full satisfaction
of all of COMSAT's obligations under this Agreement and in respect of the
termination of the Executive's employment with COMSAT, shall pay the Executive
his Base Salary and any other compensation, benefits and reimbursements due him
under COMSAT plans through the date of termination of his employment.
(d) If, prior to the expiration or termination of the Employment
Period, the Executive shall have been unable to perform substantially his duties
by reason of
-5-
<PAGE>
disability or impairment of health for at least six consecutive calendar months,
COMSAT shall have the right to terminate this Agreement by giving 60 days
written notice to the Executive to that effect, but only if at the time such
notice is given such disability or impairment is still continuing. Following the
expiration of the notice period, the Employment Period shall terminate with the
payment of the Executive's Base Salary for the month in which notice is given
and a prorated Annual Bonus through such month. In the event of a dispute as to
whether the Executive is disabled within the meaning of this Section 5(d), or
the duration of any disability, either party may request a medical examination
of the Executive by a doctor appointed by the Chief of Staff of a hospital
selected by mutual agreement of the parties, or as the parties may otherwise
agree, and the written medical opinion of such doctor shall be conclusive and
binding upon the parties as to whether the Executive has become disabled and the
date when such disability arose. The cost of any such medical examinations shall
be borne by COMSAT. In no event shall this Agreement terminate before COMSAT's
long-term disability benefits under applicable plans become payable to the
Executive.
(e) If, prior to the expiration or termination of the Employment
Period, the Executive shall die, COMSAT shall pay to the Executive's estate his
Base Salary and a prorated Annual Bonus through the end of the month in which
the Executive's death occurred, at which time the Employment Period shall
terminate without further notice.
(f) If either the Executive or COMSAT elects not to renew the
Executive's employment with COMSAT at the end of the Employment Period, the
Executive shall be entitled to receive payments under the SERP beginning on May
1, 2002 (the first day of the month after the end of such period), calculated in
accordance with the provisions of the SERP based on the Executive's retirement
on that date, provided that the Board reserves the discretion to waive the
applicable early retirement reduction under the SERP in such event. If the
Executive's employment with COMSAT under this Agreement is terminated either by
the Executive for Good Reason or by COMSAT without Cause before the Executive
attains age 55, the Executive shall be entitled to receive payments under the
SERP beginning on April 1, 2002 (the first day of the month after the
Executive's 55th birthday), calculated in accordance with the provisions of the
SERP as if the Executive retired on that date, provided that the Board reserves
the discretion to waive the applicable early retirement reduction under the SERP
in such event. If the Executive dies before payments begin under the SERP, the
Executive's surviving spouse, if any, shall receive under the SERP a $200,000
lump sum death benefit, plus annual benefit payments for a ten year period equal
to 50% of the Executive's accrued benefit under the SERP, according to the terms
of the SERP. The provisions of this Section 5(f) shall be administered
consistent with the terms of the SERP.
(g) If the Executive voluntarily terminates employment with COMSAT,
such termination shall not be considered a breach of this Agreement by the
Executive and shall not adversely affect the Executive's right to receive such
benefits as may be payable to the Executive on account of his termination of
employment under applicable
-6-
<PAGE>
COMSAT plans. The Executive shall remain obligated to comply with the provisions
of Sections 3, 4, 10 and 12 of this Agreement.
6. Change of Control. If a change of control (as defined for purposes of
-----------------
COMSAT's benefit plans) occurs during the Employment Term, the change of control
shall not adversely affect any of the Executive's rights under this Agreement,
and this Agreement shall continue in effect according to its terms. In the event
of a change of control, the Executive shall be entitled to vesting and payment
of benefits according to the terms of this Agreement or COMSAT's applicable
plans, whichever is more favorable.
7. Certain Additional Payments.
---------------------------
(a) Notwithstanding anything in this Agreement to the contrary, in
the event that it shall be determined that any payment or benefit to the
Executive, whether pursuant to the terms of this Agreement or otherwise (a
"Payment"), would constitute an "excess parachute payment" within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), the
Executive shall be paid an additional amount (a "Gross-Up Payment") such that
the net amount retained by the Executive after deduction of any excise tax
imposed under Section 4999 of the Code, and any federal, state and local income
and employment taxes and excise tax, including any interest and penalties with
respect thereto, imposed upon the Gross-Up Payment shall be equal to the
Payment. For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income tax and employment taxes at the
highest marginal rate of federal income and employment taxation in the calendar
year in which the Gross-Up Payment is to be made and state and local income
taxes at the highest marginal rate of taxation in the state and locality of the
Executive's residence on the date the Payment is made, net of the reduction in
federal income taxes that the Executive may obtain from the deduction of such
state and local income taxes.
(b) All determinations to be made under this Section 7 shall be made
by COMSAT's independent public accountant immediately prior to the date the
Payment is made (the "Accounting Firm"), which firm shall provide its
determinations and any supporting calculations and workpapers both to COMSAT and
the Executive within 10 days of such date. Any such determination by the
Accounting Firm shall be binding upon COMSAT and the Executive. Within five days
after receipt of the Accounting Firm's determination, COMSAT shall pay to the
Executive the Gross-Up Payment determined by the Accounting Firm.
(c) In the event that upon any audit by the Internal Revenue Service,
or by a state or local taxing authority, of a Payment or Gross-Up Payment, a
change is finally determined to be required in the amount of taxes paid by the
Executive, appropriate adjustments shall be made under this Section such that
the net amount which is payable to the Executive after taking into account the
provisions of Section 4999 of the Code and any interest and penalties shall
reflect the intent of the parties as expressed in paragraph
-7-
<PAGE>
(a) above, in the manner determined by the Accounting Firm. The Executive shall
notify COMSAT in writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by COMSAT of a Gross-Up Payment. Such
notification shall be given as soon as practicable but no later than ten
business days after the Executive is informed in writing of such claim and shall
apprise COMSAT of the nature of such claim and the date on which such claim is
requested to be paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it gives such notice
to COMSAT (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If COMSAT notifies the Executive in writing
prior to the expiration of such period that it desires to contest such claim,
the Executive shall: (i) give COMSAT any information reasonably requested by
COMSAT relating to such claim; (ii) take such action in connection with
contesting such claim as COMSAT shall reasonably request in writing from time to
time, including, without limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by COMSAT; (iii) cooperate with
COMSAT in good faith in order effectively to contest such claim; and (iv) permit
COMSAT to participate in any proceedings relating to such claim; provided,
--------
however, that COMSAT shall bear and pay directly all costs and expenses
- -------
(including additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive harmless, on an after-tax
basis, for any excise tax or income tax (including interest and penalties with
respect thereto) imposed as a result of such representation and payment of costs
and expenses. Without limitation on the foregoing provisions of this Section 7,
COMSAT shall control all proceedings taken in connection with such contest and,
at its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim and may contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as COMSAT shall determine. COMSAT's control of the contest
shall be limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive shall be entitled to settle or contest, as
the case may be, any other issue raised by the Internal Revenue Service or any
other taxing authority.
(d) All of the fees and expenses of the Accounting Firm in performing
the determinations referred to in paragraphs (b) and (c) above shall be borne
solely by COMSAT. COMSAT agrees to indemnify and hold harmless the Accounting
Firm from any and all claims, damages and expenses resulting from or relating to
its determinations pursuant to paragraphs (b) and (c) above, except for claims,
damages or expenses resulting from the gross negligence or willful misconduct of
the Accounting Firm.
8. Survivorship. The respective rights and obligations of the parties
------------
hereunder shall survive any termination of the Executive's employment and the
Employment Term to the extent necessary to the intended preservation of such
rights and obligations.
9. Mitigation and No Offsets. The Executive shall not be required to
-------------------------
mitigate the amount of any payment or benefit provided for in this Agreement by
seeking other
-8-
<PAGE>
employment or otherwise and there shall be no offset against amounts due the
Executive under this Agreement on account of any remuneration attributable to
any subsequent employment that he may obtain. COMSAT's obligations to make
payments under this Agreement and otherwise to perform its obligations hereunder
shall not be affected by any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, defense or other right which COMSAT may have
against the Executive or others.
10. Non-Competition.
---------------
(a) Non-Competition Agreement. As an inducement for COMSAT to enter
-------------------------
into this Agreement, the Executive agrees that, during the Non-Competition
Period (as defined below), the Executive shall not, without the prior written
consent of the Board, engage or participate, directly or indirectly, as
principal, agent, employee, employer, consultant, stockholder, partner or in any
other individual capacity whatsoever, in the conduct or management of, or own
any stock or any other equity investment in or debt of, any business which is
competitive with any business conducted by COMSAT. The Non-Competition Period is
the period commencing as of the Effective Date and running through the date that
is one year following the date on which the Executive's employment with COMSAT
terminates for any reason.
(b) Competitive Business. For the purpose of this Agreement, a
--------------------
business shall be considered to be competitive with any business of COMSAT only
if such business is engaged in providing services or products (i) comparable to
or competitive with (A) any service or product currently provided by COMSAT
during the Employment Period; (B) any service or product which evolves from or
results from enhancements in the ordinary course during the Non-Competition
Period to the services or products provided by COMSAT as of the date hereof or
during the Employment Period; or (C) any future service or product of COMSAT as
to which the Executive materially and substantially participated in the
development or enhancement, and (ii) to customers, distributors or clients of
the type served by COMSAT during the Non-Competition Period. Without limiting
the foregoing, employment of the Executive by a law firm as a lawyer will not be
considered employment with a competitor for purposes of this Agreement.
(c) Non-Solicitation of Employees. During the Non-Competition Period,
-----------------------------
the Executive will not (for his own benefit or for the benefit of any person or
entity other than COMSAT) solicit, or assist any person or entity other than
COMSAT to solicit, any officer, director, executive or employee (other than an
administrative or clerical employee) of COMSAT to leave his or her employment.
(d) Reasonableness; Interpretation. The Executive acknowledges and
------------------------------
agrees, solely for purposes of determining the enforceability of this Section 10
(and not for purposes of determining the amount of money damages or for any
other reason), that (i) the markets served by COMSAT are national and
international and are not dependent on the geographic location of executive
personnel or the businesses by which they are
-9-
<PAGE>
employed; (ii) the length of the Non-Competition Period is linked to the term of
the Employment Period; and (iii) the above covenants are manifestly reasonable
on their face, and the parties expressly agree that such restrictions have been
designed to be reasonable and no greater than is required for the protection of
COMSAT. In the event that the covenants in this Section 10 shall be determined
by any court of competent jurisdiction in any action to be unenforceable by
reason of their extending for too great a period of time or over too great a
geographical area or by reason of their being too extensive in any other
respect, they shall be interpreted to extend only over the maximum period of
time for which they may be enforceable, and/or over the maximum geographical
area as to which they may be enforceable and/or to the maximum extent in all
other respects as to which they may be enforceable, all as determined by such
court in such action.
(e) Investment. Nothing in this Agreement shall be deemed to prohibit
----------
the Executive from owning equity or debt investments in any corporation,
partnership or other entity which is competitive with COMSAT, provided that such
investments (i) are passive investments and constitute five percent or less of
the outstanding equity securities of such an entity the equity securities of
which are traded on a national securities exchange or other public market, or
(ii) are approved by the Board.
11. Indemnification; Liability Insurance. The Executive shall be entitled
------------------------------------
to indemnification and coverage under COMSAT's liability insurance policy for
officers to the same extent as other officers of COMSAT. In addition, the
Executive shall be indemnified to the maximum extent permitted by law of the
jurisdiction in which COMSAT is incorporated, as it may be amended from time to
time.
12. Enforcement.
-----------
(a) The Executive acknowledges that a breach of the covenants or
provisions contained in Sections 3, 4 and 10 of this Agreement will cause
irreparable damage to COMSAT, the exact amount of which will be difficult to
ascertain, and that the remedies at law for any such breach will be inadequate.
Accordingly, the Executive agrees that if the Executive breaches or threatens to
breach any of the covenants or provisions contained in Sections 3, 4 and 10 of
this Agreement, in addition to any other remedy which may be available at law or
in equity, COMSAT shall be entitled to seek specific performance and injunctive
relief in a court of competent jurisdiction after notice and a hearing.
(b) The parties expressly agree that any litigation directly or
indirectly arising out of or relating to this Agreement, including an action
brought by COMSAT pursuant to this Section 12, shall be brought in a court of
competent jurisdiction in the State of Maryland.
13. Expenses of Enforcing the Agreement. If the Executive brings an action
-----------------------------------
to enforce any of the obligations of COMSAT under this Agreement and prevails on
any
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<PAGE>
material issue, COMSAT shall pay the Executive on demand the amount necessary to
reimburse the Executive in full for all reasonable expenses (including
reasonable attorneys' fees and legal expenses) incurred by the Executive in
enforcing the obligations of COMSAT under this Agreement.
14. Severability. Should any provision of this Agreement be determined to
------------
be unenforceable or prohibited by any applicable law, such provision shall be
ineffective to the extent, and only to the extent, of such unenforceability or
prohibition without invalidating the balance of such provision or any other
provision of this Agreement, and any such unenforceability or prohibition in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
15. Assignment. The Executive's rights and obligations under this Agreement
----------
shall not be assignable by the Executive. COMSAT's rights and obligations under
this Agreement shall not be assignable by COMSAT except as incident to the
transfer, by merger or otherwise, of all or substantially all of the business of
COMSAT. In the event of any such assignment by COMSAT, all rights of COMSAT
hereunder shall inure to the benefit of the assignee, provided that all
references herein to COMSAT shall be deemed to refer with equal force and effect
to any corporate or other successor of COMSAT.
16. Notices. All notices and other communications which are required or
-------
may be given under this Agreement shall be in writing and shall be deemed to
have been duly given when received if personally delivered; when transmitted if
transmitted by telecopy, electronic or digital transmission method, provided
that in such case it shall also be sent by certified or registered mail, return
receipt requested; the day after it is sent, if sent for next day delivery to a
domestic address by recognized overnight delivery service (e.g., Federal
----
Express); and upon receipt, if sent by certified or registered mail, return
receipt requested. Unless otherwise changed by notice, in each case notice
shall be sent to:
If to the Executive, addressed to:
Warren Y. Zeger
10705 Stapleford Hall Drive
Potomac, MD 20854
With a copy (not constituting notice) to:
Joseph E. Bachelder, Esquire
780 Third Avenue
New York, N.Y. 10017
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<PAGE>
If to COMSAT, addressed to:
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, MD 20817
Attention: Betty C. Alewine
Telecopier No.: (301) 214-7134
With a copy (not constituting notice) to:
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, MD 20817
Attention: Robert N. Davis, Jr.
Telecopier No.: (301) 214-7128
17. Miscellaneous. This Agreement constitutes the entire agreement, and
-------------
supersedes all prior agreements, of the parties hereto relating to the subject
matter hereof, and there are no written or oral terms or representations made by
either party other than those contained herein. No amendment, supplement,
modification or waiver of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. The validity, interpretation,
performance and enforcement of the Agreement shall be governed by the laws of
the State of Maryland without giving effect to conflicts of laws principles
thereof. The headings contained herein are for reference purposes only and
shall not in any way affect the meaning or interpretation of this Agreement.
The waiver by any party of a breach of any term or condition of this Agreement
by the other party shall not operate as nor be construed as a waiver of any
subsequent breach thereof or a waiver of a breach of any other term or condition
of this Agreement. This Agreement may be signed in two or more counterparts,
each of which shall constitute an original but all of which together shall form
only a single instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
July 18, 1997.
/s/ Warren Y. Zeger
-------------------------------
Warren Y. Zeger, Executive
COMSAT Corporation
By: /s/ Betty C. Alewine
--------------------------
Betty C. Alewine
President and Chief Executive Officer
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<PAGE>
Exhibit 14
AMENDMENT TO
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made as of
September 18, 1998, by and between COMSAT Corporation ("COMSAT"), a District of
Columbia corporation, and Warren Y. Zeger, a resident of the State of Maryland
(the "Executive"). All capitalized terms used and not otherwise defined herein
shall have the meanings ascribed to such terms in the Employment Agreement (as
defined below).
WHEREAS, COMSAT and the Executive have entered into that certain Amended
and Restated Employment Agreement, dated as of April 18, 1997, and amended as of
July 18, 1997 (the "Employment Agreement");
WHEREAS, COMSAT and the Executive reserved the right to amend the
Employment Agreement pursuant to the terms thereof; and
WHEREAS, COMSAT and the Executive desire to amend the Employment Agreement,
on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
made herein, and intending to be legally bound hereby, COMSAT and the Executive
agree as follows:
1. THE FIRST SENTENCE OF SECTION 1(A) OF THE EMPLOYMENT AGREEMENT IS HEREBY
AMENDED AND RESTATED IN ITS ENTIRETY AS SET FORTH BELOW:
"COMSAT shall employ the Executive to serve as Vice-President, General
Counsel and Secretary of COMSAT or any successor entity for a period (the
"Employment Period") commencing on April 18, 1997 (the "Effective Date") and
continuing thereafter until April 17, 2002, unless terminated in accordance with
the provisions of this Agreement; provided, however, that upon the occurrence of
a Change in Control (as defined below), the Employment Period shall
automatically end on the third anniversary of the date of such Change in
Control."
2. A NEW SECTION 2.1, AS SET FORTH BELOW, IS HEREBY ADDED TO THE EMPLOYMENT
AGREEMENT IMMEDIATELY FOLLOWING SECTION 2 THEREOF:
"2.1 Retention Bonuses.
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(a) Definitions. For purposes of this Agreement, the following terms
shall have the meanings indicated below:
(1) "Closing Date" shall mean the date of the closing of the Lockheed
Merger.
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(2) "Closing Bonus" shall mean a bonus payable pursuant to Section
2.1(b) below.
(3) "Drop Dead Date" shall mean the earlier of (i) the date of the
termination of the Lockheed Merger pursuant to the Lockheed Merger
Agreement, or (ii) the date of the second anniversary of the Signing Date.
(4) "Eighteen Month Anniversary Date" shall mean the date which is
eighteen months after the Closing Date.
(5) "Lockheed Merger" shall mean the proposed merger of COMSAT and
Lockheed Martin Corporation ("Lockheed") pursuant to the Lockheed Merger
Agreement.
(6) "Lockheed Merger Agreement" shall mean that certain Agreement and
Plan of Merger, dated as of September 18, 1998, among COMSAT, Lockheed and
Deneb Corporation.
(7) "Post-Closing Bonus" shall mean a bonus payable pursuant to
Section 2.1(c) below.
(8) "Signing Date" shall mean the date of the signing of the Lockheed
Merger Agreement.
(b) Closing Bonus. Subject to subsection (e) of this Section 2.1, if the
Executive is continuously employed by COMSAT from the Signing Date through the
Closing Date (or, if the Closing Date has not occurred as of the Drop Dead Date,
through the Drop Dead Date) and the Executive has not received or delivered a
notice of termination on or before the Closing Date (or, if the Closing Date has
not occurred as of the Drop Dead Date, on or before the Drop Dead Date), the
Executive shall receive a Closing Bonus in an amount to be determined as
follows: if the Closing Date occurs prior to the Drop Dead Date or if the
Closing Date has not occurred as of the Drop Dead Date, the amount of such
Closing Bonus shall be equal to one hundred and fifty percent (150%) of the sum
(such sum, the Executive's "Closing Date Total Cash Compensation") of (i) the
Executive's Base Salary as in effect on the Closing Date (or the Drop Dead Date,
if applicable) or, if higher, as in effect immediately prior to the Signing
Date, and (ii) the Executive's targeted Annual Bonus (assuming that all target
levels and performance measures are achieved to the maximum extent) under
COMSAT's Annual Incentive Plan for the year in which the Closing Date (or the
Drop Dead Date, if applicable) occurs or, if higher, the year in which the
Signing Date occurs.
(c) Post-Closing Bonus. Subject to subsection (e) of this Section 2.1, if
the Executive is continuously employed by COMSAT from the Signing Date through
the Eighteen Month Anniversary Date and the Executive has not received or
delivered a notice of termination on or
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before the Eighteen Month Anniversary Date, the Executive shall receive a Post-
Closing Bonus in an amount equal to one hundred percent (100%) of the sum of (i)
the Executive Base Salary as in effect on the Eighteen Month Anniversary Date
or, if higher, as in effect immediately prior to the Signing Date, and (ii) the
Executive's targeted Annual Bonus (assuming that all target levels and
performance measures are achieved to the maximum extent) under COMSAT's Annual
Incentive Plan for the year in which the Eighteen Month Anniversary Date occurs
or, if higher, the year in which the Signing Date occurs.
(d) Payment of Bonuses. Payment of the Executive's Closing Bonus will be
made as soon as practicable (but in no event more than thirty (30) days) after
the Closing Date or, if the Closing Date has not occurred as of the Drop Dead
Date, as soon as practicable (but in no event more than thirty (30) days) after
the Drop Dead Date. Payment of the Executive's Post-Closing Bonus will be made
as soon as practicable (but in no event more than thirty (30) days) after the
Eighteen Month Anniversary Date.
(e) Termination of Employment.
(1) Subject to paragraphs (2), (3) and (4) of this Section 2.1(e), in
order to receive a Closing Bonus or a Post-Closing Bonus, as the case may
be, the Executive must be employed by COMSAT on the Closing Date, the Drop
Dead Date, or the Eighteen Month Anniversary Date, as the case may be
(each, a "Determination Date"), and neither the Company nor the Executive
shall have delivered notice of termination of employment on or before the
applicable Determination Date. Notwithstanding any other provisions of this
Agreement to the contrary, if the Executive incurs a termination of
employment by COMSAT for Cause or by the Executive without Good Reason, the
Executive shall forfeit all rights to receive any bonus payments that have
not yet become payable to the Executive under this Section 2.1.
(2) If, on or before the Closing Date (or, if the Closing Date has
not occurred as of the Drop Dead Date, on or before the Drop Dead Date),
the Executive incurs a termination of employment (i) by COMSAT other than
for Cause (as defined below) or (ii) by the Executive for Good Reason (as
defined below), the Executive shall be entitled to receive a payment equal
to the amount of the Closing Bonus to which he would have been entitled
under this Section 2.1 had he remained continuously employed by COMSAT
through the Closing Date or the Drop Dead Date, as applicable, payable in
accordance with Section 2.1(d) above; provided, however, that for purposes
of this paragraph (2), any and all such amounts shall be calculated based
on (a) the Executive's Base Salary as in effect immediately prior to
termination or, if higher, as in effect immediately prior to the Signing
Date, and (b) his targeted Annual Bonus (assuming that all target levels
and performance measures are achieved to the maximum extent) for the year
in which such termination occurs or, if higher, the year in which the
Signing Date occurs. In the event of such termination, the Executive shall
forfeit all rights to receive
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the Post-Closing Bonus which has not yet become payable to the Executive
under this Section 2.1.
(3) If, during the period commencing on the day after the Closing
Date and ending on the Eighteen Month Anniversary Date, the Executive
incurs a termination of employment (i) by COMSAT other than for Cause or
(ii) by the Executive for Good Reason, the Executive shall be entitled to
receive a payment equal to the amount of the Post-Closing Bonus to which he
would have been entitled under this Section 2.1 had he remained
continuously employed by COMSAT through the Eighteen Month Anniversary
Date; provided, however, that for purposes of this paragraph (3), any and
all such amounts shall be calculated based on (a) the Executive's Base
Salary as in effect immediately prior to termination or, if higher, as in
effect immediately prior to the Signing Date or the Closing Date (whichever
is greater), and (b) his targeted Annual Bonus (assuming that all target
levels and performance measures are achieved to the maximum extent) for the
year in which such termination occurs or, if higher, the year in which the
Signing Date or the Closing Date occurs (whichever is greater). Payment of
any amounts payable under this paragraph (3) will be made as soon as
practicable (but in no event more than thirty (30) days) after the date of
the Executive's termination of employment. In the event of such
termination, the Executive shall forfeit all rights to receive the Post-
Closing Bonus to which the Executive would have been entitled to under this
Section 2.1 had the Executive remained continuously employed by COMSAT
through the Eighteen Month Anniversary Date. Notwithstanding the
foregoing, within the thirty (30) day period immediately following the
Closing Date, the Executive and Lockheed shall negotiate in good faith to
reach an agreement regarding the terms and conditions of the Executive's
employment following the Closing Date. In the event that the Executive and
Lockheed are unable to reach such an agreement and the Executive's
employment is terminated either by the Executive or COMSAT within such
thirty (30) day period, the Executive shall forfeit all rights to receive
his Post-Closing Bonus under this paragraph (3). The failure to reach such
an agreement or the Executive's termination within such thirty (30) day
period shall not otherwise affect any other rights of the Executive under
this Agreement.
(4) If, on or before the Closing Date (or, if the Closing Date has not
occurred as of the Drop Dead Date, on or before the Drop Dead Date), the
Executive incurs a termination of employment by reason of the Executive's
death or disability, the Executive shall be entitled to receive a payment
equal to the amount of the Closing Bonus to which he would have been
entitled hereunder had he remained continuously employed by COMSAT through
the Closing Date or the Drop Dead Date, as applicable, payable in
accordance with Section 2.1(d) above. If during the period commencing on
the day after the Closing Date and ending on the Eighteen Month Anniversary
Date, the Executive incurs a termination of employment by reason of the
Executive's death or disability, the Executive shall be entitled to receive
a payment equal to the amount of the Post-Closing Bonus to which he would
have been entitled hereunder had he remained continuously
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employed by COMSAT through the Eighteen Month Anniversary Date, payable as
soon as practicable (but in no event more than thirty (30) days) after the
date of the Executive's termination. Notwithstanding the foregoing, any and
all amounts payable under this paragraph (4) shall be calculated based on
(a) the Executive's Base Salary as in effect immediately prior to
termination, and (b) his targeted Annual Bonus (assuming that all target
levels and performance measures are achieved to the maximum extent) for the
year in which such termination occurs. In the event of such termination,
the Executive shall forfeit all rights to receive any payments that have
not yet become payable to the Executive under Section 2.1 of this
Agreement.
(f) Effectiveness. Notwithstanding anything contained herein, this
Section 2.1 shall be effective as of the Signing Date. If the Closing Date has
not occurred as of the Drop Dead Date, this Section 2.1 shall thereupon
automatically terminate and be of no further force and effect, provided that all
obligations accrued by the Executive prior to such termination of this Section
2.1 must be satisfied in full in accordance with the terms hereof."
3. SECTION 5(A) OF THE EMPLOYMENT AGREEMENT IS HEREBY AMENDED BY ADDING THE
FOLLOWING NEW PARAGRAPH AT THE END OF SUCH SECTION 5(A):
"Notwithstanding anything contained herein, the Executive shall be entitled
to the benefits and payments, if any, under this Section 5(a) only in the event
that the termination of the Executive's employment which gives rise to such
payments occurs prior to a Change in Control."
4. SECTION 5(F) OF THE EMPLOYMENT AGREEMENT IS HEREBY AMENDED AND RESTATED IN
ITS ENTIRETY AS SET FORTH BELOW:
"(f) If either the Executive or COMSAT elects not to renew the Executive's
employment with COMSAT at the end of the Employment Period, the Executive shall
be entitled to receive payments under the SERP beginning on May 1, 2002 (the
first day of the month after the end of such period), calculated in accordance
with the provisions of the SERP based on the Executive's retirement on that date
(i.e., without any reduction pursuant to Section 7.1(a) of the SERP), provided
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that the Board reserves the discretion to waive the applicable early retirement
reduction under the SERP in such event. If the Executive's employment with
COMSAT under this Agreement is terminated either by the Executive for Good
Reason or by COMSAT without Cause before the Executive attains age 55, the
Executive shall be entitled to receive payments under the SERP beginning on
April 1, 2002 (the first day of the month after the Executive's 55th birthday),
calculated in accordance with the provisions of the SERP as if the Executive
retired on that date (i.e., without any reduction pursuant to Section 7.1(a) of
the SERP), provided that the Board reserves the discretion to waive the
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applicable early retirement reduction under the SERP in such event. If the
Executive dies before payments begin under the SERP, the Executive's surviving
spouse, if any, shall receive under the SERP a $200,000 lump sum death benefit,
plus annual benefit payments for a ten year period equal to 50% of the
Executive's accrued benefit
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under the SERP, according to the terms of the SERP. The provisions of this
Section 5(f) shall be administered consistent with the terms of the SERP."
5. SECTION 6 OF THE EMPLOYMENT AGREEMENT IS HEREBY AMENDED AND RESTATED IN ITS
ENTIRETY AS SET FORTH BELOW:
"6. Termination After Change in Control.
-----------------------------------
(a) Definitions. For purposes of this Agreement, the following terms
shall have the meanings indicated below:
(1) A "Change in Control" of COMSAT shall be deemed to have occurred
upon the happening of any one of the following events:
(i) the acquisition by any Person (as defined below) of
Beneficial Ownership (as defined below) of fifty percent (50%) or more
of the combined voting power of the then outstanding voting securities
of COMSAT. For purposes of this Agreement, (A) the term "Person"
shall have the meaning set forth in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as modified and
used in Sections 13(d) and 14(d) thereof, except that such term shall
not include (I) COMSAT or any of its subsidiaries, (II) a trustee or
other fiduciary holding securities under an employee benefit plan of
COMSAT or any of its Affiliates (as defined in Rule 12b-2 promulgated
under Section 12 of the Exchange Act), (III) an underwriter
temporarily holding securities pursuant to an offering of such
securities, or (IV) a corporation owned, directly or indirectly, by
the stockholders of COMSAT in substantially the same proportions as
their ownership of stock of COMSAT; and (B) the term "Beneficial
Ownership" shall have the meaning set forth in Rule 13d-3 under the
Exchange Act (and the terms "Beneficial Ownership" and "Beneficially
Owned" shall have correlative meanings); or
(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 COMSAT 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; or
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(iii) approval by the shareholders of COMSAT of a merger, share
exchange, swap, consolidation, recapitalization or other business
combination involving COMSAT and any other corporation or entity (a
"Transaction"), the effect of which would result in the combined
voting securities of COMSAT 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 COMSAT, or of
any surviving entity of, or parent entity following, the Transaction,
immediately after the effectiveness of the Transaction; or
(iv) approval by the shareholders of COMSAT of (A) a complete
liquidation or dissolution of COMSAT, or (B) the sale or disposition
by COMSAT 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
by all or substantially all of the individuals and entities who were
the Beneficial Owners of the voting securities of COMSAT 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) above 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 this Agreement; provided, further, that,
notwithstanding the foregoing, with respect to the Lockheed Merger, the
following provisions shall apply: (a) the signing of the Lockheed Merger
Agreement shall not constitute a Change in Control for purposes of this
Agreement, (b) the approval by the Board or COMSAT's shareholders of the
Lockheed Merger or the Lockheed Merger Agreement shall not constitute a
Change in Control for purposes of this Agreement, (c) the commencement or
the closing of the tender offer by Lockheed to purchase shares of COMSAT's
common stock as contemplated by the Lockheed Merger Agreement shall not
constitute a Change in Control for purposes of this Agreement, (d) the
acquisition by Lockheed or Regulus, LLC of COMSAT Government Systems, Inc.
shall not constitute a Change in Control for purposes of this Agreement,
and (e) upon the closing of the Lockheed Merger, a Change in Control of
COMSAT shall be deemed to have occurred for purposes of this Agreement.
(2) "Benefits Continuation Period" shall mean the period beginning on
the date of the Executive's termination of employment and ending on the
expiration of the Employment Period.
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(3) "Protected Period" shall mean the period beginning on the date of
a Change in Control and ending on the last day of the Employment Period.
(4) "COMSAT" shall mean COMSAT Corporation, a District of Columbia
corporation, and, except in determining under paragraph (1) of this Section
6(a) whether or not any Change in Control of COMSAT has occurred, shall
include any successor to its business and/or assets.
(b) If a Change in Control of COMSAT occurs and the Executive's
employment is terminated during the Protected Period (A) by COMSAT other than
for Cause or disability, or (B) by the Executive for Good Reason, then, in lieu
of any other severance payments or severance benefits payable to the Executive
under Section 5(a) hereof, COMSAT shall pay the Executive the amounts, and
provide the Executive with the benefits, described below.
(1) The Executive shall be entitled to receive the following amounts
during the Benefits Continuation Period: (i) the Executive's Base Salary as
in effect immediately prior to the date of the Executive's termination of
employment or, if higher, as in effect immediately prior to the Change in
Control, and (ii) the Executive's targeted Annual Bonus (assuming that all
target levels and performance measures are achieved to the maximum extent)
for the year in which such date of termination occurs or, if higher, the
year in which the Change in Control occurs. The payments set forth in this
Section 6(b)(1) shall be made in accordance with COMSAT's regular practice
for compensating executive personnel actively at work, provided that in no
event shall such payments be made less frequently than twice per month;
(2) During the Benefits Continuation Period, COMSAT shall provide the
Executive and his dependents with life, disability, accident and health
insurance benefits substantially similar to those provided to the Executive
and his dependents immediately prior to the date of the Executive's
termination of employment or the date of the Change in Control, whichever
is more favorable to the Executive; provided, however, that such benefits
shall be provided on substantially the same terms and conditions and at the
same cost to the Executive as in effect immediately prior to such date of
termination or the date of the Change in Control, whichever is more
favorable to the Executive; provided, further, that if the Executive
becomes reemployed with another employer and is eligible to receive such
benefits under another employer's plans, COMSAT's obligations under this
Section 6(b)(2) shall be reduced to the extent that comparable benefits are
actually received by the Executive during the Benefits Continuation Period,
and any such benefits actually received by the Executive shall be reported
to COMSAT. In the event that the Executive is ineligible under the terms
of COMSAT's benefit plans to continue to be so covered, COMSAT shall
provide the Executive with substantially equivalent coverage through other
sources or will provide the Executive with a lump sum payment (determined
on a present value basis using the interest rate provided in section
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1274(b)(2)(B) of the Code on the date of termination) in such amount that,
after all taxes on that amount, shall be equal to the cost to the Executive
of providing himself or herself such benefit coverage. At the termination
of the benefits coverage under the second preceding sentence, the Executive
and his dependents shall be entitled to continuation coverage pursuant to
section 4980B of the Code, sections 601-608 of the Employee Retirement
Income Security Act of 1974, as amended, and under any other applicable
law, to the extent required by such laws, as if the Executive had
terminated employment with COMSAT on the date such benefits coverage
terminates;
(3) COMSAT shall pay to the Executive any earned but unpaid portion
of the Executive's Base Salary as of the date of the Executive's
termination as in effect immediately prior to such date of termination is
given, plus all other amounts to which the Executive is entitled under any
compensation plan or practice of COMSAT at the time such payments are due;
(4) As of the date of the Executive's termination of employment, the
Executive shall be fully vested in his accrued benefits under the SERP and
the Executive's benefits shall be determined and shall be payable pursuant
to the terms of the SERP, subject to the following provisions,
notwithstanding any provision of the SERP to the contrary: (i) the
Executive's benefits shall be calculated without any reduction pursuant to
Section 7.1(a) or 5.2(b) of the SERP, (ii) the Executive's Benefits
Continuation Period shall be taken into account for the purpose of
determining the Executive's "Highest Average Earnings Period" under the
SERP, and the amounts payable to the Executive with respect to such periods
pursuant to Section 6(b)(1) shall constitute "Earnings" for such purposes,
provided that such amounts shall be treated as paid at the time such
amounts would have been paid had the Executive remained in the employ of
COMSAT through the end of the Employment Period; and;
(5) COMSAT shall pay the Executive any Gross-Up Payment in accordance
with the provisions of Section 7 hereof.
(c) COMSAT shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of COMSAT to expressly assume this Agreement and all
obligations of COMSAT hereunder in the same manner and to the same extent that
COMSAT would be so obligated if no such succession had taken place. Failure of
COMSAT to obtain such assumption prior to the effectiveness of any such
succession shall entitle the Executive to terminate his employment and receive
compensation from COMSAT in the same amount and on the same terms to which the
Executive would be entitled hereunder if he terminates his employment for Good
Reason during the Protected Period, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the date of the Executive's termination of employment.
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(d) Notwithstanding anything contained in this Agreement, nothing in this
Section 6 shall in any way affect or create any implication with respect to any
of the provisions of this Agreement as they apply to the Executive's employment
(or termination of employment) prior to a Change in Control.
6. A NEW SECTION 6.1, AS SET FORTH BELOW, IS HEREBY ADDED TO THE EMPLOYMENT
AGREEMENT IMMEDIATELY FOLLOWING SECTION 6 THEREOF:
"6.1 Additional SERP Enhancement.
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Notwithstanding anything contained herein, if a Change in Control of COMSAT
occurs and (i) if the Executive and Lockheed shall have negotiated in good faith
during the thirty (30) day period immediately following the Closing Date to
reach an agreement regarding the terms and conditions of the Executive's
employment following the Closing Date and the Executive and Lockheed shall have
been unable to reach such an agreement and there is a termination of the
Executive's employment with COMSAT either by the Executive or COMSAT or (ii) if
the Executive continues to be employed hereunder until the expiration of the
Employment Period, then in either event (i) or (ii) the Executive shall be
entitled to receive enhanced SERP benefits under Section 6(b)(4) of this
Agreement.
7. THIS AMENDMENT SHALL BE AND IS HEREBY INCORPORATED IN AND FORMS A PART OF
THE EMPLOYMENT AGREEMENT.
8. THIS AMENDMENT SHALL BE EFFECTIVE AS OF SEPTEMBER 18, 1998.
9. EXCEPT AS SET FORTH HEREIN, THE EMPLOYMENT AGREEMENT SHALL REMAIN IN FULL
FORCE AND EFFECT.
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment to
Amended and Restated Employment Agreement as of September 18, 1998.
/s/ Warren Y. Zeger
---------------------------------
Warren Y. Zeger, Executive
COMSAT Corporation
By: /s/ Betty C. Alewine
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Betty C. Alewine
President and Chief Executive Officer
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EXHIBIT 15
COMSAT CORPORATION
RETENTION BONUS PLAN
COMSAT CORPORATION, a District of Columbia corporation (the "Company"), has
adopted this Retention Bonus Plan (the "Plan"), effective as of September 18,
1998, for the benefit of certain key employees of the Company.
1. PURPOSES. The Board of Directors (the "Board") of the Company has
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determined that it is in the best interests of the Company and its shareholders
to pursue the possibility of accomplishing a transaction (as defined below, the
"Lockheed Merger") with Lockheed Martin Corporation ("Lockheed") which would
result in a change in control of the Company. In that connection, the Board
believes that it is in the best interests of the Company and its shareholders
that the Participants (as defined below), who are among the Company's key
employees, remain in the Company's employ during the period in which the Board
is pursuing the Lockheed Merger, be provided with additional incentives to
develop the most desirable alternatives for the Company and its shareholders,
and be eligible to receive certain bonuses for their efforts in developing such
transaction and putting the Company in a position where its shareholders may
receive the benefits of the Lockheed Merger. Further, the Board has determined
that it is in the best interests of the Company and its shareholders to act to
assure that the Participants remain in the Company's employ during the period
between the signing and the closing of the Lockheed Merger and during the
eighteen month period after the closing of the Lockheed Merger in order to
enable Lockheed to effect a prompt and successful integration of the Company's
and Lockheed's business. The Board believes that this will enable Lockheed to
provide the most attractive transaction for the Company's shareholders.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to adopt this Plan.
2. DEFINED TERMS. For purposes of the Plan, the following terms shall
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have the meanings indicated below:
(A) "Cause," with respect to any Participant, shall mean (i) the
Participant's continued failure to perform his or her material duties with the
Company (other than any such failure resulting from the Participant's incapacity
due to physical or mental illness) after a written demand for substantial
performance is delivered to the Participant by the Participant's supervisor,
which demand specifically identifies the manner in which such supervisor
believes that the Participant has not performed his or her duties, (ii) the
Participant's continued failure to substantially follow and comply with the
specific and lawful directives of the Participant's supervisor, as reasonably
prescribed by such supervisor (other than any such failure resulting from the
Participant's incapacity due to physical or mental illness) after a written
demand for substantial performance is delivered to the Participant by the
Participant's supervisor, which demand specifically identifies the manner in
which such supervisor believes that the Participant has so failed to follow and
comply, (iii) the engaging by the Participant in misconduct that is materially
injurious to the Company or its reputation, or (iv) the Participant's indictment
of a
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felony, whether or not such felony was allegedly committed in connection with
the Company's business .
(B) "Closing Date" shall mean the date of the closing of the Lockheed
Merger.
(C) "Closing Bonus" shall mean a bonus payable pursuant to Section 5
hereof.
(D) "Committee" shall mean the committee responsible for administering the
Plan, as described in Section 4 hereof.
(E) "Company" shall mean COMSAT Corporation, a District of Columbia
corporation, and any successor to its business and/or assets.
(F) "Drop Dead Date" shall mean the earlier of (i) the date of the
termination of the Lockheed Merger pursuant to the Lockheed Merger Agreement, or
(ii) the date of the second anniversary of the Signing Date.
(G) "Eighteen Month Anniversary Date" shall mean the date which is eighteen
months after the Closing Date.
(H) "Good Reason," with respect to any Group I Participant, shall mean the
occurrence (without the Participant's express written consent) after the Signing
Date of any of the following circumstances unless such circumstances are fully
corrected (provided such circumstances are capable of correction) within the
cure period specified in Section 8(D) hereof:
(i) the Company's assignment to the Participant of duties which are
professionally inconsistent with the occupational and educational
requirements of the Participant's position within the Company immediately
prior to the Signing Date;
(ii) any relocation by the Company of the Participant's offices to a
location outside the Washington, D.C. metropolitan area;
(iii) the Company's reduction of the Participant's annual base salary
as in effect on the Signing Date or as the same may be increased from time
to time;
(iv) the Company's failure to pay to the Participant any portion of
his or her current compensation or to pay to the Participant any portion of
an installment of deferred compensation under any deferred compensation
program of the Company, within twenty (20) days of the date such
compensation is due;
(v) the Company's failure to obtain a satisfactory agreement from any
successor to assume this Plan and the Company's obligations hereunder, as
contemplated in Section 10(A) hereof; or
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<PAGE>
(vi) any purported termination of the Participant's employment that is
not effected pursuant to a Notice of Termination satisfying the
requirements of the Plan, which purported termination shall not be
effective for purposes of the Plan.
provided, however, that none of the following circumstances, in and of itself,
shall constitute Good Reason for purposes of the Plan: (a) a change in the
Participant's reporting structure within the Company which does not adversely
affect the Participant's duties within the Company, (b) a reduction in the
Participant's title which does not adversely affect the Participant's duties
within the Company, (c) a transfer of the Participant to another position within
the Company which does not adversely affect the Participant's duties within the
Company, and (d) a change in the Participant's status, position, or duties
within the Company which change results solely by virtue of the Company ceasing
to be a publicly held corporation or becoming a subsidiary of Lockheed.
A Participant's right to terminate his or her employment for Good Reason
shall not be affected by the Participant's incapacity due to physical or mental
illness following the occurrence of the circumstance constituting Good Reason.
Except as otherwise provided in Section 8(D) hereof, a Participant's continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder.
(I) "Group I Participants" shall mean those persons listed on SCHEDULE A
hereto, provided that such schedule shall not be subject to amendment.
(J) "Group II Participants" shall mean those persons listed on SCHEDULE B
hereto, provided that such schedule shall not be subject to amendment except as
expressly provided thereon.
(K) "Lockheed Merger" shall mean the proposed merger of the Company and
Lockheed pursuant to the Lockheed Merger Agreement.
(L) "Lockheed Merger Agreement" shall mean that certain Agreement and Plan
of Merger, dated as of September 18, 1998, among the Company, Lockheed and Deneb
Corporation.
(M) "Participants" shall mean, collectively, the Group I Participants and
the Group II Participants.
(N) "Post-Closing Bonus" shall mean a bonus payable pursuant to Section 6
hereof.
(O) "Signing Date" shall mean the date of the signing of the Lockheed
Merger Agreement.
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3. EFFECTIVE DATE OF PLAN. The effective date of the Plan shall be the
----------------------
Signing Date. The Plan shall remain in effect until the earlier of (i) such
time as the Company has discharged all of its obligations hereunder, or (ii) the
date of the termination of the Plan pursuant to Section 13(C) hereof.
4. ADMINISTRATION.
--------------
(A) Prior to the Closing Date, the Plan shall be interpreted, administered
and operated by the Compensation Committee of the Board; on and after the
Closing Date, the Plan shall be interpreted, administered and operated by a
committee appointed by Lockheed's Vice President of Human Resources. In each
case, the Committee shall have complete authority, in its sole discretion
subject to the express provisions of the Plan, to determine who shall be a
Participant, to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to it, and to make all other determinations necessary or
advisable for the administration of the Plan. Notwithstanding the foregoing,
the Committee may delegate any of its duties hereunder to such person or persons
from time to time as it may designate.
(B) All expenses and liabilities which members of the Committee incur in
connection with the administration of the Plan shall be borne by the Company.
The Committee may employ attorneys, consultants, accountants, appraisers,
brokers, or other persons, and the Committee, the Company and the Company's
officers and directors shall be entitled to rely upon the advice, opinions or
valuations of any such persons. No member of the Committee or the Board shall
be personally liable for any action, determination or interpretation made in
good faith with respect to the Plan, and all members of the Committee shall be
fully protected by the Company in respect of any such action, determination or
interpretation.
5. CLOSING BONUSES.
---------------
(A) Group I Participants. Subject to Section 8 below, each Group I
Participant who is continuously employed by the Company from the Signing Date
through the Closing Date (or, if the Closing Date has not occurred as of the
Drop Dead Date, through the Drop Dead Date) and who has not received or
delivered a Notice of Termination on or before the Closing Date (or, if the
Closing Date has not occurred as of the Drop Dead Date, on or before the Drop
Dead Date) shall receive a Closing Bonus in an amount to be determined as
follows: if the Closing Date occurs prior to the Drop Dead Date or if the
Closing Date has not occurred as of the Drop Dead Date, the amount of such
Closing Bonus shall be equal to fifty percent (50%) of the sum (such sum, the
Participant's "Closing Date Total Cash Compensation") of (i) the Participant's
annual base salary as in effect on the Closing Date (or the Drop Dead Date, if
applicable) or, if higher, as in effect immediately prior to the Signing Date,
and (ii) the Participant's targeted annual bonus under the Company's Annual
Incentive Plan for the year in which the Closing Date (or the Drop Dead Date, if
applicable) occurs or, if higher, the year in which the Signing Date occurs.
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<PAGE>
(B) Group II Participants. Subject to Section 8 below, each Group II
Participant who is continuously employed by the Company from the Signing Date
through the Closing Date (or, if the Closing Date has not occurred as of the
Drop Dead Date, through the Drop Dead Date) and who has not received or
delivered a Notice of Termination on or before the Closing Date (or, if the
Closing Date has not occurred as of the Drop Dead Date, on or before the Drop
Dead Date) shall receive a Closing Bonus in an amount to be determined as
follows: if the Closing Date occurs prior to the Drop Dead Date or if the
Closing Date has not occurred as of the Drop Dead Date, the amount of such
Closing Bonus shall be equal to twenty-five percent (25%) of the Participant's
Closing Date Total Cash Compensation.
6. POST-CLOSING BONUSES.
--------------------
(A) Group I Participants. Subject to Section 8 below, each Group I
Participant who is continuously employed by the Company from the Signing Date
through the Eighteen Month Anniversary Date and who has not received or
delivered a Notice of Termination on or before the Eighteen Month Anniversary
Date shall receive a Post-Closing Bonus in an amount equal to one hundred
percent (100%) of the sum (such sum, the Participant's "Eighteen Month
Anniversary Date Total Cash Compensation") of (i) the Participant's annual base
salary as in effect on the Eighteen Month Anniversary Date or, if higher, as in
effect immediately prior to the Signing Date, and (ii) the Participant's
targeted annual bonus under the Company's Annual Incentive Plan for the year in
which the Eighteen Month Anniversary Date occurs or, if higher, the year in
which the Signing Date occurs.
(B) Group II Participants. Subject to Section 8 below, each Group II
Participant who is continuously employed by the Company from the Signing Date
through the Eighteen Month Anniversary Date and who has not received or
delivered a Notice of Termination on or before the Eighteen Month Anniversary
Date shall receive a Post-Closing Bonus in an amount equal to fifty percent
(50%) of the Participant's Eighteen Month Anniversary Date Total Cash
Compensation.
7. PAYMENT OF BONUSES. Payment of Closing Bonuses will be made as soon as
------------------
practicable (but in no event more than thirty (30) days) after the Closing Date
or, if the Closing Date has not occurred as of the Drop Dead Date, as soon as
practicable (but in no event more than thirty (30) days) after the Drop Dead
Date. Payment of Post-Closing Bonuses will be made as soon as practicable (but
in no event more than thirty (30) days) after the Eighteen Month Anniversary
Date.
8. TERMINATION OF EMPLOYMENT.
-------------------------
(A) General. Subject to subsections (B) and (C) of this Section 8, in
order to receive a Closing Bonus or a Post-Closing Bonus, as the case may be,
(i) a Participant must be employed by the Company on the Closing Date, the Drop
Dead Date, or the Eighteen Month Anniversary Date, as the case may be (each, a
"Determination Date"), and (ii) neither the Company nor the Participant shall
have delivered a Notice of Termination on or before the applicable
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<PAGE>
Determination Date. Notwithstanding any other provisions of the Plan to the
contrary, (i) a Group I Participant who incurs a termination of employment by
the Company for Cause (as defined above) or by the Group I Participant without
Good Reason (as defined above), and (ii) a Group II Participant who incurs a
termination of employment by the Company for Cause or by the Group II
Participant, shall forfeit all rights to receive any bonus payments that have
not yet become payable to the Participant under the Plan.
(B) Termination On or Before Closing Date. Subject to the last sentence of
this Section 8(B), if on or before the Closing Date (or, if the Closing Date has
not occurred as of the Drop Dead Date, on or before the Drop Dead Date), a
Participant incurs a termination of employment (i) by the Company other than for
Cause or (ii) with respect to each Group I Participant, by the Group I
Participant for Good Reason, such Participant shall be entitled to receive a
payment equal to the amount of the Closing Bonus to which he or she would have
been entitled hereunder had he or she remained continuously employed by the
Company through the Closing Date or the Drop Dead Date, as applicable, payable
in accordance with Section 7 above; provided, however, that for purposes of this
Section 8(B), any and all such amounts shall be calculated based on (a) the
Participant's annual base salary as in effect immediately prior to termination
or, if higher, as in effect immediately prior to the Signing Date, and (b) his
or her targeted annual bonus for the year in which such termination occurs or,
if higher, the year in which the Signing Date occurs. In the event of such
termination, the Participant shall forfeit all rights to receive any other bonus
payments hereunder.
Notwithstanding anything contained herein, if (i) the aggregate amount, if
any, that the Participant is entitled to receive under Section 4.1(A) of the
Company's Amended and Restated Change in Control Severance Plan, plus (ii) the
aggregate amount of any other severance payment to which the Participant is
entitled under any other severance plan of the Company to the extent that such
severance payment is based on the Participant's salary and/or bonus, is greater
than or equal to the amount of the payment to which the Participant would be
entitled under this Section 8(B), then the Participant shall forfeit all rights
to receive the payment to which the Participant would otherwise be entitled
under this Section 8(B) and any other bonus payments that have not yet become
payable to the Participant under the Plan. Any payment under this Section 8(B)
shall be in lieu of the Participant's Closing Bonus, and in the event that the
Participant receives a payment under this Section 8(B), the Participant shall
not be entitled to any severance payment under any severance plan of the Company
(including the Company's Amended and Restated Change in Control Severance Plan)
to the extent that such severance payment is based on the Participant's salary
and/or bonus.
(C) Termination Between Closing Date and Eighteen Month Anniversary Date.
Subject to the last sentence of this Section 8(C), if during the period
commencing on the day after the Closing Date and ending on the Eighteen Month
Anniversary Date, a Participant incurs a termination of employment (i) by the
Company other than for Cause or (ii) with respect to each Group I Participant,
by the Group I Participant for Good Reason, such Participant shall be entitled
to receive a payment equal to the amount of the Post-Closing Bonus to which he
or she
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<PAGE>
would have been entitled hereunder had he or she remained continuously employed
by the Company through the Eighteen Month Anniversary Date; provided, however,
that for purposes of this Section 8(C), any and all such amounts shall be
calculated based on (a) the Participant's annual base salary as in effect
immediately prior to termination or, if higher, as in effect immediately prior
to the Signing Date or the Closing Date (whichever is greater), and (b) his or
her targeted annual bonus for the year in which such termination occurs or, if
higher, the year in which the Signing Date or the Closing Date occurs (whichever
is greater). Payment of any amounts payable under this Section 8(C) will be made
as soon as practicable (but in no event more than thirty (30) days) after the
date of the Participant's termination of employment.
Notwithstanding anything contained herein, if (i) the aggregate amount, if
any, that the Participant is entitled to receive under Section 4.1(A) of the
Company's Amended and Restated Change in Control Severance Plan, plus (ii) the
aggregate amount of any other severance payment to which the Participant is
entitled under any other severance plan of the Company to the extent that such
severance payment is based on the Participant's salary and/or bonus, is greater
than or equal to the amount of the payment to which the Participant would be
entitled under this Section 8(C), then the Participant shall forfeit all rights
to receive the payment to which the Participant would otherwise be entitled
under this Section 8(C) and any other bonus payments that have not yet become
payable to the Participant under the Plan. Any payment under this Section 8(C)
shall be in lieu of the Participant's Post-Closing Bonus, and in the event that
the Participant receives a payment under this Section 8(C), the Participant
shall not be entitled to any severance payment under any severance plan of the
Company (including the Company's Amended and Restated Change in Control
Severance Plan) to the extent that such severance payment is based on the
Participant's salary and/or bonus.
(D) Termination Procedures. Any purported termination of a Participant's
employment following the Signing Date (other than by reason of death) shall be
communicated by written Notice of Termination from one party to the other party
in accordance with Section 11 hereof. For purposes of this Plan, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision (if any) in this Plan relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Participant's employment under the provision so indicated. Further, no
termination for Cause shall be effective without (i) reasonable notice to the
Participant setting forth the reasons for the Company's intention to terminate,
and (ii) an opportunity for the Participant to cure or correct any such breach
within twenty (20) days after receipt of such notice. Notwithstanding anything
contained herein, no termination for Good Reason shall be effective unless (i)
the Participant has delivered to the Company a Notice of Termination in
accordance with this Section 8(D) within thirty (30) days after the occurrence
of the event or circumstance which constitutes Good Reason under Section 2(H)
hereof, and (ii) the Company has been afforded an opportunity to cure or correct
such event or circumstance within twenty (20) days after receipt of such notice.
No Notice of Termination shall be effective for purposes of this Plan unless
such notice shall have been delivered on or before the Eighteen Month
Anniversary Date.
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<PAGE>
(E) Death or Disability. If, on or before the Closing Date (or, if the
Closing Date has not occurred as of the Drop Dead Date, on or before the Drop
Dead Date), a Participant incurs a termination of employment by reason of the
Participant's death or disability, such Participant shall be entitled to receive
a payment equal to the amount of the Closing Bonus to which he or she would have
been entitled hereunder had he or she remained continuously employed by the
Company through the Closing Date or the Drop Dead Date, as applicable, payable
in accordance with Section 7 above. If during the period commencing on the day
after the Closing Date and ending on the Eighteen Month Anniversary Date, a
Participant incurs a termination of employment by reason of the Participant's
death or disability, such Participant shall be entitled to receive a payment
equal to the amount of the Post-Closing Bonus to which he or she would have been
entitled hereunder had he or she remained continuously employed by the Company
through the Eighteen Month Anniversary Date, payable as soon as practicable (but
in no event more than thirty (30) days) after the date of the Participant's
termination. Notwithstanding the foregoing, any and all amounts payable under
this Section 8(E) shall be calculated based on (a) the Participant's annual base
salary as in effect immediately prior to termination, and (b) his or her
targeted annual bonus for the year in which such termination occurs. In the
event of such termination, the Participant shall forfeit all rights to receive
any payments that have not yet become payable to the Participant under the Plan.
9. NO MITIGATION. The Company agrees that, in order for a Participant to
-------------
be eligible to receive a bonus under the Plan, the Participant is not required
to seek other employment or to attempt in any way to reduce any amounts payable
to the Participant by the Company under the Plan. Further, the amount of any
payment or benefit provided for in this Plan shall not be reduced by any
compensation or income earned by the Participant as the result of employment by
another employer or self-employment, by retirement benefits, by offset against
any amount claimed to be owed by the Participant to the Company, or otherwise.
10. SUCCESSORS; BINDING AGREEMENT.
-----------------------------
(A) The Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to expressly assume this Plan and all
obligations of the Company hereunder in the same manner and to the same extent
that the Company would be so obligated if no such succession had taken place.
(B) This Plan shall inure to the benefit of and shall be binding upon the
Company, its successors and assigns, but without the prior written consent of
the Participants this Plan may not be assigned other than in connection with the
merger or sale of substantially all of the business and/or assets of the Company
or similar transaction in which the successor or assignee assumes (whether by
operation of law or express assumption) all obligations of the Company
hereunder.
(C) This Plan shall inure to the benefit of and be enforceable by the
Participant's personal or legal representatives, executors, administrators,
successors, heirs, distributees,
8
<PAGE>
devisees, legatees or other beneficiaries. If a Participant shall die while any
amount would still be payable to such Participant hereunder (other than amounts
which, by their terms, terminate upon the death of the Participant) if such
Participant had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Plan to the
executors, personal representatives or administrators of such Participant's
estate.
11. NOTICES. For the purpose of this Plan, notices and all other
-------
communications provided for in the Plan shall be in writing and shall be deemed
to have been duly given when delivered or mailed by United States registered
mail, return receipt requested, postage prepaid, addressed, if to a Participant,
to the address on file with the Company and, if to the Company, to the address
set forth below, or to such other address as either party may have furnished to
the other in writing in accordance herewith, except that notice of change of
address shall be effective only upon actual receipt:
To the Company:
6560 Rock Spring Drive
Bethesda, Maryland 20817
Attention: Corporate Secretary
12. CLAIMS PROCEDURES; EXPENSES.
---------------------------
(A) Claim for Benefits. A Participant may file with the Committee a
written claim for payment under the Plan. The Committee shall, within a
reasonable time not to exceed ninety (90) days, unless special circumstances
require an extension of time of not more than an additional ninety (90) days (in
which event a Participant will be notified of the delay during the first ninety
(90) day period), provide adequate notice in writing to any Participant whose
claim for payment shall have been denied, setting forth the following in a
manner calculated to be understood by the Participant: (i) the specific reason
or reasons for the denial; (ii) specific reference to the provision or
provisions of the Plan on which the denial is based; (iii) a description of any
additional material or information required to perfect the claim, and an
explanation of why such material or information is necessary; and (iv)
information as to the steps to be taken in order that the denial of the claim
may be reviewed. If written notice of the denial of a claim has not been
furnished to a Participant, and such claim has not been granted within the time
prescribed in this Section 12(A) (including any applicable extension), the claim
for benefits shall be deemed denied. Solely for purposes of this Section 12(A),
the following provision shall apply from and after the Closing Date: the
Committee reviewing such claim shall consist of two (2) persons designated by
Lockheed and one (1) person who was an employee of COMSAT Corporation prior to
the Closing Date.
(B) Appeal of Denial. A Participant whose claim for payment shall have
been denied in whole or in part, may, within sixty (60) days from either the
receipt of the denial of the claim or from the time the claim is deemed denied
(unless the notice of denial grants a longer period
9
<PAGE>
within which to respond), appeal such denial to the Vice President of Human
Resources of the Company or, from and after the Closing Date, to the Vice
President of Human Resources of Lockheed (in each case, the "Vice President of
Human Resources"). The Participant may, upon request, at this time review
documents pertinent to his claim and may submit written issues and comments. The
Vice President of Human Resources shall notify a Participant of its decision
within sixty (60) days after an appeal is received, unless special circumstances
require an extension of time of not more than an additional sixty (60) days (in
which event a Participant will be notified of the delay during the first sixty
(60) day period). Such decision shall be given in writing in a manner calculated
to be understood by the Participant and shall include the following: (i)
specific reasons for the decision; and (ii) specific reference to the provision
or provisions of the Plan on which the decision is based.
(C) Expenses, Legal Fees. If a Participant commences a legal action to
enforce any of the obligations of the Company under this Plan and it is
ultimately determined that the Participant is entitled to any payments under
this Plan, the Company shall pay the Participant the amount necessary to
reimburse the Participant in full for all reasonable expenses (including
reasonable attorneys' fees and legal expenses) incurred by the Participant with
respect to such action.
13. MISCELLANEOUS.
-------------
(A) No Waiver. No waiver by the Company or any Participant, as the case
may be, at any time of any breach by the other party of, or of any lack of
compliance with, any condition or provision of this Plan to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. All other plans,
policies and arrangements of the Company in which the Participant participates
during the term of this Plan shall be interpreted so as to avoid the duplication
of benefits paid hereunder.
(B) No Right to Employment. Nothing contained in this Plan or any
documents relating to the Plan shall (i) confer upon any Participant any right
to continue in the employ of the Company or a subsidiary, (ii) constitute any
contract or agreement of employment, or (iii) interfere in any way with the
right of the Company to terminate the Participant's employment at any time, with
or without cause.
(C) Termination and Amendment of Plan. The Company shall not have the
right to terminate the Plan unless such termination is required by law or the
Company has obtained the prior written consent of all Participants.
Notwithstanding the foregoing, if the Closing Date has not occurred as of the
Drop Dead Date, the Plan shall thereupon automatically terminate, provided that
all obligations accrued by Participants prior to such termination of the Plan
must be satisfied in full in accordance with the terms hereof. The Company
shall have the right to amend this Plan at any time by resolution of the Board
and to amend or cancel any amendments; provided, however, that no amendment to
the Plan shall be made which adversely affects any
10
<PAGE>
Participant's rights or interests herein without the express written consent of
each Participant so affected.
(D) Benefits not Assignable. Except as otherwise provided herein or by
law, no right or interest of any Participant under the Plan shall be assignable
or transferable, in whole or in part, either directly or by operation of law or
otherwise, including without limitation by execution, levy, garnishment,
attachment, pledge or in any manner; no attempted assignment or transfer thereof
shall be effective; and no right or interest of any Participant under the Plan
shall be liable for, or subject to, any obligation or liability of such
Participant. When a payment is due under this Plan to a Participant who is
unable to care for his or her affairs, payment may be made directly to his or
her legal guardian or personal representative.
(E) Tax Withholding. All amounts payable hereunder shall be subject to
applicable federal, state and local tax withholding.
(F) Maryland Law. This Plan shall be construed, interpreted and the rights
of the parties determined in accordance with the laws of the State of Maryland
without regard to the conflicts of laws principles thereof.
(G) Validity. The invalidity or unenforceability of any provision of this
Plan shall not affect the validity or enforceability of any other provision of
this Plan, which shall remain in full force and effect. If this Plan shall for
any reason be or become unenforceable by either party, this Plan shall thereupon
terminate and become unenforceable by the other party as well.
11
<PAGE>
SCHEDULE A
A-1
<PAGE>
SCHEDULE B
B-1
<PAGE>
EXHIBIT 16
COMSAT CORPORATION
AMENDED AND RESTATED
CHANGE IN CONTROL SEVERANCE PLAN
COMSAT CORPORATION, a District of Columbia corporation (the "Company"), has
adopted this Amended and Restated Change in Control Severance Plan (the "Plan"),
effective as of September 18, 1998, for the benefit of certain key employees of
the Company. This Plan is a complete amendment and restatement of the Change of
Control Severance Plan adopted by the Company as of June 20, 1997.
The purposes of the Plan are as follows:
(1) To reinforce and encourage the continued attention and dedication of
members of the Company's management to their assigned duties without the
distraction arising from the possibility of a change in control of the Company;
and
(2) To enable and encourage the Company's management to focus their
attention on obtaining the best possible deal for the Company's shareholders and
to make an independent evaluation of all possible transactions, without being
diverted by their personal concerns regarding the possible impact of various
transactions on the security of their jobs and benefits.
(3) To provide severance benefits to any Participant (as defined below) who
incurs a termination of employment under the circumstances described herein
within a certain period following a Change in Control (as defined below).
1. DEFINED TERMS. For purposes of the Plan, the following terms shall
-------------
have the meanings indicated below:
(A) "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated
under Section 12 of the Exchange Act.
(B) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under
the Exchange Act. The terms "Beneficial Ownership" and "Beneficially Owned"
shall have correlative meanings.
(C) "Benefits Continuation Period" shall mean (i) with respect to each
Group I Participant, the twenty-four (24) month period immediately following the
Participant's Date of Termination (as defined below), (ii) with respect to each
Group II Participant, the eighteen (18) month period immediately following the
Participant's Date of Termination, and (iii) with respect to each Group III
Participant, the fifteen (15) month period immediately following the
Participant's Date of Termination.
(D) "Board" shall mean the Board of Directors of the Company.
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(E) "Cause," with respect to any Participant, shall mean (i) the
Participant's continued failure to perform his or her material duties with the
Company (other than any such failure resulting from the Participant's incapacity
due to physical or mental illness), after a written demand for substantial
performance is delivered to the Participant by the Participant's supervisor,
which demand specifically identifies the manner in which such supervisor
believes that the Participant has not performed his or her duties, (ii) the
Participant's continued failure to substantially follow and comply with the
specific and lawful directives of the Participant's supervisor, as reasonably
prescribed by such supervisor (other than any such failure resulting from the
Participant's incapacity due to physical or mental illness), after a written
demand for substantial performance is delivered to the Participant by the
Participant's supervisor, which demand specifically identifies the manner in
which such supervisor believes that the Participant has so failed to follow and
comply, (iii) the engaging by the Participant in misconduct that is materially
injurious to the Company or its reputation, or (iv) the Participant's indictment
of a felony, whether or not such felony was allegedly committed in connection
with the Company's business.
(F) A "Change in Control" of the Company shall be deemed to have occurred
upon the happening of any one of the following events:
(i) the acquisition by any Person of Beneficial Ownership of fifty
percent (50%) or more of the combined voting power of the then outstanding
voting securities of the Company; or
(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 Company 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; or
(iii) approval by the shareholders of the Company of a merger, share
exchange, swap, consolidation, recapitalization or other business
combination involving the Company and any other corporation or entity (a
"Transaction"), the effect of which would result in the combined voting
securities of the Company 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 Company, or of any
surviving entity of, or parent entity following, the Transaction,
immediately after the effectiveness of the Transaction; or
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(iv) approval by the shareholders of the Company of (A) a complete
liquidation or dissolution of the Company, or (B) the sale or disposition
by the Company 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 by all
or substantially all of the individuals and entities who were the
Beneficial Owners of the voting securities of the Company 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)
above 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; provided, further, that, notwithstanding the foregoing,
with respect to the Lockheed Merger, the following provisions shall apply: (a)
the signing of the Lockheed Merger Agreement shall not constitute a Change in
Control for purposes of the Plan, (b) the approval by the Board or the Company's
shareholders of the Lockheed Merger or the Lockheed Merger Agreement shall not
constitute a Change in Control for purposes of the Plan, (c) the commencement or
the closing of the tender offer by Lockheed to purchase shares of the Company's
common stock as contemplated by the Lockheed Merger Agreement shall not
constitute a Change in Control for purposes of the Plan, (d) the acquisition by
Lockheed or Regulus, LLC of COMSAT Government Systems, Inc. shall not constitute
a Change in Control for purposes of the Plan, and (e) upon the closing of the
Lockheed Merger, a Change in Control of the Company shall be deemed to have
occurred for purposes of the Plan.
(G) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(H) "Committee" shall mean the committee responsible for administering the
Plan, as described in Section 3 hereof.
(I) "Company" shall mean COMSAT Corporation, a District of Columbia
corporation, and, except in determining under Section 1(F) hereof whether or not
any Change in Control of the Company has occurred, shall include any successor
to its business and/or assets.
(J) "Disability" shall be determined in accordance with the Company's long-
term disability plan.
(K) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
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<PAGE>
(L) "Good Reason," with respect to any Participant, shall mean the
occurrence (without the Participant's express written consent) after a Change in
Control of any of the following circumstances unless such circumstances are
fully corrected (provided such circumstances are capable of correction) within
the cure period specified in Section 5.1 hereof:
(i) the Company's assignment to the Participant of duties which are
professionally inconsistent with the occupational and educational
requirements of the Participant's position within the Company immediately
prior to the Change in Control;
(ii) any relocation by the Company of the Participant's offices to a
location outside the Washington, D.C. metropolitan area;
(iii) the Company's reduction of the Participant's annual base salary
as in effect on the date hereof or as the same may be increased from time
to time;
(iv) the Company's failure to pay to the Participant any portion of
his or her current compensation or to pay to the Participant any portion of
an installment of deferred compensation under any deferred compensation
program of the Company, within twenty (20) days of the date such
compensation is due;
(v) the Company's failure to obtain a satisfactory agreement from
any successor to assume this Plan and the Company's obligations hereunder,
as contemplated in Section 7.1(A) hereof; or
(vi) any purported termination of the Participant's employment that
is not effected pursuant to a Notice of Termination satisfying the
requirements of the Plan, which purported termination shall not be
effective for purposes of the Plan.
provided, however, that none of the following circumstances, in and of itself,
shall constitute Good Reason for purposes of the Plan: (a) a change in the
Participant's reporting structure within the Company which does not adversely
affect the Participant's duties within the Company, (b) a reduction in the
Participant's title which does not adversely affect the Participant's duties
within the Company, (c) a transfer of the Participant to another position within
the Company which does not adversely affect the Participant's duties within the
Company, and (d) a change in the Participant's status, position, or duties
within the Company which change results solely by virtue of the Company ceasing
to be a publicly held corporation or becoming a subsidiary of Lockheed.
A Participant's right to terminate his or her employment for Good Reason
shall not be affected by the Participant's incapacity due to physical or mental
illness following the occurrence of the circumstance constituting Good Reason.
Except as otherwise provided in Section 5.1 hereof, a Participant's continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder.
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<PAGE>
(M) "Group I Participants" shall mean those persons listed on SCHEDULE A
hereto, provided that such schedule shall not be subject to amendment.
(N) "Group II Participants" shall mean those persons listed on SCHEDULE B
hereto, provided that such schedule shall not be subject to amendment.
(O) "Group III Participants" shall mean those persons listed on SCHEDULE C
hereto, provided that such schedule shall not be subject to amendment.
(P) "Lockheed Merger" shall mean the proposed merger of the Company and
Lockheed Martin Corporation ("Lockheed") pursuant to the Lockheed Merger
Agreement.
(Q) "Lockheed Merger Agreement" shall mean that certain Agreement and Plan
of Merger, dated as of September 18, 1998, among the Company, Lockheed and Deneb
Corporation.
(R) "Participants" shall mean, collectively, the Group I Participants, the
Group II Participants, and the Group III Participants.
(S) "Person" shall have the meaning set forth in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except
that such term shall not include (i) the Company or any of its subsidiaries,
(ii) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company or any of its Affiliates, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company.
(T) "Protected Period" shall mean the period beginning on the date of a
Change in Control and ending on the date which is eighteen months after the date
of such Change in Control.
2. EFFECTIVE DATE OF PLAN. The effective date of the Plan shall be
----------------------
September 18, 1998. The Plan shall remain in effect until the earlier of (i)
such time as the Company has discharged all of its obligations hereunder, or
(ii) the date of the termination of the Plan pursuant to Section 10.3 hereof.
3. ADMINISTRATION.
--------------
(A) Prior to the date of a Change in Control, the Plan shall be
interpreted, administered and operated by the Compensation Committee of the
Board; on and after the date of a Change in Control, the Plan shall be
interpreted, administered and operated by a committee appointed by the acquiring
company in the Change in Control transaction (the "Acquiror"). In
5
<PAGE>
each case, the Committee shall have complete authority, in its sole discretion
subject to the express provisions of the Plan, to determine who shall be a
Participant, to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to it, and to make all other determinations necessary or
advisable for the administration of the Plan. Notwithstanding the foregoing, the
Committee may delegate any of its duties hereunder to such person or persons
from time to time as it may designate.
(B) All expenses and liabilities which members of the Committee incur in
connection with the administration of the Plan shall be borne by the Company.
The Committee may employ attorneys, consultants, accountants, appraisers,
brokers, or other persons, and the Committee, the Company and the Company's
officers and directors shall be entitled to rely upon the advice, opinions or
valuations of any such persons. No member of the Committee or the Board shall
be personally liable for any action, determination or interpretation made in
good faith with respect to the Plan, and all members of the Committee shall be
fully protected by the Company in respect of any such action, determination or
interpretation.
4. BENEFITS PROVIDED.
-----------------
4.1 Termination After Change in Control. Subject to Section 4.2 hereof,
if a Participant's employment is terminated during the Protected Period (a) by
the Company other than for Cause or Disability, or (b) by the Participant for
Good Reason, the Company shall, in lieu of any other severance payments or
benefits payable by the Company to the Participant, pay the Participant the
amounts, and provide the Participant with the benefits, described in this
Section 4.1 ("Severance Payments").
(A) The Company shall pay to the Participant the following amounts
during the Benefits Continuation Period: (i) the Participant's annual base
salary as in effect immediately prior to the Date of Termination or, if
higher, as in effect immediately prior to the Change in Control, and (ii)
the Participant's targeted annual bonus under the Company's Annual
Incentive Plan for the year in which such Date of Termination occurs or, if
higher, the year in which the Change in Control occurs. The payments set
forth in this Section 4.1(A) shall be made in accordance with the Company's
regular payroll practices with respect to the payment of salaries and
bonuses, as in effect immediately prior to the Date of Termination.
Notwithstanding anything contained herein, if the amount that the
Participant is entitled to receive under Section 8(B) or Section 8(C), as
the case may be, of the Company's Retention Bonus Plan is greater than the
aggregate amount that the Participant is entitled to receive under this
Section 4.1(A), then the Participant shall forfeit all rights to receive
any and all payments under this Section 4.1(A).
(B) During the Benefits Continuation Period, the Company shall provide
the Participant and his or her dependents with the same group health and
welfare benefits (including, without limitation, life, disability, accident
and health insurance) to which the
6
<PAGE>
Participant would have been entitled had he or she remained continuously
employed by the Company during the Benefits Continuation Period, such
benefits to be provided on the same terms and conditions and at the same
cost to the Participant as would have been applicable to the Participant
had he or she remained so employed; provided, however, that if the
Participant becomes reemployed with another employer and is eligible to
receive such benefits under another employer's plans, the Company's
obligations under this Section 4.1(B) shall be reduced to the extent that
comparable benefits are actually received by the Participant during the
Benefits Continuation Period, and any such benefits actually received by
the Participant shall be reported to the Company. In the event that the
Participant is ineligible under the terms of the Company's benefit plans to
continue to be so covered, the Company shall provide the Participant with
substantially equivalent coverage through other sources or will provide the
Participant with a lump sum payment (determined on a present value basis
using the interest rate provided in section 1274(b)(2)(B) of the Code on
the Date of Termination) in such amount that, after all taxes on that
amount, shall be equal to the cost to the Participant of providing himself
or herself such benefit coverage. At the termination of the benefits
coverage under the second preceding sentence, the Participant and his or
her dependents shall be entitled to continuation coverage pursuant to
section 4980B of the Code, sections 601-608 of the Employee Retirement
Income Security Act of 1974, as amended, and under any other applicable
law, to the extent required by such laws, as if the Participant had
terminated employment with the Company on the date such benefits coverage
terminates.
(C) The Company shall pay to the Participant any earned but unpaid
portion of the Participant's base salary as of the Date of Termination at
the rate in effect at the time Notice of Termination is given, plus all
other amounts to which the Participant is entitled under any compensation
plan or practice of the Company at the time such payments are due.
4.2 Section 280G. (A) Notwithstanding anything in this Plan to the
contrary, in the event that it shall be determined that any payment or benefit
to a Participant, whether pursuant to the terms of this Plan or otherwise (a
"Payment"), would constitute an "excess parachute payment" within the meaning of
section 280G of the Code, the Participant shall be paid an additional amount (a
"Gross-Up Payment") such that the net amount retained by the Participant after
deduction of any excise tax imposed under section 4999 of the Code, and any
federal, state and local income and employment taxes and excise tax, including
any interest and penalties with respect thereto, imposed upon the Gross-Up
Payment shall be equal to the Payment. For purposes of determining the amount
of the Gross-Up Payment, the Participant shall be deemed to pay federal income
tax and employment taxes at the highest marginal rate of federal income and
employment taxation in the calendar year in which the Gross-Up Payment is to be
made and state and local income taxes at the highest marginal rate of taxation
in the state and locality of the Participant's residence on the date the Payment
is made, net of the reduction in federal income taxes that the Participant may
obtain from the deduction of such state and local income taxes.
7
<PAGE>
(B) All determinations to be made under this Section 4.2 shall be made by
the Company's independent public accountant immediately prior to the date the
Payment is made (the "Accounting Firm"), which firm shall provide its
determinations and any supporting calculations and workpapers both to the
Company and the Participant within ten (10) days of such date. Any such
determination by the Accounting Firm shall be binding upon the Company and the
Participant. Within five days after receipt of the Accounting Firm's
determination, the Company shall pay to the Participant the Gross-Up Payment
determined by the Accounting Firm.
(C) In the event that upon any audit by the Internal Revenue Service, or by
a state or local taxing authority, of a Payment or Gross-Up Payment, a change is
finally determined to be required in the amount of taxes paid by the
Participant, appropriate adjustments shall be made under this Section 4.2 such
that the net amount which is payable to the Participant after taking into
account the provisions of section 4999 of the Code and any interest and
penalties shall reflect the intent of the parties as expressed in paragraph (A)
of this Section 4.2, in the manner determined by the Accounting Firm. The
Participant shall notify the Company in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by the Company of
a Gross-Up Payment. Such notification shall be given as soon as practicable but
no later than ten (10) business days after the Participant is informed in
writing of such claim and shall apprise the Company of the nature of such claim
and the date on which such claim is requested to be paid. The Participant shall
not pay such claim prior to the expiration of the 30-day period following the
date on which it gives such notice to the Company (or such shorter period ending
on the date that any payment of taxes with respect to such claim is due). If
the Company notifies the Participant in writing prior to the expiration of such
period that it desires to contest such claim, the Participant shall: (i) give
the Company any information reasonably requested by the Company relating to such
claim; (ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company; (iii) cooperate with the Company
in good faith in order effectively to contest such claim; and (iv) permit the
Company to participate in any proceedings relating to such claim; provided,
however, that the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Participant harmless, on an after-tax
basis, for any excise tax or income tax (including interest and penalties with
respect thereto) imposed as a result of such representation and payment of costs
and expenses. Without limitation on the foregoing provisions of this Section
4.2, the Company shall control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may contest the claim in any permissible manner, and
the Participant agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine. The Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Participant shall be entitled to settle or
contest, as
8
<PAGE>
the case may be, any other issue raised by the Internal Revenue Service or any
other taxing authority.
(D) All of the fees and expenses of the Accounting Firm in performing the
determinations referred to in paragraphs (B) and (D) of this Section 4.2 shall
be borne solely by the Company. The Company agrees to indemnify and hold
harmless the Accounting Firm from any and all claims, damages and expenses
resulting from or relating to its determinations pursuant to paragraphs (B) and
(C) of this Section 4.2, except for claims, damages or expenses resulting from
the gross negligence or willful misconduct of the Accounting Firm.
5. TERMINATION PROCEDURES.
----------------------
5.1 Notice of Termination. Any purported termination of a Participant's
employment following a Change in Control (other than by reason of death) shall
be communicated by written Notice of Termination from one party to the other
party in accordance with Section 8 hereof. For purposes of this Plan, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this Plan relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Participant's employment under the provision so indicated. Further, no
termination for Cause shall be effective without (i) reasonable notice to the
Participant setting forth the reasons for the Company's intention to terminate,
and (ii) an opportunity for the Participant to cure or correct any such breach
within twenty (20) days after receipt of such notice. Notwithstanding anything
contained herein, no termination for Good Reason shall be effective unless (i)
the Participant has delivered to the Company a Notice of Termination in
accordance with this Section 5.1 within thirty (30) days after the occurrence of
the event or circumstance which constitutes Good Reason under Section 1(L)
hereof, and (ii) the Company has been afforded an opportunity to cure or correct
such event or circumstance within twenty (20) days after receipt of such notice.
5.2 Date of Termination. "Date of Termination," with respect to any
purported termination of a Participant's employment (other than by reason of the
Participant's death), shall mean (i) if the Participant's employment is
terminated for Disability, the date upon which a Notice of Termination is given,
and (ii) if the Participant's employment is terminated for any other reason, the
date specified in the Notice of Termination (which shall be within thirty (30)
days from the date such Notice of Termination is given).
6. NO MITIGATION. The Company agrees that, in order for a Participant to
-------------
be eligible to receive the Severance Payments and other benefits described
herein, the Participant is not required to seek other employment or to attempt
in any way to reduce any amounts payable to the Participant by the Company
pursuant to Section 4 hereof. Further, the amount of any payment or benefit
provided for in this Plan (other than pursuant to Section 4.1(B) hereof) shall
not be reduced by any compensation or income earned by the Participant as the
result of employment by another employer or self-employment, by retirement
benefits, by offset against any amount claimed to be owed by the Participant to
the Company, or otherwise.
9
<PAGE>
7. SUCCESSORS; BINDING AGREEMENT.
-----------------------------
7.1 (A) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume this Plan and all obligations of the Company hereunder in the same manner
and to the same extent that the Company would be so obligated if no such
succession had taken place.
(B) This Plan shall inure to the benefit of and shall be binding upon
the Company, its successors and assigns, but without the prior written consent
of the Participants this Plan may not be assigned other than in connection with
the merger or sale of substantially all of the business and/or assets of the
Company or similar transaction in which the successor or assignee assumes
(whether by operation of law or express assumption) all obligations of the
Company hereunder.
7.2 This Plan shall inure to the benefit of and be enforceable by the
Participant's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees, legatees or other beneficiaries. If
a Participant shall die while any amount would still be payable to such
Participant hereunder (other than amounts which, by their terms, terminate upon
the death of the Participant) if such Participant had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Plan to the executors, personal representatives or
administrators of such Participant's estate.
8. NOTICES. For the purpose of this Plan, notices and all other
-------
communications provided for in the Plan shall be in writing and shall be deemed
to have been duly given when delivered or mailed by United States registered
mail, return receipt requested, postage prepaid, addressed, if to a Participant,
to the address on file with the Company and, if to the Company, to the address
set forth below, or to such other address as either party may have furnished to
the other in writing in accordance herewith, except that notice of change of
address shall be effective only upon actual receipt:
To the Company:
6560 Rock Spring Drive
Bethesda, Maryland 20817
Attention: Corporate Secretary
9. CLAIMS PROCEDURES; EXPENSES.
---------------------------
9.1 Claim for Benefits. A Participant may file with the Committee a
written claim for benefits under the Plan. The Committee shall, within a
reasonable time not to exceed ninety (90) days, unless special circumstances
require an extension of time of not more than an additional
10
<PAGE>
ninety (90) days (in which event a Participant will be notified of the delay
during the first ninety (90) day period), provide adequate notice in writing to
any Participant whose claim for benefits shall have been denied, setting forth
the following in a manner calculated to be understood by the Participant: (i)
the specific reason or reasons for the denial; (ii) specific reference to the
provision or provisions of the Plan on which the denial is based; (iii) a
description of any additional material or information required to perfect the
claim, and an explanation of why such material or information is necessary; and
(iv) information as to the steps to be taken in order that the denial of the
claim may be reviewed. If written notice of the denial of a claim has not been
furnished to a Participant, and such claim has not been granted within the time
prescribed in this Section 9.1 (including any applicable extension), the claim
for benefits shall be deemed denied. Solely for purposes of this Section 9.1,
the following provision shall apply from and after the date of a Change in
Control: the Committee reviewing such claim shall consist of two (2) persons
designated by the Acquiror and one (1) person who was an employee of COMSAT
Corporation prior to the Change in Control.
9.2 Appeal of Denial. (A) A Participant whose claim for benefits shall
have been denied in whole or in part, may, within sixty (60) days from either
the receipt of the denial of the claim or from the time the claim is deemed
denied (unless the notice of denial grants a longer period within which to
respond), appeal such denial to the Vice President of Human Resources of the
Company or, from and after a Change in Control, to the Vice President of Human
Resources of the Acquiror (in each case, the "Vice President of Human
Resources"). The Participant may, upon request, at this time review documents
pertinent to his claim and may submit written issues and comments.
(B) The Vice President of Human Resources shall notify a Participant of
its decision within sixty (60) days after an appeal is received, unless special
circumstances require an extension of time of not more than an additional sixty
(60) days (in which event a Participant will be notified of the delay during the
first sixty (60) day period). Such decision shall be given in writing in a
manner calculated to be understood by the Participant and shall include the
following: (i) specific reasons for the decision; and (ii) specific reference
to the provision or provisions of the Plan on which the decision is based.
9.3 Expenses, Legal Fees. If a Participant commences a legal action to
enforce any of the obligations of the Company under this Plan and it is
ultimately determined that the Participant is entitled to any payments or
benefits under this Plan, the Company shall pay the Participant the amount
necessary to reimburse the Participant in full for all reasonable expenses
(including reasonable attorneys' fees and legal expenses) incurred by the
Participant with respect to such action.
10. MISCELLANEOUS.
-------------
10.1 No Waiver. No waiver by the Company or any Participant, as the case
may be, at any time of any breach by the other party of, or of any lack of
compliance with, any condition or
11
<PAGE>
provision of this Plan to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. All other plans, policies and arrangements of the
Company in which the Participant participates during the term of this Plan shall
be interpreted so as to avoid the duplication of benefits paid hereunder.
10.2 No Right to Employment. Nothing contained in this Plan or any
documents relating to the Plan shall (i) confer upon any Participant any right
to continue in the employ of the Company or a subsidiary, (ii) constitute any
contract or agreement of employment, or (iii) interfere in any way with the
right of the Company to terminate the Participant's employment at any time, with
or without Cause.
10.3 Termination and Amendment of Plan. From and after the earlier to
occur of (i) the date of the signing of the Lockheed Merger Agreement, or (ii)
the date of a Change in Control, the Company shall not have the right to
terminate the Plan unless such termination is required by law or the Company has
obtained the prior written consent of all Participants. Notwithstanding the
foregoing, the Plan shall automatically terminate on the date following the
termination of the Protected Period, provided that all obligations accrued by
Participants prior to such termination of the Plan must be satisfied in full in
accordance with the terms hereof. The Company shall have the right to amend this
Plan at any time by resolution of the Board and to amend or cancel any
amendments; provided, however, that no amendment to the Plan shall be made which
adversely affects any Participant's rights or interests herein without the
express written consent of each Participant so affected.
10.4 Benefits not Assignable. Except as otherwise provided herein or by
law, no right or interest of any Participant under the Plan shall be assignable
or transferable, in whole or in part, either directly or by operation of law or
otherwise, including without limitation by execution, levy, garnishment,
attachment, pledge or in any manner; no attempted assignment or transfer thereof
shall be effective; and no right or interest of any Participant under the Plan
shall be liable for, or subject to, any obligation or liability of such
Participant. When a payment is due under this Plan to a Participant who is
unable to care for his or her affairs, payment may be made directly to his or
her legal guardian or personal representative.
10.5 Tax Withholding. All amounts payable hereunder shall be subject to
applicable federal, state and local tax withholding.
10.6 Maryland Law. This Plan shall be construed, interpreted and the
rights of the parties determined in accordance with the laws of the State of
Maryland (without regard to the conflicts of laws principles thereof), to the
extent not preempted by federal law, which shall otherwise control.
10.7. Validity. The invalidity or unenforceability of any provision of
this Plan shall not affect the validity or enforceability of any other provision
of this Plan, which shall remain in full
12
<PAGE>
force and effect. If this Plan shall for any reason be or become unenforceable
by either party, this Plan shall thereupon terminate and become unenforceable by
the other party as well.
13
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SCHEDULE A
A-1
<PAGE>
SCHEDULE B
B-1
<PAGE>
SCHEDULE C
C-1
<PAGE>
Exhibit 17
AMENDMENT TO
COMSAT CORPORATION
1995 KEY EMPLOYEE STOCK PLAN
THIS AMENDMENT TO COMSAT CORPORATION 1995 KEY EMPLOYEE STOCK PLAN (this
"Amendment") is made and adopted by COMSAT CORPORATION, a District of Columbia
corporation (the "Corporation"), as of September 18, 1998. Capitalized terms
used but not otherwise defined herein shall have the respective meanings
ascribed to such terms in the Plan (as defined below).
WHEREAS, the Corporation has adopted the COMSAT Corporation 1995 Key
Employee Stock Plan (as amended, the "Plan");
WHEREAS, the Plan generally provides that upon the occurrence of a "Change
in Control" (as defined therein) of the Corporation, all awards granted
thereunder will immediately become vested or exercisable, as applicable;
WHEREAS, the Corporation reserved the right to amend the Plan pursuant to
the terms and conditions thereof;
WHEREAS, the Corporation desires to amend the Plan so as to revise the
definition of "Change in Control" set forth therein; and
WHEREAS, this Amendment was duly adopted by a resolution of the Board of
Directors of the Corporation dated as of September 18, 1998.
NOW THEREFORE, in consideration of the foregoing, the Corporation hereby
amends the Plan as follows:
1. SECTION 10(B) OF THE PLAN IS HEREBY AMENDED AND RESTATED IN ITS
ENTIRETY AS FOLLOWS:
"(b) 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 Person (as defined below) of Beneficial
Ownership (as defined below) of fifty percent (50%) or more of the combined
voting power of the then outstanding voting securities of the Corporation.
For purposes of this Section 10(b), (A) the term "Person" shall have the
meaning set forth in Section 3(a)(9) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as modified and used in Sections
13(d) and 14(d) thereof, except that such term shall not include (1) the
Corporation or any of its subsidiaries, (2) a trustee or other fiduciary
holding securities
<PAGE>
under an employee benefit plan of the Corporation or any of its Affiliates
(as defined in Rule 12b-2 promulgated under Section 12 of the Exchange
Act), (3) an underwriter temporarily holding securities pursuant to an
offering of such securities, or (4) a corporation owned, directly or
indirectly, by the stockholders of the Corporation in substantially the
same proportions as their ownership of stock of the Corporation; and (B)
the term "Beneficial Ownership" shall have the meaning set forth in Rule
13d-3 under the Exchange Act (and the terms "Beneficial Ownership" and
"Beneficially Owned" shall have correlative meanings); or
(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; or
(iii) approval by the shareholders of the Corporation of a merger,
share exchange, swap, consolidation, recapitalization or other business
combination involving the Corporation and 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; or
(iv) approval by the shareholders of the Corporation of (A) a
complete liquidation or dissolution of the Corporation, or (B) the sale or
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 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
2
<PAGE>
resolution specifically providing that the event shall not be deemed to
constitute a Change in Control for purposes of this Plan; provided, further,
that, notwithstanding the foregoing, with respect to the proposed merger (the
"Lockheed Merger") of the Corporation and Lockheed Martin Corporation
("Lockheed") pursuant to that certain Agreement and Plan of Merger, dated as of
September 18, 1998, among the Corporation, Lockheed and Deneb Corporation (the
"Lockheed Merger Agreement"), the following provisions shall apply: (a) the
signing of the Lockheed Merger Agreement shall not constitute a Change in
Control for purposes of this Plan, (b) the approval by the Board or the
Corporation's shareholders of the Lockheed Merger or the Lockheed Merger
Agreement shall not constitute a Change in Control for purposes of this Plan,
(c) the commencement or the closing of the tender offer by Lockheed to purchase
shares of the Corporation's common stock as contemplated by the Lockheed Merger
Agreement shall not constitute a Change in Control for purposes of this Plan,
(d) the acquisition by Lockheed or Regulus, LLC of COMSAT Government Systems,
Inc. shall not constitute a Change in Control for purposes of the Plan, and (e)
upon the closing of the Lockheed Merger, a Change in Control of the Corporation
shall be deemed to have occurred for purposes of this Plan."
2. THIS AMENDMENT SHALL BE AND IS HEREBY INCORPORATED IN AND FORMS A PART
OF THE PLAN.
3. EXCEPT AS SET FORTH HEREIN, THE PLAN SHALL REMAIN IN FULL FORCE AND
EFFECT.
* * *
IN WITNESS WHEREOF, the Corporation has caused this Amendment to the
Plan to be executed by its duly authorized officer as of September 18, 1998.
COMSAT CORPORATION
By: /S/ Paul A. Jones
------------------------------------
Title: Vice President, Human Resources
& Organizational Development
3
<PAGE>
EXHIBIT 18
AMENDMENT TO
COMSAT CORPORATION
1990 KEY EMPLOYEE STOCK PLAN
THIS AMENDMENT TO COMSAT CORPORATION 1990 KEY EMPLOYEE STOCK PLAN (this
"Amendment") is made and adopted by COMSAT CORPORATION, a District of Columbia
corporation (the "Corporation"), as of September 18, 1998. Capitalized terms
used but not otherwise defined herein shall have the respective meanings
ascribed to such terms in the Plan (as defined below).
WHEREAS, the Corporation has adopted the COMSAT Corporation 1990 Key
Employee Stock Plan (as amended, the "Plan");
WHEREAS, the Plan generally provides that upon the occurrence of a "Change
in Control" (as defined therein) of the Corporation, all awards granted
thereunder will immediately become vested or exercisable, as applicable;
WHEREAS, the Corporation reserved the right to amend the Plan pursuant to
the terms and conditions thereof;
WHEREAS, the Corporation desires to amend the Plan so as to revise the
definition of "Change in Control" set forth therein; and
WHEREAS, this Amendment was duly adopted by a resolution of the Board of
Directors of the Corporation dated as of September 18, 1998.
NOW THEREFORE, in consideration of the foregoing, the Corporation hereby
amends the Plan as follows:
1. SECTION 9(B) OF THE PLAN IS HEREBY AMENDED AND RESTATED IN ITS
ENTIRETY AS FOLLOWS :
"(b) 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 Person (as defined below) of Beneficial
Ownership (as defined below) of fifty percent (50%) or more of the combined
voting power of the then outstanding voting securities of the Corporation.
For purposes of this Section 9(b), (A) the term "Person" shall have the
meaning set forth in Section 3(a)(9) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as modified and used in Sections
13(d) and 14(d) thereof, except that such term shall not include (1) the
Corporation or any of its subsidiaries, (2) a trustee or other fiduciary
holding securities
<PAGE>
under an employee benefit plan of the Corporation or any of its Affiliates
(as defined in Rule 12b-2 promulgated under Section 12 of the Exchange
Act), (3) an underwriter temporarily holding securities pursuant to an
offering of such securities, or (4) a corporation owned, directly or
indirectly, by the stockholders of the Corporation in substantially the
same proportions as their ownership of stock of the Corporation; and (B)
the term "Beneficial Ownership" shall have the meaning set forth in Rule
13d-3 under the Exchange Act (and the terms "Beneficial Ownership" and
"Beneficially Owned" shall have correlative meanings); or
(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; or
(iii) approval by the shareholders of the Corporation of a merger,
share exchange, swap, consolidation, recapitalization or other business
combination involving the Corporation and 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; or
(iv) approval by the shareholders of the Corporation of (A) a
complete liquidation or dissolution of the Corporation, or (B) the sale or
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 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
2
<PAGE>
resolution specifically providing that the event shall not be deemed to
constitute a Change in Control for purposes of this Plan; provided, further,
that, notwithstanding the foregoing, with respect to the proposed merger (the
"Lockheed Merger") of the Corporation and Lockheed Martin Corporation
("Lockheed") pursuant to that certain Agreement and Plan of Merger, dated as of
September 18, 1998, among the Corporation, Lockheed and Deneb Corporation (the
"Lockheed Merger Agreement"), the following provisions shall apply: (a) the
signing of the Lockheed Merger Agreement shall not constitute a Change in
Control for purposes of this Plan, (b) the approval by the Board or the
Corporation's shareholders of the Lockheed Merger or the Lockheed Merger
Agreement shall not constitute a Change in Control for purposes of this Plan,
(c) the commencement or the closing of the tender offer by Lockheed to purchase
shares of the Corporation's common stock as contemplated by the Lockheed Merger
Agreement shall not constitute a Change in Control for purposes of this Plan,
(d) the acquisition by Lockheed or Regulus, LLC of COMSAT Government Systems,
Inc. shall not constitute a Change in Control for purposes of the Plan, and (e)
upon the closing of the Lockheed Merger, a Change in Control of the Corporation
shall be deemed to have occurred for purposes of this Plan."
2. THIS AMENDMENT SHALL BE AND IS HEREBY INCORPORATED IN AND FORMS A PART
OF THE PLAN.
3. EXCEPT AS SET FORTH HEREIN, THE PLAN SHALL REMAIN IN FULL FORCE AND
EFFECT.
* * *
IN WITNESS WHEREOF, the Corporation has caused this Amendment to the
Plan to be executed by its duly authorized officer as of September 18, 1998.
COMSAT CORPORATION
By: /S/ Paul A. Jones
------------------------------------
Title: Vice President, Human Resources
& Organizational Development
3
<PAGE>
EXHIBIT 19
AMENDMENT TO
COMSAT CORPORATION
NON-EMPLOYEE DIRECTORS STOCK PLAN
THIS AMENDMENT TO COMSAT CORPORATION NON-EMPLOYEE DIRECTORS STOCK PLAN
(this "Amendment") is made and adopted by COMSAT CORPORATION, a District of
Columbia corporation (the "Corporation"), as of September 18, 1998. Capitalized
terms used but not otherwise defined herein shall have the respective meanings
ascribed to such terms in the Plan (as defined below).
WHEREAS, the Corporation has adopted the COMSAT Corporation Non-Employee
Directors Stock Plan (as amended, the "Plan");
WHEREAS, the Plan generally provides that upon the occurrence of a "Change
in Control" (as defined therein) of the Corporation, all awards granted
thereunder will immediately become vested or exercisable, as applicable;
WHEREAS, the Corporation reserved the right to amend the Plan pursuant to
the terms and conditions thereof;
WHEREAS, the Corporation desires to amend the Plan to, among other things,
revise the definition of "Change in Control" set forth therein; and
WHEREAS, this Amendment was duly adopted by a resolution of the Board of
Directors of the Corporation dated as of September 18, 1998.
NOW THEREFORE, in consideration of the foregoing, the Corporation hereby
amends the Plan as follows:
1. SECTION 5(D) OF THE PLAN IS HEREBY AMENDED AND RESTATED IN ITS ENTIRETY
AS FOLLOWS:
"(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 Person (as defined below) of Beneficial
Ownership (as defined below) of fifty percent (50%) or more of the combined
voting power of the then outstanding voting securities of the Corporation.
For purposes of this Section 5(d), (A) the term "Person" shall have the
meaning set forth in Section 3(a)(9) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as modified and used in
<PAGE>
Sections 13(d) and 14(d) thereof, except that such term shall not include
(1) the Corporation or any of its subsidiaries, (2) a trustee or other
fiduciary holding securities under an employee benefit plan of the
Corporation or any of its Affiliates (as defined in Rule 12b-2 promulgated
under Section 12 of the Exchange Act), (3) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (4) a
corporation owned, directly or indirectly, by the stockholders of the
Corporation in substantially the same proportions as their ownership of
stock of the Corporation; and (B) the term "Beneficial Ownership" shall
have the meaning set forth in Rule 13d-3 under the Exchange Act (and the
terms "Beneficial Ownership" and "Beneficially Owned" shall have
correlative meanings); or
(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; or
(iii) approval by the shareholders of the Corporation of a merger,
share exchange, swap, consolidation, recapitalization or other business
combination involving the Corporation and 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; or
(iv) approval by the shareholders of the Corporation of (A) a
complete liquidation or dissolution of the Corporation, or (B) the sale or
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 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;
2
<PAGE>
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 this Plan;
provided, further, that, notwithstanding the foregoing, with respect to the
proposed merger (the "Lockheed Merger") of the Corporation and Lockheed Martin
Corporation ("Lockheed") pursuant to that certain Agreement and Plan of Merger,
dated as of September 18, 1998, among the Corporation, Lockheed and Deneb
Corporation (the "Lockheed Merger Agreement"), the following provisions shall
apply: (a) the signing of the Lockheed Merger Agreement shall not constitute a
Change in Control for purposes of this Plan, (b) the approval by the Board or
the Corporation's shareholders of the Lockheed Merger or the Lockheed Merger
Agreement shall not constitute a Change in Control for purposes of this Plan,
(c) the commencement or the closing of the tender offer by Lockheed to purchase
shares of the Corporation's common stock as contemplated by the Lockheed Merger
Agreement shall not constitute a Change in Control for purposes of this Plan,
(d) the acquisition by Lockheed or Regulus, LLC of COMSAT Government Systems,
Inc. shall not constitute a Change in Control for purposes of the Plan, and (e)
upon the closing of the Lockheed Merger, a Change in Control of the Corporation
shall be deemed to have occurred for purposes of this Plan."
2. SECTION 11 OF THE PLAN IS HEREBY AMENDED BY ADDING THE FOLLOWING
PARAGRAPH (III) IMMEDIATELY AFTER PARAGRAPH (II) OF SUCH SECTION:
"(iii) no such amendment shall be made which adversely affects any Non-
Employee Director's rights or interests in the Plan or in any award granted
hereunder, without the express written consent of each Non-Employee Director so
affected."
3. THIS AMENDMENT SHALL BE AND IS HEREBY INCORPORATED IN AND FORMS A PART
OF THE PLAN.
4. EXCEPT AS SET FORTH HEREIN, THE PLAN SHALL REMAIN IN FULL FORCE AND
EFFECT.
* * *
IN WITNESS WHEREOF, the Corporation has caused this Amendment to the
Plan to be executed by its duly authorized officer as of September 18, 1998.
COMSAT CORPORATION
By: /S/ Paul A. Jones
----------------------
Title: Vice President,
Human Resources &
Organizational
Development
3
<PAGE>
EXHIBIT 20
AMENDMENT TO
COMSAT CORPORATION
DIRECTORS AND EXECUTIVES DEFERRED COMPENSATION PLAN
THIS AMENDMENT TO COMSAT CORPORATION DIRECTORS AND EXECUTIVES DEFERRED
COMPENSATION PLAN (this "Amendment") is made and adopted by COMSAT CORPORATION,
a District of Columbia corporation (the "Corporation"), as of September 18,
1998. Capitalized terms used but not otherwise defined herein shall have the
respective meanings ascribed to such terms in the Plan (as defined below).
WHEREAS, the Corporation has adopted the COMSAT Corporation Directors and
Executives Deferred Compensation Plan (as amended, the "Plan");
WHEREAS, the Corporation reserved the right to amend the Plan pursuant to
the terms and conditions thereof;
WHEREAS, the Corporation desires to amend the Plan, as set forth herein;
and
WHEREAS, this Amendment was duly adopted by a resolution of the Board of
Directors of the Corporation dated as of September 18, 1998.
NOW THEREFORE, in consideration of the foregoing, the Corporation hereby
amends the Plan as follows:
1. SECTION 7.2 OF THE PLAN IS HEREBY AMENDED AND RESTATED IN ITS ENTIRETY
AS FOLLOWS:
"7.2 Effect of Amendment or Termination. No amendment or termination of
----------------------------------
the Plan pursuant to Section 7.1 shall adversely affect any Participant's or
Beneficiary's rights or interests in the Plan or shall deprive any Participant
or Beneficiary of any part of his or her benefits under the Plan accrued as of
the time of such amendment or termination, in each case without the express
written consent of each such Participant or Beneficiary so affected. If the
Plan is terminated, each Participant shall be paid the full amount of his or her
Deferred Compensation Account in accordance with the terms of the Plan and the
election(s) made by the Participant thereunder.
2. THIS AMENDMENT SHALL BE AND IS HEREBY INCORPORATED IN AND FORMS A PART
OF THE PLAN.
3. EXCEPT AS SET FORTH HEREIN, THE PLAN SHALL REMAIN IN FULL FORCE AND
EFFECT.
* * *
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Amendment to the
Plan to be executed by its duly authorized officer as of September 18, 1998.
COMSAT CORPORATION
By: /S/ Paul A Jones
------------------------
Title: Vice President, Human Resources
& Organizational Development
2
<PAGE>
EXHIBIT 21
ITEM 2. PROPOSED COMSAT CORPORATION 1995 KEY EMPLOYEE STOCK PLAN
At its meeting held January 20, 1995, the Board of Directors of the
Corporation approved and adopted the COMSAT Corporation 1995 Key Employee Stock
Plan (the Plan), which is effective on that date, subject to approval by the
shareholders. The Plan is intended to replace the 1990 Key Employee Stock Plan
(the 1990 Plan), which expires May 19, 1995. Approval of the adoption of the
Plan requires the affirmative vote of a majority of the outstanding shares of
the Common Stock represented and entitled to vote at the meeting.
The purpose of the Plan is to promote the interests of the Corporation by
affording its key employees an incentive, by means of an opportunity to acquire
the Corporation's Common Stock, to remain in the employ of the Corporation and
to exert their maximum efforts on its behalf. The following is a summary of the
principal provisions of the Plan.
Shares Covered. The Plan authorizes the granting of options, which may be
--------------
either non-statutory options or "incentive stock options" (as defined in the
Internal Revenue Code of 1986, as amended (the Code)), stock appreciation rights
(SARs), restricted stock units (RSUs) and restricted stock awards (RSAs) with
respect to no more than 5,000,000 shares of the Corporation's Common Stock in
the aggregate, subject to adjustment as described below. No more than 1,665,000
of the shares may be covered by RSUs and RSAs. Any SAR or RSU, or any portion
thereof, which is payable in cash is not counted against the various share
limits on grants.
The shares of Common Stock covered by the Plan may be either treasury
shares or authorized but unissued shares. Shares covered by options that expire
unexercised (without having been surrendered upon the exercise of SARs, whether
settled in cash or Common Stock) and shares covered by any RSUs and RSAs that
are forfeited may be used again for new grants under the Plan. In addition,
shares tendered in payment of the purchase price of shares purchased pursuant to
the exercise of options may be used for grants under the Plan.
There is no maximum number of shares that can be allocated to one employee
in any grant of non-statutory options, SARs, RSUs or RSAs, except as described
below with respect to performance-based awards. However, the aggregate fair
market value of the shares with respect to which options intended to be
incentive stock options are exercisable for the first time by an employee in any
calendar year may not exceed $100,000, or such other amount as the Code
provides.
1
<PAGE>
Administration. The Committee on Compensation and Management Development of
--------------
the Board of Directors of the Corporation (the Committee) administers the Plan.
Eligibility. The Committee selects the employees to participate in the Plan
-----------
from among the key employees of the Corporation and its subsidiary corporations
(Subsidiaries) and determines the number of shares covered by stock options,
SARs, RSUs and RSAs to be granted to each employee to fulfill the purpose of the
Plan. Directors who are not employees of the Corporation are not eligible to
participate in the Plan.
Duration. Any grant of an option, SAR, RSU or RSA under the Plan must be
--------
made no later than May 19, 2000.
Adjustments. If there is a change in 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
a distribution to shareholders of the Corporation's Common Stock other than a
cash dividend, or a grant of substitute options pursuant to the Plan, the
Committee may make such adjustments as it deems necessary or equitable in the
number and kind of shares subject to the Plan, number and kind of shares under
options, SARs, RSUs and RSAs then outstanding, purchase price for shares of
Common Stock covered by options, and other relevant provisions of the Plan.
Nontransferability. Options, SARs, RSUs, and RSAs are assignable and
------------------
transferable by the Plan participant only to the extent permitted by the rules
promulgated by the Securities and Exchange Commission or, in the case of
incentive stock options, by Section 422 of the Code.
Terms of Options. The Committee has the discretion to determine the time or
----------------
times when options are granted and the number of shares of Common Stock subject
to each option. The purchase price for each share of stock subject to an option
may not be less than the fair market value of the Common Stock on the date the
option is granted. Fair market value is 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).
Except as otherwise determined by the Committee, no option may be exercised
to any extent before six months from the date of
2
<PAGE>
grant. The Committee in its discretion may determine the provisions of the
options granted under the Plan, including installment exercise terms for an
option under which the option may be exercised in a series of cumulative
installments; rules limiting the frequency of exercise of options or the minimum
number of shares that may be exercised at any one time; the form of
consideration, including cash, shares of Common Stock or any combination
thereof, which may be accepted in payment of the purchase price of shares
purchased pursuant to the exercise of an option; special rules regarding
exercise in the case of retirement, death, disability, or other termination of
employment; and any other rules or conditions as it considers appropriate
regarding the exercise of options granted under the Plan.
The Committee determines the term of each option granted, but no option may
be exercised after the expiration of 10 years from the date it is granted,
except that the term of an option other than an incentive stock option may
extend up to 11 years from the date the option is granted if the participant
dies within the 10th year following the date of grant.
Options may be granted under the Plan on such terms and conditions as the
Committee considers appropriate, which may differ from those provided in the
Plan, where such options are granted in substitution for stock options held by
employees of other companies who concurrently become employees of the
Corporation or a Subsidiary as the result of a merger or consolidation of the
other company with, or the acquisition of the property or stock of the other
company by, the Corporation or a Subsidiary.
Terms of SARs. The Committee may grant SARs, which may be freestanding SARs
-------------
or SARs related to options or portions of options granted to participants under
the Plan. Each SAR is subject to such terms and conditions as the Committee may
determine, including terms and conditions as the Committee may determine,
including terms and conditions regarding the exercise price for each share of
Common Stock subject to such SAR, provided that in the case of an SAR related to
an option or portion thereof, such terms and conditions may not be less
restrictive than the terms and conditions of the related option.
The participant may exercise an SAR or portion thereof, and is thereupon
entitled to receive payment of an amount equal to the aggregate appreciation in
value of the shares covered by the SAR or portion thereof exercised, as measured
by the difference between the exercise price of such shares and their fair
market value on the date of exercise. Such payment may be made in cash,
3
<PAGE>
in shares of Common Stock valued at fair market value as of the date of
exercise, or in any combination thereof, as the Committee in its discretion
determines.
Terms of RSUs. The Committee may grant employees RSUs, each equivalent in
-------------
value to a share of Common Stock. Vesting of the RSUs requires that the employee
remain employed by the Corporation or a Subsidiary for a period prescribed by
the Committee for each grant, which period cannot be less than one year.
Upon the conclusion of the period prescribed by the Committee, the employee
is entitled to receive payment of an amount equal to the aggregate fair market
value of the shares of Common Stock covered by the RSU on the date of
expiration. The payment may be made in cash, in shares of Common Stock equal to
the number of RSUs with respect to which the payment is made, or in any
combination of cash and shares, as the Committee determines. In addition,
during the period prescribed by the Committee, the employee is entitled to
receive payment of an amount equal to each cash dividend the Corporation would
have paid to that employee if he or she had been the owner of the shares of
Common Stock covered by the RSUs on the record date for payment of each such
dividend. However, except as otherwise determined by the Committee, if the
employee's employment with the Corporation or any Subsidiary terminates prior to
the end of the period prescribed by the Committee, the employee's RSUs terminate
concurrently and the employee is not entitled to any further payments under the
Plan.
Terms of RSAs. The Committee may grant employees RSAs of shares of Common
-------------
Stock. These employees generally have the rights and privileges of a shareholder
of the Corporation with respect to such shares, including the right to vote the
shares and to receive dividends. The shares are, however, subject to forfeiture
and may not be transferred, assigned, pledged or otherwise encumbered until the
end of a period of time to be determined by the Committee, which cannot be less
than one year, or the occurrence of events before the end of such period as the
Committee may determine. Forfeiture may be waived by the Committee in its sole
discretion.
Performance-Based Awards. The Committee may determine that, in addition to
------------------------
the provisions described above, a grant of RSUs or RSAs may be subject to
performance goals, the terms and conditions of which must be stated in the
written instrument evidencing the RSU or RSA. No more than 50,000 performance-
based RSUs or RSAs may be granted to any individual in any given year.
4
<PAGE>
The Committee administers this provision and the other provisions of the Plan so
as to comply with the requirements of Section 162(m) of the Code to ensure the
Federal tax deductibility under that section of compensation paid to the
Corporation's key employees pursuant to performance-based RSUs and RSAs.
The Committee determines the performance measures, the appropriate
weighting for each performance measure (where more than one such measure
applies), the specific targets applicable to those measures and whether the
target for each performance measure is subject to full or partial satisfaction,
and the performance period for each RSU and RSA grant. In no event may the
performance period be less than one year. The performance measures must include
one or more of the following: improvements in revenues, earnings per share,
profit before taxes, price/equity ratio, net income or operating income; return
on shareholder equity; return on net assets; or stock price performance. At the
end of the performance period applicable to each grant of RSUs or RSAs subject
to these performance goals, the Committee must certify whether the applicable
performance measures have been achieved. The participant will forfeit the shares
of Common Stock covered by the RSUs or RSAs to the extent that the applicable
performance measures have not been achieved. For RSAs, the participant must
immediately transfer the forfeited shares back to the Corporation without
payment by the Corporation.
Where RSUs are performance-based, the Committee may determine that the
dividend equivalents otherwise payable to a participant during the applicable
performance period will instead be accrued and paid to the participant at the
end of the performance period to the extent that the applicable performance
measures have been achieved.
Termination and Amendments. The Board may terminate the Plan or amend the
--------------------------
Plan or any outstanding options, SARs, RSUs or RSAs at any time. Except as
provided under "Adjustments" above, no amendment may, without the approval of
the shareholders of the Corporation: (i) increase the maximum number of shares
of Common Stock for which options, SARs, RSUs, or RSAs may be granted under the
Plan; (ii) except to the extent required or permitted in the case of substitute
options, reduce the price at which options may be granted below the fair market
value provided for under "Options" above; (iii) reduce the option price of
outstanding options; (iv) extend the period during which options, SARs, RSUs or
RSAs may be granted; (v) except to the extent permitted or required in the case
of substitute options, extend the period during which an outstanding option may
be exercised beyond the
5
<PAGE>
maximum period provided for under "Options" above; (vi) materially increase in
any other way the benefits accruing to participants; or (vii) change the class
of persons eligible to be participants.
Federal Income Tax Consequences. With respect to non-statutory options,
-------------------------------
SARs and RSUs, the employee would generally realize ordinary income in the year
the option is exercised, or the SAR or RSU is paid. The amount of income would
be equal, in the case of non-statutory options, to the difference between the
option price and the fair market value of the stock on the exercise date and, in
the case of SARs and RSUs, to the amount of cash or the fair market value of the
stock received by the employee. The Corporation would receive an equivalent
deduction. If the employee later sells the stock, any further gain would be
capital gain.
With respect to incentive stock options, in general, no income to an
employee results for Federal income tax purposes upon either the granting or the
exercise of an option under the Plan. If the employee later sells the acquired
stock at least two years after the date the option is granted and at least one
year after the transfer of the acquired stock to the employee, the employee
would realize capital gain equal to the difference between the option price and
the proceeds of the sale. If the employee's gain is taxed as capital gain, the
Corporation would not be allowed a business expense deduction. If the employee
disposes of the acquired stock before the end of the required holding periods,
the employee would realize ordinary income in the year of disposition equal to
the lesser of: (i) the difference between the option price and the fair market
value of the stock on the exercise date; or (ii) if the disposition is a taxable
sale or exchange, the amount of gain realized. In this event, the Corporation
would receive an equivalent deduction.
With respect to RSAs, the employee would generally realize ordinary income
in the year the shares of Common Stock covered by the award become non-
forfeitable and fully transferable, in an amount equal to the fair market value
of the shares on the date they become non-forfeitable and fully transferable.
The Corporation would receive an equivalent deduction. If the employee later
sells the stock, any further gain would be capital gain.
Grants Made. It is currently estimated that the eligible group to receive
-----------
grants of options, SARS, RSUs and RSAs consists of approximately 200 persons.
The following table shows the dollar value and number of options and RSAs
awarded to the
6
<PAGE>
following persons in January 1995: (i) each of the Chief Executive Officer and
the four other most highly compensated executive officers of the Corporation;
(ii) all executive officers as a group; and (iii) all other employees as a
group. All such grants are subject to the approval of the Plan by the
shareholders.
NEW PLAN BENEFITS
1995 Key Employee Stock
Plan Awards
_____________________________________________
Stock Award Dollar Value Number
Name and Position Type (1) of Units
(2)
- ----------------- ----------- ------------ --------
Bruce L. Crockett, Options $ 19.3125 130,000
President & Chief RSAs $ 393,750 20,000
Executive Officer
Betty C. Alewine, Options 19.3125 55,000
President, COMSAT RSAs 147,656 7,500
International
Communications
C. Thomas Faulders, III, Options 19.3125 55,000
Vice President & Chief RSAs 147,656 7,500
Financial Officer
Charles Lyons, Options 19.3125 55,000
President, COMSAT RSAs 147,656 7,500
Video Enterprises, Inc.
Ronald J. Mario, Options 19.3125 60,000
President, COMSAT RSAs 147,656 7,500
Mobile Communications
All Executive Options 19.3125 490,000
Officers RSAs 1,466,719 74,500
All Other Employees Options 19.3125 0
RSAs 315,000 16,000
________________
(1) Dollar Value:
Options = Fair market value per share on date of award.
RSAs = Number of units multiplied by the fair market value
7
<PAGE>
per share on date of award.
(2) In January 1995, the Corporation awarded employees other than executive
officers 390,650 options valued at $19.3125 per share and 27,600 RSUs
valued at $543,375 under the 1990 Plan.
8
<PAGE>
Exhibit 22
[LOGO APPEARS HERE]
March 31, 1998
Dear Shareholder:
The 1998 Annual Meeting of Shareholders will be held at 9:30 a.m. on Friday,
May 15, 1998, at COMSAT's headquarters building in Bethesda, 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.
A map and directions by car and the Washington Metro to COMSAT's
headquarters in Bethesda 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 1998 Annual Meeting of Shareholders of COMSAT Corporation will be held
in the Charyk Conference Center, COMSAT Headquarters, 6560 Rock Spring Drive,
Bethesda, Maryland, on May 15, 1998, at 9:30 a.m., Eastern Daylight Time, for
the following purposes:
1. election of 12 directors;
2. appointment of independent public accountants;
3. action on a shareholder proposal to recommend that the Corporation
affirm its political non-partisanship and require the reporting of
certain practices; and
4. 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 March 26, 1998, 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
March 31, 1998
<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 1998 Annual Meeting of Shareholders. The Proxy Statement is
first being mailed on or about March 31, 1998.
Shareholders of record of the Corporation's common stock, without par value
(Common Stock), at the close of business on March 26, 1998 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 March 26, 1998, the record date, approximately 51,665,000 shares of
Common Stock were outstanding, of which 18,984 were Series II shares (held by
communications common carriers authorized to hold shares by the Federal
Communications Commission) and approximately 51,646,000 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 March 1, 1998, 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. 3,337,920(1) 6.5%
333 South Hope Street
Los Angeles, CA 90071
Morgan Stanley, Dean Witter, 2,882,803(2) 5.7%
Discover & Co.
1585 Broadway
New York, NY 10036
</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 3,077,920 shares and indirect sole dispositive power with
respect to 3,337,920 shares. The Capital Group Companies, Inc. disclaims
beneficial ownership of all of the shares reported.
(2) Morgan Stanley, Dean Witter, Discover & Co. and Morgan Stanley Asset
Management Limited reported shared voting power with respect to 2,723,803
and 2,644,317 shares, respectively, and shared dispositive power with
respect to 2,882,803 and 2,799,117 shares, respectively.
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 15 times in 1997. All incumbent directors, except Mr.
Eagleburger, attended 75% or more of Board meetings and meetings of Board
committees of which they were members in 1997.
VOTING FOR DIRECTORS
At the meeting 12 directors will be elected to serve until the 1999 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.
2
<PAGE>
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. Biographical information for the
Presidentially appointed directors is set forth under the caption
"Presidentially Appointed Directors."
Pursuant to a settlement agreement the Corporation entered into on June 9,
1997 with Messrs. Schafran and Wyser-Pratte and certain other persons and
entities, the Corporation agreed to nominate Messrs. Schafran and Wyser-Pratte
on the Board's slate of candidates for the 1997 Annual Meeting and to re-
nominate them on the slate for the 1998 Annual Meeting.
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 February
20, 1998, the Corporation issued a press release announcing, among other
things, the date of the 1998 Annual Meeting. Accordingly, nominations by
shareholders for director and proposals by shareholders were required to be
received no later than March 2, 1998 to be considered at the 1998 Annual
Meeting. No such nominations or proposals were received by the deadline other
than the proposal discussed under the caption "Item 3. Shareholder Proposal."
Consequently, no nomination and no other proposal will be in order at the 1998
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.
3
<PAGE>
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 [PHOTO OF
January 1995 to July 1996, and was President, COMSAT BETTY C. ALEWINE
World Systems from May 1991 to January 1995. She joined APPEARS HERE]
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, 62, is Executive Vice President and
Chief Financial Officer and a director of Lockheed Martin
Corporation. He joined Martin Marietta Corporation in [PHOTO OF
1959 and has held various administrative and finance MARCUS C. BENNETT
positions with Martin Marietta and Lockheed Martin APPEARS HERE]
Corporation. He has been a COMSAT director since August
1997. 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, 70, has been a director of various
business, educational and nonprofit organizations since
1980. She was Under Secretary of State for Security [PHOTO OF
Assistance, Science and Technology from 1977 to 1980. She LUCY WILSON
has been a COMSAT director since September 1987. She also BENSON APPEARS
is a director of General Re Corporation and Logistics HERE]
Management Institute, a trustee of the Alfred P. Sloan
Foundation and Vice Chairman of the Atlantic Council of
the U.S., the Board of Trustees of Lafayette College and
the Citizens Network for Foreign Affairs. 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 US Airways Group, Inc. and of its [PHOTO OF
subsidiary, US Airways, Inc., a commercial airline EDWIN I. COLODNY
company, from 1978 until July 1992 and was a director of APPEARS HERE]
both corporations until May 1997. He was Chief Executive
Officer of US Airways Group from 1983 to June 1991 and of
its subsidiary, US Airways, Inc., from 1975 to June 1991.
He has served as counsel to the Washington, D. C., law
firm of Paul, Hastings, Janofsky and Walker since
September 1991.
LAWRENCE S. EAGLEBURGER, 67, has been Senior Foreign
Policy Advisor for Baker, Donelson, Bearman & Caldwell, a
Washington, D.C., law firm, since January 1993. He [PHOTO OF
previously served as United States Secretary of State LAWRENCE S.
from December 1992 through January 1993, Acting Secretary EAGLEBURGER
of State from August 1992 to December 1992, and Deputy APPEARS HERE]
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.
4
<PAGE>
NEAL B. FREEMAN, 57, has been Chairman and Chief
Executive Officer of The Blackwell Corporation, a
television production and distribution company, since [PHOTO OF
1981. He was a Presidentially appointed COMSAT director NEAL B. FREEMAN
from November 1983 to September 1988 and has been an APPEARS HERE]
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, 66, is a director or trustee of various
organizations. He was President of Martin Marietta
Aerospace from 1982 to 1987 and then President and Chief [PHOTO OF
Operating Officer of Martin Marietta Corporation from CALEB B. HURTT
1987 through 1989. He has been a COMSAT director since APPEARS HERE]
May 1996. He also is a director of Lockheed Martin
Corporation and has served as Chairman of the Board of
Governors of the Aerospace Industries Association, as
Chairman of the NASA Advisory Council, as Chairman of the
Federal Reserve Bank, Denver Branch, and as Vice Chairman
of the Board of Trustees of Stevens Institute of
Technology.
PETER W. LIKINS, 61, has been President of the University
of Arizona since October 1997. He was President of Lehigh
University from 1982 to September 1997, Provost of [PHOTO OF
Columbia University from 1980 to 1982 and Professor and PETER W. LIKINS
Dean of the Columbia University School of Engineering and APPEARS HERE]
Applied 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 was [PHOTO OF
Chairman of the Executive Committee of Dart Group LARRY G. SCHAFRAN
Corporation from 1994 to October 1997 and a director of APPEARS HERE]
Dart from 1993 to October 1997. He has been a COMSAT
director since August 1997. He also is a director of
Publicker Industries Inc., Discovery Zone, Inc. and
Kasper A.S.L., Ltd., a trustee of National Income Realty
Trust and Chairman of the board of directors of Delta-
Omega Technologies, Inc.
ROBERT G. SCHWARTZ, 70, is a director or trustee of
various business organizations. He was Chairman of the
Board, President and Chief Executive Officer of [PHOTO OF
Metropolitan Life Insurance Co. (MetLife) from September ROBERT G.
1989 to March 1993 and remains a director of MetLife. He SCHWARTZ APPEARS
was Chairman of the Board of MetLife from February 1983 HERE]
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.
5
<PAGE>
KATHRYN C. TURNER, 50, is the founder and sole
shareholder of Standard Technology, Inc., a high-
technology, engineering and systems integration firm. She
previously has been appointed by the President to serve [PHOTO OF
on the President's Export Council, the Eximbank Advisory KATHRYN C.TURNER
Committee, and the Commission on the Future of Worker- APPEARS HERE]
Management Relations and by the Secretary of Defense to
the Defense Policy Advisory Committee on Trade. She has
been a COMSAT director since August 1997. 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 has
been a COMSAT director since August 1997. He also is a [PHOTO OF
director of The Eureka (US$) Fund, The Eureka (DM) Fund GUY P. WYSER-
and the International Rescue Committee, a non- PRATTE APPEARS
governmental international refugee organization, and a HERE]
trustee of the U.S. Marine Corps University Foundation.
PRESIDENTIALLY APPOINTED DIRECTORS
PETER S. KNIGHT, 47, has been a partner in the
Washington, D.C., law firm of Wunder, Knight, Levine,
Thelen & Forscey since 1991. In 1996, he took a leave of [PHOTO OF
absence from his firm to serve as Campaign Manager for PETER S. KNIGHT
Clinton/Gore '96. From 1989 to 1991, he was General APPEARS HERE]
Counsel and Secretary of the 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 the Medicis
Pharmaceutical Corporation, Whitman Education Group Inc.,
Healthworld and the Schroder Series Trust. His current
term expires at the 1999 Annual Meeting.
CHARLES T. MANATT, 61, is the Chairman of Manatt, Phelps
& Phillips, a Washington, D.C., and Los Angeles law firm
which he founded in 1965. He was Chairman of the [PHOTO OF
Democratic National Committee from 1981 through 1985. He CHARLES T. MANATT
has been a Presidentially appointed COMSAT director since APPEARS HERE]
May 1995. He also is a director of the Federal Express
Corporation and ICN Pharmaceuticals, Inc. His current
term expired at the 1997 Annual Meeting, and he continues
to serve in accordance with the Satellite Act.
LOGO
The third Presidentially appointed director position is currently vacant
pending nomination and confirmation of a successor to fill the vacancy.
6
<PAGE>
OTHER INFORMATION CONCERNING DIRECTORS
COMMITTEES
The Board currently has six standing committees, described below.
The Committee on Audit, Corporate Responsibility and Ethics consists of Lucy
Wilson Benson (Chairman), Marcus C. Bennett, Lawrence S. Eagleburger, Peter W.
Likins, Charles T. Manatt and Guy P. Wyser-Pratte. 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 1997.
The Committee on Compensation and Management Development consists of Caleb
B. Hurtt (Chairman), Neal B. Freeman, Peter S. Knight, Robert G. Schwartz and
Kathryn C. Turner. 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 nine times
during 1997.
The Finance Committee consists of Robert G. Schwartz (Chairman), Betty C.
Alewine, Marcus C. Bennett, Neal B. Freeman, Peter S. Knight and Larry G.
Schafran. 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, 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 eight
times during 1997.
The Nominating and Corporate Governance Committee consists of Edwin I.
Colodny (Chairman), Lucy Wilson Benson, Caleb B. Hurtt, Charles T. Manatt 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 seven times during 1997. 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, Charles T.
Manatt, Larry G. Schafran and Kathryn C. Turner. 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 1997.
The Strategic Planning Committee consists of Edwin I. Colodny (Chairman),
Robert G. Schwartz and Guy P. Wyser-Pratte. The Committee reviews and makes
recommendations to the Board with respect to all aspects of the Corporation's
business and its current and future business and financial strategies,
transactional opportunities and the enhancement of shareholder value. The
Committee met six times during 1997.
7
<PAGE>
DIRECTORS COMPENSATION
Directors, other than the Chairman of the Board and the President, currently
receive an annual retainer of 1,000 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 paid in quarterly installments. The
President and Chief Executive Officer is not compensated separately for
service as a director.
The Chairman of the Board is compensated solely on an annual basis in the
amount of $190,000 per year. The Chairman may elect to receive all or a
portion of this annual cash compensation in the form of COMSAT stock or stock
options. The shares or stock options are 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 are 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 are
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 is the fair market
value of a share of Common Stock on the date of grant. Each option expires 10
years from the date of grant and is 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. For 1997, Mr. Colodny 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
16,123 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.
Under the Non-Employee Directors Stock Plan, directors may elect to defer
receipt of the annual 1,000 share stock award and receive phantom stock units
(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.
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 1997, (1)
the interest crediting rate was prime plus 1% for amounts deferred after 1996,
12.5% for amounts deferred from February 1994 to December 1996 and 13.7% for
amounts deferred prior to that period under the Directors and Executives
Deferred Compensation Plan; and (2) the aggregate amount of interest accrued
in respect of amounts deferred by participating directors (13 persons) was
$352,700.
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
8
<PAGE>
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 1997, the aggregate value of split dollar life insurance premiums
paid for the benefit of all covered directors was $140,612.
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 1990, each option is for
2,480 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 from 1990 to 1992, each option is for 2,480
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 after 1992, each option is for 4,961 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 27, 1997 have been adjusted to reflect
(1) the two-for-one split in the Corporation's Common Stock effective June 1,
1993 and (2) the spin-off of Ascent Entertainment Group, Inc. to the
Corporation's shareholders on June 27, 1997, pursuant to which 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.
All options granted before 1996 under the Non-Employee Directors Stock Plan
are currently exercisable. For options granted after 1995, each option becomes
exercisable for 2,481 shares one year after the date of grant and for the
remaining 2,480 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 1997, options for a total of 64,493 shares of Common Stock were granted
to non-employee directors at a purchase price per share of $21.0148, which was
the fair market value of the Common Stock on the date of grant. In 1997, no
non-employee director exercised options granted under the Plan.
9
<PAGE>
On August 26, 1997, the Corporation entered into agreements with Arthur
Hauspurg and Howard M. Love, directors who retired at the 1997 Annual Meeting
of Shareholders, to retain their advisory services to the Chairman of the
Board and the President and Chief Executive Officer of the Corporation for a
period of two years at a rate of $25,000 per year.
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, insider participation in
compensation decisions or related party transactions during 1997.
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 March 1, 1998, 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 sole or
shared voting or investment power, and also any shares that the 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 COMSAT
NAME(1) COMMON STOCK(2)
- ------- --------------------
<S> <C>
Betty C. Alewine...................................... 484,656(3)
Marcus C. Bennett..................................... --
Lucy Wilson Benson.................................... 35,524
Edwin I. Colodny...................................... 32,385
Lawrence S. Eagleburger............................... 8,141
Allen E. Flower....................................... 116,728(4)
Neal B. Freeman....................................... 26,204
Caleb B. Hurtt........................................ 3,480
Dwight E. Jasmann..................................... 9,002(5)
Peter S. Knight....................................... 8,441
Peter W. Likins....................................... 32,374(6)
Charles T. Manatt..................................... 8,941
John H. Mattingly..................................... 29,939(7)
Larry G. Schafran..................................... 5,000(8)
Robert G. Schwartz.................................... 38,324
Kathryn C. Turner..................................... 1,000
Guy P. Wyser-Pratte................................... 1,856,300(9)
Warren Y. Zeger....................................... 254,040(10)
All directors and executive officers as a group (21
persons)............................................. 3,020,788(11)
</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 Corporation's Common Stock.
(2) Each number in this column has been rounded to the nearest whole share.
The following directors elected to defer receipt of their 1,000 share
annual retainer for 1997 and instead received phantom stock units which
are not included in their beneficial ownership of COMSAT Common Stock: Mr.
Bennectt, Mrs. Benson, Mr. Eagleburger, Mr. Hurtt, Mr. Knight, Mr. Manatt
and Mr. Schafran. Beneficial ownership of COMSAT Common Stock includes
shares that may be acquired within 60 days after March 1, 1998 through the
exercise of options as follows: Mrs. Alewine, 381,650 shares; Mrs. Benson,
34,724 shares; Mr. Colodny, 30,385 shares; Mr. Eagleburger, 7,441 shares;
Mr. Flower, 75,281 shares; Mr. Freeman, 24,804 shares; Mr. Hurtt, 2,480
shares; Mr. Jasmann, 7,750 shares; Mr. Knight, 7,441 shares; Dr. Likins,
26,044 shares; Mr. Manatt, 7,441 shares; Mr. Mattingly, 16,122 shares; Mr.
Schwartz, 32,244 shares; Mr. Zeger, 223,415 shares; and all directors and
executive officers as a group, 911,948 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 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 61,438 shares which are restricted against transfer and 1,315
shares which are held in the Corporation's Savings and Profit-Sharing Plan
as of March 1, 1998.
(4) Includes 20,618 shares which are restricted against transfer and 1,069
shares which are held in the Corporation's Savings and Profit-Sharing Plan
as of March 1, 1998.
(5) Includes 302 shares which are held in the Corporation's Savings and
Profit-Sharing Plan as of March 1, 1998. Mr. Jasmann resigned in February
1998.
(6) Includes 2,850 shares over which Dr. Likins shares voting power and
investment power with Mrs. Likins.
11
<PAGE>
(7) Includes 9,201 shares which are restricted against transfer and 885 shares
which are held in the Corporation's Savings and Profit-Sharing Plan as of
March 1, 1998.
(8) Mr. Schafran disclaims beneficial ownership of the 5,000 shares, which are
held by Mrs. Schafran.
(9) Includes 20,000 shares held by an IRA trustee and 1,815,300 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 3.6% of the
Corporation's outstanding Common Stock as of March 1, 1998.
(10) Includes 29,300 shares which are restricted against transfer and 1,225
shares which are held in the Corporation's Savings and Profit-Sharing
Plan as of March 1, 1998.
(11) Includes 5,000 shares with respect to which beneficial ownership is
disclaimed. Also includes an aggregate of 149,849 shares which are
restricted against transfer, which are held in the Corporation's Savings
and Profit-Sharing Plan as of March 1, 1998, or which are held in the
COMSAT RSI, Inc. Employee Stock Ownership Plan as of December 31, 1997.
All directors and executive officers as a group beneficially owned 5.9%
of the Corporation's outstanding Common Stock as of March 1, 1998.
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 1997 compensation of the executive
officers of the Corporation, including Mrs. Alewine, the Chief Executive
Officer, and the other four most highly compensated executive officers (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. One of the objectives 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.
There are two groups of competitive companies that are used in the executive
compensation analysis. The first group, consisting of the companies that make
up the new 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 industries with
revenues comparable to the Corporation's, is used to benchmark competitive
compensation levels.
ANNUAL COMPENSATION
Mrs. Alewine has an employment agreement as Chief Executive Officer dated
July 19, 1996 which is summarized below under the caption "Agreements with
Executive Officers." Pursuant to the agreement, Mrs. Alewine received a base
salary of $450,000 for the first year and an increase to $500,000 beginning in
the second year. The Committee recommended to the Board a 1997 cash bonus
award of $215,000 for Mrs. Alewine. The Board approved the Committee's
recommendation.
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 are
based on recommendations to the Committee by the Chief Executive Officer
taking into account such factors as total professional experience,
performance, and experience in the current assignment. The bonus opportunities
for other executive officers for 1997 were based on a range of award
percentages of base salary for each position determined by the Committee. A
portion of each bonus award was tied to corporate performance criteria based
12
<PAGE>
on the achievement of 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 Committee recommended a bonus award for each executive
officer based on a bonus range and the performance measures noted above. The
Board had final approval authority for these awards.
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 1997, awards by the Committee
consisted of non-qualified stock options and restricted stock awards (RSAs).
These awards were consistent with ranges in the revenue group of competitive
companies which were approved by the Committee. The stock option ranges
position the Corporation at the median of the market for these companies while
the performance-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 portion of executive compensation is represented by stock options granted
at fair market value which the Committee believes provide a tie to shareholder
interests. Pursuant to the terms of her employment agreement, Mrs. Alewine was
not eligible for a stock option grant in 1997.
Stock options were granted to the other Named Executive Officers in February
1997 as reflected in the table below setting forth 1997 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 competitive analysis of total compensation for each executive officer.
Second, the Committee approved the actual awards for each executive officer
based on these guidelines and performance recommendations made by Mrs. Alewine
based on her evaluation of each officer's performance for 1996.
RSAs are restricted shares of COMSAT stock which are granted to executive
officers and selected key employees as a performance incentive and 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. Pursuant to the terms of her employment agreement, Mrs. Alewine
received 20,000 RSAs in February 1997 (subsequently adjusted on June 27, 1997
to 24,804 RSAs as a result of the spin-off of Ascent Entertainment Group, Inc.
to the shareholders). The other Named Executive Officers also received RSAs in
February 1997 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.
COMMITTEE ON COMPENSATION AND MANAGEMENT DEVELOPMENT
Caleb B. Hurtt, Chairman
Neal B. Freeman
Peter S. Knight
Robert G. Schwartz
Kathryn C. Turner
13
<PAGE>
EXECUTIVE COMPENSATION
The following table shows the compensation received by the Chief Executive
Officer and the other four most highly compensated executive officers of the
Corporation (the Named Executive Officers) for the three fiscal years ended
December 31, 1997. The table shows the amounts received by each Named
Executive Officer for all three fiscal years, whether or not such Named
Executive Officer was the Chief Executive Officer or an executive officer of
the Corporation for each of those three years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------ ---------------------
OTHER RESTRICTED SECURITIES ALL
ANNUAL STOCK UNDERLYING OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) OPTIONS COMPENSATION
POSITION YEAR ($) ($)(2) ($)(3) ($)(4) (#)(5) ($)(6)
- ------------------ ---- -------- -------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Betty C. Alewine, 1997 $472,116 $221,756 $ 8,370 $498,749 0 $22,135
President & Chief 1996 355,846 189,111 3,238 238,188 260,442 20,799
Executive Officer 1995 226,923 142,803 448 178,363 68,211 20,536
Allen E. Flower 1997 209,770 83,627 5,622 174,554 49,608 36,855
Vice President and 1996 180,000 73,301 60,122 90,000 43,407 31,578
Chief Financial Officer 1995 145,000 46,483 0 121,563 8,681 10,053
Dwight E. Jasmann, (1) 1997 244,985 204,187 39,961 0 18,603 4,750
President and General 1996 98,770 203,600 13,795 97,813 12,402 923
Manager, COMSAT 1995 -- -- -- -- -- --
International
John H. Mattingly, 1997 190,308 75,029 0 74,820 24,804 4,750
President, COMSAT 1996 162,039 57,274 0 35,994 12,402 4,498
Satellite Services 1995 146,985 62,800 0 0 2,480 4,410
Warren Y. Zeger, 1997 229,808 94,348 5,466 174,554 49,608 26,938
Vice President, 1996 196,551 181,487 2,422 63,000 37,206 25,871
General Counsel and 1995 184,050 71,196 2,755 123,061 37,206 23,677
Secretary
</TABLE>
- --------
(1) Mr. Jasmann became an executive officer when he joined the Corporation as
President and General Manager, COMSAT International in August 1996. He
resigned in February 1998.
(2) Bonus for 1997 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. Jasmann for 1997 also includes
$62,371 of relocation expenses paid to him as a result of his relocation
to COMSAT's offices in Bethesda, Maryland to become President and General
Manager, COMSAT International. The bonus reflected for Mr. Zeger for 1996
includes a special performance-based spot bonus in the amount of $100,000.
<TABLE>
<CAPTION>
UNUSED TIME OFF
CREDITS BUY-BACK
------- --------
<S> <C> <C>
Mrs. Alewine............................................. $ 6,756 $ 0
Mr. Flower............................................... 3,627 0
Mr. Jasmann.............................................. 11,816 0
Mr. Mattingly............................................ 6,529 3,500
Mr. Zeger................................................ 9,348 0
</TABLE>
14
<PAGE>
(3) With the exception of Mr. Flower, Other Annual Compensation shown for
1995, 1996 and 1997 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.
(4) Includes restricted stock awards (RSAs), restricted stock units (RSUs) and
phantom stock units (PSUs). Dividends are paid on RSAs. 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, 1997, are as follows:
<TABLE>
<CAPTION>
NUMBER OF VALUE AS OF
RSAS/RSUS/PSUS 12/31/97
-------------- -----------
<S> <C> <C>
Mrs. Alewine................................... 79,980 $1,909,523
Mr. Flower..................................... 23,811 568,488
Mr. Jasmann.................................... 6,201 148,049
Mr. Mattingly.................................. 6,201 148,049
Mr. Zeger...................................... 35,439 846,106
</TABLE>
The amounts shown have 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. Mr. Jasmann forfeited his restricted
stock holdings when he resigned in February 1998.
(5) All options shown have 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.
(6) All Other Compensation for 1997 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
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 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........................ $4,750 $7,959 $ 9,426
Mr. Flower.......................... 4,750 9,944 22,161
Mr. Jasmann......................... 4,750 0 0
Mr. Mattingly....................... 4,750 0 0
Mr. Zeger........................... 4,750 6,620 15,568
</TABLE>
15
<PAGE>
OPTION GRANTS
The following table sets forth information on options granted to the Named
Executive Officers in 1997.
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........ 0 --% $ -- -- $ --
Allen E. Flower......... 49,608 6.81 20.1076 02/20/07 334,358
Dwight E. Jasmann....... 18,603 2.55 20.1076 02/20/07 125,384
John H. Mattingly....... 24,804 3.41 20.1076 02/20/07 167,179
Warren Y. Zeger......... 49,608 6.81 20.1076 02/20/07 334,358
</TABLE>
- --------
(1) The options shown were granted on February 20, 1997 to acquire the
Corporation's Common Stock. All options granted in 1997 vest as follows:
25% on the first anniversary of the date of grant; another 25% on the
second anniversary of the date of grant; and the remaining 50% on the
third anniversary of the date of grant. All options shown have 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 1997 was
728,392.
(3) The exercise price shown has been adjusted 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 3.3%; stock price volatility of 0.37; a six-year option term; a risk-
free rate of return of 6.41%; 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 1997, and (2) the number and value of their
unexercised options as of December 31, 1997.
AGGREGATED OPTION EXERCISES IN 1997 AND 12/31/97 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
UNDERLYING OPTIONS AT 12/31/97(1) OPTIONS AT 12/31/97
OPTIONS VALUE ------------------------- -------------------------
EXERCISED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
- ---- ---------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Betty C. Alewine........ 3,721 $29,718 333,902 229,438 $1,809,204 $1,612,508
Allen E. Flower......... 3,721 29,718 47,688 86,503 483,473 527,682
Dwight E. Jasmann....... 0 0 3,100 27,905 25,115 145,443
John H. Mattingly....... 0 0 5,581 35,345 49,621 190,811
Warren Y. Zeger......... 1,860 14,668 183,109 96,115 715,064 602,567
</TABLE>
- --------
(1) The amounts shown have 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.
16
<PAGE>
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 1997 is $125,000.
<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.................. $25,153 $ 38,729 $ 42,901 $ 51,776 $ 59,626
150,000.................. 39,103 59,639 66,852 80,727 92,951
200,000.................. 49,904 77,401 87,653 106,528 123,127
250,000.................. 57,692 92,149 105,441 125,000 125,000
300,000.................. 63,692 105,109 121,441 125,000 125,000
350,000.................. 69,692 118,069 125,000 125,000 125,000
400,000.................. 75,692 125,000 125,000 125,000 125,000
450,000.................. 81,692 125,000 125,000 125,000 125,000
500,000.................. 87,692 125,000 125,000 125,000 125,000
</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, 1997 are:
11 for Mrs. Alewine; 28 for Mr. Flower; 1 for Mr. Jasmann; 3 for Mr.
Mattingly; and 22 for Mr. Zeger.
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, 1997 for each of
the Named Executive Officers under the Supplemental Retirement Plan are:
$328,686 for Mrs. Alewine; $51,266 for Mr. Flower; and $96,184 for Mr. Zeger.
Mrs. Alewine and Messrs. Flower and Zeger are each 100% vested in the Plan.
Messrs. Jasmann and Mattingly are not participants in the Plan.
17
<PAGE>
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 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 186,030 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) 6,201 restricted stock units which vest after three years. Mrs.
Alewine was also granted 24,804 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 17, 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
18
<PAGE>
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 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.
The Corporation and Mr. Jasmann entered into a three-year employment
agreement dated August 1, 1996. Pursuant to the agreement, Mr. Jasmann's base
salary was $240,000 per year, subject to increases at the discretion of the
Corporation's Board of Directors. The agreement provided for a guaranteed
bonus of $130,000 for 1996 and annual bonuses thereafter based on performance
measures determined by the Board's Compensation Committee with a target bonus
equal to 40% of his base salary. Pursuant to the agreement, on August 1, 1996,
Mr. Jasmann was granted (i) an option to purchase 12,402 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) 6,201
restricted stock units which vest after three years. On February 2, 1998, Mr.
Jasmann resigned pursuant to a provision of the agreement which permitted him
to terminate his employment if the Corporation failed to do an initial public
offering of COMSAT International by February 1, 1998. Pursuant to this
provision, Mr. Jasmann will continue to receive salary and an annual bonus at
the same rate as in effect on the date of his termination until August 1,
1999. His existing stock options, but not his restricted stock units, will
continue to vest during that period.
The share amounts discussed above have been adjusted to give effect to the
Ascent spin-off to COMSAT shareholders on June 27, 1997 by multiplying the
number of shares or units held on that date by an adjustment ratio of 1.2402.
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.
19
<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, 1993, and ending on December 31,
1997. During 1997, the Corporation changed its Peer Group Index to reflect the
restructuring of its businesses, pursuant to which the Corporation divested
its entertainment business, Ascent Entertainment Group, Inc., through a spin-
off to its shareholders and refocused on its core satellite and network
services businesses. The old peer group consisted 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.). The new peer group consists of the three long-distance
telecommunications companies in the old peer group (AT&T, MCI and Sprint) plus
the following companies in the satellite industry (the years for which the
returns of each such company have been included in the five-year period are
noted in parentheses): American Mobile Satellite Corporation (1994-1997), Asia
Satellite Telecom (American Depository Receipts (ADRs)) (1996-1997), British
Sky Broadcasting Group (ADRs) (1995-1997), Echostar Communications Corporation
(1996-1997), Globalstar Telecommunications Ltd. (1996-1997), Iridium World
Communications (1996-1997), Orion Network Systems, Inc. (1996-1997), PanAmSat
Corp. (1996-1997), PT Pasifik Satelit Nusantara (ADRs) (1996-1997) and United
States Satellite Broadcasting Co., Inc. (1996-1997).
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN AMONG COMSAT,
S&P 500 INDEX, NEW PEER GROUP INDEX AND OLD PEER GROUP INDEX
(Assumes $100 Invested on December 31, 1992 & Dividends Reinvested)
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Old New
Measurement Period S&P Peer Peer
(Fiscal Year Covered) COMSAT 500 INDEX Group Group
- --------------------- --------------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Measurement Pt-12/31/1992 $100.00 $100.00 $100.00 $100.00
FYE 12/31/1993 $128.00 $110.00 $113.00 $113.00
FYE 12/31/1994 $ 83.00 $112.00 $108.00 $103.00
FYE 12/31/1995 $ 86.00 $153.00 $152.00 $142.00
FYE 12/31/1996 $118.00 $189.00 $156.00 $152.00
FYE 12/31/1997 $137.00 $252.00 $215.00 $213.00
</TABLE>
20
<PAGE>
ITEM 2. 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, 1998. 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
1997. 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 3. 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.
21
<PAGE>
Above all, it must avoid the appearance of coercion in encouraging its
employees to make political contributions against their personal inclinations.
The Troy (Ohio) News has condemned partisan solicitation for political
purposes by managers in a local company (not COMSAT)."
"Last year the owners of 3,661,791 shares, representing approximately 13% of
shares voting, voted FOR this proposal."
"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.
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.
22
<PAGE>
OTHER MATTERS
At March 31, 1998, the management knew of no other matters to be presented
for action at the meeting. If any other matter is properly introduced by the
Corporation, 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 March 2, 1998 to be considered at the 1998 Annual
Meeting. See "Item 1. Election of Directors--Requirements for Nominations and
Shareholder Proposals." No such proposals were received other than the one
discussed under the caption "Item 3. Shareholder Proposal."
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 1999 Annual Meeting will be held on or
about May 21, 1999. Shareholders wishing to submit proposals to be included in
the proxy statement for consideration at the 1999 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 December 1, 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
March 31, 1998
A COPY OF THE CORPORATION'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION FOR 1997 ON FORM 10-K, 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.
23
<PAGE>
DIRECTIONS TO THE COMSAT BUILDING
6560 ROCK SPRING DRIVE--BETHESDA, MARYLAND
The COMSAT Building at Rock Spring Plaza in Bethesda, Maryland, is located
on the corner of Rock Spring Drive and Fernwood Road. For shareholders who
wish to use public transportation, take the Red Line of the Washington Metro
to the Grosvenor Station. Take the #47 RIDE-ON bus, operated by Montgomery
County Transit, to Fernwood Road and Rockledge Drive and walk to Rock Spring
Plaza. It departs every half hour beginning at approximately 6:30 a.m., and
the trip takes 10 minutes. Alternatively, you may take the #6 RIDE-ON express
bus to Rock Spring Plaza. It departs every 10 minutes from 6:40 a.m. to 8:00
a.m.
Set forth below is a map and instructions on how to get there by car. The
COMSAT garage will be open for shareholders' parking on the first level (P1).
[MAP APPEARS HERE]
. FROM FREDERICK/I-270 SOUTH: Take I-270 East toward Silver Spring. Exit at
Old Georgetown Road and turn right. At the second light turn right on
Democracy Boulevard. At the second light turn right on Fernwood Road. Just
beyond the first light turn right onto the driveway that leads to the
COMSAT garage entrance.
. FROM SILVER SPRING/I-495 WEST: Take I-495 West to Exit 36 (Old Georgetown
Road). Turn right on Old Georgetown Road (toward Rockville). At the third
light turn left on Democracy Boulevard. At the second light turn right on
Fernwood Road. Just beyond the first light turn right onto the driveway
that leads to the COMSAT garage entrance.
. FROM NORTHERN VIRGINIA/I-495 NORTH: Take I-495 North to I-270 Spur North.
Take the first exit off ofI-270 Spur (Democracy Boulevard East). At the
first intersection light turn left on Fernwood Road. Just beyond the first
light turn right onto the driveway that leads to the COMSAT garage
entrance.
<PAGE>
COMSAT CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, MAY 15, 1998
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 May 15, 1998, 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 AND 2
AND AGAINST PROPOSAL 3.
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, N.Y. 10203-0141
