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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
SCHEDULE 14D-1
Tender Offer Statement Pursuant to Section
14(d)(1) of the Securities Exchange Act of 1934
__________________
COMSAT CORPORATION
(Name of Subject Company)
REGULUS, LLC
LOCKHEED MARTIN CORPORATION
(Bidders)
COMMON STOCK, WITHOUT PAR VALUE
(Title of Class of Securities)
20564D107
(CUSIP Number of Class of Securities)
STEPHEN M. PIPER, ESQ.
LOCKHEED MARTIN CORPORATION
6801 ROCKLEDGE DRIVE
BETHESDA, MARYLAND 20817
(301) 897-6000
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications on behalf of Bidders)
COPY TO:
DAVID G. LITT, ESQ.
O'MELVENY & MYERS LLP
555 13TH STREET, N.W.
SUITE 500 WEST
WASHINGTON, D.C. 20004-1109
(202) 383-5300
CALCULATION OF FILING FEE
Transaction Valuation(1): $1,169,509,386 Amount of Filing Fee: $227,901
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(1) Estimated for purposes of calculating the amount of the filing fee only.
The amount assumes the purchase of 25,703,503 shares of common stock,
without par value (the "Shares"), of COMSAT Corporation (the "Company") at
a price per Share of $45.50 in cash (the "Offer Price"). Such number of
shares represents 49% of the shares of Common Stock of the Company
outstanding as of September 11, 1998, minus the number of shares of the
Series II Common Stock of the Company outstanding as of September 11, 1998.
[_] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
Amount previously paid: Not applicable Filing Party: Not applicable
Form or registration no.: Not applicable Date Filed: Not applicable
(Continued on following page(s))
(Page 2 of 11 pages)
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CUSIP No. 20564D107 14D-1
1. Name of Reporting Person
S.S. or I.R.S. Identification Nos. of Above Persons
Regulus, LLC (52-2121081)
2. Check the Appropriate Box if a Member of a Group (a)[_]
(b)[X]
3. SEC Use Only
4. Sources of Funds
AF
5. Check Box if Disclosure of Legal Proceedings is Required [_]
Pursuant to Items 2(e) or 2(f)
6. Citizenship or Place of Organization
Delaware
7. Aggregate Amount Beneficially Owned by Each Reporting Person
None
8. Check Box if the Aggregate Amount in Row (7) Excludes Certain [_]
Shares
9. Percent of Class Represented by Amount in Row (7)
Not applicable
10. Type of Reporting Person
OO (limited liability company)
(Page 3 of 11 pages)
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CUSIP No. 20564D107 14D-1
1. Name of Reporting Person
S.S. or I.R.S. Identification Nos. of Above Persons
Lockheed Martin Corporation (52-1893632)
2. Check the Appropriate Box if a Member of a Group (a)[_]
(b)[X]
3. SEC Use Only
4. Sources of Funds
WC, OO
5. Check Box if Disclosure of Legal Proceedings is Required Pursuant [_]
to Items 2(e) or 2(f)
6. Citizenship or Place of Organization
Maryland
7. Aggregate Amount Beneficially Owned by Each Reporting Person
None
8. Check Box if the Aggregate Amount in Row (7) Excludes Certain [_]
Shares
9. Percent of Class Represented by Amount in Row (7)
Not applicable
10. Type of Reporting Person
CO, HC
(Page 4 of 11 pages)
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TENDER OFFER
This Tender Offer Statement on Schedule 14D-1 relates to the 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"), to purchase up to 49% (less certain
adjustments) of the issued and outstanding shares (the "Shares") of common
stock, without par value (the "Common Stock"), of COMSAT Corporation, a District
of Columbia corporation (the "Company"), at a price of $45.50 per Share, net to
the seller in cash, without interest thereon (the "Offer Price"), upon the terms
and subject to the conditions set forth in the Offer to Purchase and in the
related Letter of Transmittal, copies of which are attached hereto as Exhibits
(a)(1) and (a)(2), respectively (which, as amended or supplemented from time to
time, together constitute the "Offer"). The item numbers and responses thereto
below are in accordance with the requirements of Schedule 14D-1.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is COMSAT Corporation, a District
of Columbia corporation. The address of the Company's principal executive
offices is 6560 Rock Spring Drive, Bethesda, Maryland 20817.
(b) The information set forth on the cover page and under
"Introduction" in the Offer to Purchase annexed hereto as Exhibit (a)(1) is
incorporated herein by reference.
(c) The information set forth in Section 6 ("Price Range of Shares;
Dividends") of the Offer to Purchase annexed hereto as Exhibit (a)(1) is
incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d), (g) This Tender Offer Statement is filed by the Purchaser and
Parent. The information set forth on the cover page, under Introduction, in
Section 9 ("Certain Information Concerning Parent and the Purchaser") and in
Schedule I (Information Concerning the Directors and Executive Officers of
Parent and the Purchaser) of the Offer to Purchase annexed hereto as Exhibit
(a)(1) is incorporated by reference.
(e)-(f) During the last five years, neither the Parent nor the
Purchaser nor, to their knowledge, any of the persons listed in Schedule I to
the Offer to Purchase annexed hereto as Exhibit (a)(1) (i) has been convicted in
a criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) has been a party to a civil proceeding of a judicial or administrative body
of competent jurisdiction and as a result of such proceeding was or is subject
to a judgment, decree or final order enjoining future
(Page 5 of 11 pages)
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violations of, or prohibiting activities subject to, federal or state securities
laws or finding any violation of such laws.
While Parent has not, during the last five years, been convicted in a
criminal proceeding (excluding traffic violations and similar misdemeanors), on
January 27, 1995, Lockheed Corporation, one of the corporations that combined to
form Parent, entered into a plea agreement pursuant to which Lockheed
Corporation agreed to plead guilty to one count of conspiring to violate the
bribery provisions of the Foreign Corrupt Practices Act and conspiracy to
falsify its books, records and accounts. For further information concerning the
plea agreement and the events out of which it arose, see the description
contained under the caption "Lockheed Plea Agreement" on page 54 of the Joint
Proxy Statement/Prospectus which is contained in Registration Statement
No. 33-57645 on Form S-4 filed by Parent on February 9, 1995.
ITEM 3. PAST CONTRACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth on the cover page, under
"Introduction" and in Section 9 ("Certain Information Concerning Parent and the
Purchaser"), Section 11 ("Background of the Offer; Contacts with the Company")
and Section 12 ("Purpose of the Offer; Plans for the Company; the Merger
Agreement; Shareholders Agreement; Registration Rights Agreement; Carrier
Acquisition Agreement") of the Offer to Purchase annexed hereto as Exhibit
(a)(1) is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(c) The information set forth in Section 10 ("Source and Amount of
Funds") of the Offer to Purchase annexed hereto as Exhibit (a)(1) is
incorporated herein by reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the Introduction, Section 11
("Background of the Offer; Contacts with the Company"), Section 12 ("Purpose of
the Offer; Plans for the Company; the Merger Agreement; Shareholders Agreement;
Registration Rights Agreement; Carrier Acquisition Agreement") and Section 13
("Dividends and Distributions") of the Offer to Purchase annexed hereto as
Exhibit (a)(1) is incorporated herein by reference.
(f)-(g) The information set forth in Section 7 ("Effect of the Offer
on the Market for the Shares; NYSE Listing and Exchange Act Registration; Margin
Regulations") of the Offer to Purchase annexed hereto as Exhibit (a)(1) is
incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF SUBJECT COMPANY.
(a)-(b) The information set forth in Section 9 ("Certain Information
Concerning Parent and the Purchaser") of the Offer to Purchase annexed hereto as
Exhibit (a)(1) is incorporated by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES
The information set forth in the Introduction, Section 9 ("Certain
Information Concerning Parent and the Purchaser"), Section 11 ("Background of
the Offer; Contacts with the Company") and Section 12 ("Purpose of the Offer;
Plans for the Company; the Merger
(Page 6 of 11 pages)
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Agreement; the Shareholders Agreements; Registration Rights Agreement; Carrier
Acquisition Agreement") of the Offer to Purchase annexed hereto as Exhibit
(a)(1) is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in Section 16 ("Fees and Expenses") of the
Offer to Purchase annexed hereto as Exhibit (a)(1) is incorporated herein by
reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in (i) Section 9 ("Certain Information
Concerning Parent and the Purchaser") of the Offer to Purchase annexed hereto as
Exhibit (a)(1), (ii) Parent's Annual Report on Form 10-K for the year ended
December 31, 1997 filed with the Commission pursuant to Rule 15d-2 of the
Exchange Act (the "Parent 10-K") and (iii) Parent's Quarterly Report on Form 10-
Q for the quarterly period ended June 30, 1998 (the "Parent 10-Q") is
incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in Section 11 ("Background of the
Offer; Contacts with the Company") and Section 12 ("Purpose of the Offer; Plans
for the Company; the Merger Agreement; the Shareholders Agreement; Registration
Rights Agreement; Carrier Acquisition Agreement") of the Offer to Purchase
annexed hereto as Exhibit (a)(1) is incorporated herein by reference.
(b)-(c) The information set forth in the Introduction, Section 1
("Terms of the Offer; Proration; Expiration Date"), Section 7 ("Effect of the
Offer on the Market for the Shares; NYSE Listing and Exchange Act Registration;
Margin Regulations"), Section 12 ("Purpose of the Offer; Plans for the Company;
the Merger Agreement; the Shareholders Agreement; Registration Rights Agreement;
Carrier Acquisition Agreement"), Section 15 ("Certain Legal Matters; Regulatory
Approvals") and Section 17 ("Miscellaneous") of the Offer to Purchase annexed
hereto as Exhibit (a)(1) is incorporated herein by reference.
(d) The information set forth in Section 7 ("Effect of the Offer on
the Market for the Shares; NYSE Listing and Exchange Act Registration; Margin
Regulations") and Section 15 ("Certain Legal Matters; Regulatory Approvals") of
the Offer to Purchase annexed hereto as Exhibit (a)(1) is incorporated herein by
reference.
(e) The information set forth in Section 15 ("Certain Legal Matters;
Regulatory Approvals") of the Offer to Purchase annexed hereto as Exhibit (a)(1)
is incorporated by reference.
(Page 7 of 11 pages)
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(f) The information set forth in the Offer to Purchase, annexed
hereto as Exhibit (a)(1), and the Letter of Transmittal, annexed hereto as
Exhibit (a)(2), is incorporated herein by reference.
ITEM 11. MATTER TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase, dated September 25, 1998.
(2) Letter of Transmittal.
(3) Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
(4) Notice of Guaranteed Delivery.
(5) Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees.
(6) Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(7) Text of Press Release dated September 20, 1998 is incorporated
herein by reference to Exhibit 99 to Parent's Current Report on
Form 8-K filed with the Commission on September 21, 1998 and
amended September 25, 1998.
(8) Summary Advertisement dated September 25, 1998.
(b)(1) Not Applicable.
(c)(1) Agreement and Plan of Merger, dated as of September 18, 1998,
among Lockheed Martin Corporation, Deneb Corporation and COMSAT
Corporation.
(2) Registration Rights Agreement, dated as of September 18, 1998,
between COMSAT Corporation and Lockheed Martin Corporation.
(3) Shareholders Agreement, dated as of September 18, 1998, between
COMSAT Corporation and Lockheed Martin Corporation.
(4) Carrier Acquisition Agreement, dated as of September 18, 1998,
by and among COMSAT Corporation, Lockheed Martin Corporation,
Regulus, LLC and COMSAT Government Systems, Inc.
(5) Confidentiality Agreements, dated August 5, 1997, between
COMSAT Corporation and Lockheed Martin Corporation.
(Page 8 of 11 pages)
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SIGNATURE
After due 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.
September 25, 1998
REGULUS, LLC
By: /s/ Stephen M. Piper
--------------------------------------
Name: Stephen M. Piper
Title: Vice President
(Page 9 of 11 pages)
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SIGNATURE
After due 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.
September 25, 1998
LOCKHEED MARTIN CORPORATION
By: /s/ Stephen M. Piper
----------------------------------------
Name: Stephen M. Piper
Title: Associate General Counsel and
Assistant Secretary
(Page 10 of 11 pages)
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14D-EXHIBIT INDEX
EXHIBIT DESCRIPTION
- - --------------------------------------------------------------------------------
(a)(1) Offer to Purchase, dated September 25, 1998.
(2) Letter of Transmittal.
(3) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(4) Notice of Guaranteed Delivery.
(5) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(6) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(7) Text of Press Release dated September 20, 1998 is incorporated herein
by reference to Exhibit 99 to Parent's Current Report on Form 8-K
filed with the Commission on September 21, 1998 and amended September
25, 1998.
(8) Summary Advertisement dated September 25, 1998.
(b)(1) Not Applicable.
(c)(1) Agreement and Plan of Merger, dated as of September 18, 1998, among
Lockheed Martin Corporation, Deneb Corporation and COMSAT Corporation.
(2) Registration Rights Agreement, dated as of September 18, 1998 between
COMSAT Corporation and Lockheed Martin Corporation.
(3) Shareholders Agreement, dated as of September 18, 1998 between COMSAT
Corporation and Lockheed Martin Corporation.
(4) Carrier Acquisition Agreement, dated as of September 18, 1998, by and
among COMSAT Corporation, Lockheed Martin Corporation, Regulus, LLC
and COMSAT Government Systems, Inc.
(5) Confidentiality Agreements, dated August 5, 1997, between COMSAT
Corporation and Lockheed Martin Corporation.
(Page 11 of 11 pages)
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OFFER TO PURCHASE FOR CASH
UP TO 49% OF THE OUTSTANDING SHARES OF COMMON STOCK
OF
COMSAT CORPORATION
AT
$45.50 NET PER SHARE IN CASH
BY
REGULUS, LLC
A WHOLLY-OWNED SUBSIDIARY
OF
LOCKHEED MARTIN CORPORATION
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, NOVEMBER 24, 1998, UNLESS THE
OFFER IS EXTENDED.
THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, DATED
SEPTEMBER 18, 1998, BY AND AMONG LOCKHEED MARTIN CORPORATION ("PARENT"), DENEB
CORPORATION ("ACQUISITION SUB") AND COMSAT CORPORATION (THE "COMPANY"). THE
BOARD OF DIRECTORS OF THE COMPANY HAS BY A UNANIMOUS VOTE (EXCLUDING ONE
DIRECTOR WHO WAS ABSENT AND THREE DIRECTORS WHO RECUSED THEMSELVES) APPROVED
THE OFFER, THE MERGER AND THE MERGER AGREEMENT AND DETERMINED THAT THE TERMS
OF EACH OF THE OFFER, THE 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 SHAREHOLDERS OF THE COMPANY, AND RECOMMENDS THAT THE COMPANY'S
SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION
1) SUCH NUMBER OF SHARES THAT WOULD CONSTITUTE AT LEAST ONE-THIRD ( 1/3) OF
THE OUTSTANDING SHARES (THE "MINIMUM CONDITION"), (II) THE TERMINATION OR
EXPIRATION OF ANY WAITING PERIOD UNDER THE ANTITRUST LAWS (AS DEFINED IN
SECTION 14) APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE OFFER AND THE
RECEIPT OF ALL CONSENTS OR APPROVALS REQUIRED UNDER THE ANTITRUST LAWS (THE
"ANTITRUST CONDITION"), (III) THE FULFILLMENT OF THE SHAREHOLDER APPROVAL
CONDITION (AS DEFINED IN THE INTRODUCTION) AND (IV) THE SATISFACTION OF THE
AUTHORIZED CARRIER CONDITIONS (AS DEFINED IN THE INTRODUCTION). SEE THE
INTRODUCTION AND SECTIONS 1 AND 14. THE PURCHASER RESERVES THE RIGHT, SUBJECT
ONLY TO THE APPLICABLE RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE
COMMISSION (THE "COMMISSION"), TO WAIVE EACH OF THE CONDITIONS (OTHER THAN THE
MINIMUM CONDITION) TO THE OBLIGATIONS OF THE PURCHASER TO CONSUMMATE THE OFFER
AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT TO THE EXTENT
PERMITTED BY LAW. SEE SECTIONS 1, 12 AND 14.
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 (AS DEFINED IN THE INTRODUCTION) 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 SECTIONS 12 AND 14.
---------------
THE DEALER MANAGER FOR THE OFFER IS:
BEAR, STEARNS & CO. INC.
---------------
September 25, 1998
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IMPORTANT
According to the Company, there were 52,494,820 shares of common stock,
without par value, of the Company outstanding as of September 11, 1998, of
which 52,475,862 were shares of the Company's Series I common stock and 18,958
were shares of the Company's Series II common stock. Assuming no change in
such number and no Dissenting Shares (as defined herein), the Offer is to
purchase up to 25,703,503 shares.
Any shareholder desiring to tender all or any portion of such shareholder's
Shares (as defined herein) should either (i) complete and sign the Letter of
Transmittal (or a facsimile thereof) in accordance with the instructions set
forth in the Letter of Transmittal and (A) mail or deliver the Letter of
Transmittal, together with the certificate(s) representing tendered Shares and
any other required documents, to the Depositary (as defined herein) or (B)
tender such Shares pursuant to the procedures for book-entry transfer set
forth in Section 3 or (ii) request such shareholder's broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
such shareholder. A shareholder whose Shares are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee must contact
such broker, dealer, commercial bank, trust company or other nominee if such
shareholder desires to tender such Shares.
Any shareholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available, or who cannot comply
on a timely basis, with the procedures for book-entry transfer described in
this Offer to Purchase, may tender such Shares by following the procedures for
guaranteed delivery set forth in Section 3.
Questions and requests for assistance, or for additional copies of this
Offer to Purchase, the Letter of Transmittal or other tender offer materials,
may be directed to the Information Agent or the Dealer Manager (as such terms
are defined herein) at their respective addresses and telephone numbers set
forth on the back cover of this Offer to Purchase. Holders of Shares may also
contact brokers, dealers, commercial banks and trust companies for additional
copies of this Offer to Purchase, the Letter of Transmittal or other tender
offer materials.
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
INTRODUCTION............................................................. 1
THE TENDER OFFER......................................................... 5
1. Terms of the Offer; Proration; Expiration Date ..................... 5
2. Acceptance for Payment and Payment for Shares ...................... 7
3. Procedures for Tendering Shares .................................... 8
4. Withdrawal Rights .................................................. 11
5. Certain United States Federal Income Tax Consequences of the Offer
and the Merger .................................................... 11
6. Price Range of Shares; Dividends ................................... 15
7. Effect of the Offer on the Market for the Shares; NYSE Listing and
Exchange Act Registration; Margin Regulations ..................... 16
8. Certain Information Concerning the Company ......................... 17
9. Certain Information Concerning Parent and the Purchaser ............ 19
10. Source and Amount of Funds ......................................... 23
11. Background of the Offer; Contacts with the Company ................. 23
12. Purpose of the Offer and the Merger; Plans for the Company; the
Merger Agreement; Shareholders Agreement; Registration Rights
Agreement; Carrier Acquisition Agreement .......................... 25
13. Dividends and Distributions ........................................ 40
14. Certain Conditions of the Offer .................................... 41
15. Certain Legal Matters; Regulatory Approvals ........................ 43
16. Fees and Expenses .................................................. 46
17. Miscellaneous ...................................................... 46
Schedule I--Information Concerning the Directors and Executive Officers
of Parent and the Purchaser............................................. I-1
</TABLE>
ii
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To the Holders of Shares of Common Stock of COMSAT Corporation:
INTRODUCTION
The Offer
Regulus, LLC, a single member Delaware limited liability company (the
"Purchaser") and a wholly-owned subsidiary of Lockheed Martin Corporation, a
Maryland corporation ("Parent"), hereby offers to purchase up to that certain
number of shares (collectively, the "Shares") of common stock, without par
value (the "Company Common Stock"), of COMSAT Corporation, a District of
Columbia corporation (the "Company"), 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 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,
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 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 Section 29-373 of the District of
Columbia Business Corporation Act (the "DCBCA") (the "Dissenting Shares"), at
a price of $45.50 per Share, net to the seller in cash, without interest
thereon (the "Offer Price"), upon the terms and subject to the conditions set
forth in this Offer to Purchase and in the related Letter of Transmittal
(which, as amended or supplemented from time to time, together constitute the
"Offer"). The Company has informed the Purchaser that there were 52,494,820
shares of Company Common Stock outstanding as of September 11, 1998, of which
52,475,862 were shares of Series I Company Common Stock and 18,958 were shares
of Series II Company Common Stock. Assuming no change in such number and no
Dissenting Shares, (i) the Offer is to purchase up to 25,703,503 Shares
(subject to adjustment in accordance with the Offer) and (ii) the Minimum
Condition will be satisfied if at least 17,498,274 shares of Company Common
Stock are validly tendered and not withdrawn prior to the Expiration Date.
Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares pursuant to the
Offer. However, any tendering shareholder or other payee who fails to complete
and sign the Substitute Form W-9 included in the Letter of Transmittal may be
subject to a required backup federal income tax withholding of 31% of the
gross proceeds payable to such shareholder or other payee pursuant to the
Offer. See Section 3. The Purchaser will pay all charges and expenses of Bear,
Stearns & Co. Inc. ("Bear Stearns"), as Dealer Manager (in such capacity, the
"Dealer Manager"), First Chicago Trust Company of New York, as Depositary (the
"Depositary"), and Morrow & Co., Inc., as Information Agent (the "Information
Agent"), incurred in connection with the Offer. See Section 16.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION
1) SUCH NUMBER OF SHARES THAT WOULD SATISFY THE MINIMUM CONDITION, (II) THE
TERMINATION OR EXPIRATION OF ANY WAITING PERIOD UNDER THE ANTITRUST LAWS (AS
DEFINED IN SECTION 14) APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE
OFFER AND THE RECEIPT OF ALL CONSENTS OR APPROVALS REQUIRED UNDER THE
ANTITRUST LAWS (THE "ANTITRUST CONDITION"), (III) THE APPROVAL OF THE MERGER
AND THE MERGER AGREEMENT BY THE SHAREHOLDERS OF THE COMPANY PURSUANT TO
SECTION 29-367 OF THE DCBCA (THE "SHAREHOLDER APPROVAL CONDITION"), (IV) THE
RECEIPT BY PARENT AND THE PURCHASER OF ALL APPROVALS OF THE FEDERAL
COMMUNICATIONS COMMISSION ("FCC") NECESSARY FOR THEM TO CONSUMMATE THE CARRIER
ACQUISITION (AS DEFINED IN SECTION 12), (V) THE CONSUMMATION OF THE CARRIER
ACQUISITION AND (VI) THE RECEIPT BY THE PURCHASER OF AN APPROVAL BY THE FCC TO
BECOME AN AUTHORIZED CARRIER AND
1
<PAGE>
TO ACQUIRE THE MAXIMUM NUMBER OF SHARES TO BE PURCHASED PURSUANT TO THE OFFER
(THE CONDITIONS OF SUBSECTIONS (IV)-(VI) ARE REFERRED TO AS THE "AUTHORIZED
CARRIER CONDITIONS"). SEE SECTIONS 1 AND 14. THE PURCHASER RESERVES THE RIGHT,
SUBJECT ONLY TO THE APPLICABLE RULES AND REGULATIONS OF THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION"), TO WAIVE EACH OF THE CONDITIONS (OTHER
THAN THE MINIMUM CONDITION) TO THE OBLIGATIONS OF THE PURCHASER TO CONSUMMATE
THE OFFER AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT TO THE
EXTENT PERMITTED BY LAW. SEE SECTIONS 1, 12 AND 14.
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 Parent, Deneb
Corporation, a Delaware corporation and a wholly-owned subsidiary of Parent
("Acquisition Sub"), and the Company. The Merger Agreement provides, among
other things, for the commencement of the Offer by the Purchaser and further
provides that, after the purchase of Shares pursuant to the Offer and subject
to the satisfaction or waiver of certain conditions set forth therein, (i) if
certain conditions relating to the tax treatment of the Merger and the receipt
of certain govermental approvals (as outlined in Section 12) have been
satisfied, 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 or (ii) if such conditions have not been
satisfied, Acquisition Sub will be merged with and into the Company (the
"Reverse Merger" and, alternatively with the Forward Merger, the "Merger"),
with the Company surviving the Reverse Merger as a wholly-owned subsidiary of
Parent. The surviving corporation of the Forward Merger or the Reverse Merger,
as the case may be, is referred to herein as the "Surviving Corporation."
In the Merger, each Share issued and outstanding immediately prior to the
effective time of the Merger (other than shares of Company Common Stock held
in the treasury of the Company, held by the Purchaser, held by Parent, if any,
and 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" and, together with the Offer Price, the
"Consideration").
THE BOARD OF DIRECTORS OF THE COMPANY HAS BY A UNANIMOUS VOTE (EXCLUDING
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, THE 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 SHAREHOLDERS OF THE COMPANY, AND RECOMMENDS THAT THE COMPANY'S
SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
The consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including, (i) the Shareholder Approval Condition and (ii)
the amendment or repeal of the Satellite Act, and all other applicable
proceedings before the FCC or other governmental authority necessary to
implement such amendment or repeal and to otherwise permit the consummation of
the Merger. Under the Company's Articles of Incorporation and the DCBCA, the
affirmative vote of the holders of two-thirds ( 2/3) of the outstanding Shares
is required to approve and adopt the Merger and the Merger Agreement. See
Section 12.
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
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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 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
SECTIONS 12 AND 14.
The Company's financial advisor, Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ"), has delivered to the Company's Board of Directors its
written opinion, dated as of September 18, 1998 (the "DLJ Fairness Opinion"),
to the effect that, as of the date of such opinion, the Consideration to be
received by the holders of Company Common Stock pursuant to the Merger
Agreement is fair to such holders from a financial point of view. The full
text of the opinion, which sets forth the factors considered and the
assumptions made by DLJ, are contained in the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-
9"), which is being mailed to shareholders of the Company herewith.
SHAREHOLDERS ARE URGED TO, AND SHOULD, READ THE DLJ FAIRNESS OPINION CAREFULLY
IN ITS ENTIRETY.
In connection with the execution of the Merger Agreement, the Company and
Parent have entered into a Shareholders Agreement (the "Shareholders
Agreement"), dated as of September 18, 1998, pursuant to which, among other
things, promptly after the consummation of the Offer, the Company shall take
all such actions necessary to cause the election as directors of the Company
three individuals selected by Parent (the "Parent Designees") and the
appointment of a Parent Designee as a member of each of the existing
committees of the Company's Board of Directors. The Shareholders Agreement
also provides that, other than pursuant to the transactions contemplated by
the Merger Agreement, Parent together with its affiliates will not, without
the approval of the Company's Board of Directors, acquire Shares if such
acquisition would result in Parent beneficially owning in excess of 49% of the
Company's Shares and in addition imposes certain limitations upon Parent's
ability to sell any Shares acquired. Finally, the Shareholders Agreement
imposes certain restrictions on actions that Parent may take that may affect
the management or direction of the Company. See Section 12. Parent and the
Company also have entered into a Registration Rights Agreement, dated as of
September 18, 1998 (the "Registration Rights Agreement"), pursuant to which
the Company grants to Parent certain rights with respect to registration of
Shares under the Securities Act of 1933, as amended (the "Securities Act").
Also in connection with the execution of the Merger Agreement and in order
to facilitate consummation of the Offer and Merger, the Company, COMSAT
Government Systems, Inc., a Delaware corporation ("CGSI") and wholly-owned
subsidiary of the Company, Parent and the Purchaser have entered into a
Carrier Acquisition Agreement, dated as of September 18, 1998 (the "Carrier
Acquisition Agreement"), pursuant to which Parent will acquire CGSI by a
merger of CGSI with and into the Purchaser (the transactions contemplated by
the Carrier Acquisition Agreement are herein referred to as the "Carrier
Acquisition"). Parent, the Purchaser and the Company will apply to the FCC for
those approvals necessary to consummate the Carrier Acquisition, to have the
Purchaser approved to be an Authorized Carrier and to acquire the maximum
number of Shares to be purchased pursuant to the Offer. See Section 12.
The Merger Agreement, the Shareholders Agreement, the Registration Rights
Agreement and the Carrier Acquisition Agreement are more fully described in
Section 12. Certain federal income tax consequences of the sale of Shares
pursuant to the Offer and the exchange of Shares for the Merger Consideration
pursuant to the Merger Agreement are described in Section 5.
* * *
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
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INFORMATION APPEARING OR INCORPORATED HEREIN IN RESPECT OF THE COMPANY, THE
COMPANY'S BOARD OF DIRECTORS AND THE DLJ FAIRNESS OPINION HAS BEEN FURNISHED
TO THE PURCHASER, ACQUISITION SUB AND PARENT BY THE COMPANY OR OBTAINED FROM
PUBLISHED SOURCES. WHILE THE PURCHASER, ACQUISITION SUB AND PARENT HAVE NO
REASON, AS OF THE DATE OF THIS OFFER TO PURCHASE, TO BELIEVE THAT SUCH
INFORMATION IS INCORRECT IN ANY MATERIAL RESPECT, NONE OF THE PURCHASER,
ACQUISITION SUB, PARENT OR ANY REPRESENTATIVE OF ANY OF THE FOREGOING ASSUMES
ANY LIABILITY THEREFOR.
THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR ANY MEETING OF
THE SHAREHOLDERS OF THE COMPANY OR ANY OFFER TO SELL OR SOLICITATION OF OFFERS
TO BUY PARENT COMMON STOCK OR OTHER SECURITIES. ANY SUCH SOLICITATION WILL BE
MADE ONLY PURSUANT TO SEPARATE PROXY MATERIALS PURSUANT TO THE REQUIREMENTS OF
SECTION 14(A) OF THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED (THE
"EXCHANGE ACT"), AND ANY OFFER WILL BE MADE ONLY THROUGH A REGISTRATION
STATEMENT AND PROSPECTUS PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT,
WHICH PROSPECTUS WILL ALSO CONSTITUTE A PROXY STATEMENT FOR THE MEETING OF
SHAREHOLDERS OF THE COMPANY RELATING TO THE MERGER (THE "PROXY
STATEMENT/PROSPECTUS").
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PARENT, ACQUISITION SUB OR THE PURCHASER NOT
CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED.
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THE TENDER OFFER
1. TERMS OF THE OFFER; PRORATION; EXPIRATION DATE. Upon the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any extension or amendment), the
Purchaser will accept for payment and pay for all Shares (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 prior to the Expiration Date and not withdrawn in accordance with
Section 4. The term "Expiration Date" means 12:00 midnight, New York City
time, on November 24, 1998, unless and until the Purchaser, in accordance with
the terms of the Merger Agreement, shall have extended the period of time
during which the Offer is open, in which event the term "Expiration Date"
shall mean the latest time and date at which the Offer, as so extended by the
Purchaser, shall expire.
If more than the Maximum Number of Shares are validly tendered prior to the
Expiration Date and not properly withdrawn, the Purchaser will, upon the terms
and subject to the conditions of the Offer, accept for payment and pay for
only the Maximum Number of Shares on a pro rata basis, with adjustments to
avoid purchases of fractional Shares, based upon the number of Shares validly
tendered prior to the Expiration Date and not properly withdrawn.
In the event that proration of tendered Shares is required, because of the
difficulty of determining precisely the number of Shares validly tendered and
not withdrawn (due in part to the guaranteed delivery procedure described in
Section 3), the Purchaser does not expect to be able to announce the final
results of such proration or pay for any Shares until at least five New York
Stock Exchange, Inc. ("NYSE") trading days after the Expiration Date.
Preliminary results of proration will be announced by press release as
promptly as practicable after the Expiration Date. Shareholders may obtain
such information from the Information Agent and may also be able to obtain
such information from their brokers.
Consummation of the Offer is conditioned upon, among other things,
satisfaction of each of the Minimum Condition, the Antitrust Condition, the
Shareholder Approval Condition and the Authorized Carrier Conditions. The
Offer also is subject to certain other conditions set forth in Section 14
(together with the Minimum Condition, the Antitrust Condition, the Shareholder
Approval Condition and the Authorized Carrier Conditions, the "Offer
Conditions").
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 SECTIONS 12 AND 14.
Pursuant to the terms of the Merger Agreement, Parent and the Purchaser
expressly reserve the right (but are not obligated) to waive any or all of the
Offer Conditions to the extent permitted by law. If any of the Offer
Conditions are not satisfied prior to the Expiration Date, Parent and the
Purchaser reserve the right (but are not obligated) to (i) decline to purchase
any or all of the Shares tendered and terminate the Offer, and return all such
tendered Shares to tendering shareholders, (ii) waive any or all Offer
Conditions and, subject to complying with applicable rules and regulations of
the Commission, purchase all Shares validly tendered and not theretofor
withdrawn, (iii) subject to the terms of the Merger Agreement, extend the
Offer and, subject to the right of shareholders to withdraw Shares until the
Expiration Date, retain the Shares which have been tendered during the period
or periods for which the Offer is extended or (iv) subject to the terms of the
Merger Agreement, otherwise amend the Offer. In addition, Parent has agreed in
the Merger Agreement that it will not, without the consent of the Company, (i)
reduce the number of Shares subject to the Offer, (ii) waive the Minimum
Condition, (iii) reduce the Offer Price, (iv) modify or add to the conditions
set forth in Section 14, (v) extend the Offer, except as
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provided in the Merger Agreement, (vi) change the form of the consideration
payable in the Offer or (vii) make any other modifications that are otherwise
materially adverse to the Company's shareholders.
Subject to the terms of the Merger Agreement and the applicable rules and
regulations of the Commission, except as described below, the Purchaser
expressly reserves the right, in its sole discretion, at any time and from
time to time, and regardless of the occurrence of any of the events specified
in Section 14, by giving oral or written notice to the Depositary, as
described below, to (i) extend the period of time during which the Offer is
open, and thereby delay acceptance of such payment of, and the payment for any
Shares and (ii) amend the Offer in any other respect. UNDER NO CIRCUMSTANCES
WILL INTEREST BE PAID ON THE OFFER PRICE OF THE SHARES TO BE PAID BY THE
PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING
SUCH PAYMENT. During any such extension, all Shares previously tendered and
not withdrawn will remain subject to the Offer, subject to the rights of a
tendering shareholder to withdraw any tendered Shares. See Section 4.
There can be no assurance that Parent will exercise its right to extend the
Offer (other than as required by the Merger Agreement). In the Merger
Agreement, Parent has agreed to extend the Offer, for consecutive periods of
no more than 60 days, until the earlier of (i) the one year anniversary of the
date of the Merger Agreement or (ii) ten business days after the date on which
the last of the Authorized Carrier Conditions shall have been satisfied. The
Merger Agreement also provides that Parent may, without consent of the
Company, (i) extend the term of the Offer beyond any scheduled expiration date
of the Offer (but not beyond the two year anniversary of the date of the
Merger Agreement) if, at any such scheduled expiration date, any of the
conditions to Parent's obligations to accept for payment, and pay for, Shares
tendered pursuant to the Offer shall not have been satisfied or waived and
(ii) extend the Offer (but not beyond the two year anniversary of the date of
the Merger Agreement) for any period required by any rule, regulation,
interpretation or position of the Commission or the staff thereof applicable
to the Offer or any other applicable law.
If the Purchaser extends the Offer or if the Purchaser (whether before or
after its acceptance for payment of Shares) is delayed in its acceptance for
payment of or payment for Shares or is unable to pay for Shares pursuant to
the Offer for any reason, then, without prejudice to the Purchaser's rights
under the Offer, the Depositary may retain tendered Shares on behalf of the
Purchaser, and such Shares may not be withdrawn except to the extent tendering
shareholders are entitled to withdrawal rights as described in Section 4.
However, the ability of the Purchaser to delay the payment for Shares that the
Purchaser has accepted for payment is limited by Rule 14e-1 under the Exchange
Act, which requires that a bidder pay the consideration offered or return the
securities deposited by or on behalf of holders of securities promptly after
the termination or withdrawal of the Offer.
Any extension, amendment or termination of the Offer will be followed as
promptly as practicable by public announcement thereof, the announcement in
the case of an extension to be issued no later than 9:00 a.m., New York City
Time, on the next business day after the previously scheduled Expiration Date
in accordance with Rules 14d-4(c), 14d-6(d) and 14e-1(d) under the Exchange
Act. Without limiting the obligations of the Purchaser under such Rules or the
manner in which the Purchaser may choose to make any public announcement, the
Purchaser currently intends to make announcements by issuing a press release
to the Dow Jones News Service. As used in this Offer to Purchase, "business
day" has the meaning set forth in Rule 14d-1 under the Exchange Act. The
minimum period during which an offer must remain open following material
changes in the terms of the Offer or information concerning the Offer, other
than a change in price or a change in the percentage of securities sought,
will depend upon the facts and circumstances then existing, including the
materiality of the changed terms or information. With respect to a change in
price or a change in the percentage of securities sought, a minimum period of
ten business days generally is required to allow for adequate dissemination of
information concerning the change to shareholders.
The Company has provided the Purchaser with the Company's shareholder list
and security position listings for the purpose of disseminating the Offer to
holders of the Shares. This Offer to Purchase, the related Letter of
Transmittal and other relevant materials will be mailed by the Purchaser to
record holders of Shares and will be furnished by the Purchaser to brokers,
dealers, banks, trust companies and similar persons whose names, or the names
of whose nominees, appear on the shareholder lists or, if applicable, who are
listed as participants in a clearing agency's security position listing, for
subsequent transmittal to beneficial owners of Shares.
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2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will purchase, by accepting for payment, and will
pay for, the Maximum Number of Shares validly tendered prior to the Expiration
Date (and not properly withdrawn in accordance with Section 4) promptly after
the Expiration Date. Any determination concerning the satisfaction of such
terms and conditions shall be within the sole discretion of the Purchaser. See
Section 4. Subject to the terms of the Merger Agreement, the Purchaser
expressly reserves the right, in its sole discretion, to delay acceptance for
payment of, or, subject to the applicable rules of the Commission, payment
for, Shares in order to comply in whole or in part with any applicable law.
See Section 15. Any such delays will be effected in compliance with Rule 14e-
1(c) under the Exchange Act (relating to the Purchaser's obligation to pay for
or return tendered Shares promptly after the termination or withdrawal of the
Offer).
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
the certificate(s) representing tendered Shares (the "Share Certificates") or
timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of
such Shares (if such procedure is available) into the Depositary's account at
The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to
the procedures set forth in Section 3, (ii) the Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, or an Agent's
Message (as defined herein) in connection with a book-entry transfer, and
(iii) any other documents required by the Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility
has received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, tendered Shares if, as and when the Purchaser
gives oral or written notice to the Depositary of the Purchaser's acceptance
of such Shares for payment. Payment for Shares accepted pursuant to the Offer
will be made by deposit of the aggregate purchase price therefor with the
Depositary, which will act as agent for tendering shareholders for the purpose
of receiving payment from the Purchaser and transmitting payment to such
tendering shareholders. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE OFFER
PRICE FOR SHARES BE PAID BY THE PURCHASER BY REASON OF ANY DELAY IN MAKING
SUCH PAYMENT.
In the Merger Agreement, Parent has agreed that, following the satisfaction
or waiver of all of the conditions to the Offer, the Purchaser shall accept
for payment, in accordance with the terms of the Offer, the Maximum Number of
Shares which are validly tendered and not withdrawn as soon as practicable
thereafter, except as otherwise consented to by the Company. If, for any
reason whatsoever, acceptance for payment of or payment for any Shares
tendered pursuant to the Offer is delayed, or the Purchaser is unable to
accept for payment or pay for Shares tendered pursuant to the Offer, then,
without prejudice to the Purchaser's rights set forth herein, the Depositary
may, nevertheless, on behalf of the Purchaser and subject to Rule 14e-1(c)
under the Exchange Act, retain tendered Shares and such Shares may not be
withdrawn except to the extent that the tendering shareholder is entitled to
and duly exercises withdrawal rights as described in Section 4.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer (including due to proration if more
than the Maximum Number of Shares of the Company are tendered) or if Share
Certificates are submitted evidencing more Shares than are tendered, Share
Certificates evidencing unpurchased or untendered Shares will be returned,
without expense to the tendering shareholder (or, in the case of Shares
tendered by book-entry transfer into the Depositary's account at the Book-
Entry Transfer Facility pursuant to the procedure set forth in Section 3, such
Shares will be credited to an account maintained at the Book-Entry Transfer
Facility), as promptly as practicable following the expiration or termination
of the Offer.
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If, prior to the Expiration Date, the Purchaser increases the consideration
offered to shareholders pursuant to the Offer, such increased consideration
will be paid to all shareholders whose Shares are purchased pursuant to the
Offer, regardless of whether those Shares were tendered prior to or after the
increase in consideration.
Subject to the provisions of the Merger Agreement, Parent may assign its
rights and obligations under the Merger Agreement or those of Acquisition Sub
to Parent or any subsidiary of Parent, but in each case no such assignment
shall relieve Parent or Acquisition Sub, of its obligations under the Merger
Agreement.
Parent and the Company each will file a Notification and Report Form with
respect to the transactions contemplated by the Merger Agreement under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"). The waiting period under the HSR Act will expire at 11:59 p.m., New
York City Time, on the 30th calendar day after filing of HSR notices by Parent
and the Company, unless early termination of the waiting period is granted. In
addition, the Antitrust Division of the United States Department of Justice
(the "Antitrust Division") or the United States Federal Trade Commission (the
"FTC") may extend the waiting period by requesting additional information or
documentary material from Parent. If such a request is made, such waiting
period will expire at 11:59 p.m., New York City Time, on the 20th day after
substantial compliance by Parent and the Company with such request. See
Section 15 hereof for additional information concerning the HSR Act and the
applicability of the antitrust laws to the Offer.
3. PROCEDURES FOR TENDERING SHARES.
Valid Tender of Shares. Except as set forth below, in order for Shares to be
validly tendered pursuant to the Offer, the Letter of Transmittal or a
facsimile thereof, properly completed and duly executed, with any required
signature guarantees, or an Agent's Message in connection with a book-entry
delivery of Shares and any other required documents, must be received by the
Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase prior to the Expiration Date and either (i) the Share Certificates
evidencing tendered Shares must be received by the Depositary along with the
Letter of Transmittal, (ii) Shares must be tendered pursuant to the procedure
for book-entry transfer described below and a Book-Entry Confirmation must be
received by the Depositary, in each case, prior to the Expiration Date, or
(iii) the tendering shareholder must comply with the guaranteed delivery
procedures described below.
If Share Certificates are forwarded to the Depositary in multiple
deliveries, a properly completed and duly executed Letter of Transmittal (or a
facsimile thereof) must accompany each delivery. No alternative, conditional
or contingent tenders will be accepted and no fractional Shares will be
purchased.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER.
SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY
(INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION).
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ENSURE TIMELY DELIVERY.
Book-Entry Transfer. The Depositary will establish an account at the Book-
Entry Transfer Facility with respect to the Shares for purposes of the Offer
within two business days after the date of this Offer to Purchase, and any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Shares by causing the Book-
Entry Transfer Facility to transfer such Shares into the Depositary's account
at the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer
Facility's procedures for transfer. Although delivery of Shares may be
effected through book-entry transfer at the Book-Entry Transfer
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Facility, the Letter of Transmittal or a facsimile thereof, with any required
signature guarantees, or an Agent's Message in connection with a book-entry
delivery of Shares, and any other required documents, must, in any case, be
transmitted to and received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase prior to the Expiration Date
or the guaranteed delivery procedures described below must be complied with.
REQUIRED DOCUMENTS MUST BE TRANSMITTED TO AND RECEIVED BY THE DEPOSITARY AT
ONE OF ITS ADDRESSES SET FORTH ON THE BACK COVER PAGE OF THIS OFFER TO
PURCHASE. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN
ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal if the Shares tendered thereby are tendered (i) by a registered
holder of Shares who has not completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on
the Letter of Transmittal or (ii) for the account of a bank, broker, dealer,
credit union, savings association or other entity that is a member in good
standing of the Securities Transfer Agents Medallion Program (each, an
"Eligible Institution"). In all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instruction 1
of the Letter of Transmittal.
If a Share Certificate is registered in the name of a person other than the
signer of the Letter of Transmittal or if payment is to be made to a person
other than the registered holder(s), or if a Share Certificate not accepted
for payment is to be returned to a person other than the registered holder(s),
or if a portion of the Shares evidenced by such Share Certificate are to be
returned because fewer than all of the Shares evidenced by such Share
Certificate are to be tendered to a person other than the registered
holder(s), then the Share Certificate must be endorsed or accompanied by
appropriate stock powers, in any of these cases, signed exactly as the name(s)
of the registered holder(s) appear on the Share Certificate, with the
signature(s) on such Share Certificate or stock powers guaranteed as described
above. See Instructions 1 and 5 of the Letter of Transmittal.
Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's Share Certificates are not immediately
available or time will not permit all required documents to reach the
Depositary prior to the Expiration Date or the procedure for book-entry
transfer cannot be completed on a timely basis, such Shares may nevertheless
be tendered if all the following conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser herewith, is
received by the Depositary as provided below prior to the Expiration Date;
and
(iii) the Share Certificates (or a Book-Entry Confirmation) representing
all tendered Shares in proper form for transfer together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof),
with any required signature guarantees (or, in the case of a book-entry
transfer, an Agent's Message) and any other documents required by the
Letter of Transmittal are received by the Depositary within three NYSE
trading days after the date of execution of such Notice of Guaranteed
Delivery.
Any Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile transmission or mailed to the Depositary, and must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
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Notwithstanding any other provisions hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of Share Certificates for, or of Book-Entry
Confirmation with respect to, such Shares, a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof), together with any
required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message) and any other documents required by the Letter of
Transmittal. Accordingly, payment might not be made to all tendering
shareholders at the same time and will depend upon when Share Certificates are
received by the Depositary or Book-Entry Confirmations with respect to such
Shares are received into the Depositary's account at the Book-Entry Transfer
Facility.
The valid tender of Shares pursuant to one of the procedures described above
will constitute a binding agreement between the tendering shareholder and the
Purchaser upon the terms and subject to the conditions of the Offer.
Appointment as Proxy. Except as otherwise prohibited by law, by executing a
Letter of Transmittal as set forth above, a tendering shareholder irrevocably
appoints certain designees of the Purchaser as such shareholder's attorneys-
in-fact and proxies, in the manner set forth in the Letter of Transmittal,
each with full power of substitution, to the full extent of such shareholder's
rights with respect to the Shares tendered by such shareholder and accepted
for payment by the Purchaser (and any and all non-cash dividends,
distributions, rights or other securities issued or issuable in respect of
such Shares on or after the date of the Offer). All such proxies shall be
considered coupled with an interest in the tendered Shares. This appointment
will be effective if, when and only to the extent that the Purchaser accepts
such Shares for payment pursuant to the Offer. Upon such acceptance for
payment, all prior proxies given by such shareholder with respect to such
Shares and other securities will, without further action, be revoked, and no
subsequent proxies may be given. The designees of the Purchaser will, with
respect to the Shares and other securities for which the appointment is
effective, be empowered to exercise all voting and other rights of such
shareholder as they, in their sole discretion, may deem proper at any annual,
special, adjourned or postponed meeting of the Company's shareholders, or
otherwise, and the Purchaser reserves the right to require that in order for
Shares or other securities to be deemed validly tendered, immediately upon the
Purchaser's acceptance for payment of such Shares, the Purchaser must be able
to exercise full voting rights with respect to such Shares.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tendered Shares pursuant to any of the procedures described above will be
determined by the Purchaser, in its sole discretion, whose determination will
be final and binding on all parties. The Purchaser reserves the absolute right
to reject any or all tenders of Shares determined by it not to be in proper
form or if the acceptance for payment of, or payment for, such Shares may, in
the opinion of the Purchaser's counsel, be unlawful. The Purchaser also
reserves the absolute right, in its sole discretion, to waive any defect or
irregularity in any tender with respect to Shares of any particular
shareholder, whether or not similar defects or irregularities are waived in
the case of other shareholders. No tender of Shares will be deemed to have
been validly made until all defects and irregularities have been cured or
waived.
The Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be
final and binding. None of Parent, the Purchaser, the Dealer Manager, the
Depositary, the Information Agent or any other person will be under any duty
to give notification of any defects or irregularities in tenders or will incur
any liability for failure to give any such notification.
Backup Withholding. In order to avoid "backup withholding" of federal income
tax on payments of the Offer Price pursuant to the Offer, a shareholder
surrendering Shares in the Offer must, unless an exemption applies, provide
the Depositary with such shareholder's correct taxpayer identification number
("TIN") on a Substitute Form W-9 and certify under penalty of perjury that
such TIN is correct and that such shareholder is not subject to backup
withholding. Certain shareholders (including, among others, all corporations
and certain foreign individuals and entities) are not subject to backup
withholding. If a shareholder does not provide its correct TIN or fails to
provide the certifications described above, the Internal Revenue Service
("IRS") may
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<PAGE>
impose a penalty on such shareholder and payment of the Offer Price to such
shareholder pursuant to the Offer may be subject to backup withholding of 31%
of the amount payable to such shareholder. All shareholders surrendering
Shares pursuant to the Offer should complete and sign the main signature form
and the Substitute Form W-9 included as part of the Letter of Transmittal to
provide the information and certification necessary to avoid backup
withholding (unless an applicable exemption exists and is proven in a manner
satisfactory to the Purchaser and the Depositary). Noncorporate foreign
shareholders should complete and sign the main signature form and a Form W-8,
Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction 10 to the
Letter of Transmittal.
4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4,
tenders of Shares made pursuant to the Offer are irrevocable. Shares tendered
pursuant to the Offer may be withdrawn at any time prior to the Expiration
Date and, unless previously accepted for payment by the Purchaser pursuant to
the Offer, may also be withdrawn at any time after November 24, 1998.
If the Purchaser extends the Offer, is delayed in its acceptance for payment
of Shares or is unable to accept Shares for payment pursuant to the Offer for
any reason, then, without prejudice to the Purchaser's rights under the Offer,
the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered
Shares, and such Shares may not be withdrawn except to the extent that
tendering shareholders are entitled to withdrawal rights as described in this
Section 4; subject, however, to the Purchaser's obligation, pursuant to Rule
14e-1(c) under the Exchange Act, to pay for the tendered Shares or return
those Shares promptly after termination or withdrawal of the Offer. Any such
delay will be accompanied by an extension of the Offer to the extent required
by law.
For a withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase. Any such
notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and (if Share
Certificates have been tendered) the name of the registered holder, if
different from that of the person who tendered such Shares. If Share
Certificates evidencing Shares to be withdrawn have been delivered or
otherwise identified to the Depositary, then prior to the release of such
Share Certificates, the serial numbers shown on the particular Share
Certificates to be withdrawn must be submitted to the Depositary, and the
signature(s) on the notice of withdrawal must be guaranteed by an Eligible
Institution, unless such Shares have been tendered for the account of an
Eligible Institution. If Shares have been tendered pursuant to the procedure
for book-entry transfer as set forth in Section 3, any notice of withdrawal
must also specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawn Shares, in which case a
notice of withdrawal will be effective if delivered to the Depositary by any
method of delivery described in Section 3. Withdrawals of Shares may not be
rescinded.
All questions as to the form and validity (including, without limitation,
time of receipt) of notices of withdrawal will be determined by the Purchaser,
in its sole discretion, the determination of which will be final and binding.
None of Parent, the Purchaser, the Dealer Manager, the Depositary, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
Any Shares properly withdrawn will thereafter be deemed to not have been
validly tendered for purposes of the Offer. Withdrawn Shares may be retendered
at any time prior to the Expiration Date by following one of the procedures
described in Section 3.
5. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER AND
THE MERGER.
The following discussion is a summary of the material federal income tax
consequences of the Offer and the Merger to holders of Shares who hold the
Shares as capital assets. The discussion set forth below is for general
information only and may not apply to certain categories of holders of Shares
subject to special treatment under the Internal Revenue Code of 1986, as
amended (the "Code"), such as foreign holders and holders who acquired such
Shares pursuant to the exercise of employee stock options or otherwise as
compensation. This
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<PAGE>
summary is based upon laws, regulations, rulings, and decisions currently in
effect, all of which are subject to change, retroactively or prospectively.
Integration of the Offer and the Merger. It is unclear whether the Offer and
the Merger should be treated as a single integrated transaction for federal
income tax purposes. The tax consequences for a shareholder who sells Shares
pursuant to the Offer and also receives Parent Common Stock in the Merger may
differ depending upon whether the Offer and the Merger are treated as a single
integrated transaction or as two separate transactions for federal income tax
purposes. Factors which may be inconsistent with integration include the
anticipated significant time period between completion of the Offer and the
Merger, the requirement of a change in law in order to consummate the Merger,
and the fact that the plan for the Merger contemplates the possibility of two
alternative forms of acquisition. Nevertheless, a case for integrating the
Offer and the Merger for federal income tax purposes exists because the multi-
step transaction, if completed as contemplated, will occur pursuant to the
plan as set forth in the Merger Agreement, which the shareholders of the
Company must approve as a condition to the Purchaser's obligation to purchase
Shares pursuant to the Offer. Parent intends to take the position that the
Offer and the Merger constitute a single integrated transaction.
Tax Opinions as a Condition to the Forward Merger. The Forward Merger is
conditioned upon, among other things, the receipt by Parent of an opinion from
its tax counsel, King & Spalding, and upon the receipt by the Company of an
opinion from its tax counsel, Skadden, Arps, Slate, Meagher & Flom, LLP, each
substantially to the effect that the Forward Merger (if the Merger is effected
as such) will constitute a "reorganization" within the meaning of Section
368(a) of the Code for federal income tax purposes. The issuance of the tax
opinions will depend on the facts as they exist at the time of the Forward
Merger, and the tax opinions will be based on certain factual assumptions and
on representations which are customary for transactions similar to the Offer
and the Merger. The tax opinions cannot be relied upon if any of such factual
assumptions or representations is, or later becomes, inaccurate. No ruling
from the IRS concerning the tax consequences of the Offer and the Merger has
been or will be requested, and the tax opinions will not be binding upon the
IRS or the courts.
TAX CONSEQUENCES IF THE OFFER AND THE FORWARD MERGER ARE TREATED AS A SINGLE
INTEGRATED TRANSACTION THAT CONSTITUTES A REORGANIZATION
If the Offer and the Merger are integrated and the Merger is effected as the
Forward Merger, the Offer and the Merger together will qualify as a
reorganization pursuant to Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code.
In such event, generally no gain or loss will be recognized by Parent, the
Purchaser, Acquisition Sub or the Company pursuant to the Offer and the
Merger.
Exchange of Shares Solely Pursuant to the Offer. In general, a shareholder
of the Company who, pursuant to the Offer, exchanges all of the Shares owned
by such shareholder solely for cash will recognize gain or loss equal to the
difference between the amount of cash received pursuant to the Offer and such
shareholder's adjusted tax basis in the Shares surrendered therefor.
Exchange of Shares Solely Pursuant to the Forward Merger. A shareholder of
the Company who, pursuant to the Forward Merger, exchanges all of the Shares
owned by such shareholder solely for Parent Common Stock (and who does not
exchange any Shares for cash pursuant to the Offer) will not recognize any
gain or loss upon such exchange. Such shareholder will recognize gain or loss,
however, to the extent cash is received in the Merger in lieu of a fractional
share of Parent Common Stock, as discussed below. The aggregate adjusted tax
basis in the Parent Common Stock received in such exchange will be equal to
the aggregate adjusted tax basis in the Shares surrendered therefor, and the
holding period of Parent Common Stock will include the holding period of the
Shares surrendered therefor.
Exchange of Shares Pursuant to the Offer and the Forward Merger. If the
Offer and the Forward Merger are treated as a single integrated transaction, a
shareholder of the Company who, pursuant to the Offer and the Forward Merger,
exchanges all of the Shares owned by such shareholder for a combination of
cash pursuant to the Offer and Parent Common Stock pursuant to the Merger will
not recognize loss but will recognize gain, if any, to the extent of the
lesser of (i) the excess, if any, of the sum of the amount of cash received
pursuant to the Offer and the fair market value of the Parent Common Stock
received pursuant to the Merger over such shareholder's adjusted tax basis in
the Shares exchanged therefor and (ii) the amount of cash received pursuant to
the Offer.
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<PAGE>
Any gain recognized by a shareholder of the Company who receives a
combination of cash and Parent Common Stock pursuant to the Offer and the
Forward Merger will be treated as capital gain unless the receipt of the cash
has the effect of the distribution of a dividend for federal income tax
purposes, in which case such recognized gain will be treated as ordinary
dividend income to the extent of such shareholder's ratable share of the
Company's accumulated earnings and profits.
For purposes of determining whether the cash received pursuant to the Offer
will be treated as a dividend for federal income tax purposes, a shareholder
of the Company will be treated as if such shareholder first exchanged all of
such shareholder's Shares solely for Parent Common Stock and then Parent
immediately redeemed a portion of such Parent Common Stock in exchange for the
cash such shareholder actually received.
In general, the determination as to whether the cash received will be
treated as received pursuant to a sale or exchange (generating capital gain)
or a dividend distribution (generating ordinary dividend income) depends upon
whether and to what extent there is a reduction in the shareholder's deemed
percentage stock ownership of Parent. A shareholder of the Company who
exchanges such shareholder's Shares for a combination of Parent Common Stock
and cash will recognize capital gain rather than ordinary dividend income if
the deemed redemption by Parent (described in the preceding paragraph) is "not
essentially equivalent to a dividend" or is "substantially disproportionate"
with respect to such shareholder.
Whether the deemed exchange and subsequent redemption transaction are "not
essentially equivalent to a dividend" with respect to a Company shareholder
will depend upon such shareholder's particular circumstances. In order to
reach such conclusion, it must be determined that the transaction results in a
"meaningful reduction" in such Company shareholder's deemed percentage stock
ownership of Parent. In determining whether a reduction in a shareholder's
deemed percentage stock ownership has occurred, (i) the percentage of the
outstanding stock of Parent that such Company shareholder is deemed actually
and constructively to have owned immediately before the deemed redemption by
Parent should be compared to (ii) the percentage of the outstanding stock of
Parent actually and constructively owned by such shareholder immediately after
the deemed redemption by Parent. The relevant constructive ownership rules
treat shareholders as owning stock held indirectly (through partnerships,
estates, trusts and corporations) and, under certain circumstances, treat
persons as owning stock owned by their partners, beneficiaries, and
shareholders. Shareholders will also be treated as owning stock that could be
acquired by virtue of the exercise of any option to acquire stock, and
individual shareholders are treated as owning any stock owned by their family.
A Company shareholder will comply with the "substantially disproportionate"
rule if the percentage described in (ii) above is less than 80% of the
percentage described in (i) above. Even if a Company shareholder does not
qualify under such test, the IRS has ruled that a minority shareholder in a
publicly held corporation whose relative stock interest is minimal and who
exercises no control with respect to corporate affairs is considered to have a
"meaningful reduction" in the percentage of stock ownership of the corporation
if such shareholder has any reduction, however small, in such shareholder's
percentage stock ownership. In most circumstances, therefore, it is
anticipated that gain recognized by a shareholder of the Company who exchanges
such shareholder's shares for a combination of cash and Parent Common Stock
will be capital gain. The IRS has ruled, however, that a minority shareholder
in a publicly traded corporation is not considered to have a "meaningful
reduction" in the percentage of stock ownership of the corporation if such
shareholder does not have a reduction in such shareholder's percentage stock
ownership.
The aggregate adjusted tax basis in Parent Common Stock received by a
Company shareholder who, pursuant to the Offer and the Forward Merger,
exchanges such shareholder's Shares for a combination of cash and Parent
Common Stock will be the same as the aggregate adjusted tax basis in the
Shares surrendered therefor, decreased by the amount of cash received and
increased by the amount of gain recognized, if any (including any portion of
such gain that is treated as a dividend). The holding period of Parent Common
Stock will include the holding period of the Shares surrendered therefor.
Cash Received in Lieu of a Fractional Share of Parent Common Stock. Cash
received in the Merger in lieu of a fractional share of Parent Common Stock
generally will be treated as received in redemption of such fractional share
upon which gain or loss will be recognized. The amount of the gain or loss to
a shareholder will be equal to the difference between the amount of cash
received for such fractional share and the portion of the adjusted tax basis
in the Shares allocable to such fractional share.
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<PAGE>
TAX CONSEQUENCES IF THE OFFER AND THE FORWARD MERGER ARE TREATED AS SEPARATE
TRANSACTIONS AND THE FORWARD MERGER IS TREATED AS A REORGANIZATION
If the Offer and the Forward Merger are not integrated, notwithstanding
Parent's intended treatment of the Offer and the Merger, but are treated as
separate transactions for federal income tax purposes, the receipt of cash
pursuant to the Offer will be treated as a sale or exchange upon which gain or
loss will be recognized by a shareholder of the Company who participates in
the Offer. In such case, a shareholder of the Company will recognize gain or
loss equal to the difference between the amount of cash received pursuant to
the Offer and such shareholder's adjusted tax basis in the Shares surrendered.
The Forward Merger will qualify as a reorganization pursuant to Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code pursuant to which no gain or loss
will be recognized by a shareholder of the Company who, pursuant to the
Forward Merger, exchanges Shares for Parent Common Stock. A shareholder will
recognize gain or loss, however, to the extent cash is received in lieu of a
fractional share of Parent Common Stock, as discussed above under the heading
"Cash Received in Lieu of a Fractional Share of Parent Common Stock." The
aggregate adjusted tax basis in the Parent Common Stock received in an
exchange pursuant to the Forward Merger will be equal to the aggregate
adjusted tax basis in the Shares surrendered therefor, and the holding period
of Parent Common Stock will include the holding period of the Shares
surrendered therefor.
TAX CONSEQUENCES IF THE MERGER IS EFFECTED AS A REVERSE MERGER
Offer and Reverse Merger as an Integrated Transaction. If the Offer and the
Merger are integrated and the Merger is effected as the Reverse Merger, the
Reverse Merger will not qualify as a reorganization pursuant to Section 368(a)
of the Code, and the receipt of cash pursuant to the Offer and Parent Common
Stock pursuant to the Reverse Merger will constitute a sale or exchange upon
which gain or loss will be recognized. The amount of the gain or loss to a
shareholder will be equal to the difference between the sum of the amount of
cash and the fair market value of the Parent Common Stock received by such
shareholder and such shareholder's adjusted tax basis in the Shares
surrendered therefor.
Offer and Reverse Merger as Separate Transactions. If, however, the Offer
and the Merger are not integrated, notwithstanding Parent's intended treatment
of the Offer and the Merger, and the Merger is effected as the Reverse Merger,
the receipt of cash pursuant to the Offer also will be treated as a sale or
exchange upon which gain or loss will be recognized. In such circumstance, a
shareholder of the Company will recognize gain or loss equal to the difference
between the amount of cash received pursuant to the Offer and such
shareholder's adjusted tax basis in the Shares surrendered pursuant to the
Offer. The Reverse Merger, analyzed as a transaction separate from the Offer,
may qualify as a reorganization pursuant to Section 368(a)(1)(B) of the Code.
In such case, a shareholder of the Company should not recognize any gain or
loss upon such exchange. A shareholder will recognize gain or loss, however,
to the extent cash is received in lieu of a fractional share of Parent Common
Stock, as discussed above under the heading "Cash Received in Lieu of a
Fractional Share of Parent Common Stock."
TAX CONSEQUENCES IF THE MERGER IS NOT TREATED AS A REORGANIZATION
In the event that the Merger does not qualify as a reorganization (whether
effected as the Forward Merger or the Reverse Merger), a shareholder of the
Company will recognize gain or loss with respect to Shares exchanged pursuant
to the Offer equal to the difference between the amount of cash received and
such shareholder's adjusted tax basis in the Shares surrendered pursuant to
the Offer, and will recognize gain or loss with respect to Shares exchanged
pursuant to the Merger equal to the difference between the fair market value
of the Parent Common Stock received and such shareholder's adjusted tax basis
in the Shares exchanged pursuant to the Merger.
TAX CONSEQUENCES OF THE OFFER IF THE MERGER IS NOT CONSUMMATED
If the Merger is not consummated, a shareholder of the Company who, pursuant
to the Offer, exchanges Shares for cash will recognize gain or loss equal to
the difference between the amount of cash received pursuant to the Offer and
such shareholder's adjusted tax basis in the Shares surrendered therefor.
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<PAGE>
CHARACTERIZATION OF GAIN OR LOSS
The gain or loss recognized, if any, by a shareholder of the Company
pursuant to the Offer or the Merger will be capital gain or loss and if, as of
the date of the exchange pursuant to the Offer or the Merger, as the case may
be, the shareholder has held the Shares surrendered for more than one year,
such capital gain will be long-term. The amount of any gain or loss recognized
and its character as short-term or long-term will be calculated and determined
separately for each identifiable block of Shares surrendered pursuant to the
Offer and the Merger.
BACKUP WITHHOLDING
Unless a shareholder complies with certain reporting and/or certification
procedures or is an exempt recipient under applicable provisions of the Code
and Treasury Regulations promulgated thereunder, such shareholder may be
subject to withholding tax of 31% with respect to any cash payments received
pursuant to the Offer. See the discussion regarding backup withholding in
Section 3. Foreign shareholders should consult with their own tax advisors
regarding withholding taxes in general.
THE ABOVE DISCUSSION MAY NOT APPLY TO CERTAIN CATEGORIES OF SHAREHOLDERS
SUBJECT TO SPECIAL TREATMENT UNDER THE CODE, SUCH AS FOREIGN SHAREHOLDERS AND
SHAREHOLDERS WHOSE SHARES WERE ACQUIRED PURSUANT TO THE EXERCISE OF ANY
EMPLOYEE STOCK OPTION OR OTHERWISE AS COMPENSATION. SHAREHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE SPECIFIC TAX CONSEQUENCES OF
THE OFFER AND THE MERGER, INCLUDING ANY FEDERAL, STATE, LOCAL OR OTHER TAX
CONSEQUENCES (INCLUDING ANY TAX RETURN FILING OR OTHER TAX REPORTING
REQUIREMENTS) OF THE OFFER AND THE MERGER.
6. PRICE RANGE OF SHARES; DIVIDENDS.
The principal market for the Shares is the NYSE, where the shares of Company
Common Stock are traded under the symbol "CQ." The Company Common Stock is
also listed on the Chicago Stock Exchange and the Pacific Stock Exchange in
the United States and on the Swiss Exchange. The following table sets forth,
for the periods indicated, the high and low sales prices per Share on the NYSE
and the amount of cash dividends paid per Share as reported in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997 and its
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, and as
otherwise reported by published financial sources.
<TABLE>
<CAPTION>
SALES PRICE DIVIDEND
----------------- --------
YEAR HIGH LOW
---- -------- --------
<S> <C> <C> <C> <C>
1996
First Quarter................................. $ 25 5/8 $ 16 3/4 $.195
Second Quarter................................ 33 1/8 23 3/8 .195
Third Quarter................................. 26 1/2 18 3/4 .195
Fourth Quarter................................ 26 3/4 21 1/2 .195
1997
First Quarter................................. 28 1/2 23 .195
Second Quarter................................ 26 11/16 19 5/8 .05
Third Quarter................................. 24 5/16 20 13/16 .05
Fourth Quarter................................ 25 3/4 20 5/16 .05
1998
First Quarter................................. 35 5/8 21 5/8 .05
Second Quarter................................ 42 3/4 27 3/4 .05
Third Quarter................................. 36 7/8 21 7/8 .05
(through September 24, 1998)
</TABLE>
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<PAGE>
On September 18, 1998, the last full trading day prior to the announcement
of the execution of the Merger Agreement, the last reported sales price of the
Shares on the NYSE Composite Tape was $34 1/8 per Share. On September 24,
1998, the last full trading day prior to the date hereof, the last reported
sales price of the Shares on the NYSE Composite Tape was $34 7/16 per Share.
SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; NYSE LISTING AND
EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS.
Market for the Shares. The purchase of Shares pursuant to the Offer will
reduce the number of holders of Shares and the number of Shares that might
otherwise trade publicly and could adversely affect the liquidity and market
value of the remaining Shares held by the public. Neither Parent nor the
Purchaser can predict whether the reduction in the number of Shares that might
otherwise trade publicly would have an adverse or beneficial effect on the
market price for or marketability of the Shares or whether it would cause
future market prices to be greater or less than the Offer Price.
The principal market for Company Common Stock is the NYSE. Depending upon
the number of Shares purchased pursuant to the Offer, the Shares may no longer
meet the standards of the NYSE for continued listing and, therefore, may be
delisted therefrom. According to the NYSE's published guidelines, the NYSE
could consider delisting the Shares if, among other things, the number of
publicly held Shares (excluding Shares held by officers, directors, their
immediate families and other concentrated holdings of 10% of more) were less
than 600,000, there were less than 1,200 holders of at least 100 shares or the
aggregate market value of the publicly held Shares was less than $5 million.
If, as a result of the purchase of Shares pursuant to the Offer, the Shares no
longer meet the requirements of the NYSE for continued listing and the listing
of Shares on such exchanges is discontinued, the market for the Shares could
be adversely affected. As of August 31, 1998, there were approximately 8,000
holders of record of at least 100 shares of Company Common Stock.
If the NYSE were to delist the Shares, it is possible that the Shares would
continue to trade on another securities exchange or would trade in the over-
the-counter market and that price quotations for the Shares would be reported
by such exchange or through the Nasdaq National Market or other sources. The
Company Common Stock is currently also listed on the Chicago and Pacific Stock
Exchanges in the United States and on the Swiss Stock Exchange. The extent of
the public market for the Shares and availability of such quotations would,
however, depend upon such factors as the number of holders and/or the
aggregate market value of the publicly-held Shares at such time, the interest
in maintaining a market in the Shares on the part of securities firms, the
possible termination of registration of the Shares under the Exchange Act and
other factors.
Exchange Act Registration. The Shares currently are registered under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the Commission if the Shares are
neither listed on a national securities exchange nor held by 300 or more
holders of record. Termination of registration of the Shares under the
Exchange Act would substantially reduce the information required to be
furnished by the Company to its shareholders and to the Commission and would
make certain provisions of the Exchange Act no longer applicable to the
Company, such as the short-swing profit recovery provisions of Section 16(b)
of the Exchange Act, the requirement of furnishing a proxy statement pursuant
to Section 14(a) of the Exchange Act in connection with shareholders' meetings
and the related requirement of furnishing an annual report to shareholders and
the requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions. Furthermore, the ability of "affiliates" of the Company
and persons holding "restricted securities" of the Company to dispose of such
securities pursuant to Rule 144 or 144A promulgated under the Securities Act
may be impaired or eliminated. If registration of the Shares under the
Exchange Act were terminated, the Shares would no longer be "margin
securities" or be eligible for NYSE reporting.
If registration of the Company Common Stock is not terminated prior to the
Merger, then the Company Common Stock will be delisted from all stock
exchanges and the registration of the Company Common Stock under the Exchange
Act will be terminated following the consummation of the Merger.
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<PAGE>
Margin Regulations. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of
allowing brokers to extend credit on the collateral of the Shares. Depending
upon factors similar to those described above regarding listing and market
quotations, it is possible that, following the Offer, Shares would no longer
constitute "margin securities" for the purposes of the margin regulations of
the Federal Reserve Board and therefore could no longer be used as collateral
for loans made by brokers.
8. CERTAIN INFORMATION CONCERNING THE COMPANY. General. Unless otherwise
indicated, the information concerning the Company contained in this Offer to
Purchase, including financial information (except the information described
below under "Other Financial Information") has been taken from or is based
upon publicly available documents and records on file with the Commission and
other public sources. None of Parent, Acquisition Sub, the Purchaser, the
Dealer Manager, the Depositary or the Information Agent assumes any
responsibility for the accuracy or completeness of the information concerning
the Company contained in such documents and records or for any failure by the
Company to disclose events which may have occurred or may affect the
significance or accuracy of any such information but which are unknown to
Parent, Acquisition Sub, the Purchaser, the Dealer Manager, the Depositary or
the Information Agent.
The Company is a District of Columbia corporation incorporated in 1963. Its
principal executive offices are located at 6560 Rock Spring Drive, Bethesda,
Maryland 20817. The telephone number of the Company at such location is (301)
214-3000. The Company's operations are conducted through two business
segments: Satellite Services and Network Services.
The Satellite Services segment consists of the Company's COMSAT World
Systems ("CWS") and COMSAT Mobile Communications ("CMC") businesses. CWS
provides voice, data, video and audio communications services between the U.S.
and other countries using the satellite system of the International
Telecommunications Satellite Organization ("INTELSAT"). CMC provides voice,
data, fax, telex and information services for ships, aircraft and land mobile
applications throughout the world primarily using the satellite system of the
International Maritime Satellite Organization ("Inmarsat").
The Network Services segment consists of the Company's COMSAT International
("CI"), COMSAT Laboratories ("Labs") and Government Programs businesses. CI
operates an integrated group of telecommunications companies that are engaged
principally in providing individualized digital communications network
solutions to business clients and carriers in high-growth emerging markets
overseas. Labs provides technical consulting in the design and development of
advanced digital communications technologies and also designs, develops and
licenses communications products for satellite access, compression and
networking applications. Government Programs include the operations of COMSAT
General Corporation and CGSI, both of which are wholly-owned subsidiaries of
the Company. (CGSI is to be acquired by Parent pursuant to the Carrier
Acquisition Agreement.)
17
<PAGE>
Financial Information. Set forth below is a summary of certain selected
consolidated financial information with respect to the Company, excerpted or
derived from the audited financial information of the Company contained in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997 and unaudited information of the Company contained in the Quarterly
Report on Form 10-Q of the Company for the quarterly period ended June 30,
1998. More comprehensive financial information is included in such reports and
other documents filed with the Commission, and the following summary is
qualified in its entirety by reference to such reports and other documents,
including the financial information and related notes contained therein. Such
reports and other documents may be inspected and copies may be obtained from
the offices of the Commission or the NYSE in the manner set forth below under
"Available Information."
COMSAT CORPORATION
SUMMARY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
---------------------- ---------------------------------
1998 1997 1997 1996 1995
---------- ---------- ---------- ---------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Revenues................ $ 295,762 $ 275,968 $ 562,651 $ 545,100 $ 507,687
Operating expenses...... 255,124 229,405 480,683 437,875 387,873
Operating income........ 40,638 46,463 81,968 107,225 119,814
Income from continuing
operations............. 7,924 17,197 28,568 36,197 43,507
Net income (loss)....... 7,924 (15,610) (64,446) 8,622 37,817
Earnings (loss) per
share--
assuming dilution:
Income from continuing
operations........... 0.15 0.35 0.57 0.74 0.91
Net income (loss)..... 0.15 (0.32) (1.29) 0.18 0.79
BALANCE SHEET DATA (at
end of period)
Total assets............ 1,855,134 1,894,775 1,894,775 2,097,286 2,022,247
Long-term debt.......... 454,478 461,960 461,960 578,379 590,378
Stockholders' equity.... 655,707 586,271 586,271 841,817 839,433
DIVIDENDS
Dividends paid.......... 5,145 12,000 16,975 37,698 36,874
Dividends paid per
share.................. 0.10 0.245 0.345 0.78 0.78
Distribution of Ascent
Entertainment Group,
Inc. shares............ -- -- 194,633 -- --
</TABLE>
Other Financial Information. During the course of the discussions between
Parent and the Company that led to the execution of the Merger Agreement, the
Company provided Parent with financial projections and other information
relating to the Company which is not publicly available. The information
included projections of the Company's estimated revenues, pre-tax earnings and
earnings per share as an independent company (i.e., without regard to the
impact to the Company of a transaction with Parent) of approximately:
$666 million, $47 million and $0.58 per share, respectively, for fiscal year
1998; $760 million, $76 million and $0.89 per share, respectively, for fiscal
year 1999; and $919 million, $124 million, and $1.44 per share, respectively,
for fiscal year 2000. The foregoing projections were prepared in the fall of
1997 solely for internal use and not for publication or with a view to
complying with the published guidelines of the SEC regarding projections or
with the guidelines established by the American Institute of Certified Public
Accountants. The projections are "forward-looking" and inherently subject to
significant uncertainties and contingencies, many of which are
18
<PAGE>
beyond the control of the Company, including: potentially adverse changes in
laws, regulations or rules applicable to the Company or the satellite industry
generally; the outcome and timing of efforts to privatize INTELSAT and
Inmarsat; changes in the demand and competition for satellite and competing
services; general business and economic conditions; changes in tax and
accounting matters affecting the Company; and other matters. The Company has
informed Parent that certain of the assumptions used by the Company in
preparing the projections have changed significantly. Accordingly, the
Company's actual results over the periods indicated may be materially higher
or lower than those described above. The inclusion of this information should
not be regarded as an indication that Parent, the Purchaser, the Company or
anyone who received this information considers it a reliable predictor of
future events, and this information should not be relied upon as such. This
information is being included in this Offer to Purchase only because it was
furnished by the Company to Parent. None of Parent, the Purchaser or the
Company assumes any responsibility for the validity, reasonableness, accuracy
or completeness of the projections, and the Company has made no
representations to Parent, or the Purchaser regarding the financial
projections described above.
Available Information. The Shares are registered under the Exchange Act.
Accordingly, the Company is subject to the informational and reporting
requirements of the Exchange Act and is required to file reports and other
information with the Commission relating to its business, financial condition
and other matters. Information, as of particular dates, concerning the
Company's directors and officers, their remuneration, stock options or
restricted stock units granted to them, the principal holders of the Company's
securities, any material interests of such persons in transactions with the
Company and other matters is required to be disclosed in proxy statements
distributed to the Company's shareholders and filed with the Commission. These
reports, proxy statements and other information are available for inspection
at the public reference facilities of the Commission located in Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and also are available
for inspection and copying at prescribed rates at the following regional
offices of the Commission: Seven World Trade Center, New York, New York 10048;
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of this material may also be obtained by mail, upon payment of
the Commission's customary fees, from the Commission's principal office at 450
Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains an
Internet site on the World Wide Web at http://www.sec.gov that contains
reports, proxy statements and other information. Reports, proxy statements and
other information concerning the Company should also be available for
inspection at the offices of the NYSE, 20 Broad Street, New York, New York
10005.
9. CERTAIN INFORMATION CONCERNING PARENT AND THE PURCHASER.
The Purchaser. The Purchaser is a newly formed single member Delaware
limited liability company organized in connection with the Offer and the
Merger and has not carried on any activities since its organization other than
with respect to the Offer and the Merger. The principal executive offices of
the Purchaser are located at c/o Lockheed Martin Corporation, 6801 Rockledge
Drive, Bethesda, Maryland 20817. The Purchaser is a wholly-owned subsidiary of
Parent.
Parent. Parent was incorporated in Maryland in August 1994 to effect the
combination (the "Combination") of the businesses of Martin Marietta
Corporation and Lockheed Corporation. The Combination was consummated on March
15, 1995. Parent is a highly diversified global enterprise principally engaged
in the conception, research, design, development, manufacture, integration and
operation of advanced technology products and services. The principal
executive offices of Parent are located at 6801 Rockledge Drive, Bethesda,
Maryland 20817.
Parent conducts its principal businesses through: the Space & Strategic
Missiles sector; the Electronics sector; the Information & Services sector;
the Aeronautics sector; the Energy & Environment sector; and Lockheed Martin
Global Telecommunications, Inc., a Delaware corporation and wholly-owned
subsidiary of Parent ("Global Telecommunications").
19
<PAGE>
The Space & Strategic Missiles sector's activities include the design,
development, engineering and production of civil, commercial and military
space systems, including: spacecraft, space launch vehicles, manned space
systems and their supporting ground systems and services; telecommunications
systems and services; strategic fleet ballistic missiles; and defensive
missiles.
The Electronics sector's activities primarily relate to the design,
development, engineering and production of high performance electronic systems
for undersea, shipboard, land-, airborne- and space-based applications. Major
business elements include: Naval Systems; Missiles and Air Defense; Aerospace
Electronics; and Platform Integration. The Naval Systems element serves
customers world-wide with major lines of business in surface ship and
submarine combat systems, missile launching systems, anti-submarine warfare
systems, and navigation systems. The Air Defense and Missiles element produces
air defense systems; tactical battlefield missiles; and precision guided
weapons and munitions. The Aerospace Electronics element manufactures major
electronics subsystems such as: aircraft controls; electronic-warfare;
electro-optic and night vision; radar; displays; and computers for the
military and commercial aerospace market. The Platform Integration element
performs systems integration of mission specific combat suites for both fixed
and rotary wing aircraft and postal automation.
The Information & Services sector consists of four major lines of business:
systems integration and command, control, communications, computer and
intelligence (C4I) systems; federal technology services; state and municipal
systems support services; and commercial systems and products. This sector's
activities include the development, integration and operation of large,
complex information systems, including satellite command and control systems,
simulation and training systems, and nationally critical intelligence systems.
This sector provides federal government, civil and military customers with
engineering, scientific, management, technical and information technology
support. Services to state and local government customers include systems
development, integration and operational support in the areas of welfare
reform, municipal services, children and family services, transportation, and
telecommunications. Commercial systems businesses include information
technology services, computer peripheral products, real-time 3-D graphics
products and enterprise data management software. This sector also provides
Parent's affiliated companies with internal information systems support.
The Aeronautics sector operates in the following primary lines of business:
tactical aircraft, airlift, surveillance/command,
maintenance/modification/logistics, reconnaissance and advanced development
programs. Programs include the F-22 air-superiority fighter, Joint Strike
Fighter, F-16 multirole fighter, C-130J tanker/transport, X-33 reusable launch
vehicle technology demonstrator, DarkStar reconnaissance vehicle, Airborne
Early Warning & Control systems, Contractor Logistics Support and a variety of
maintenance and modification programs for aircraft such as U.S. Navy P-3s and
U.S. Air Force KC-10s, as well as the Big Safari modification program for
special operations forces.
The Energy & Environment sector's activities primarily focus on the
management of various U.S. Department of Energy ("DOE") facilities,
environmental management and remediation, and enrichment services. Parent is
the largest management and operations contractor within the DOE's system of
laboratories, managing energy research and defense programs at, among other
facilities, the Sandia National Laboratories, the Idaho National Engineering
and Environmental Laboratory and the Oak Ridge National Laboratory. These
contractual arrangements provide for Parent to be reimbursed for the cost of
operations and receive a fee for performing management services. Only the
management fees are reflected within Parent's net sales and earnings. Parent
is one of two competitors for the DOE's Tank Waste Remediation System-
Privatization program.
Formation of Global Telecommunications was announced on August 11, 1998.
Global Telecommunications is comprised of Lockheed Martin Intersputnik, Ltd.,
a joint venture between Parent and Moscow-based Intersputnik that is scheduled
to deploy its first satellite in 1999; AstrolinkTM International Ltd., a
Parent strategic venture that will provide global interactive multimedia
services using next-generation broadband satellite technology; Communications
Systems, which markets commercial satellite communications systems
capabilities; the elements of Lockheed Martin Management Data Systems and
Lockheed Martin Western Development Laboratories that provide commercial
communications capabilities; and Satco (Asia), LLC, Parent's joint venture
with GE Americom that is scheduled to launch a satellite next year that will
serve broadcasters in the Asia-Pacific region. If the Offer and the Merger are
consummated, the Surviving Corporation will be part of Global
Telecommunications.
20
<PAGE>
Financial Information. Set forth below is a summary of certain consolidated
financial data with respect to Parent and its subsidiaries, excerpted or
derived from audited financial information presented in Parent's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997 (the "Parent 1997 10-
K"), and the unaudited financial information contained in Parent's Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 1998 (the "Parent
10-Q"). The financial information summary set forth below is qualified in its
entirety by reference to the Parent 1997 10-K and the Parent 10-Q and the
other documents, financial information and related notes contained therein
which have been filed with the Commission, which are hereby incorporated
herein by reference. Such reports and other documents may be inspected and
copies may be obtained from the Commission, or the NYSE in the manner set
forth below under "Available Information."
LOCKHEED MARTIN CORPORATION
SUMMARY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------- ------------------------
1998 1997 1997 1996 1995
-------- -------- ------- ------- -------
(IN MILLIONS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net sales........................... $ 12,737 $ 13,572 $28,069 $26,875 $22,853
Costs and expenses:
Cost of sales .................... 11,481 12,279 25,772 24,594 20,881
Merger related and consolidation
expenses......................... -- -- -- -- 690
-------- -------- ------- ------- -------
Earnings from operations............ 1,256 1,293 2,297 2,281 1,282
Other income and expenses, net...... 70 73 482 452 95
-------- -------- ------- ------- -------
1,326 1,366 2,779 2,733 1,377
Interest expense.................... 434 402 842 700 288
-------- -------- ------- ------- -------
Earnings before income taxes........ 892 964 1,937 2,033 1,089
Income tax expense.................. 334 366 637 686 407
-------- -------- ------- ------- -------
Net earnings (loss)................. $ 558 $ 598 $ 1,300 $ 1,347 $ 682
======== ======== ======= ======= =======
EARNINGS (LOSS) PER COMMON SHARE
Basic:*
Before deemed preferred stock
dividend......................... $ 2.98 $ 3.08 $ 6.73 $ 6.80 $ 3.28
Deemed preferred stock dividend... -- -- (9.85) -- --
-------- -------- ------- ------- -------
Earnings (loss) per share....... $ 2.98 $ 3.08 $ (3.12) $ 6.80 $ 3.28
======== ======== ======= ======= =======
Diluted:*
Before deemed preferred stock
dividend......................... $ 2.94 $ 2.77 $ 6.09 $ 6.09 $ 3.09
Deemed preferred stock dividend... -- -- (8.55) -- --
-------- -------- ------- ------- -------
Earnings (loss) per share....... $ 2.94 $ 2.77 ** $ 6.09 $ 3.09
======== ======== ======= ======= =======
Cash dividends...................... $ .80 $ .80 $ 1.60 $ 1.60 $ 1.34
======== ======== ======= ======= =======
</TABLE>
- - --------
* In 1997, Parent reacquired all of its outstanding Series A preferred stock
resulting in a deemed dividend of $1,826 million. For purposes of computing
net earnings applicable to common stock, the deemed preferred stock
dividend was deducted from 1997 net earnings.
** Antidilutive.
21
<PAGE>
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, DECEMBER 31,
----------- ---------------
1998 1997 1996
----------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
CONDENSED BALANCE SHEET DATA (AT END OF PERIOD)
Current assets.................................... $11,301 $10,105 $10,346
Property, plant and equipment..................... 3,613 3,669 3,721
Intangible assets related to contracts and
programs acquired................................ 1,491 1,566 1,767
Cost in excess of net assets acquired............. 9,732 9,856 10,394
Other assets...................................... 3,420 3,165 3,312
------- ------- -------
Total........................................... $29,557 $28,361 $29,540
======= ======= =======
Short-term borrowings............................. $ 1,598 $ 494 $ 1,110
Current maturities of long-term debt.............. 579 876 180
Other current liabilities......................... 8,019 7,819 7,382
Long-term debt.................................... 10,183 10,528 10,188
Post-retirement benefit liabilities............... 1,941 1,982 2,077
Other liabilities................................. 1,501 1,486 1,747
Stockholders' equity.............................. 5,736 5,176 6,856
------- ------- -------
Total........................................... $29,557 $28,361 $29,540
======= ======= =======
</TABLE>
The name, citizenship, business address, principal occupation or employment
and five-year employment history for each of the directors and executive
officers of Parent and the Purchaser are set forth in Schedule I hereto.
Except as described in this Offer to Purchase, none of Parent or the
Purchaser or, to the best knowledge of Parent or the Purchaser, any of the
persons listed in Schedule I hereto or any associate or majority owned
subsidiary of Parent, the Purchaser or such persons beneficially owns any
equity security of the Company, and none of Parent or the Purchaser or, to the
best knowledge of Parent or the Purchaser, any of the persons referred to
above, or any of the respective directors, executive officers or subsidiaries
of any of the foregoing has effected any transaction in any equity security of
the Company during the past 60 days.
Except as described in this Offer to Purchase, none of Parent or the
Purchaser or, to the best knowledge of Parent or the Purchaser, any of the
persons listed in Schedule I hereto has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Company, including, without limitation, any contract,
arrangement, understanding or relationship concerning the transfer or the
voting of any securities of the Company, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against loss or
the giving or withholding of proxies. Except as described in this Offer to
Purchase, none of Parent or the Purchaser or, to the best knowledge of Parent
or the Purchaser, any of the persons listed in Schedule I hereto has had any
transactions with the Company or any of its executive officers, directors or
affiliates that would require reporting under the rules of the Commission.
Marcus C. Bennett, Executive Vice President and Chief Financial Officer and
a director of Parent, and Caleb B. Hurtt, a director of Parent, each also
serves on the Board of Directors of the Company. Mr. Bennett joined the
Company's Board of Directors in August 1997. He serves on the Board's
Committee on Audit, Corporate Responsibility and Ethics and on the Board's
Finance Committee. Mr. Hurtt joined the Company's Board of Directors in May
1996. He is the Chairman of the Board's Committee on Compensation and
Management Development and serves on the Board's Nominating and Corporate
Governance Committee. Mr. Hurtt holds options to purchase 9,922 shares of
Company Common Stock, of which options with respect to 3,480 shares are
presently exercisable or will be exercisable within sixty days. Mr Bennett
holds options to purchase 4,961 shares of Company Common Stock, none of which
are currently exercisable. Both Mr. Hurtt and Mr. Bennett have elected to
defer receipt of annual retainer fees and instead have received phantom stock
units which are not included in their beneficial ownership of Company Common
Stock. Mr. Hurtt's account holds a balance of 2,775 phantom stock units, and
Mr. Bennett's account holds a balance of 2,009 phantom stock units. To avoid
any
22
<PAGE>
actual or perceived conflict of interest, each of Mr. Bennett and Mr. Hurtt
recused himself from the deliberations relating to the transaction conducted
by both Boards.
Except with respect to the transactions contemplated by the Merger
Agreement, the Shareholders Agreement, the Registration Rights Agreement, and
the Carrier Acquisition Agreement (collectively, the "Transaction Agreements")
and as described in this Offer to Purchase, there have been no contacts,
negotiations or transactions between Parent or the Purchaser, or their
respective subsidiaries, or to the best knowledge of Parent or the Purchaser,
any of the persons listed in Schedule I hereto, on the one hand, and the
Company or its executive officers, directors or affiliates, on the other hand,
concerning a merger, consolidation or acquisition, tender offer or other
acquisition of securities, election of directors or a sale or other transfer
of a material amount of assets.
Parent and its affiliates have, from time to time, had contractual
relationships with the Company and its affiliates in the ordinary course of
their respective businesses. Parent is a customer of Labs and most recently,
in June, 1998, awarded a contract to Labs for in-orbit testing of a mobile
telephone communications satellite.
Available Information. Parent is subject to the informational and reporting
requirements of the Exchange Act and Parent is required to file reports and
other information with the Commission relating to its business, financial
condition and other matters. Information, as of particular dates, concerning
Parent's directors and officers, their remuneration, stock options granted to
them, the principal holders of Parent's securities, any material interests of
such persons in transactions with Parent, and other matters, is required to be
disclosed in proxy statements distributed to Parent's respective shareholders
and filed with the Commission. These reports, proxy statements and other
information are available for inspection and copies may be obtained in the
same manner as set forth for the Company under "Available Information" in
Section 8. Shares of Parent Common Stock are listed on the NYSE, and reports,
proxy statements and other information concerning Parent are available for
inspection at the offices of the NYSE, 20 Broad Street, New York, New York
10005.
10. SOURCE AND AMOUNT OF FUNDS. The Purchaser estimates that the total
amount of funds required to consummate the Offer and the Merger and to pay
related fees and expenses will be approximately $1.2 billion. See Sections 12
and 16. The Purchaser expects to obtain these funds from Parent by means of a
capital contribution or advance at the time Shares tendered pursuant to the
Offer are accepted for payment. Parent, in turn, expects to obtain the funds
necessary to make the capital contribution or advance utilizing any one or
more of the following methods: (i) monetization of Parent's equity holdings in
Loral Space & Communications Ltd. and L-3 Communications Corporation and
Parent's partnership interest in Iridium LLC, (ii) internally generated funds,
(iii) issuance of commercial paper or other short term instruments, and
(iv) borrowing capacity under its existing or future credit facilities. No
final decisions have been made by Parent concerning the specific source of
funds to be used to purchase the Shares. Neither the Offer nor the Merger is
conditioned on obtaining financing.
11. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY.
Parent, as a leading provider of communications satellites, space launch
vehicles, information and communications systems, and systems integration
services, has identified in its strategic plans over the past several years
the commercial satellite communications services market as an attractive
growth opportunity for Parent. This market opportunity was, and is, viewed as
consistent with Parent's strategy to grow into closely related market sectors
to augment Parent's core aerospace and defense businesses. In light of the
potential for expansion into this market, the management and Board of
Directors of Parent have periodically reviewed potential market entry
strategies, including but not limited to the possibility of internal
investments, joint ventures and strategic alliances, and acquisitions and
business combinations with companies participating in the commercial
telecommunications services industry.
On August 5, 1997, Parent and the Company entered into confidentiality
agreements, in customary form, pursuant to which, among other things, Parent
and the Company agreed to maintain the confidentiality of information provided
by the other.
On August 7 and 8, 1997, several members of the management of the Company
met with members of the management of Parent. The parties discussed the
overall market environment of the satellite telecommunications industry and
each company's strategies regarding that market. The Company's management also
discussed with Parent the regulatory and legislative environment under which
the Company operates.
23
<PAGE>
Over the next several weeks, a series of meetings occurred at which various
business, financial, legal, and regulatory issues were discussed. Parent's
management also held discussions with outside counsel regarding the regulatory
aspects of a potential transaction. Parent's management also solicited and
received advice from Bear Stearns regarding valuation, transaction structuring
and the financial implications of a potential transaction. At a regularly
scheduled meeting of the Board of Directors of Parent held on September 25,
1997, the Board reviewed Parent's commercial telecommunications strategy and
the strategic and financial implications of a potential transaction with the
Company.
Subsequent to Parent's Board of Directors meeting, the management of Parent
and the Company met to discuss the terms and structure of a possible
transaction. No agreement was reached, and the parties agreed to put the
discussions on hold pending further strategic reviews by the parties. Parent
took the opportunity to engage a number of outside consultants to review and
supplement Parent's commercial telecommunications strategy.
Commencing in early January, 1998, the parties held a series of meetings to
continue to pursue alternative transaction structures within the legislative
and regulatory framework constraining the Company. These alternatives included
structures involving varying degrees of equity ownership of the Company as
well as potential joint ventures involving the Company's non-regulated
businesses. At a regularly scheduled Parent Board of Directors meeting on
February 26, 1998, Parent's management updated the directors on the status of
discussions with the Company and reiterated management's interest in a
transaction.
Meetings continued during March and early April in which the parties
primarily discussed alternative transaction structures and sources of
potential synergies between the two corporations. At a regularly scheduled
meeting of Parent's Board of Directors held on April 23, 1998, the business of
the Company and the pro forma financial implications of a potential
transaction were discussed. During May and June 1998, discussions between the
parties continued, focusing on further exploration of alternative transaction
structures and the evolving regulatory and legislative environment.
At a regularly scheduled Parent Board of Directors meeting held on June 26,
1998, the results of a review by a Parent task force, which included
participation by outside consultants and which validated Parent's commercial
telecommunications strategy, was presented and Parent's Board of Directors was
updated on the status of the discussions with the Company and the implications
of a potential transaction. On the same day, the parties, representatives of
Bear Stearns and representatives of DLJ met to discuss transaction structures
and valuations, and potential timetables to reach a conclusion for the
negotiations. Over the subsequent three weeks, a number of meetings between
the parties were held to further define the transaction structure, exchange
preliminary drafts of transaction documentation, and discuss transaction
valuations.
At a regularly scheduled Board of Directors meeting of Parent held on July
23, 1998, management presented a detailed summary of the status of
discussions. During the week of July 27, members of management and counsel for
the companies met with outside counsel and investment banking advisors to
discuss and negotiate specifics regarding the transaction structure and
related issues. In the ensuing weeks, the parties engaged in ongoing
negotiations with a view toward finalizing the terms and conditions of a
transaction, with active participation by investment bankers, outside counsel
and regulatory counsel. As a result of significant progress toward an
agreement on terms, the parties reached an agreement to hold simultaneous
Boards of Directors meetings on Sunday, August 30, to seek approval of the
transaction if progress continued. However, due to volatility in the stock
markets on Thursday, August 27, concerns related to economic instability in
certain regions (including, Russia, Asia, Central and South America and other
emerging markets), additional issues that arose in the negotiations related to
those developments and the fact that certain issues proved more difficult to
address than had been anticipated, the parties subsequently agreed that Board
of Directors meetings would be premature.
Negotiations continued and sufficient progress was made in resolving
outstanding issues such that the parties agreed to seek Board approval at the
regularly scheduled Company Board of Directors meeting on September 18, 1998
and a special Parent Board of Directors meeting that same day.
24
<PAGE>
A special telephonic meeting of the Parent Board of Directors to consider
the proposed transaction began at approximately 5:00 p.m. on September 18,
1998 and continued for several hours. The presentation to and discussion by
the Parent Board of Directors was wide-ranging and included, among other
things, a review of (i) management's current view of the financial condition
and prospects of the Company; (ii) the strategic value of the proposed
transaction and the possible effects of the transaction on Parent's
shareholders, operations, customers and future growth, and its financial
condition and prospects; and (iii) the current state of the telecommunications
industry and trends in the foreseeable future. A summary of the financial
implications of the transaction was also provided. In addition, Bear Stearns
presented its view as to possible market reactions and competitive responses
to the potential transaction. The General Counsel of Parent also reviewed with
Parent's Board the transaction structure and various legal and regulatory
issues relating to the proposed transaction. In addition, Bear Stearns
rendered its opinion to the Parent Board of Directors that the transactions
contemplated by the Merger Agreement, taken as a whole, were fair from a
financial point of view to the shareholders of Parent. After receiving such
advice and after reviewing various additional information relating to the
transaction, the Parent Board of Directors unanimously (with the exception of
directors who were absent or who recused themselves) approved the terms and
conditions of the proposed transaction with the Company, including the terms
and conditions of the Merger Agreement and the other transaction documents
contemplated thereby.
During the period from August 1997 through September 1998, the Company's
management made a number of presentations to the Company's Board of Directors
and the Strategic Planning Committee of the Company's Board of Directors as to
the discussions with Parent and proposed transaction terms and structure. The
Company's Board of Directors were briefed by management and considered the
strategic aspects of the Transaction or alternative structures at various
meetings held in 1997 (including on August 15, September 19, October 17 and
November 21) and in 1998 (including on January 16, February 20, April 17, May
15, July 17 and September 18). The Strategic Planning Committee of the
Company's Board of Directors also were briefed by management and considered
the strategic aspects of the Transaction or alternative structures at various
meetings held in 1997 (including on August 15, September 10, September 17,
October 8, November 20, and December 22) and in 1998 (including on January 8,
January 15, February 9, March 6, April 16, May 14, June 10, June 12, June 17,
July 16, August 21, September 15, and September 18). In certain of those
instances, the Strategic Planning Committee met in joint session with the
Finance Committee of the Company's Board of Directors. During the same period,
management consulted frequently with DLJ, the Company's financial advisor for
the Transaction. DLJ also participated in certain of the meetings with Parent,
Bear Stearns, the Company's Board of Directors and the Strategic Planning
Committee. The Company's Board of Directors approved the transactions by
unanimous vote (excluding directors who either were absent or recused
themselves) at its regularly scheduled meeting on September 18, 1998. The
factors considered in approving the Merger Agreement and the transactions
contemplated thereby, and in recommending that shareholders tender their
Shares pursuant to the Offer, are described in the Company's
Solicitation/Recommendation Statement on Schedule 14D-9, which is being mailed
to shareholders of the Company herewith. Following the conclusion of Parent's
Board of Directors meeting on the evening of Friday, September 18, 1998, the
parties executed the Merger Agreement and the other Transaction Agreements and
publicly announced the Merger on Sunday, September 20.
12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY; THE MERGER
AGREEMENT; SHAREHOLDERS AGREEMENT; REGISTRATION RIGHTS AGREEMENT; CARRIER
ACQUISITION AGREEMENT.
Purpose of the Offer and the Merger. The purpose of the Offer is to enable
Parent to acquire a significant equity interest in the Company while remaining
below the ownership limitations imposed by the Satellite Act. Following the
Offer and subsequent to the repeal or amendment of the Satellite Act as is
necessary in order to permit the Merger, Parent and Acquisition Sub intend to
acquire the remaining equity interest in the Company not acquired in the Offer
by consummating the Merger. Upon consummation of the Merger, the Surviving
Corporation will become a wholly-owned subsidiary of Parent. Accordingly, the
Shares will cease to be publicly traded and will no longer be quoted on the
NYSE.
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
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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 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.
Plans for the Company. It is expected that, initially following the Merger,
the business and operations of the Company will continue without substantial
change and that Parent will integrate the Company with Parent's existing
telecommunications business. Parent will continue to evaluate the business and
operations of the Company during the pendency of the Offer and the Merger and
after the consummation of the Offer and the Merger, and will take such further
actions as it deems appropriate under the circumstances then existing. Such
actions could include changes in the Company's business, corporate structure,
Articles of Incorporation, By-Laws, capitalization or management, although,
except as disclosed in this Offer to Purchase, Parent has no current plans
with respect to any of such matters. Following consummation of the Offer but
prior to consummation of the Merger, Parent will have the right to nominate
and vote for only three (3) out of fifteen (15) members of the Board of
Directors of the Company, and Parent will not control the Company during such
period.
Under the Satellite Act, as currently in effect, assuming the Purchaser
receives approval of the FCC to be an Authorized Carrier, (i) Parent, the
Purchaser and their affiliates are prohibited from owning in excess of 50% of
the issued and outstanding Company Common Stock, minus any shares held by
other Authorized Carriers and (ii) Parent and the Purchaser are prohibited
from voting the Shares acquired in the Offer for more than three candidates
for the Board of Directors of the Company. It is a condition to consummation
of the Merger, but not to consummation of the Offer, that the Satellite Act
have been amended or repealed in a manner necessary to permit the consummation
of the Merger as contemplated by the Merger Agreement.
The Merger Agreement.
The following is a summary of certain provisions of the Merger Agreement.
The summary is qualified in its entirety by reference to the Merger Agreement
which is incorporated herein by reference and a copy of which has been filed
with the Commission as an exhibit to the Schedule 14D-1. The Merger Agreement
may be examined and copies may be obtained at the place and in the manner set
forth in Section 8, "Available Information," of this Offer to Purchase.
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), the
Purchaser will purchase 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 as described in Section 1. 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). See Sections 1 and 4.
The Merger. The Merger Agreement provides that, subject to the terms and
conditions thereof, and in accordance with 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) 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) 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.
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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.
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 Dissenting Shares, if any) will be
converted into the right to receive 0.5 shares of 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, mutatis mutandis, 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
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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 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 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"
and "Certain Conditions of the Offer" 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
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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 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.
THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR ANY MEETING OF
THE SHAREHOLDERS OF THE COMPANY. ANY SUCH SOLICITATION WHICH THE COMPANY,
PARENT, ACQUISITION SUB OR THE PURCHASER MIGHT MAKE WOULD BE MADE ONLY
PURSUANT TO SEPARATE PROXY OR SOLICITATION MATERIALS COMPLYING WITH THE
REQUIREMENTS OF SECTION 14(A) OF THE EXCHANGE ACT, AND THE RULES AND
REGULATIONS PROMULGATED THEREUNDER.
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, any Transaction
Agreement;
(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
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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;
(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 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 INTELSAT or 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 described 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;
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(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
(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 specified
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"
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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 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 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 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, to cause the
Purchaser to become 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
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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 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:
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(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 NYSE;
(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
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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.
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.
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), Parent shall have (A) failed to commence
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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);
(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
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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.
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 the material terms of the Shareholders
Agreement. This summary is qualified in its entirety by reference to the
Shareholders Agreement which is incorporated herein by reference, a copy of
which has been filed with the Commission as an exhibit to the Schedule 14D-1.
The Shareholders Agreement may be examined and copies may be obtained at the
place and in the manner as set forth in Section 8 of this Offer to Purchase.
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.
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The Shareholders Agreement also provides that the Company shall, at Parent's
request, 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 "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 the material terms of the Registration Rights.
This summary is qualified in its entirety by references to the Registration
Rights Agreement which is incorporated herein by reference, copy of which as
been filed with the Commission as an exhibit to the Schedule 14D-1. The
Registration Rights Agreement may be examined and copies may be obtained at
the place and in the manner as set forth in Section 8 of this Offer to
Purchase.
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 limitation 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 the material terms of the Carrier Acquisition
Agreement. This summary is qualified in its entirety by references to the
Carrier Acquisition Agreement which is incorporated herein by reference, copy
of which as been filed with the Commission as an exhibit to the Schedule 14D-
1. The Carrier
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Acquisition Agreement may be examined and copies may be obtained at the place
and in the manner as set forth in Section 8 of this Offer to Purchase.
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."
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.
13. DIVIDENDS AND DISTRIBUTIONS. As described above, the Merger Agreement
provides that, prior to the Effective Time, the Company and each of its
subsidiaries shall not, without the prior written consent of Parent, (i)
declare or pay any dividend on or make other distributions (whether in stock,
cash or property) in respect of any of its capital stock, except regular
quarterly cash dividends not to exceed $0.05 per Share and dividends from
subsidiaries of the Company to the Company or another of its subsidiaries or
(ii) directly or indirectly redeem, purchase or otherwise acquire any shares
of its capital stock of any of its subsidiaries or make any commitment for any
such action.
If, on or after the date of the Merger Agreement, the Company should (i)
split, combine or otherwise change the Shares or its capitalization, (ii)
other than as permitted by the Merger Agreement, issue or sell, or enter into
any arrangement or contract with respect to the issuance or sale of, any
additional securities (including rights, options or warrants, conditional or
otherwise) of the Company or otherwise cause an increase in the number of
outstanding securities (including rights, options or warrants, conditional or
otherwise) of the Company, or (iii) acquire currently outstanding Shares or
otherwise cause a reduction in the number of outstanding Shares, then, subject
to the provisions of the Merger Agreement, the Purchaser, in its sole
judgment, may make such adjustments in the Offer Price and the other terms of
the Offer as it deems appropriate in the Offer Price and other terms of the
Offer (including, without limitation, the number and type of securities
offered to be purchased, the amounts payable therefor and the fees payable
hereunder).
If, on or after the date of the Merger Agreement, the Company should, other
than as permitted by the Merger Agreement, declare or pay any cash or stock
dividend or other distribution (including the issuance of any securities) on
or issue any rights with respect to the Shares payable or distributable to
shareholders of record on a date before the transfer to the name of the
Purchaser or its nominee or transferee on the Company's stock transfer records
of the Shares accepted for payment pursuant to the Offer, then, subject to the
provisions of the Merger Agreement, (i) the Offer Price payable by the
Purchaser pursuant to the Offer may, in the sole discretion of the Purchaser,
be reduced by the amount of any such cash dividend or cash distribution and
(ii) the whole of any such non-cash dividend, distribution or right (a) will
be received and held by the tendering shareholder for the account of the
Purchaser and shall be required to be promptly remitted and transferred by
each tendering shareholder to the Depositary for the account of the Purchaser,
accompanied by appropriate documentation of transfer and (b) at the direction
of the Purchaser, will be exercised for the benefit of the Purchaser, in which
case the proceeds of such exercise will be remitted promptly to the Purchaser.
Pending such remittance and subject to applicable law, the Purchaser will be
entitled to all rights and privileges as owner of any such non-cash dividend,
distribution or right and may withhold the entire purchase price or deduct
from the purchase price the amount or value thereof, as determined by the
Purchaser, in its sole discretion.
Pursuant to the terms of the Merger Agreement, the Company is prohibited
from taking any of the actions described in the preceding paragraphs and
nothing herein shall constitute a waiver by the Purchaser or Parent of any of
its rights under the Merger Agreement or a limitation of remedies available to
the Purchaser or Parent for any breach of the Merger Agreement, including
termination thereof.
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If, on or after the date of the Merger Agreement, the outstanding shares of
Parent Common Stock are 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 shall be adjusted accordingly to provide to the holders of
Company Common Stock the same economic effect as contemplated by the Merger
Agreement prior to such reclassification, recapitalization, stock split,
reverse stock split, combination, exchange or dividend.
14. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provisions of
the Offer, in addition to (and not in limitation of) the Purchaser's rights
pursuant to the Merger Agreement to, in its sole discretion, extend or amend
the Offer at any time, the Purchaser shall not be required to accept for
payment or, subject to any applicable rules and regulations of the Commission,
including Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's
obligation to pay for or return tendered Shares promptly after termination or
withdrawal of the Offer), pay for, and may delay the acceptance for payment of
or, subject to the restriction referred to above, the payment for, any
tendered Shares, and may terminate the Offer, if, in the sole judgment of the
Purchaser, any of the following events occurs:
(i) immediately prior to the Expiration Date of the Offer, (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) the Minimum Condition
shall not have been satisfied, (C) the Shareholder Approval Condition shall
not have been satisfied, (D) any of the Authorized Carrier Conditions shall
not have been satisfied or (E) Parent 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 the Company 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
the Company; 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 the Company
through the exercise of its reasonable efforts, then Parent may not
terminate the Offer under this subsection (A) until ten business days
after written notice thereof has been given to the Company by Parent
and unless at such time the matter has not been cured; or
(B) the Company 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 the Company; provided
that, if any such breach is curable by the Company through the exercise
of its reasonable efforts, then Parent may not terminate the Offer
under this subsection (B) until ten business days after written notice
thereof has been given to the Company by Parent and unless at such time
the breach has not been cured; or
(C) (I) 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 the Company or to the transactions
contemplated by the Merger Agreement or (II) 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 (I) or clause (II) that Parent determines in good
faith (after consultation with the Company) would reasonably be
expected to have a Material Adverse Effect on the Company; or
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(D) any fact or circumstance exists or shall have occurred that has
or would reasonably be expected to have a Material Adverse Effect on
the Company; 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 U.S. (whether or not mandatory), (III) the
commencement of a war, armed hostilities or other international or
national calamity directly or indirectly involving the U.S. and 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, (IV) any
limitation or proposed limitation (whether or not mandatory) by any
governmental authority or other instrumentality of the U.S. 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 of the Merger Agreement 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 of the Merger Agreement on the earlier
of (1) the close of trading on the next trading date at least 30
calendar days from such Measurement Date, and (2) the close of trading
on the trading date immediately prior to the date on which the
Expiration Date would otherwise occur, but for the failure to satisfy
this condition; or
(G) prior to the purchase of Shares pursuant to the Offer, the Board
of Directors of the Company shall have (I) recommended an Acquisition
Proposal that is a Superior Proposal, (II) withdrawn, modified or
materially qualified in a manner adverse to Parent its approval or
recommendation of the Offer, the Merger or the Merger Agreement, (III)
recommended to the Company's shareholders another offer, or (IV)
adopted any resolution to effect any of the foregoing which, in the
sole judgment of Parent in any such case, and regardless of the
circumstances (including any action or omission by Parent) 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 Merger Agreement provides that the foregoing conditions are for the sole
benefit of Parent and may be asserted by Parent regardless of the
circumstances giving rise to such conditions, or may be waived by Parent in
whole or in part at any time and from time to time in its sole discretion. The
failure by Parent or the Purchaser at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time.
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.
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,
the 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. The term "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
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and the regulations and decisions of the Council or Commission of the European
Community or other organs of the European Union or European Community
implementing such regulations.
15. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.
General. Except as otherwise disclosed herein or as set forth in the Merger
Agreement, based on a review of publicly available filings by the Company with
the Commission, neither Parent nor the Purchaser is aware of (i) any license
or regulatory permit that appears to be material to the business of the
Company and its subsidiaries, taken as a whole, that might be adversely
affected by the acquisition of Shares by the Purchaser pursuant to the Offer
or the Merger or (ii) any approval or other action by any governmental,
administrative or regulatory agency or authority, domestic or foreign, that
would be required for the acquisition or ownership of Shares by the Purchaser
as contemplated herein. Should any such approval or other action be required,
the Purchaser currently contemplates that such approval or action would be
sought, except as described below under "State Takeover Statutes." While the
Purchaser does not currently intend to delay the acceptance for payment of
Shares tendered pursuant to the Offer pending the outcome of any such matter,
there can be no assurance that any such approval or action, if needed, would
be obtained or would be obtained without substantial conditions or that
adverse consequences might not result to the business of the Company or the
Purchaser or that certain parts of the businesses of the Company or the
Purchaser might not have to be disposed of in the event that such approvals
were not obtained or any other actions were not taken. The Purchaser's
obligation under the Offer to accept for payment and pay for Shares is subject
to certain conditions. See Section 14.
FCC Approvals. CGSI holds an FCC authorization pursuant to Section 214 of
the Communications Act of 1934, as amended (the "Communications Act") to
provide international common carrier services on a resale basis. CGSI also
holds two fixed earth station licenses with respect to earth stations located
in Clarksburg, Maryland for the provision of international fixed satellite
service. To obtain the FCC consent required to consummate the Carrier
Acquisition, Parent, the Purchaser and the Company will apply to the FCC for
the authority necessary to effect a transfer of control of CGSI. Pursuant to
Section 304(b) of the Satellite Act, 47 U.S.C. (S)734(b) and the rules of the
FCC, the Purchaser must be a common carrier and receive FCC authorization to
become an Authorized Carrier and to acquire up to 49% of the Company's Common
Stock as an Authorized Carrier.
Pursuant to the Communications Act, the Satellite Act and the rules of the
FCC, the FCC will require the applicants in connection with each of these
applications to show that grant of the applications is consistent with the
public interest, convenience and necessity, and to show that the applicant is
qualified to control such licenses and authorizations. There can be no
assurance as to when and if the requisite FCC approvals will be obtained to
permit, and satisfy the related conditions to, consummation of the Offer.
Satellite Act Amendment or Repeal and Further FCC Approvals. Section 304(b)
of the Satellite Act, 47 U.S.C. (S)734(b), provides that only those common
carriers that are Authorized Carriers may, in the aggregate, own up to 50% of
the issued and outstanding Company Common Stock and that no stockholder, or
syndicate or affiliated group of stockholders, other than an Authorized
Carrier, shall own more than 10% of the Company's Common Stock. Section 304(f)
of the Satellite Act, 47 U.S.C. (S)734(f) provides that, upon application to
the FCC, and after notice and hearing, the FCC may compel any Authorized
Carrier which owns shares of stock in the Company to transfer to the
applicant, for a fair and reasonable consideration, a number of such shares as
the FCC determines will advance the public interest and the purposes of the
Satellite Act. Accordingly, until the amendment or repeal of the Satellite
Act, Parent, the Purchaser, and their affiliates will be prohibited from
owning in excess of 50% of the issued and outstanding Company Common Stock,
minus any shares held by other Authorized Carriers.
Section 303 of the Satellite Act, 47 U.S.C. (S)733, sets forth requirements
for the Board of Directors of the Company. The Board of Directors consists of
fifteen persons, twelve of whom are elected annually by the shareholders and
three of whom are appointed for three-year terms by the President of the
United States, with the advice and consent of the Senate. No more than six
members of the Board of Directors are to be elected by stockholders who are
Authorized Carriers and, if Authorized Carriers in the aggregate own eight (8)
percent or more of Company Common Stock, no Authorized Carrier may vote its
shares for more than three candidates for
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election to the Company's Board of Directors. Accordingly, until the amendment
or repeal of the Satellite Act, Parent and the Purchaser will be prohibited
from voting the Shares acquired in the Offer for more than three candidates
for the Board of Directors of the Company.
It is a condition to consummation of the Merger, but not to consummation of
the Offer, that the Satellite Act have been amended or repealed in a manner
necessary to permit the consummation of the Merger as contemplated by the
Merger Agreement. It is also a condition to the Merger that, after the date of
the Merger Agreement, there shall have been no 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 that Parent
determines in good faith (after consultation with the Company) would
reasonably be expected to have a Significant Adverse Effect (as defined in
Section 12). See Section 12. With respect to the Offer, it is a condition that
there shall have been no 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 that Parent determines in good faith
(after consultation with the Company) would reasonably be expected to have a
Material Adverse Effect on the Company (as defined in Section 12). Parent and
the Company each has agreed, pursuant to the Merger Agreement, to use all
reasonable efforts to seek the amendment or repeal of the Satellite Act and
any other applicable law, or the applicable provisions thereof, that would
prohibit or limit the ability of Parent to acquire and own equity securities
of the Company, to appoint all of the officers and directors of the Company
following the merger, or to consummate the transactions contemplated by the
Merger Agreement. Legislation currently is pending in Congress to amend the
Satellite Act to repeal the current ownership and governance restrictions
applicable to the Company and to encourage the privatization of INTELSAT and
Inmarsat. There can be no assurance as to when and if the requisite repeal or
amendment of the Satellite Act will be enacted, and whether any such repeal or
amendment would permit, and satisfy the related conditions to, consummation of
the Merger or would otherwise contain terms that would have a Material Adverse
Effect or Significant Adverse Effect on the Company.
Parent expects that, following enactment of the amendment or repeal of the
Satellite Act, Parent, the Purchaser and the Company will be required to apply
to the FCC for the authority necessary to effect a transfer of control of the
Company, in a process similar to the applications submitted by Parent and the
Purchaser with respect to the transfer of control of CGSI. The precise nature
of any approval requirement will depend upon the details of any amendment to
or repeal of the Satellite Act. There can be no assurance as to when and if
the requisite FCC approvals will be obtained in order to permit, and satisfy
the related conditions to, consummation of the Merger.
Antitrust Compliance. Under the HSR Act, and the rules that have been
promulgated by the FTC and the Antitrust Division, certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division and the FTC and certain waiting period
requirements have been satisfied. The acquisition of Shares pursuant to the
Offer is subject to such requirements.
Representatives of Parent in a meeting with the staff of the FTC were
informed that the government antitrust authorities intend to consider the
various subparts of the transactions contemplated by the Merger Agreement as a
single integrated merger transaction in which Parent proposes to acquire the
Company in its entirety. Thus, rather than requiring separate filings of
Notification and Report Forms ("HSR Notices") with respect to the (i) Carrier
Acquisition, (ii) Offer, and (iii) Merger, only one filing of an HSR Notice
will be required in which all three transactions will be considered. The
waiting period with respect to the transactions (including the Offer) under
the HSR Act will expire at 11:59 p.m., New York City Time, on the 30th
calendar day after filing of HSR Notices by Parent and the Company, unless
earlier terminated. If the Governmental Authority reviewing the transactions
(one of the FTC or the Antitrust Division) elects to extend the period by
requesting additional information or material from Parent and the Company, the
waiting period will expire at 11:59 p.m., New York City Time, on the 20th
calendar day after Parent and the Company have substantially complied with
such request. Thereafter, the waiting period may be extended only by court
order. Parent and the Company may agree to not close the transaction, even if
the waiting period has expired, in order to allow the government additional
time to review the transaction. Parent will not accept for payment Shares
tendered pursuant to the Offer unless and until the waiting period
requirements imposed by the HSR Act have expired or been terminated. If all
elements of the transactions contemplated by the Merger Agreement have not
closed within one year after the HSR Act waiting period expires or is
terminated, any such remaining elements will require an additional filing
under the HSR Act.
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The FTC and the Antitrust Division frequently review the legality under the
antitrust laws of transactions such as the proposed acquisition of Shares by
the Purchaser pursuant to the Offer. At any time before or after the purchase
of Shares pursuant to the Offer by the Purchaser, the FTC or the Antitrust
Division could take such action under the antitrust laws as it deems necessary
or desirable in the public interest, including seeking to enjoin the purchase
of Shares pursuant to the Offer or the consummation of the Merger or seeking
the divestiture of Shares purchased by the Purchaser or the divestiture of
substantial assets of Parent, the Company or their respective subsidiaries.
Private parties and state attorneys general may also bring legal action under
federal or state antitrust laws under certain circumstances. Based upon an
examination of information available to the Purchaser relating to the
businesses in which Parent, the Purchaser, the Company and their respective
subsidiaries are engaged, the Purchaser believes that the Offer will not
violate the antitrust laws. Nevertheless, there can be no assurance that a
challenge to the Offer on antitrust grounds will not be made or, if such a
challenge is made, what the result would be. See Section 14 for certain
conditions to the Offer.
There is a possiblility that filings may have to be made with foreign
governments under their pre-merger notification statutes. The filing
requirements of various nations are being analyzed by the parties and, where
necessary, such filings will be made.
State Takeover Statutes. A number of states throughout the United States
have enacted takeover statutes that purport, in varying degrees, to be
applicable to attempts to acquire securities of corporations that are
incorporated or have assets, shareholders, executive offices or places or
business in such states. In Edgar v. MITE Corp., the Supreme Court of the
United States held that the Illinois Business Takeover Act, which involved
state securities laws that made the takeover of certain corporations more
difficult, imposed a substantial burden on interstate commerce and therefore
was unconstitutional. However, in CTS Corp. v. Dynamics Corp. of America, the
Supreme Court of the United States held that a state may, as a matter of
corporate law, and, in particular, those laws concerning corporate governance,
constitutionally disqualify a potential acquiror from voting on the affairs of
a target corporation without prior approval of the remaining shareholders;
provided that such laws were applicable only under certain conditions.
Based on information supplied by the Company, the Purchaser does not believe
that any state takeover statutes purport to apply to the Offer or the Merger.
Neither the Purchaser nor Parent has currently complied with any state
takeover statute or regulation. The Purchaser reserves the right to challenge
the applicability or validity of any state law purportedly applicable to the
Offer or the Merger and nothing in this Offer to Purchase or any action taken
in connection with the Offer or the Merger is intended as a waiver of such
right. If it is asserted that any state takeover statute is applicable to the
Offer or the Merger and if an appropriate court does not determine that it is
inapplicable or invalid as applied to the Offer or the Merger, the Purchaser
might be required to file certain information with, or to receive approvals
from, the relevant state authorities, and the Purchaser might be unable to
accept for payment or pay for Shares tendered pursuant to the offer, or be
delayed in consummating the Offer or the Merger. In such case, the Purchaser
may not be obliged to accept for payment or pay for any Shares tendered
pursuant to the Offer.
Appraisal Rights. No appraisal rights are available in connection with the
Offer. However, shareholders of the Company who do not vote in favor of the
Merger will be entitled to receive an amount in cash representing the fair
value of the shares possessed if certain specific procedures are followed. A
shareholder wishing to exercise the statutory right to dissent pursuant to
Section 29-373 of the DCBCA shall file with the Company at or before the
Company Shareholders Meeting a written objection to the Merger. A vote against
the Merger will not satisfy the requirement that a written objection be made
to the Company. In addition, such shareholder must, within 20 days after the
actual date of consummation of the Merger, make a written demand to the
Surviving Corporation for payment of the fair value of the shares as of the
day prior to the date on which the vote was taken approving the Merger. In
exchange for the certificates representing such shares, the shareholder will
be paid the fair value of such shares determined in accordance with the
procedures described below. Such demand shall state the number and class of
shares owned by the dissenting shareholder. A shareholder failing to make
demand within the 20-day period shall be bound by the terms of the Merger.
If the fair value of the shares of any dissenting shareholder is agreed upon
by such dissenting shareholder and the Surviving Corporation within the 30
days after consummation of the Merger, payment therefor will be
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made by the Surviving Corporation within 90 days after the consummation of the
Merger upon the surrender of the certificate or certificates representing such
dissenting shareholder's shares. Upon payment of the agreed value, the
dissenting shareholder will cease to have any interest in such shares or in
the Surviving Corporation.
If within such period of 30 days the shareholder and the Surviving
Corporation do not agree as to the fair value of the shares, then the
dissenting shareholder may, within 60 days after the expiration of the 30-day
period, file a petition in any court of competent jurisdiction within the
District of Columbia asking for a finding and determination of the fair value
of such shares, and will be entitled to judgment against the Surviving
Corporation for the amount of such fair value as of the day prior to the date
on which the vote was taken approving the Merger, together with interest
thereon at a rate of five percent (5%) per annum to the date of the judgment.
The judgment will be payable only upon and simultaneously with the surrender
to the Surviving Corporation of the certificate or certificates representing
such shares. Upon payment of the judgment, the dissenting shareholder will
cease to have any interest in such shares or in the Surviving Corporation. The
DCBCA provides that, unless the dissenting shareholder files such a petition
within the time limits herein provided and as provided by the DCBCA, such
shareholder and all persons claiming under him will be bound by the terms of
the Merger.
16. FEES AND EXPENSES. Except as set forth below, neither Parent,
Acquisition Sub nor the Purchaser will pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of Shares pursuant to
the Offer.
Bear Stearns is acting as the Dealer Manager in connection with the Offer
and is acting as financial advisor to Parent in connection with its effort to
acquire the Company. Parent has agreed to pay Bear Stearns a tender fee of
$3 million upon consummation of the Offer. Parent has also agreed to pay Bear
Stearns an opinion fee of $3 million in connection with its rendering an
opinion as to the fairness of the transactions contemplated by the Merger
Agreement, from a financial point of view, to Parent's shareholders. If the
Merger is consummated, or if an alternative transaction were to be completed
resulting in the acquisition of 50% or more of the voting securities of the
Company, Parent will pay to Bear Stearns a transaction fee of $11 million. Any
tender fee or opinion fee will be credited toward the amount of such
transaction fee.
Parent has also agreed to reimburse Bear Stearns (in its capacity as Dealer
Manager and financial advisor) for its reasonable out-of-pocket expenses,
including the reasonable fees and expenses of its legal counsel, incurred in
connection with its engagement, and to indemnify Bear Stearns and certain
related persons against certain liabilities and expenses in connection with
their engagement, including certain liabilities under the federal securities
laws. Bear Stearns renders various investment banking and other advisory
services to Parent and its affiliates and is expected to continue to render
such services, for which it has received and will continue to receive
customary compensation from Parent and its affiliates.
The Purchaser has retained Morrow & Co., Inc. to act as the Information
Agent in connection with the Offer. The Information Agent may contact holders
of Shares by mail, telephone, facsimile, telegraph and personal interviews and
may request brokers, dealers and other nominee shareholders to forward
materials relating to the Offer to beneficial owners of Shares. The
Information Agent will receive reasonable and customary compensation together
with reimbursement for its reasonable out-of-pocket expenses and will be
indemnified against certain liabilities and expenses, including certain
liabilities under the federal securities laws.
In addition, First Chicago Trust Company of New York has been retained as
the Depositary. The Depositary has not been retained to make solicitations or
recommendations in its role as Depositary. The Depositary will receive
reasonable and customary compensation for its services, will be reimbursed for
certain reasonable out-of-pocket expenses and will be indemnified against
certain liabilities and expenses. Brokers, dealers, commercial banks and trust
companies will be reimbursed by the Purchaser for customary mailing and
handling expenses incurred by them in forwarding offering material to their
customers.
17. MISCELLANEOUS. The Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Shares in any jurisdiction in which
the making of the Offer or the acceptance thereof would not be in compliance
with the laws of such jurisdiction. Neither the Purchaser nor Parent is aware
of any jurisdiction in which the making of the Offer or the tender of Shares
in connection therewith would not be in compliance with the laws of such
jurisdiction. To the extent the Purchaser or Parent becomes aware of any state
law that would
46
<PAGE>
limit the class of offerees in the Offer, the Purchaser will amend the Offer
and, depending on the timing of such amendment, if any, will extend the Offer
to provide adequate dissemination of such information to holders of Shares
prior to the expiration of the Offer.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER NOT CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
This Offer to Purchase contains statements which, to the extent that they
are not recitations of historical fact, constitute "forward looking"
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. The words "estimate," "anticipate," "project,"
"intend," "expect," and similar expressions are intended to identify forward
looking statements. All forward looking statements involve risks and
uncertainties, including, without limitations, statements and assumptions with
respect to future revenues, program performance and cash flows, the outcome of
contingencies, including litigation and environmental remediation, anticipated
costs of capital investments and planned dispositions, and the consummation of
the Offer and the Merger. Readers are cautioned not to place undue reliance on
these forward looking statements which speak only as of the date of this Offer
to Purchase. Parent does 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 Offer to Purchase or to reflect
the occurrence of unanticipated events. The forward looking statements in this
document are intended to be subject to the safe harbor protection provided by
Section 27A of the Securities Act and 21E of the Exchange Act. For a
discussion identifying some important factors that could cause actual results
to vary materially from those anticipated in the forward looking statements,
see Parent's filings with the Commission.
Parent and the Purchaser have filed with the Commission a Tender Offer
Statement on Schedule 14D-1 (the "Schedule 14D-1"), together with exhibits,
pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange
Act, furnishing certain additional information with respect to the Offer and
may file amendments thereto. In addition, the Company has filed with the
Commission the Schedule 14D-9 pursuant to Rule 14d-9 under the Exchange Act
setting forth its recommendation with respect to the Offer and the reasons for
such recommendation and furnishing certain additional related information. The
Schedule 14D-9 is enclosed herewith and the Schedule 14D-1 and any amendments
thereto, including exhibits, should be available for inspection and copies
should be obtainable in the manner set forth in Section 8 (except that they
will not be available at the regional offices of the Commission).
September 25, 1998 REGULUS, LLC
47
<PAGE>
SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS AND
EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. Set forth in the table below
are the names and the present principal occupations or employment and the
name, principal business and address of any corporation or other organization
in which such occupation or employment is conducted, and the five-year
employment history of each of the directors and executive officers of Parent.
Unless otherwise indicated, each person identified below is employed by Parent
and is a United States citizen. The principal business address of Parent and,
unless otherwise indicated, the business address of each person identified
below is 6801 Rockledge Drive, Bethesda, Maryland 20817.
<TABLE>
<CAPTION>
CURRENT POSITIONS AND
OFFICES HELD PRINCIPAL OCCUPATION AND
NAME WITH PARENT BUSINESS EXPERIENCE
---- ------------------------ -----------------------------------------
<S> <C> <C>
Vance D. Coffman Chairman of the Board Chairman of the Board since April 1998
and Chief Executive and Chief Executive Officer since August
Officer; Director 1997; Vice Chairman of the Board from
August 1997 to April 1998; Director since
January 1996; President from June 1996 to
July 1997; Chief Operating Officer from
January 1996 to July 1997; Executive Vice
President from January to June 1996;
President and Chief Operating Officer,
Space & Strategic Missiles Sector from
March 1995 to December 1995; previously
served in Lockheed Corporation as
Executive Vice President, from 1992 to
1995 and President of Lockheed Space
Systems Division from 1988 to 1992.
Norman R. Augustine Director Director since 1995 and Professor,
Department of Mechanical and Aerospace
Engineering, School of Engineering and
Applied Science, Princeton University,
since September 1997; Chief Executive
Officer from January 1996 to August 1997;
Vice Chairman from April 1996 to December
1996; President from March 1995 to June
1996; Chairman and Chief Executive
Officer of Martin Marietta Corporation
from April 1988 to March 1995; director
of Martin Marietta from 1986 to 1995;
director of The Black & Decker
Corporation, Phillips Petroleum Company
and Procter & Gamble Co.
Marcus C. Bennett Executive Vice President Director since 1995 and Executive Vice
and Chief Financial President and Chief Financial Officer
Officer; Director since July 1996; Senior Vice President
and Chief Financial Officer from March
1995 to July 1996; Vice President and
Chief Financial Officer of Martin
Marietta Corporation from 1988 to 1995;
director of Carpenter Technology, Inc.,
COMSAT Corporation and Martin Marietta
Materials, Inc.; member of the Financial
Executives Institute, MAPI Finance
Council and The Economic Club of
Washington; director of the Private
Sector Council and a member of its CFO
Task Force.
</TABLE>
I-1
<PAGE>
<TABLE>
<S> <C> <C>
James A. Blackwell, Jr. Sector President and President and Chief Operating Officer,
Chief Operating Aeronautics Sector since March 1995;
Officer--Aeronautics previously served in Lockheed Corporation
as Vice President and President from
April 1993 to March 1995; served as an
executive employee of Lockheed
Aeronautical Systems Company from 1986 to
March 1995.
Melvin R. Brashears Sector President and President and Chief Operating Officer,
Chief Operating Space & Strategic Missiles Sector since
Officer--Space & January 1996; Deputy, Space & Strategic
Strategic Missiles Missiles Sector from November 1995 to
December 1995; Executive Vice President
of Lockheed Missiles & Space Company,
Inc. from March 1995 to November 1995 and
President of Lockheed Commercial Space
Company; previously served in Lockheed
Corporation as Vice President and
Assistant General Manager, Space Systems
Division, Lockheed Missiles & Space
Company, Inc., from 1992 to 1995 and
Director of Advanced Space Programs from
1991 to 1992.
Lynne V. Cheney Director Director since March 1995. Senior Fellow
at the American Enterprise Institute for
Public Policy Research since 1992;
Chairman of the National Endowment for
the Humanities from 1986 to 1992;
director of Reader's Digest Association,
Inc., American Express/IDS Mutual Fund
Group and Union Pacific Group Resources,
Inc.
Thomas A. Corcoran Sector President and President and Chief Operating Officer,
Chief Operating Electronics Sector since March 1995;
Officer--Electronics previously served in Martin Marietta
Corporation as President, Electronics
Group from April 1993 to March 1995;
previously served at General Electric
Corporation as Vice President and General
Manager from 1990 to 1993.
Philip J. Duke Vice President--Finance Vice President Finance since July 1996;
Chief Financial Officer, Space &
Strategic Missiles Sector from March 1995
to July 1996; previously served as Vice
President Finance, Martin Marietta
Corporation from May 1994 to March 1995;
Chief Financial Officer, Electronics
Sector of Martin Marietta Corporation
from April 1993 to May 1994; and Vice
President Business Management of Martin
Marietta Corporation from July 1987 to
April 1993.
</TABLE>
I-2
<PAGE>
<TABLE>
<S> <C> <C>
Houston I. Flournoy Director Director since March 1995; Special Assistant
to the President for Governmental Affairs,
University of Southern California, Sacramento,
California since August 1981; Professor of
Public Administration, University of Southern
California, Sacramento, California from 1981
to 1993; Vice President for Governmental Af-
fairs, University of Southern California, Los
Angeles from 1978 to 1981; director of Lock-
heed Corporation from 1976 to 1995; director
of Fremont General Corporation, Fremont In-
vestment and Loan Corporation and Tosco
Corporation.
James F. Gibbons Director Director since March 1995; Special Counsel to
the President for Industry Relations, Stanford
University, Stanford, California from 1996 to
present; Dean of the School of Engineering,
Stanford University from September 1984 to
June 1996; Reid Weaver Dennis Professor of
Electrical Engineering, Stanford University
since 1983; director of Lockheed from 1985 to
1995; director of Raychem Corporation, Centi-
gram Communications Corporation, Cisco Systems
Incorporated and El Paso Natural Gas Company.
Edward E. Hood, Jr. Director Director since March 1995; Joined General
Electric Company ("GE") in 1957 after service
in the U.S. Air Force; elected as Vice
President of GE in 1968 and Vice Chairman and
Executive Officer of GE in 1979; director of
GE from 1980 until his retirement in 1993;
director of Martin Marietta Corporation from
1993 to 1995; director of The Lincoln Electric
Company and Gerber Scientific, Inc.; Chairman
Emeritus of the Board of Trustees of
Rensselaer Polytechnic Institute; trustee of
North Carolina State University.
Caleb B. Hurtt Director Director since March 1995; President and Chief
Operating Officer of Martin Marietta
Corporation from 1987 until his retirement in
January 1990; Executive Vice President of
Martin Marietta Corporation in 1987 and Senior
Vice President from 1983 to 1987; director of
Martin Marietta Corporation from 1987 to 1995;
Chairman of the Board of Governors of the
Aerospace Industries Association in 1989 and
past Chairman of the NASA Advisory Council and
of the Federal Reserve Bank, Denver Branch;
director of COMSAT Corporation; past Vice
Chairman of the Board of Trustees of Stevens
Institute of Technology.
</TABLE>
I-3
<PAGE>
<TABLE>
<S> <C> <C>
Gwendolyn S. King Director Director since March 1995; Senior Vice
President of Corporate and Public Affairs
for PECO Energy Company (formerly Phila-
delphia Electric Company) from October
1992 until her retirement in February
1998; Commissioner of the Social Security
Administration from August 1989 to Sep-
tember 1992; director of Martin Marietta
Corporation from 1992 to 1995; director
of Monsanto Company and Marsh and McLen-
nan Company.
Arthur E. Johnson President and Chief President and Chief Operating Officer
Operating Officer-- Information & Services Sector since
Information & Services August 1997; President, Systems
Integration Group from January to August
1997; President, Lockheed Martin Federal
Systems, Inc. from January 1996 to
January 1997; previously served as Vice
President, Loral Federal Systems Group of
Loral Corporation from January 1994 to
January 1996; President and Chief
Operating Officer of IBM Federal Systems
Division from January 1993 to January
1994.
Todd J. Kallman Vice President and Vice President and Controller since
Controller August 1997; Vice President Finance,
Aeronautics Sector from July 1995 to
August 1997; Vice President Business
Management, Lockheed Martin Aeronautic
Systems Company from June 1994 to July
1995; Vice President Finance, Lockheed
Martin Aeronautic Systems Company from
September 1992 to June 1994.
Vincent N. Marafino Director Director since March 1995; Executive Vice
President of Lockheed Martin from March
1995 to December 1995; director of Lock-
heed Corporation from 1980 to 1995; Vice
Chairman of the Board and Chief Financial
and Administrative Officer of Lockheed
Corporation from 1988 to 1995; Executive
Vice President to Chief Financial and Ad-
ministrative Officer of Lockheed Corpora-
tion from 1983 to 1988; Executive Officer
of Lockheed Corporation from 1971 to
1995.
Frank H. Menaker, Jr. Senior Vice President Senior Vice President since July 1996;
and General Counsel Vice President and General Counsel from
March 1995 to July 1996, after having
served in the same capacity for Martin
Marietta Corporation since 1981.
</TABLE>
I-4
<PAGE>
<TABLE>
<S> <C> <C>
Eugene F. Murphy Director Director since March 1995; Vice Chairman
and Executive Officer of General Electric
Company ("GE") since September 1997;
President and Chief Executive Officer of
GE Aircraft Engines from 1993 to Septem-
ber 1997; President and Chief Executive
Officer of GE Aerospace from 1992 to
1993; Senior Vice President of GE
Communications & Services from 1986 to
1992; director of Martin Marietta Corpo-
ration from 1993 to 1995; member of Pres-
ident Reagan's National Security Telecom-
munications Advisory Committee; former
Chairman and permanent member of the
Board of Directors of the Armed Forces
Communications and Electronics Associa-
tion; member of the Aerospace Industries
Association Board of Governors. In accor-
dance with an agreement with GE, as the
result of the aggregate principal amount
of loans outstanding between GE and the
Lockheed Martin Corporation, GE is enti-
tled to nominate one director to the
Lockheed Martin Corporation's Board. Mr.
Murphy is that nominee.
Allen E. Murray Director Director since March 1995; Chairman of
the Board and Chief Executive Officer of
Mobil Corporation from 1986 until 1994;
director of Martin Marietta Corporation
from 1991 to 1995; director of
Metropolitan Life Insurance Company,
Minnesota Mining and Manufacturing
Company, Morgan Stanley, Dean Witter,
Discover & Co. and St. Francis Hospital
Foundation; member of the Board of
Trustees of New York University; honorary
director of the American Petroleum
Institute; member of The Business Council
and The Council on Foreign Relations.
Frank Savage Director Director since March 1995; Chairman of
Alliance Capital Management
International, an investment management
company since 1994; Chairman of the Board
of Alliance Corporate Finance Group, Inc.
since 1993; Senior Vice President of The
Equitable Life Assurance Society of the
United States from 1987 to 1996; Chairman
of the Board of Equitable Capital
Management Corporation from 1992 to 1993;
Vice Chairman of the Board of Equitable
Capital Management Corporation from 1986
to 1992; director of Alliance Capital
Management Corporation, ARCO Chemical
Company, Qualcomm Inc. and Essence
Communications, Inc.; trustee of Johns
Hopkins University and Chairman of the
Board of Trustees of Howard University;
director of Lockheed from 1990 to 1995;
director of the Council on Foreign
Relations and the New York Philharmonic;
</TABLE>
I-5
<PAGE>
<TABLE>
<S> <C> <C>
former U.S. Presidential appointee to the
Board of Directors of U.S. Synthetic
Fuels Corporation.
Walter E. Skowronski Vice President and Vice President and Treasurer since March
Treasurer 1995; previously served in Lockheed
Corporation as Vice President and
Treasurer from 1992 to 1995 and served as
staff Vice President, Investor Relations
from 1990 to 1992.
Robert J. Stevens Sector President and President and Chief Operating Officer,
Chief Operating Energy and Environment Sector since
Officer--Energy & January 1998; President, Air Traffic
Environment Management Division from June 1996 to
January 1998; Executive Vice President
and Senior Vice President and Chief
Financial Officer of Air Traffic
Management from December 1993 to June
1996; previously served as an executive
employee of Loral Corporation from August
1987 to June 1996.
Peter B. Teets President and Chief President and Chief Operating Officer
Operating Officer; since August 1997; Director since July
Director 1997; President and Chief Operating
Officer, Information & Services Sector
from March 1995 to July 1997; previously
served in Martin Marietta Corporation as
Corporate Vice President from 1985 to
1995 and President, Space Group from 1993
to 1995; and President, Astronautics
Group from 1987 to 1993.
Carlisle A. H. Trost Director (1995) Director since March 1995; Retired
Admiral, U.S. Navy, 1990; Chief of Naval
Operations, United States Navy from 1986
to 1990; Commander in Chief, U.S.
Atlantic Fleet, Commander U.S. Seventh
Fleet, and Deputy Commander in Chief of
the U.S. Pacific Fleet; director of
Lockheed Corporation from 1990 to 1995;
director of GPU Inc., GPU Nuclear Corp.,
General Dynamics Corporation, Precision
Components Corporation and Bird-Johnson
Company; Trustee of the U. S. Naval
Academy Foundation and Olmsted
Foundation.
James R. Ukropina Director (1995) Director since March 1995; Partner of
O'Melveny & Myers since 1992; Chairman of
the Board and Chief Executive Officer of
Pacific Enterprises from 1989 to 1991;
director of Lockheed Corporation from
1988 to 1995; director of Pacific Life
Insurance Company; Vice Chairman and
member of the Board of Trustees of
Stanford University.
</TABLE>
I-6
<PAGE>
<TABLE>
<S> <C> <C>
Douglas C. Yearley Director since March 1995; Chairman of
the Board and Chief Executive Officer of
Phelps Dodge Corporation since 1989 and
President since 1991; Executive Vice
President of Phelps Dodge Corporation
from 1987 to 1989; President of Phelps
Dodge Industries, a division of Phelps
Dodge Corporation from 1988 to 1990;
Senior Vice President of Phelps Dodge
Corporation from 1982 to 1986; director
of Lockheed Corporation from 1990 to
1995; director of J.P. Morgan & Co.
Incorporated, Morgan Guaranty Trust
Company of New York, Southern Peru Copper
Corporation, and USX Corporation; member
of The Business Roundtable, The Business
Council and The Conference Board.
</TABLE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER. Set forth in the
table below are the name and the present principal occupations or employment
and the name, principal business and address of any corporation or other
organization in which such occupation or employment is conducted, and the
five-year employment history of each of the executive officers of the
Purchaser. Unless otherwise indicated, each person identified below is
employed by Parent and is a United States citizen. The principal business
address of the Purchaser and, unless otherwise indicated, the business address
of each person identified below is c/o Parent, 6801 Rockledge Drive, Bethesda,
Maryland 20817. The Purchaser is a member-managed Delaware limited liability
company and does not have directors.
<TABLE>
<CAPTION>
CURRENT POSITIONS AND PRINCIPAL OCCUPATION AND
OFFICES HELD BUSINESS EXPERIENCE
NAME WITH PURCHASER (PAST FIVE YEARS)
---- ------------------------ -----------------------------------------
<S> <C> <C>
John V. Sponyoe Chief Executive Officer Chief Executive Officer since September
1998; Chief Executive Officer, Lockheed
Martin Global Telecommunications since
August 1998; President, Lockheed Martin
Corporation's Electronics Platform Inte-
gration Group from April 1997 to August
1998 and President, Lockheed Martin Fed-
eral Systems, Owego from April 1996 to
April 1998, having served in the same ca-
pacity for Loral Corporation and IBM
since June 1987.
Brian D. Dailey Chief Operating Officer Chief Operating Officer since September
1998; Chief Operating Officer, Lockheed
Martin Global Telecommunications since
August 1998; Vice President, Strategic
Development for Lockheed Martin
Corporation from March 1995 to May 1997;
Vice President, Washington Operations for
Lockheed Martin Corporation Space &
Strategic Missiles Sector from March 1994
to March 1995; Vice President, Lockheed
Martin Commercial Space Company and
Director, Commercial Programs for
Lockheed Martin Commercial Space Company
from March 1993 to March 1994.
John E. Montague Chief Financial Officer Chief Financial Officer since September
1998; Chief Financial Officer, Lockheed
Martin Global Telecommunications since
August 1998; Vice President, Financial
Strategies for Lockheed Martin
Corporation from March 1995 to August
1998; Vice President, Corporate
Development and Investor Relations for
Martin Marietta Corporation from
September 1991 to March 1995.
</TABLE>
I-7
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, Certificates for Shares
and any other required documents should be sent or delivered by each
shareholder of the Company or his broker, dealer, commercial bank, trust
company or other nominee to the Depositary at one of its addresses set forth
below:
The Depositary for the Offer is:
First Chicago Trust Company of New York
By Mail:
Tenders & Exchanges
Suite 4660
P.O. Box 2569
Jersey City, NJ 07303
By Hand:
c/o Securities Transfer and Reporting Services, Inc.
Attn: Tenders & Exchanges
One Exchange Plaza, Third Floor
New York, NY 10006
By Overnight Delivery:
Tenders & Exchanges
Suite 4680
14 Wall Street, 8th Floor
New York, NY 10005
By Facsimile Transmission:
(201) 222-4720 or (201) 222-4721
Confirm Receipt of Facsimile by Telephone:
(201) 222-4707
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone
numbers listed below. Additional copies of this Offer to Purchase, the Letter
of Transmittal and other tender offer materials may be obtained from the
Information Agent as set forth below, and will be furnished promptly at the
Purchaser's expense. You may also contact your broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
Morrow & Co., Inc.
445 Park Avenue
5th floor
New York, NY 10022
(212) 754-8000
Toll Fee (800) 566-9061
Banks and Brokerage Firms
Please call:
(800) 662-5200
The Dealer Manager for the Offer is:
BEAR, STEARNS & CO. INC.
245 Park Avenue
New York, New York 10167
(877) 762-5237 (Toll Free)
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
COMSAT CORPORATION
PURSUANT TO THE OFFER TO PURCHASE
DATED SEPTEMBER 25, 1998, BY
REGULUS, LLC
A WHOLLY-OWNED SUBSIDIARY
OF
LOCKHEED MARTIN CORPORATION
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, NOVEMBER 24, 1998, UNLESS THE
OFFER IS EXTENDED.
The Depositary for the Offer is:
First Chicago Trust Company of New York
By Mail: By Hand:
First Chicago Trust Company of New First Chicago Trust Company of New
York York
Tenders & Exchanges c/o Securities Transfer and
Suite 4660 Reporting Services, Inc.
P.O. Box 2569 Attn: Tenders & Exchanges
Jersey City, NJ 07303 One Exchange Plaza, Third Floor
New York, NY 10006
By Overnight Delivery:
First Chicago Trust Company of New York
Tenders & Exchanges
Suite 4680
14 Wall Street, 8th Floor
New York, NY 10005
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
<PAGE>
DESCRIPTION OF TENDERED SHARES
- - -------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF SHARE CERTIFICATE(S) TENDERED
REGISTERED HOLDER(S) (ATTACH ADDITIONAL SIGNED LIST IF
(PLEASE FILL IN EXACTLY AS NAME(S) NECESSARY)
APPEAR(S) ON CERTIFICATE(S)
- - -------------------------------------------------------------------------------
TOTAL NUMBER NUMBER
SHARE CERTIFICATE OF OF SHARES
NUMBER(S)(1) SHARES TENDERED(2)
REPRESENTED
BY
CERTIFICATE(S)(1)
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
TOTAL SHARES
- - -------------------------------------------------------------------------------
(1) Need not be completed by Book-Entry Shareholders.
(2) Unless otherwise indicated, it will be assumed that all Shares
Certificates delivered to the Depositary are being tendered. See
Instruction 4.
This Letter of Transmittal is to be completed by shareholders either if
certificates for Shares (the "Share Certificates") are to be forwarded with
this Letter of Transmittal or, unless an Agent's Message (as defined in
Instruction 2 herein) is utilized, if delivery of Shares is to be made by
book-entry transfer to an account maintained by the Depositary at the Book-
Entry Transfer Facility (as defined in Section 2 of the Offer to Purchase,
dated September 25, 1998 (the "Offer to Purchase")) pursuant to the procedures
set forth in Section 3 of the Offer to Purchase. Shareholders who deliver
Shares by book-entry transfer are referred to herein as "Book-Entry
Shareholders" and all other shareholders are referred to as "Certificate
Shareholders." DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY FACILITY IN ACCORDANCE
WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
This Letter of Transmittal must be accompanied by Share Certificates unless
the holder complies with the procedures for guaranteed delivery set forth in
Section 3 of the Offer to Purchase. Holders whose Share Certificates are not
immediately available or who cannot deliver their Share Certificates and all
other required documents to the Depositary on or prior to the Expiration Date
(as defined in Section 1 of the Offer to Purchase) or who cannot complete the
procedures for book-entry transfer on a timely basis, must tender their Shares
according to the guaranteed delivery procedures. See Instruction 2 herein.
[_]CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN
ACCOUNT MAINTAINED BY THE DEPOSITARY AT THE BOOK-ENTRY TRANSFER FACILITY
AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY TRANSFER
FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution: _____________________________________________
Account Number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
2
<PAGE>
[_]CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING.
PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY.
Name(s) of Registered Holder(s): _______________________________________________
Window Ticket Number (if any): _________________________________________________
Date of Execution of Notice of Guaranteed Delivery: ____________________________
Name of Institution which Guaranteed Delivery: _________________________________
If delivered by Book-Entry Transfer, check box [_]
Account Number: ________________________________________________________________
Transaction Code Number: _______________________________________________________
3
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to Regulus, LLC, a single member Delaware
limited liability company (the "Purchaser") and a wholly-owned subsidiary of
Lockheed Martin Corporation, a Maryland corporation ("Parent"), the above
described shares of common stock, without par value (the "Shares"), of COMSAT
Corporation, a District of Columbia corporation (the "Company"), at a price of
$45.50 per Share, net to the seller in cash, without interest thereon, upon
the terms and subject to the conditions set forth in the Offer to Purchase,
dated September 25, 1998 (the "Offer to Purchase"), and in this Letter of
Transmittal (which, as amended or supplemented from time to time, together
with the Offer to Purchase constitute the "Offer") receipt of which is hereby
acknowledged. The undersigned understands that the Purchaser reserves the
right to transfer or assign, in whole or from time to time in part, to one or
more of its subsidiaries or affiliates the right to purchase all or any
portion of the Shares tendered pursuant to the Offer.
Upon the terms of the Offer, subject to, and effective upon, acceptance for
payment of and payment for the Shares tendered herewith in accordance with the
terms of the Offer, the undersigned hereby sells, assigns, and transfers to,
or upon the order of, the Purchaser all right, title and interest in and to
all of the Shares that are being tendered hereby (and any and all other Shares
or other securities or rights issued or issuable in respect thereof on or
after September 25, 1998) and constitutes and irrevocably appoints First
Chicago Trust Company of New York (the "Depositary") the true and lawful
agent, attorney-in-fact and proxy of the undersigned to the full extent of the
undersigned's rights with respect to such Shares with full power of
substitution (such power of attorney and proxy being deemed to be an
irrevocable power coupled with an interest), to (a) deliver Share Certificates
(and any such other Shares or securities or rights), or transfer ownership of
such Shares (and any such other Shares or securities or rights) on the account
books maintained by the Book-Entry Transfer Facility, together in either such
case with all accompanying evidences of transfer and authenticity, to or upon
the order of the Purchaser, upon receipt by the Depositary, as the
undersigned's agent, of the purchase price, (b) present such Shares (and any
such other Shares or securities or rights) for transfer on the books of the
Company and (c) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares (and any such other Shares or securities
or rights), all in accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints Vance D. Coffman and John V.
Sponyoe, and each of them, and any other designees of the Purchaser as the
attorneys-in-fact and proxies of the undersigned, each with full power of
substitution, to vote in such manner as each such attorney and proxy or his
substitute shall, in his sole discretion, deem proper, and otherwise act
(including pursuant to written consent) with respect to all of the Shares
tendered hereby (and any and all other Shares or other securities or rights
issued or issuable in respect thereof on or after September 25, 1998) which
have been accepted for payment by the Purchaser prior to the time of such vote
or action which the undersigned is entitled to vote at any meeting of
shareholders (whether annual or special and whether or not an adjourned
meeting) of the Company, or by written consent in lieu of such meeting, or
otherwise. This power of attorney and proxy is coupled with an interest in the
Company and in the Shares and is irrevocable and is granted in consideration
of, and is effective upon, the acceptance for payment of such Shares by the
Purchaser in accordance with the terms of the Offer. Such acceptance for
payment shall revoke, without further action, any other power of attorney or
proxy granted by the undersigned at any time with respect to such Shares and
no subsequent powers of attorney or proxies will be given (and if given will
be deemed not to be effective) with respect thereto by the undersigned. The
undersigned understands that the Purchaser reserves the right to require that,
in order for Shares to be deemed validly tendered, immediately upon the
Purchaser's acceptance for payment of such Shares, the Purchaser is able to
exercise full voting rights with respect to such Shares and other securities,
including voting at any meeting of shareholders then scheduled or acting by
written consent without a meeting.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby (and any and all other Shares or other securities or rights
4
<PAGE>
issued or issuable in respect thereof on or after September 25, 1998) and
that, when the same are accepted for payment by the Purchaser, the Purchaser
will acquire good, marketable and unencumbered title thereto, free and clear
of all liens, restrictions, charges and encumbrances and the same will not be
subject to any adverse claim. The undersigned, upon request, will execute and
deliver any additional documents deemed by the Depositary or the Purchaser to
be necessary or desirable to complete the sale, assignment and transfer of the
Shares tendered hereby (and any such other Shares or securities or rights).
All authority herein conferred or herein agreed to be conferred shall not be
affected by, and shall survive, the death or incapacity of the undersigned and
any obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, legal representatives, successors and assigns of
the undersigned. Except as stated in the Offer to Purchase, this tender is
irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the
undersigned and the Purchaser upon the terms and subject to the conditions of
the Offer. The undersigned recognizes that under certain circumstances set
forth in the Offer to Purchase, the Purchaser may not be required to accept
for payment any of the Shares tendered hereby.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any Share
Certificates not tendered or accepted for payment in the name(s) of the
undersigned. Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the purchase price and/or return any
Share Certificates not tendered or accepted for payment (and any accompanying
documents, as appropriate) to the undersigned at the address shown below the
undersigned's signature. In the event that both the "Special Delivery
Instructions" and the "Special Payment Instructions" are completed, please
issue the check for the purchase price and/or return any Share Certificates
not tendered or accepted for payment in the name(s) of, and deliver said check
and/or return certificates to, the person or persons so indicated.
Shareholders tendering Shares by book-entry transfer may request that any
Shares not accepted for payment be returned by crediting such account
maintained at such Book-Entry Transfer Facility as such shareholder may
designate by making an appropriate entry under "Special Payment Instructions."
The undersigned recognizes that the Purchaser has no obligation pursuant to
the "Special Payment Instructions" to transfer any Shares from the name of the
registered holder thereof if the Purchaser does not accept for payment any of
the Shares so tendered.
5
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Share To be completed ONLY if Share
Certificates not tendered or not Certificates not tendered or not
purchased and/or the check for the purchased and/or the check for the
purchase price of Shares purchased purchase price of Shares purchased
are to be issued in the name of are to be sent to someone other
someone other than the than the undersigned, or to the
undersigned, or if Shares tendered undersigned at an address other
by book-entry transfer which are than that shown on the front
not purchased are to be returned cover. Mail check and/or
by credit to an account maintained certificates to:
at a Book-Entry Transfer Facility
other than that designated on the
front cover. Issue check and/or
certificates to:
Name ______________________________
(Please Print)
Address ___________________________
Name ______________________________
(Please Print) -----------------------------------
Address ___________________________ -----------------------------------
(Include Zip Code)
-----------------------------------
-----------------------------------
----------------------------------- (Taxpayer Identification or Social
(Include Zip Code) Security No.)
----------------------------------- (See Substitute Form W-9 on Back
(Taxpayer Identification or Social Cover)
Security No.)
(See Substitute Form W-9 on Back
Cover)
6
<PAGE>
SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Signature(s) of Owner(s)
DATED: ________________________________________________________________, 1998
(Must be signed by the registered holder(s) EXACTLY as name(s) appear(s) on
the Share Certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, please provide the
necessary information. See Instruction 5.)
Name(s): ____________________________________________________________________
-----------------------------------------------------------------------------
(Please Print)
Capacity (Full Title): ______________________________________________________
Address: ____________________________________________________________________
-----------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number: _____________________________________________
Tax Identification or Social Security No.: __________________________________
(See Substitute Form W-9)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED - SEE INSTRUCTIONS 1 AND 5)
Authorized Signature: _______________________________________________________
Name of Firm: _______________________________________________________________
Address: ____________________________________________________________________
-----------------------------------------------------------------------------
Area Code and Telephone Number:
Dated: ________________________________________________________________, 1998
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required (i) if this Letter of Transmittal is signed by the
registered holder (which term, for purposes of this document, shall include
any participant in a Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of Shares) of the Shares tendered
herewith, unless such holder has completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on
this Letter of Transmittal or (ii) if such Shares are tendered for the account
of a firm that is a bank, broker, dealer, credit union, savings association or
other entity which is a member in good standing of the Securities Transfer
Agent's Medallion Program (each, an "Eligible Institution"). In all other
cases, all signatures on this Letter of Transmittal must be guaranteed by an
Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be used either if Share Certificates are to be forwarded
herewith or, unless an Agent's Message (as defined below) is utilized, if
tenders are to be made pursuant to the procedures for tender by book-entry
transfer set forth in Section 3 of the Offer to Purchase. Share Certificates,
or timely confirmation (a "Book-Entry Confirmation") of a book-entry transfer
of such Shares into the Depositary's account at a Book-Entry Transfer
Facility, as well as this Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees,
or an Agent's Message in the case of a book-entry delivery, and any other
documents required by this Letter of Transmittal, must be received by the
Depositary at one of its addresses set forth herein prior to the Expiration
Date. Shareholders whose Share Certificates are not immediately available or
who cannot deliver their Share Certificates and all other required documents
to the Depositary prior to the Expiration Date or who cannot complete the
procedures for delivery by book-entry transfer on a timely basis may tender
their Shares by properly completing and duly executing a Notice of Guaranteed
Delivery pursuant to the guaranteed delivery procedures set forth in Section 3
of the Offer to Purchase. Pursuant to such procedure (i) such tender must be
made by or through an Eligible Institution; (ii) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form made
available by the Purchaser, must be received by the Depositary on or prior to
the Expiration Date; and (iii) the Share Certificates (or a Book-Entry
Confirmation) representing all tendered Shares, in proper form for transfer,
together with a Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees (or, in
the case of a book-entry delivery, an Agent's Message) and any other documents
required by this Letter of Transmittal, must be received by the Depositary
within three New York Stock Exchange trading days after the date of execution
of such Notice of Guaranteed Delivery, as provided in Section 3 of the Offer
to Purchase. If Share Certificates are forwarded separately to the Depositary,
a properly completed and duly executed Letter of Transmittal (or a facsimile
thereof) must accompany each such delivery.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
THE METHOD OF DELIVERY OF SHARES, THIS LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND SOLE RISK OF THE TENDERING SHAREHOLDER AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY
(INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK ENTRY CONFIRMATION).
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ENSURE TIMELY DELIVERY.
8
<PAGE>
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering shareholders, by execution
of this Letter of Transmittal or a facsimile thereof, waive any right to
receive any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares and any other required
information should be listed on a separate schedule attached hereto and
separately signed on each page thereof in the same manner as this Letter of
Transmittal is signed.
4. PARTIAL TENDERS. (APPLICABLE TO CERTIFICATE SHAREHOLDERS ONLY) If fewer
than all the Shares evidenced by any certificate submitted are to be tendered,
fill in the number of Shares which are to be tendered in the box entitled
"Number of Shares Tendered." In such case, new Share Certificate(s) for the
remainder of the Shares that were evidenced by the old Share Certificate(s)
will be sent to the registered holder, unless otherwise provided in the
appropriate box marked "Special Payment Instructions" and/or "Special Delivery
Instructions" on this Letter of Transmittal, as soon as practicable after the
acceptance for payment of, and payment for, the Shares tendered herewith. All
Shares represented by certificates delivered to the Depositary will be deemed
to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond exactly with the name(s) as
written on the face of the Share Certificate(s) without alteration,
enlargement or any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on Share
Certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of Share
Certificates.
If this Letter of Transmittal or any Share Certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and should submit
proper evidence satisfactory to the Purchaser of their authority to so act.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and transmitted hereby, no endorsements of Share Certificates or
separate stock powers are required unless payment is to be made to, or Share
Certificates for Shares not tendered or purchased are to be issued in, the
name of a person other than the registered owner(s). Signatures on such Share
Certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Shares listed, the Share Certificates must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered owner(s) appear(s) on the Share
Certificates. Signatures on such Share Certificates or stock powers must be
guaranteed by an Eligible Institution.
6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, the
Purchaser will pay or cause to be paid any stock transfer taxes with respect
to the transfer and sale of purchased Shares to it or its order pursuant to
the Offer for which the Purchaser is liable in connection with the Offer,
whether or not another person is jointly liable therefor. If, however, payment
of the purchase price is to be made to, or if Share Certificates not tendered
or purchased are to be registered in the name of, any person other than the
registered holder, or if tendered Share Certificates are registered in the
name of any person other than the person(s) signing this Letter of
Transmittal, the amount of any stock transfer taxes (whether imposed on the
registered holder or such person) payable on account of the transfer to such
person will be deducted from the purchase price unless satisfactory evidence
of the payment of such taxes or exemption therefrom is submitted.
9
<PAGE>
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in
the name of and/or Share Certificates for unpurchased Shares are to be
returned to a person other than the signer of this Letter of Transmittal or if
a check is to be sent and/or such Share Certificates are to be returned to
someone other than the signer of this Letter of Transmittal or to an address
other than that shown on the front cover hereof, the appropriate boxes on this
Letter of Transmittal should be completed. Shareholders tendering Shares by
book-entry transfer may request that Shares not purchased be credited to such
account maintained at such Book-Entry Transfer Facility as such shareholder
may designate hereon. If no such instructions are given, such Shares not
purchased will be returned by crediting the account at the Book-Entry Transfer
Facility designated above. See Instruction 1.
8. WAIVER OF CONDITIONS. The Purchaser reserves the absolute right in its
sole discretion to waive any of the specified conditions of the Offer, in
whole or in part, in the case of any Shares tendered.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance or additional copies of the Offer to Purchase and this Letter of
Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
directed to the Information Agent at its address set forth below.
10. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income
tax law, a shareholder whose tendered Shares are accepted for payment is
required to provide the Depositary with such shareholder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below. If the shareholder
does not provide the Depositary with the correct TIN, the Internal Revenue
Service (the "IRS") may subject the shareholder or other payee to a $50
penalty. In addition, payments that are made to such shareholder or other
payee with respect to Shares exchanged pursuant to the Offer may be subject to
31% backup withholding.
If backup withholding applies, the Depositary is required to withhold 31% of
any such payments made to the shareholder or other payee. Backup withholding
is not an additional tax. Rather, the tax liability of persons subject to
backup withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be obtained from
the IRS.
Certain shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, the shareholder must submit a Form W-8, signed under penalties of
perjury, attesting to that individual's exempt status. A Form W-8 can be
obtained from the Depositary. See the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for more
instructions.
To prevent backup withholding, each tendering shareholder must provide his
or her correct TIN by completing Substitute Form W-9 set forth below,
certifying that the TIN provided is correct (or that the shareholder is
awaiting a TIN) and that (a) the shareholder has not been notified by the IRS
that he or she is subject to backup withholding as a result of failure to
report all interest or dividends or (b) the IRS has notified the shareholder
that he or she is no longer subject to backup withholding. To prevent possible
erroneous backup withholding, exempt shareholders (other than certain foreign
individuals) should certify in accordance with the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" that
such shareholder is exempt from backup withholding. If a shareholder has been
notified by the IRS that he or she is subject to backup withholding because of
underreporting interest or dividends on his or her tax return, he or she
should nevertheless complete and sign Substitute Form W-9 but should (unless
after being so notified by the IRS he or she received a notification from the
IRS that he or she is no longer subject to backup withholding) cross out item
(2) of the certification on the form.
The box in Part 3 of the Substitute Form W-9 may be checked if the tendering
shareholder has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future. If the box in Part 3 is
10
<PAGE>
checked, the shareholder or other payee must also complete the Certificate of
Awaiting Taxpayer Identification Number below in order to avoid backup
withholding. Notwithstanding that the box in Part 3 is checked and the
Certificate of Awaiting Taxpayer Identification Number is completed, the
Depositary will withhold 31% of all payments made prior to the time a properly
certified TIN is provided to the Depositary.
The shareholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
Shares or of the last transferee appearing on the transfers attached to, or
endorsed on, the Shares. If the Shares are in more than one name or are not in
the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which number to report.
11. LOST, DESTROYED OR STOLEN SHARE CERTIFICATES. If any Share
Certificate(s) has been lost, destroyed or stolen, the shareholder should
promptly notify the Transfer Agent for the Company. The shareholder will then
be instructed as to the steps that must be taken in order to replace the Share
Certificate(s). This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost or destroyed Share
Certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY THEREOF),
TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES, OR, IN THE CASE OF A BOOK-
ENTRY TRANSFER, AN AGENT'S MESSAGE AND ANY OTHER REQUIRED DOCUMENTS MUST BE
RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE AND EITHER
CERTIFICATES FOR TENDERED SHARES MUST BE RECEIVED BY THE DEPOSITARY OR SHARES
MUST BE DELIVERED PURSUANT TO THE PROCEDURES FOR BOOK-ENTRY TRANSFER, IN EACH
CASE PRIOR TO THE EXPIRATION DATE, OR THE TENDERING SHAREHOLDER MUST COMPLY
WITH THE PROCEDURES FOR GUARANTEED DELIVERY.
11
<PAGE>
PART 1--PLEASE PROVIDE
SUBSTITUTE YOUR NAME, ADDRESS AND -------------------------
FORM W-9 TIN IN THE BOX AT RIGHT Name
AND CERTIFY BY SIGNING
AND DATING BELOW.
DEPARTMENT OF THE
TREASURY -------------------------
INTERNAL REVENUE Address
SERVICE
-------------------------
PAYER'S REQUEST FOR Social Security or
Employer Identification
Number
TAXPAYER PART 2--CERTIFICATION--Under penalties of perjury,
IDENTIFICATION I certify that:
NUMBER (TIN) AND
------------------------------------------------------
CERTIFICATION FOR (1) The number shown on this form is my correct
PAYEE Taxpayer Identification Number (or I am waiting for
EXEMPT FROM a Taxpayer Identification Number to be issued to
BACKUP WITHHOLDING me) and
(2) I am not subject to backup withholding because:
(a) I am exempt from backup withholding, (b) I have
not been notified by the Internal Revenue Service
(the "IRS") that I am subject to backup withholding
as a result of a failure to report all interest or
dividends or, (c) the IRS has notified me that I am
no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS--YOU MUST CROSS OUT ITEM
(2) ABOVE IF YOU HAVE BEEN NOTIFIED BY THE IRS THAT
YOU ARE SUBJECT TO BACKUP WITHHOLDING BECAUSE OF A
FAILURE TO REPORT ALL INTEREST OR DIVIDENDS ON YOUR
TAX RETURN. HOWEVER, IF AFTER BEING NOTIFIED BY THE
IRS THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING, YOU
RECEIVED ANOTHER NOTIFICATION FROM THE IRS THAT YOU
ARE NO LONGER SUBJECT TO BACKUP WITHHOLDING, DO NOT
CROSS OUT SUCH ITEM (2). (ALSO SEE INSTRUCTIONS IN
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM
W-9).
------------------------------------------------------
PART 3--[_] Check this box if you have not been
issued a TIN and have applied for one or intend to
apply for one in the near future.
SIGNATURE ____________________ DATE ____________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE
THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE
FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number within
sixty (60) days, 31% of all payments made to me will be withheld until I
provide such a number.
SIGNATURE _____________________________________ DATE _____________________
12
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, Share Certificates and
any other required documents should be sent or delivered by each shareholder
of the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary at one of its addresses set forth below:
The Depositary for the Offer is:
First Chicago Trust Company of New York
By Mail: By Hand:
First Chicago Trust Company of New First Chicago Trust Company of New
York York
Tenders & Exchanges c/o Securities Transfer and
Suite 4660 Reporting Services, Inc.
P.O. Box 2569 Attn: Tenders & Exchanges
Jersey City, NJ 07303 One Exchange Plaza, Third Floor
New York, NY 10006
By Overnight Delivery:
First Chicago Trust Company of New York
Tenders & Exchanges
Suite 4680
14 Wall Street, 8th Floor
New York, NY 10005
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone
numbers listed below. Additional copies of this Offer to Purchase, the Letter
of Transmittal and other tender offer materials may be obtained from the
Information Agent as set forth below, and will be furnished promptly at the
Purchaser's expense. You may also contact your broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
MORROW & CO., INC.
445 Park Avenue
5th Floor
New York, NY 10022
(212) 754-8000
Toll Free (800) 566-9061
Banks and Brokerage Firms
Please call:
(800) 662-5200
The Dealer Manager for the Offer is:
BEAR, STEARNS & CO. INC.
245 Park Avenue
New York, New York 10167
(877) 762-5237 (Toll Free)
13
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e. 00-0000000. The table below will help determine the
number to give the payer.
- - --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
- - ------------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
funds, the first
individual on the
account(1)
3. Husband and wife (joint The actual owner
account) of the account
or, if joint
funds, either
person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if
account) the minor is the
only contributor,
the minor(1)
6. Account in the name of The ward, minor,
guardian or committee for a or incompetent
designated ward, minor, or person(3)
incompetent person
7. a. A revocable savings The grantor-
trust account (in which trustee(1)
grantor is also
trustee)
b. Any "trust" account that The actual
is not a legal or valid owner(1)
trust under State law
8. Sole proprietorship The owner(4)
account
</TABLE>
<TABLE>
<CAPTION>
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF --
--------
<S> <C>
9. A valid trust, estate, or The legal entity
pension (do not furnish
the identifying
number of the
personal
representative or
trustee unless
the legal entity
itself is not
designated in the
account title)
(5)
10. Corporate account The corporation
11. Religious, charitable or The organization
educational organization
account
12. Partnership account held The partnership
in the name of the business
13. Association, club, or The organization
other tax-exempt
organization
14. A broker or registered The broker or
nominee nominee
15. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as a State or
local government, school
district, or prison) that
receives agricultural
program payments
</TABLE>
---------------------------------------
- - ---------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's Social Security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner. If the owner does not have an employer
identification number, furnish the owner's social security number.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
resident individuals), Form SS-4, Application for Employer Identification
Number (for businesses and all other entities), or Form W-7 for International
Taxpayer Identification Number (for alien individuals required to file U.S.
tax returns), at an office of the Social Security Administration or the
Internal Revenue Service.
To complete Substitute Form W-9, if you do not have a taxpayer identification
number, write "Applied For" in the space for the taxpayer identification
number in Part 1, sign and date the Form, and give it to the requester.
Generally, you will then have 60 days to obtain a taxpayer identification
number and furnish it to the requester. If the requester does not receive your
taxpayer identification number within 60 days, backup withholding, if
applicable, will begin and will continue until you furnish your taxpayer
identification number to the requester.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual re-
tirement plan, or a custodial account under section 403(b)(7).
. The United States or any agency or instrumentality thereof.
. A state, the District of Columbia, a possession of the United States, or
any political subdivision or instrumentality thereof.
. A foreign government or a political subdivision, agency or instrumentality
thereof.
. An international organization or any agency or instrumentality thereof.
. A registered dealer in securities or commodities registered in the United
States or a possession of the United States.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a)
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times during the tax year under the Investment
Company Act of 1940.
. A foreign central bank of issue.
. Unless otherwise noted herein, all references below to section numbers or
to regulations are references to the Internal Revenue Code and the regula-
tions promulgated thereunder.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. NOTE: You may
be subject to backup withholding if (i) this interest is $600 or more, and
(ii) the interest is paid in the course of the payer's trade or business
and (iii) you have not provided your correct taxpayer identification num-
ber to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
EXEMPT PAYEES DESCRIBED ABOVE SHOULD FILE A SUBSTITUTE FORM W-9 TO AVOID
POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM,
AND RETURN IT TO THE PAYER.
Certain payments other than interest, dividends, and patronage dividends that
are not subject to information reporting are also not subject to backup with-
holding. For details, see the regulations under sections 6041, 6041A(a), 6045,
and 6050A.
PRIVACY ACT NOTICES. Section 6109 requires most recipients of dividends, in-
terest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for identi-
fication purposes and to help verify the accuracy of your tax return. Payers
must be given the numbers whether or not recipients are required to file tax
returns. Payers must generally withhold 31% of taxable interest, dividends,
and certain other payments to a payee who does not furnish a taxpayer identi-
fication number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your taxpayer identification number to a payer, you are sub-
ject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends, or pat-
ronage dividends in gross income and such failure is due to negligence, a pen-
alty of 20% is imposed on any portion of an underpayment attributable to the
failure.
(3) CIVIL PENALTY FOR FALSE STATEMENTS WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--If you falsify certifica-
tions or affirmations, you are subject to criminal penalties including fines
and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. IF YOU ARE
IN ANY DOUBT AS TO THE ACTION TO BE TAKEN, YOU SHOULD SEEK YOUR OWN FINANCIAL
ADVICE IMMEDIATELY FROM YOUR OWN APPROPRIATELY AUTHORIZED INDEPENDENT
FINANCIAL ADVISOR.
IF YOU HAVE SOLD OR TRANSFERRED ALL OF YOUR REGISTERED HOLDINGS OF COMMON
STOCK OF COMSAT CORPORATION, PLEASE FORWARD THIS DOCUMENT AND ALL ACCOMPANYING
DOCUMENTS TO THE STOCKBROKER, BANK OR OTHER AGENT THROUGH WHOM THE SALE OR
TRANSFER WAS EFFECTED, FOR SUBMISSION TO THE PURCHASER OR TRANSFEREE.
NOTICE OF GUARANTEED DELIVERY
TO
TENDER SHARES OF COMMON STOCK
OF
COMSAT CORPORATION
PURSUANT TO THE OFFER TO PURCHASE
DATED SEPTEMBER 25, 1998
BY
REGULUS, LLC
A WHOLLY-OWNED SUBSIDIARY OF
LOCKHEED MARTIN CORPORATION
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially equivalent hereto,
must be used to accept the Offer (as defined below) if certificates
representing shares of common stock, without par value (the "Shares"), of
COMSAT Corporation, a District of Columbia corporation (the "Company"), are
not immediately available or time will not permit all required documents to
reach First Chicago Trust Company of New York (the "Depositary") on or prior
to the Expiration Date (as defined in the Offer to Purchase), or the
procedures for delivery by book-entry transfer cannot be completed on a timely
basis. This Notice of Guaranteed Delivery may be delivered by hand or sent by
facsimile transmission or mail to the Depositary and must include a guarantee
by an Eligible Institution (as defined in the Offer to Purchase (as defined
below)). See Section 3 of the Offer to Purchase.
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Mail: By Hand:
First Chicago Trust Company of New First Chicago Trust Company of New
York York
Tenders & Exchanges c/o Securities Transfer and
Suite 4660 Reporting Services, Inc.
P.O. Box 2569 Attn: Tenders & Exchanges
Jersey City, NJ 07303 One Exchange Plaza, Third Floor
New York, NY 10006
By Overnight Delivery:
First Chicago Trust Company of New York
Tenders & Exchanges
Suite 4680
14 Wall Street, 8th Floor
New York, NY 10005
By Facsimile Transmission: Confirm Receipt of Facsimile
(For Eligible Institutions Only) by Telephone:
(201) 222-4720 or (201) 222-4721 (201) 222-4707
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION
TO A NUMBER OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID
DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
Shares may not be tendered pursuant to the Guaranteed Delivery Procedures.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Regulus, LLC, a single member Delaware
limited liability company and a wholly-owned subsidiary of Lockheed Martin
Corporation, a Maryland corporation, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated September 25, 1998 (the
"Offer to Purchase"), and in the related Letter of Transmittal (which,
together with any supplements or amendments thereto, collectively constitute
the "Offer"), receipt of each of which is hereby acknowledged, the number of
Shares indicated below pursuant to the guaranteed delivery procedures set
forth in Section 3 of the Offer to Purchase.
Name(s) of Record Holder(s): ________
Number of Shares: ___________________ -------------------------------------
Certificate No(s). (if available): __ Address(es): ________________________
- - ------------------------------------- -------------------------------------
- - -------------------------------------
Area Code and Telephone Number(s): __
Check box if Share(s) will be -------------------------------------
tendered by Book-Entry Transfer
Signatures: _________________________
[_] The Depository Trust Company -----------------------------
Account Number: _____________________ Dated: ______________________________
Date: _______________________________
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, an Eligible Institution, hereby guarantees delivery to the
Depositary, at one of its addresses set forth above, certificates ("Share
Certificates") evidencing the tendered Shares hereby, in proper form for
transfer, or confirmation of book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company with delivery of a Letter
of Transmittal (or facsimile thereof) properly completed and duly executed, or
an Agent's Message (as defined in the Letter of Transmittal) in the case of a
book-entry delivery, and any other required documents, all within three New
York Stock Exchange trading days after the date of execution hereof.
The Eligible Institution that completes this form must communicate this
guarantee to the Depositary and must deliver the Letter of Transmittal, Share
Certificates and any other required documents to the Depositary within the
time period shown herein. Failure to do so could result in a financial loss to
such Eligible Institution.
Name of Firm: _______________________ -------------------------------------
(Authorized Signature)
Address: ____________________________
- - ------------------------------------- Name: _______________________________
- - ------------------------------------- (Please Type or Print)
- - -------------------------------------
(Zip Code) Title: ______________________________
Area Code and Telephone Number: _____ Date: _______________________________
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED
DELIVERY. CERTIFICATES FOR SHARES SHOULD BE SENT WITH YOUR LETTER OF
TRANSMITTAL.
2
<PAGE>
OFFER TO PURCHASE FOR CASH
UP TO 49% OF THE OUTSTANDING SHARES OF COMMON STOCK
OF
COMSAT CORPORATION
AT
$45.50 NET PER SHARE IN CASH
BY
REGULUS, LLC
A WHOLLY-OWNED SUBSIDIARY
OF
LOCKHEED MARTIN CORPORATION
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, NOVEMBER 24, 1998, UNLESS THE
OFFER IS EXTENDED.
September 25, 1998
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed 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"), to act as financial
advisor and Dealer Manager in connection with the Purchaser's offer to
purchase up to 49% (less certain adjustments) of the outstanding shares of
common stock, without par value (the "Shares"), of COMSAT Corporation, a
District of Columbia corporation (the "Company"), at a price of $45.50 per
Share, net to the seller in cash, without interest thereon, 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 any supplements or amendments thereto, collectively
constitute the "Offer") enclosed herewith.
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 Parent, Deneb
Corporation, a Delaware corporation and a wholly-owned subsidiary of Parent
("Acquisition Sub"), and the Company. The Merger Agreement provides, among
other things, for the commencement of the Offer by the Purchaser and further
provides that, after the purchase of Shares pursuant to the Offer and subject
to the satisfaction or waiver of certain conditions set forth therein, (i) if
the certain conditions relating to the tax treatment of the Merger and the
receipt of certain govermental approvals (as outlined in Section 12 of the
Offer to Purchase) have been satisfied, 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 or (ii) if such
conditions have not been satisfied, Acquisition Sub will be merged with and
into the Company (the "Reverse Merger" and, alternatively with the Forward
Merger, the "Merger"), with the Company surviving the Reverse Merger as a
wholly-owned subsidiary of Parent.
In the Merger, each Share issued and outstanding immediately prior to the
effective time of the Merger (other than shares of Company Common Stock held
in the treasury of the Company, held by the Purchaser, held by Parent, if any,
and Dissenting Shares (as defined in the Merger Agreement), if any) will be
converted into the right to receive 0.5 shares of common stock, par value
$1.00 per share, of Parent, subject to adjustment as provided in the Merger
Agreement.
Please furnish copies of the enclosed materials to those of your clients for
whom you hold Shares registered in your name or in the name of your nominee.
<PAGE>
The Offer is conditioned upon, among other things, (i) there being validly
tendered and not withdrawn prior to the expiration of the Offer such number of
Shares that would constitute at least one-third (1/3) of the outstanding
Shares, (ii) the termination or expiration of any waiting period under the
Antitrust Laws (as defined in the Offer to Purchase) applicable to the
purchase of Shares pursuant to the Offer and the receipt of all consents or
approvals required under the Antitrust Laws, (iii) the approval of the Merger
and the Merger Agreement by the shareholders of the Company pursuant to
Section 29-367 of the District of Columbia Business Corporation Act, (iv) the
receipt by Parent and the Purchaser of all approvals of the Federal
Communications Commission necessary for them to consummate the Carrier
Acquisition (as defined in the Offer to Purchase), (v) the consummation of the
Carrier Acquisition, and (vi) the receipt by the Purchaser of an approval by
the FCC to become an Authorized Carrier (as defined in the Offer to Purchase)
and to acquire the maximum number of Shares to be purchased pursuant to the
Offer.
Enclosed herewith for your information and for forwarding to your clients
are copies of the following documents:
1. The Offer to Purchase, dated September 25, 1998;
2. The Letter of Transmittal to be used by shareholders of the Company
accepting the Offer;
3. The letter to shareholders of the Company from the Chairman of the
Board of Directors of the Company and the President and Chief Executive
Officer of the Company, accompanied by the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission by the Company;
4. The Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares are not immediately available, or if such
certificates and all other required documents cannot be delivered to First
Chicago Trust Company of New York (the "Depositary") by the Expiration Date
(as defined in the Offer to Purchase), or if the procedure for book-entry
transfer cannot be completed by the Expiration Date;
5. A printed form of letter which may be sent to your clients for whose
accounts you hold Shares registered in your name or in the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Offer;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. A return envelope addressed to the Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER, PRORATION PERIOD AND
WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
TUESDAY, NOVEMBER 24, 1998, UNLESS THE OFFER IS EXTENDED.
The Board of Directors of the Company has by a unanimous vote (excluding
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, the 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 shareholders of the Company, and recommends that the Company's
shareholders accept the Offer and tender their Shares pursuant to the Offer.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (a) certificates
representing Shares (or a timely Book-Entry Confirmation (as defined in the
Offer to Purchase) with respect to such Shares) into the account maintained by
the Depositary at The Depository Trust Company, (the "Book-Entry Transfer
Facility"), pursuant to the procedures set forth in Section 3 of the Offer to
Purchase, (b) the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees or an
Agent's Message (as defined in the Offer to Purchase), in connection with a
book-entry delivery, and (c) any other documents required by the Letter of
Transmittal. Accordingly, payment may not be made to all tendering
shareholders at the same time depending upon when certificates for or Book
Entry Confirmations into the Depositary's account at the Book-Entry Transfer
Facility are actually received
2
<PAGE>
by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE
PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY
EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
If holders of Shares wish to tender Shares, but it is impracticable for them
to forward their Share certificates or other required documents on or prior to
the Expiration Date or to comply with the book-entry transfer procedures on a
timely basis, a tender may be effected by following the guaranteed delivery
procedures specified in Section 3 of the Offer to Purchase.
Neither Parent nor the Purchaser will pay any commissions or fees to any
broker, dealer or other person (other than the Dealer Manager, the Information
Agent and the Depositary, as described in the Offer to Purchase) for
soliciting tenders of Shares pursuant to the Offer. The Purchaser will,
however, upon request, reimburse you for customary clerical and mailing
expenses incurred by you in forwarding any of the enclosed materials to your
clients. The Purchaser will pay or cause to be paid any stock transfer taxes
payable on the transfer of Shares to it, except as otherwise provided in
Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to,
and additional copies of the enclosed materials may be obtained from, the
Dealer Manager or the Information Agent, at their respective addresses and
telephone numbers set forth on the back cover of the Offer to Purchase.
Very truly yours,
Bear, Stearns & Co. Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR
ANY OTHER PERSON THE AGENT OF PARENT, THE PURCHASER, THE DEALER MANAGER, THE
COMPANY, THE DEPOSITARY OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF
THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY
DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE
ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
3
<PAGE>
OFFER TO PURCHASE FOR CASH
UP TO 49% OF THE OUTSTANDING SHARES OF COMMON STOCK
OF
COMSAT CORPORATION
AT
$45.50 NET PER SHARE IN CASH
BY
REGULUS, LLC
A WHOLLY-OWNED SUBSIDIARY
OF
LOCKHEED MARTIN CORPORATION
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, NOVEMBER 24, 1998, UNLESS THE
OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration is an Offer to Purchase, dated September 25,
1998 (the "Offer to Purchase"), and a related Letter of Transmittal (which,
together with any supplements or amendments thereto, collectively constitute
the "Offer") relating to the 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"), to purchase up
to 49% (less certain adjustments) of the outstanding shares of common stock,
without par value (the "Shares"), of COMSAT Corporation, a District of
Columbia corporation (the "Company"), at a price of $45.50 per Share, net to
the seller in cash, without interest thereon, upon the terms and subject to
the conditions set forth in the Offer to Purchase and in the related Letter of
Transmittal. Also enclosed is the letter to shareholders of the Company from
the Chairman of the Board of Directors of the Company and the President and
Chief Executive Officer of the Company, accompanied by the Company's
Solicitation/Recommendation Statement on Schedule 14D-9.
WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER
OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR
YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish to have us
tender, on your behalf, any or all Shares held by us for your account pursuant
to the terms and conditions set forth in the Offer.
Please note the following:
1. The tender price is $45.50 per Share, net to you in cash without
interest thereon, upon the terms and subject to the conditions set forth in
the Offer.
2. The Board of Directors of the Company has by a unanimous vote
(excluding directors who either were absent or recused themselves) approved
the Offer, the Merger (as defined below) and the Merger Agreement (as
defined below) and determined that the terms of each of the Offer, the
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
shareholders of the Company, and recommends that the Company's shareholders
accept the Offer and tender their Shares pursuant to the Offer.
3. The Offer is being made for less than all of the outstanding Shares.
<PAGE>
4. 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
Parent, Deneb Corporation, a Delaware corporation and a wholly-owned
subsidiary of Parent ("Acquisition Sub"), and the Company. The Merger
Agreement provides, among other things, for the commencement of the Offer
by the Purchaser and further provides that, after the purchase of Shares
pursuant to the Offer and subject to the satisfaction or waiver of certain
conditions set forth therein, (i) if the certain conditions relating to the
tax treatment of the Merger and the receipt of certain govermental
approvals (as outlined in Section 12 of the Offer to Purchase) have been
satisfied, 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 or (ii) if such conditions have not been
satisfied, Acquisition Sub will be merged with and into the Company (the
"Reverse Merger" and, alternatively with the Forward Merger, the "Merger"),
with the Company surviving the Reverse Merger as a wholly-owned subsidiary
of Parent.
In the Merger, each Share issued and outstanding immediately prior to the
effective time of the Merger (other than shares of Company Common Stock
held in the treasury of the Company, held by the Purchaser, held by Parent,
if any, and Dissenting Shares (as defined in the Merger Agreement), 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").
5. The Offer is conditioned upon, among other things, (i) there being
validly tendered and not withdrawn prior to the expiration of the Offer
such number of Shares that would constitute at least one-third (1/3) of the
outstanding Shares, (ii) the termination or expiration of any waiting
period under the Antitrust Laws (as defined in the Offer to Purchase)
applicable to the purchase of Shares pursuant to the Offer and the receipt
of all consents or approvals required under the Antitrust Laws, (iii) the
approval of the Merger and the Merger Agreement by the shareholders of the
Company pursuant to Section 29-367 of the District of Columbia Business
Corporation Act, (iv) the receipt by Parent and the Purchaser of all
approvals of the Federal Communications Commission necessary for them to
consummate the Carrier Acquisition (as defined in the Offer to Purchase),
(v) the consummation of the Carrier Acquisition, and (vi) the receipt by
the Purchaser of an approval by the FCC to become an Authorized Carrier (as
defined in the Offer to Purchase) and to acquire the maximum number of
Shares to be purchased pursuant to the Offer.
6. Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the Letter
of Transmittal, stock transfer taxes on the purchase of Shares by the
Purchaser pursuant to the Offer.
7. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Tuesday, November 24, 1998, unless the Offer is extended
in accordance with the terms of the Merger Agreement.
If you wish to have us tender any or all of the Shares held by us for your
account, please so instruct us by completing, executing, detaching and
returning to us the instruction form set forth below. If you authorize the
tender of your Shares, all such Shares will be tendered unless otherwise
specified below. An envelope to return your instructions to us is enclosed.
Your instructions should be forwarded to us in ample time to permit us to
submit a tender on your behalf prior to the expiration of the Offer.
For purposes of the Offer, the Purchaser shall be deemed to have accepted
for payment, and thereby purchased, tendered Shares, if, as and when the
Purchaser gives oral or written notice to First Chicago Trust Company of New
York (the "Depositary") of the Purchaser's acceptance of such Shares for
payment. Upon the terms and subject to the conditions of the Offer, payment
for Shares purchased pursuant to the Offer will in all cases be made only
after timely receipt by the Depositary of (a) Share Certificates (or a timely
Book-Entry Confirmation (as defined in the Offer to Purchase) with respect to
such Shares) into the account maintained by the Depositary at The Depository
Trust Company (the "Book-Entry Transfer Facility"), pursuant to the procedures
set forth in Section 3 of the Offer to Purchase, (b) the Letter of Transmittal
(or a facsimile thereof), properly completed and duly executed, with any
required signature guarantees or an Agent's Message (as defined in the Offer
to Purchase), in connection with a book-entry delivery, and (c) any other
documents required by the Letter of Transmittal. Accordingly, payment may not
be made to all tendering shareholders at the same time
2
<PAGE>
depending upon when certificates for or Book Entry Confirmations into the
Depositary's account at the Book-Entry Transfer Facility are actually received
by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE
PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY
EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares residing in any jurisdiction in which the making
of the Offer or the acceptance thereof would not be in compliance with the
laws of such jurisdiction. In any jurisdiction where securities, blue-sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of the Purchaser by Bear, Stearns &
Co. Inc., the Dealer Manager for the Offer, or one or more registered brokers
or dealers that are licensed under the laws of such jurisdiction.
3
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE
FOR CASH UP TO 49% OF THE OUTSTANDING SHARES OF COMMON STOCK
OF
COMSAT CORPORATION
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase, dated September 25, 1998, and the related Letter of Transmittal
in connection with the 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, to purchase up to 49% (less
certain adjustments) of the outstanding shares of common stock, without par
value (the "Shares"), of COMSAT Corporation, a District of Columbia
corporation.
This will instruct you to tender to the Purchaser the number of Shares
indicated below (or if no number is indicated below, all Shares) which are
held by you for the account of the undersigned, upon the terms and subject to
the conditions set forth in the Offer.
Number of Shares to Be Tendered: _______________________________________ Date:
SIGN HERE
Signature(s) __________________________________________________________________
Print Name(s) _________________________________________________________________
Print Address(es) _____________________________________________________________
Area Code and Telephone Number ________________________________________________
Telephone Number(s) ___________________________________________________________
Taxpayer Identification or
Social Security Number(s) _____________________________________________________
4
<PAGE>
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares (as defined below). The Offer is made solely by the Offer to
Purchase, dated September 25, 1998, and the related Letter of Transmittal
and is being made to all holders of Shares. The Offer is not being made
to (nor will tenders be accepted from or on behalf of) holders of
Shares in any jurisdiction in which the making of the Offer or
acceptance thereof would not be in compliance with the laws
of such jurisdiction or any administrative or judicial
action pursuant thereto. In any jurisdiction where
securities, blue sky or other laws require the
Offer to be made by a licensed broker or
dealer, the Offer shall be deemed to
be made on behalf of Regulus, LLC
by Bear, Stearns & Co. Inc. or
one or more registered
brokers or dealers
licensed under the
laws of such
jurisdiction.
Notice of Offer to Purchase for Cash
Up to 49% of the Outstanding Shares of Common Stock
of
COMSAT Corporation
at
$45.50 Net Per Share
by
Regulus, LLC
a wholly-owned subsidiary of
Lockheed Martin Corporation
Regulus, LLC, a single member Delaware limited liability company (the
"Purchaser") and a wholly-owned subsidiary of Lockheed Martin Corporation, a
Maryland corporation ("Parent"), is offering to purchase up to 49% (less certain
adjustments) of the outstanding shares of common stock, without par value (the
"Shares"), of COMSAT Corporation, a District of Columbia corporation (the
"Company"), at $45.50 per Share, net to the seller in cash, without interest
thereon (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 in the related Letter of Transmittal (which together with any
amendments or supplements thereto, collectively constitute the "Offer").
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, NOVEMBER 24, 1998, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE OF THE OFFER (THE
"EXPIRATION DATE") SUCH NUMBER OF SHARES THAT WOULD CONSTITUTE AT LEAST ONE-
THIRD (1/3) OF THE OUTSTANDING SHARES (THE "MINIMUM CONDITION"),
<PAGE>
(II) THE TERMINATION OR EXPIRATION OF ANY APPLICABLE WAITING PERIOD UNDER THE
ANTITRUST LAWS (AS DEFINED IN THE OFFER TO PURCHASE) APPLICABLE TO THE PURCHASE
OF SHARES PURSUANT TO THE OFFER AND THE RECEIPT OF ALL CONSENTS OR APPROVALS
REQUIRED UNDER THE ANTITRUST LAWS (THE "ANTITRUST CONDITION"), (III) THE
FULFILLMENT OF THE SHAREHOLDER APPROVAL CONDITION (AS DEFINED IN THE OFFER TO
PURCHASE) AND (IV) THE SATISFACTION OF THE AUTHORIZED CARRIER CONDITIONS (AS
DEFINED IN THE OFFER TO PURCHASE). THE PURCHASER RESERVES THE RIGHT, SUBJECT
ONLY TO THE APPLICABLE RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE
COMMISSION, TO WAIVE EACH OF THE CONDITIONS (OTHER THAN THE MINIMUM CONDITION)
TO THE OBLIGATIONS OF THE PURCHASER TO CONSUMMATE THE OFFER AND THE TRANSACTIONS
CONTEMPLATED BY THE MERGER AGREEMENT TO THE EXTENT PERMITTED BY LAW.
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 Parent, Deneb
Corporation, a Delaware corporation and a wholly-owned subsidiary of Parent
("Acquisition Sub"), and the Company. The Merger Agreement provides, among other
things, for the commencement of the Offer by the Purchaser and further provides
that, after the purchase of Shares pursuant to the Offer and subject to the
satisfaction or waiver of certain conditions set forth therein, (i) if the
certain conditions relating to the tax treatment of the Merger and the receipt
of certain governmental approvals have been satisfied, 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 or (ii)
if such conditions and approvals have not been satisfied, Acquisition Sub will
be merged with and into the Company (the "Reverse Merger" and, alternatively
with the Forward Merger, the "Merger"), with the Company surviving the Reverse
Merger as a wholly-owned subsidiary of Parent. In the Merger, each Share issued
and outstanding immediately prior to the effective time of the Merger (other
than shares of Company Common Stock held in the treasury of the Company, held by
the Purchaser, held by Parent, if any, and 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, subject to adjustment as provided in the Merger Agreement.
In connection with the execution of the Merger Agreement, the Company and
Parent have entered into a Shareholders Agreement, dated as of September 18,
1998, pursuant to which, among other things, promptly after the consummation of
the Offer, the Company shall take all such actions necessary to cause the
election as directors of the Company three individuals selected by Parent (the
"Parent Designees") and the appointment of a Parent Designee as a member of each
of the existing committees of the Company's Board of Directors. The Shareholders
Agreement also provides that, other than pursuant to the transactions
contemplated by the Merger Agreement, Parent together with its affiliates will
not acquire Shares if this would result in Parent beneficially owning in excess
of 49% of the Company's Shares and in addition imposes certain limitations upon
Parent's ability to sell any Shares acquired. Finally, the Shareholders
Agreement imposes certain restrictions on actions that Parent may take that
might affect the management or direction of the Company. Parent and the Company
also have entered into a Registration Rights Agreement, dated as of September
18, 1998, pursuant to which the Company grants to Parent certain rights with
respect to registration of Shares under the Securities Act of 1933, as amended.
Also in connection with the execution of the Merger Agreement and n order
to facilitate the consummation of the Offer and the Merger, the Company, COMSAT
Government Systems, Inc. ("CGSI"), a Delaware corporation and a wholly-owned
subsidiary of the Company, Parent and the Purchaser have entered into a Carrier
Acquisition Agreement, dated as of September 18, 1998 (the "Carrier Acquisition
Agreement"), pursuant to which Parent will acquire CGSI by a merger of CGSI with
and into the Purchaser (the transactions contemplated by the Carrier Acquisition
Agreement herein referred to as the "Carrier
<PAGE>
Acquisition"). Parent, the Purchaser and the Company will apply to the FCC for
those approvals necessary to consummate the Carrier Acquisition, to have the
Purchaser approved to be an Authorized Carrier (as defined in the Offer to
Purchase) and to have the Purchaser be, as an Authorized Carrier, authorized by
the FCC to acquire the maximum number of Shares to be purchased pursuant to the
Offer.
THE BOARD OF DIRECTORS OF THE COMPANY HAS BY A UNANIMOUS VOTE (EXCLUDING THREE
DIRECTORS WHO EITHER WERE ABSENT OR ABSTAINED) APPROVED THE OFFER, THE MERGER
AND THE MERGER AGREEMENT AND DETERMINED THAT THE TERMS OF EACH OF THE OFFER, THE
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 SHAREHOLDERS OF
THE COMPANY, AND RECOMMENDS THAT THE COMPANY SHAREHOLDERS ACCEPT THE OFFER AND
TENDER THEIR SHARES PURSUANT TO THE OFFER.
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
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.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, tendered Shares if, as and when the
Purchaser gives oral or written notice to First Chicago Trust Company of New
York (the "Depositary") of the Purchaser's acceptance of such Shares for
payment. Payment for Shares accepted pursuant to the Offer will be made by
deposit of the aggregate purchase price therefor with the Depositary, which will
act as agent for tendering shareholders for the purpose of receiving payment
from the Purchaser and transmitting payment to such tendering shareholders.
Under no circumstances will interest on the Offer Price for Shares be paid by
the Purchaser by reason of any delay in making such payment.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i) the
certificate(s) representing tendered Shares (the "Share Certificates") o timely
confirmation of a book-entry transfer of such Shares (if such procedure is
available) into the Depositary's account at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in Section
3 of the Offer to Purchase, (ii) the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, or an Agent's Message (as
defined in the Offer to Purchase) in connection with a book-entry transfer, and
(iii) any other documents required by the Letter of Transmittal.
Except as otherwise provided in the Offer to Purchase, tenders of Shares
made pursuant to the Offer are irrevocable. Shares tendered pursuant to the
Offer may be withdrawn at any time prior to the Expiration Date and, unless
previously accepted for payment by the Purchaser pursuant to the Offer, may also
be withdrawn
<PAGE>
at any time after November 24, 1998. For a withdrawal to be effective, a written
or facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth in the Offer to Purchase. Any such
notice of withdrawal must specify the name of the person who tendered the Shares
to be withdrawn, the number of Shares to be withdrawn and (if Share Certificates
have been tendered) the name of the registered holder, if different from that of
the person who tendered such Shares. If Share Certificates evidencing Shares to
be withdrawn have been delivered or otherwise identified to the Depositary, then
prior to the release of such Share Certificates, the serial numbers shown on the
particular Share Certificates to be withdrawn must be submitted to the
Depositary, and the signature(s) on the notice of withdrawal must be guaranteed
by an Eligible Institution (as defined in the Offer to Purchase), unless such
Shares have been tendered for the account of an Eligible Institution. If Shares
have been tendered pursuant to the procedure for book-entry transfer as set
forth in Section 3 of the Offer to Purchase, any notice of withdrawal must also
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Shares, in which case a notice of withdrawal
will be effective if delivered to the Depositary by any method of delivery
described in Section 3 of the Offer to Purchase. Withdrawals of Shares may not
be rescinded. Withdrawn Shares may be retendered at any time prior to the
Expiration Date by following one of the procedures described in Section 3 of the
Offer to Purchase. All questions as to the form and validity (including, without
limitation, time of receipt) of notices of withdrawal will be determined by the
Purchaser, in its sole discretion, the determination of which will be final and
binding.
The Purchaser reserves the right, at any time or from time to time in
accordance with the terms of the Merger Agreement, to extend the period of time
during which the Offer is open by giving oral or written notice of such
extension to the Depositary. Any such extension will be followed as promptly as
practicable by public announcement thereof no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled date on which
the Offer was to expire. During any such extension, all Shares previously
tendered and not withdrawn will remain subject to the Offer subject to the right
of a tendering shareholder to withdraw such shareholder's Shares.
The information required to be disclosed by paragraph (e)(1)(vii) of Rule
14d-6 of the General Rules and Regulations under the Securities Exchange Act of
1934, as amended, is contained in the Offer to Purchase and is incorporated
herein by reference.
The Company has agreed to provide the Purchaser with the Company's
shareholder list and security position listings for the purpose of disseminating
the Offer to holders of Shares. The Offer to Purchase and the related Letter of
Transmittal will be mailed to record holders of Shares and will be furnished to
brokers, banks and similar persons whose names, or the names of whose nominees,
appear on the shareholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
The Offer to Purchase and the related Letter of Transmittal contain
important information which should be read carefully before any decision is made
with respect to the Offer.
Requests for copies of the Offer to Purchase, the related Letter of
Transmittal and other tender offer materials may be directed to the Information
Agent or the Dealer Manger as set forth below, and copies will be furnished
promptly at the Purchaser's expense. The Purchaser will not pay any fees or
commissions to any broker or dealer or any other person (other than the Dealer
Manager and the Information Agent) for soliciting tenders of Shares pursuant to
the Offer.
<PAGE>
The Information Agent for the Offer is:
MORROW & CO., INC.
445 Park Avenue
5th Floor
New York, New York 10022
Toll Free (800) 566-9061
or
Call Collect (212) 754-8000
Banks and Brokerage Firms Please Call:
(800) 662-5200
The Dealer Manager for the Offer is:
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
(877) 762-5237 (Toll Free)
September 25, 1998
<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)
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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
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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
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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,
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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
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shareholders of COMSAT; provided, that subject to the provisions of Section
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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
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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.
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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").
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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
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"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
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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
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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
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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
-------
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
---------
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
--------
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
-------- -------
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
--------
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
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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
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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
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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
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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
- - --------
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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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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
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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.]
52
<PAGE>
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>
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.]
16
<PAGE>
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
17
<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
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(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
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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.
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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
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(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>
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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<PAGE>
(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)
3
<PAGE>
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").
4
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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
5
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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:
6
<PAGE>
(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
7
<PAGE>
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
8
<PAGE>
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.
9
<PAGE>
(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
-------------------------------------
10
<PAGE>
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 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
