SHAREHOLDERS AGREEMENT
SHAREHOLDERS AGREEMENT (this "AGREEMENT") dated as of September 18,
1998 between COMSAT CORPORATION, a District of Columbia corporation ("COMSAT")
and LOCKHEED XXXXXX CORPORATION, a Maryland corporation ("LOCKHEED XXXXXX").
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 Xxxxxx and Deneb Corporation, a Delaware
corporation and a wholly-owned subsidiary of Lockheed Xxxxxx ("ACQUISITION
SUB"), Lockheed Xxxxxx, 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 Xxxxxx 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.
(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
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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 Xxxxxx
(collectively, the "LOCKHEED XXXXXX DESIGNEES"), (ii) the appointment of a
Lockheed Xxxxxx 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
Xxxxxx Designee shall cease to be a director for any reason, the filling of the
vacancy resulting thereby with an individual selected by Lockheed Xxxxxx (such
individual thereafter being a Lockheed Xxxxxx Designee). Any Lockheed Xxxxxx
officer or employee serving as a director of COMSAT will be deemed a Lockheed
Xxxxxx 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 Xxxxxx 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.
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From the Merger Termination Date to the Expiration Date, unless
Lockheed Xxxxxx 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 Xxxxxx 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 Xxxxxx and its Subsidiaries of the legal rights generally
enjoyed by shareholders of COMSAT.
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SECTION 2.3 ACCESS TO INFORMATION.
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From the Offer Closing Date to the Expiration Date, COMSAT shall:
(a) promptly furnish to Lockheed Xxxxxx all information that is
required by GAAP to enable Lockheed Xxxxxx to account for its investment in
COMSAT under the equity method. To the extent reasonably requested by Lockheed
Xxxxxx, COMSAT shall, and shall cause its employees, independent public
accountants and other representatives to, provide information regarding COMSAT
to, and otherwise cooperate with, Lockheed Xxxxxx and the representatives of
Lockheed Xxxxxx so as to enable Lockheed Xxxxxx to prepare financial statements
in accordance with GAAP; and
(b) upon the request of Lockheed Xxxxxx xxxx time to time, promptly
disclose to Lockheed Xxxxxx 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
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DISPOSITION OF SHARES. COMSAT shall cause its Board of Directors, at a meeting
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duly called and held within thirty days of a request by Lockheed Xxxxxx, 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 Xxxxxx
(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 Xxxxxx) 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.
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ARTICLE III
LOCKHEED XXXXXX PURCHASE AND SALE RESTRICTIONS
SECTION 3.1 LOCKHEED XXXXXX PURCHASE RESTRICTIONS.
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(a) Other than pursuant to the transactions contemplated by the
Merger Agreement, Lockheed Xxxxxx shall not, and shall not cause or permit its
affiliates or any Group including Lockheed Xxxxxx 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 Xxxxxx and its Subsidiaries, after giving
effect to the Offer, would result in Lockheed Xxxxxx 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 Xxxxxx or its Subsidiaries propose to acquire all of the issued and
outstanding COMSAT Common Stock not owned by Lockheed Xxxxxx or its
Subsidiaries.
(b) Nothing in this Section 3.1 shall require Lockheed Xxxxxx or its
Subsidiaries to transfer any shares of COMSAT Common Stock if the aggregate
percentage ownership of Lockheed Xxxxxx 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 XXXXXX SALE RESTRICTIONS.
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(a) Lockheed Xxxxxx shall not, and shall not cause or permit its
affiliates or any Group including Lockheed Xxxxxx 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 Xxxxxx shall not, and shall not cause or permit
its Subsidiaries or any Group including Lockheed Xxxxxx 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;
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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
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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 Xxxxxx 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
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until the Expiration Date, neither Lockheed Xxxxxx 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 Xxxxxx 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 Xxxxxx shall not and shall not
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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.
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ARTICLE IV
RESTRICTIONS ON SHARES
SECTION 4.1 LEGENDS.
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(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:
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"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 Xxxxxx 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
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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 Xxxxxx
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
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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.
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(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,
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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.
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(a) No party may assign its rights or delegate its obligations under
this Agreement without the prior written consent of the other party; provided
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that Lockheed Xxxxxx 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
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any such delegation shall not relieve the delegating party of any of its
obligations under this Agreement.
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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
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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
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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
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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
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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
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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
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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
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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
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any action in those jurisdictions; provided, however, that each party may assert
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in an action in any other jurisdiction or venue each mandatory defense, third-
party claim or similar claim that, if not so asserted in
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such action, may not be asserted in an original action in the courts referred to
in clause (i) above. Lockheed Xxxxxx 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
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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.
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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/ Xxxxx X. Flower
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Name: Xxxxx X. Flower
Title: Vice President and
Chief Financial Officer
LOCKHEED XXXXXX CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
Title: Chairman and
Chief Executive Officer
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