Exhibit 14
AMENDMENT TO
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made as of
September 18, 1998, by and between COMSAT Corporation ("COMSAT"), a District of
Columbia corporation, and Xxxxxx X. Xxxxx, a resident of the State of Maryland
(the "Executive"). All capitalized terms used and not otherwise defined herein
shall have the meanings ascribed to such terms in the Employment Agreement (as
defined below).
WHEREAS, COMSAT and the Executive have entered into that certain Amended
and Restated Employment Agreement, dated as of April 18, 1997, and amended as of
July 18, 1997 (the "Employment Agreement");
WHEREAS, COMSAT and the Executive reserved the right to amend the
Employment Agreement pursuant to the terms thereof; and
WHEREAS, COMSAT and the Executive desire to amend the Employment Agreement,
on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
made herein, and intending to be legally bound hereby, COMSAT and the Executive
agree as follows:
1. THE FIRST SENTENCE OF SECTION 1(A) OF THE EMPLOYMENT AGREEMENT IS HEREBY
AMENDED AND RESTATED IN ITS ENTIRETY AS SET FORTH BELOW:
"COMSAT shall employ the Executive to serve as Vice-President, General
Counsel and Secretary of COMSAT or any successor entity for a period (the
"Employment Period") commencing on April 18, 1997 (the "Effective Date") and
continuing thereafter until April 17, 2002, unless terminated in accordance with
the provisions of this Agreement; provided, however, that upon the occurrence of
a Change in Control (as defined below), the Employment Period shall
automatically end on the third anniversary of the date of such Change in
Control."
2. A NEW SECTION 2.1, AS SET FORTH BELOW, IS HEREBY ADDED TO THE EMPLOYMENT
AGREEMENT IMMEDIATELY FOLLOWING SECTION 2 THEREOF:
"2.1 Retention Bonuses.
-----------------
(a) Definitions. For purposes of this Agreement, the following terms
shall have the meanings indicated below:
(1) "Closing Date" shall mean the date of the closing of the Lockheed
Merger.
(2) "Closing Bonus" shall mean a bonus payable pursuant to Section
2.1(b) below.
(3) "Drop Dead Date" shall mean the earlier of (i) the date of the
termination of the Lockheed Merger pursuant to the Lockheed Merger
Agreement, or (ii) the date of the second anniversary of the Signing Date.
(4) "Eighteen Month Anniversary Date" shall mean the date which is
eighteen months after the Closing Date.
(5) "Lockheed Merger" shall mean the proposed merger of COMSAT and
Lockheed Xxxxxx Corporation ("Lockheed") pursuant to the Lockheed Merger
Agreement.
(6) "Lockheed Merger Agreement" shall mean that certain Agreement and
Plan of Merger, dated as of September 18, 1998, among COMSAT, Lockheed and
Deneb Corporation.
(7) "Post-Closing Bonus" shall mean a bonus payable pursuant to
Section 2.1(c) below.
(8) "Signing Date" shall mean the date of the signing of the Lockheed
Merger Agreement.
(b) Closing Bonus. Subject to subsection (e) of this Section 2.1, if the
Executive is continuously employed by COMSAT from the Signing Date through the
Closing Date (or, if the Closing Date has not occurred as of the Drop Dead Date,
through the Drop Dead Date) and the Executive has not received or delivered a
notice of termination on or before the Closing Date (or, if the Closing Date has
not occurred as of the Drop Dead Date, on or before the Drop Dead Date), the
Executive shall receive a Closing Bonus in an amount to be determined as
follows: if the Closing Date occurs prior to the Drop Dead Date or if the
Closing Date has not occurred as of the Drop Dead Date, the amount of such
Closing Bonus shall be equal to one hundred and fifty percent (150%) of the sum
(such sum, the Executive's "Closing Date Total Cash Compensation") of (i) the
Executive's Base Salary as in effect on the Closing Date (or the Drop Dead Date,
if applicable) or, if higher, as in effect immediately prior to the Signing
Date, and (ii) the Executive's targeted Annual Bonus (assuming that all target
levels and performance measures are achieved to the maximum extent) under
COMSAT's Annual Incentive Plan for the year in which the Closing Date (or the
Drop Dead Date, if applicable) occurs or, if higher, the year in which the
Signing Date occurs.
(c) Post-Closing Bonus. Subject to subsection (e) of this Section 2.1, if
the Executive is continuously employed by COMSAT from the Signing Date through
the Eighteen Month Anniversary Date and the Executive has not received or
delivered a notice of termination on or
2
before the Eighteen Month Anniversary Date, the Executive shall receive a Post-
Closing Bonus in an amount equal to one hundred percent (100%) of the sum of (i)
the Executive Base Salary as in effect on the Eighteen Month Anniversary Date
or, if higher, as in effect immediately prior to the Signing Date, and (ii) the
Executive's targeted Annual Bonus (assuming that all target levels and
performance measures are achieved to the maximum extent) under COMSAT's Annual
Incentive Plan for the year in which the Eighteen Month Anniversary Date occurs
or, if higher, the year in which the Signing Date occurs.
(d) Payment of Bonuses. Payment of the Executive's Closing Bonus will be
made as soon as practicable (but in no event more than thirty (30) days) after
the Closing Date or, if the Closing Date has not occurred as of the Drop Dead
Date, as soon as practicable (but in no event more than thirty (30) days) after
the Drop Dead Date. Payment of the Executive's Post-Closing Bonus will be made
as soon as practicable (but in no event more than thirty (30) days) after the
Eighteen Month Anniversary Date.
(e) Termination of Employment.
(1) Subject to paragraphs (2), (3) and (4) of this Section 2.1(e), in
order to receive a Closing Bonus or a Post-Closing Bonus, as the case may
be, the Executive must be employed by COMSAT on the Closing Date, the Drop
Dead Date, or the Eighteen Month Anniversary Date, as the case may be
(each, a "Determination Date"), and neither the Company nor the Executive
shall have delivered notice of termination of employment on or before the
applicable Determination Date. Notwithstanding any other provisions of this
Agreement to the contrary, if the Executive incurs a termination of
employment by COMSAT for Cause or by the Executive without Good Reason, the
Executive shall forfeit all rights to receive any bonus payments that have
not yet become payable to the Executive under this Section 2.1.
(2) If, on or before the Closing Date (or, if the Closing Date has
not occurred as of the Drop Dead Date, on or before the Drop Dead Date),
the Executive incurs a termination of employment (i) by COMSAT other than
for Cause (as defined below) or (ii) by the Executive for Good Reason (as
defined below), the Executive shall be entitled to receive a payment equal
to the amount of the Closing Bonus to which he would have been entitled
under this Section 2.1 had he remained continuously employed by COMSAT
through the Closing Date or the Drop Dead Date, as applicable, payable in
accordance with Section 2.1(d) above; provided, however, that for purposes
of this paragraph (2), any and all such amounts shall be calculated based
on (a) the Executive's Base Salary as in effect immediately prior to
termination or, if higher, as in effect immediately prior to the Signing
Date, and (b) his targeted Annual Bonus (assuming that all target levels
and performance measures are achieved to the maximum extent) for the year
in which such termination occurs or, if higher, the year in which the
Signing Date occurs. In the event of such termination, the Executive shall
forfeit all rights to receive
3
the Post-Closing Bonus which has not yet become payable to the Executive
under this Section 2.1.
(3) If, during the period commencing on the day after the Closing
Date and ending on the Eighteen Month Anniversary Date, the Executive
incurs a termination of employment (i) by COMSAT other than for Cause or
(ii) by the Executive for Good Reason, the Executive shall be entitled to
receive a payment equal to the amount of the Post-Closing Bonus to which he
would have been entitled under this Section 2.1 had he remained
continuously employed by COMSAT through the Eighteen Month Anniversary
Date; provided, however, that for purposes of this paragraph (3), any and
all such amounts shall be calculated based on (a) the Executive's Base
Salary as in effect immediately prior to termination or, if higher, as in
effect immediately prior to the Signing Date or the Closing Date (whichever
is greater), and (b) his targeted Annual Bonus (assuming that all target
levels and performance measures are achieved to the maximum extent) for the
year in which such termination occurs or, if higher, the year in which the
Signing Date or the Closing Date occurs (whichever is greater). Payment of
any amounts payable under this paragraph (3) will be made as soon as
practicable (but in no event more than thirty (30) days) after the date of
the Executive's termination of employment. In the event of such
termination, the Executive shall forfeit all rights to receive the Post-
Closing Bonus to which the Executive would have been entitled to under this
Section 2.1 had the Executive remained continuously employed by COMSAT
through the Eighteen Month Anniversary Date. Notwithstanding the
foregoing, within the thirty (30) day period immediately following the
Closing Date, the Executive and Lockheed shall negotiate in good faith to
reach an agreement regarding the terms and conditions of the Executive's
employment following the Closing Date. In the event that the Executive and
Lockheed are unable to reach such an agreement and the Executive's
employment is terminated either by the Executive or COMSAT within such
thirty (30) day period, the Executive shall forfeit all rights to receive
his Post-Closing Bonus under this paragraph (3). The failure to reach such
an agreement or the Executive's termination within such thirty (30) day
period shall not otherwise affect any other rights of the Executive under
this Agreement.
(4) If, on or before the Closing Date (or, if the Closing Date has not
occurred as of the Drop Dead Date, on or before the Drop Dead Date), the
Executive incurs a termination of employment by reason of the Executive's
death or disability, the Executive shall be entitled to receive a payment
equal to the amount of the Closing Bonus to which he would have been
entitled hereunder had he remained continuously employed by COMSAT through
the Closing Date or the Drop Dead Date, as applicable, payable in
accordance with Section 2.1(d) above. If during the period commencing on
the day after the Closing Date and ending on the Eighteen Month Anniversary
Date, the Executive incurs a termination of employment by reason of the
Executive's death or disability, the Executive shall be entitled to receive
a payment equal to the amount of the Post-Closing Bonus to which he would
have been entitled hereunder had he remained continuously
4
employed by COMSAT through the Eighteen Month Anniversary Date, payable as
soon as practicable (but in no event more than thirty (30) days) after the
date of the Executive's termination. Notwithstanding the foregoing, any and
all amounts payable under this paragraph (4) shall be calculated based on
(a) the Executive's Base Salary as in effect immediately prior to
termination, and (b) his targeted Annual Bonus (assuming that all target
levels and performance measures are achieved to the maximum extent) for the
year in which such termination occurs. In the event of such termination,
the Executive shall forfeit all rights to receive any payments that have
not yet become payable to the Executive under Section 2.1 of this
Agreement.
(f) Effectiveness. Notwithstanding anything contained herein, this
Section 2.1 shall be effective as of the Signing Date. If the Closing Date has
not occurred as of the Drop Dead Date, this Section 2.1 shall thereupon
automatically terminate and be of no further force and effect, provided that all
obligations accrued by the Executive prior to such termination of this Section
2.1 must be satisfied in full in accordance with the terms hereof."
3. SECTION 5(A) OF THE EMPLOYMENT AGREEMENT IS HEREBY AMENDED BY ADDING THE
FOLLOWING NEW PARAGRAPH AT THE END OF SUCH SECTION 5(A):
"Notwithstanding anything contained herein, the Executive shall be entitled
to the benefits and payments, if any, under this Section 5(a) only in the event
that the termination of the Executive's employment which gives rise to such
payments occurs prior to a Change in Control."
4. SECTION 5(F) OF THE EMPLOYMENT AGREEMENT IS HEREBY AMENDED AND RESTATED IN
ITS ENTIRETY AS SET FORTH BELOW:
"(f) If either the Executive or COMSAT elects not to renew the Executive's
employment with COMSAT at the end of the Employment Period, the Executive shall
be entitled to receive payments under the SERP beginning on May 1, 2002 (the
first day of the month after the end of such period), calculated in accordance
with the provisions of the SERP based on the Executive's retirement on that date
(i.e., without any reduction pursuant to Section 7.1(a) of the SERP), provided
--------
that the Board reserves the discretion to waive the applicable early retirement
reduction under the SERP in such event. If the Executive's employment with
COMSAT under this Agreement is terminated either by the Executive for Good
Reason or by COMSAT without Cause before the Executive attains age 55, the
Executive shall be entitled to receive payments under the SERP beginning on
April 1, 2002 (the first day of the month after the Executive's 55th birthday),
calculated in accordance with the provisions of the SERP as if the Executive
retired on that date (i.e., without any reduction pursuant to Section 7.1(a) of
the SERP), provided that the Board reserves the discretion to waive the
--------
applicable early retirement reduction under the SERP in such event. If the
Executive dies before payments begin under the SERP, the Executive's surviving
spouse, if any, shall receive under the SERP a $200,000 lump sum death benefit,
plus annual benefit payments for a ten year period equal to 50% of the
Executive's accrued benefit
5
under the SERP, according to the terms of the SERP. The provisions of this
Section 5(f) shall be administered consistent with the terms of the SERP."
5. SECTION 6 OF THE EMPLOYMENT AGREEMENT IS HEREBY AMENDED AND RESTATED IN ITS
ENTIRETY AS SET FORTH BELOW:
"6. Termination After Change in Control.
-----------------------------------
(a) Definitions. For purposes of this Agreement, the following terms
shall have the meanings indicated below:
(1) A "Change in Control" of COMSAT shall be deemed to have occurred
upon the happening of any one of the following events:
(i) the acquisition by any Person (as defined below) of
Beneficial Ownership (as defined below) of fifty percent (50%) or more
of the combined voting power of the then outstanding voting securities
of COMSAT. For purposes of this Agreement, (A) the term "Person"
shall have the meaning set forth in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as modified and
used in Sections 13(d) and 14(d) thereof, except that such term shall
not include (I) COMSAT or any of its subsidiaries, (II) a trustee or
other fiduciary holding securities under an employee benefit plan of
COMSAT or any of its Affiliates (as defined in Rule 12b-2 promulgated
under Section 12 of the Exchange Act), (III) an underwriter
temporarily holding securities pursuant to an offering of such
securities, or (IV) a corporation owned, directly or indirectly, by
the stockholders of COMSAT in substantially the same proportions as
their ownership of stock of COMSAT; and (B) the term "Beneficial
Ownership" shall have the meaning set forth in Rule 13d-3 under the
Exchange Act (and the terms "Beneficial Ownership" and "Beneficially
Owned" shall have correlative meanings); or
(ii) any change in the composition of the Board such that the
individuals who, as of May 17, 1996, constitute those members of the
Board who have been elected by the shareholders of COMSAT in
accordance with the provisions of Section 303(a) of the Communications
Satellite Act of 1962, as amended (the "Incumbent Directors"), cease
for any reason to constitute a majority of the Board at any time;
provided, however, that any individual becoming a director subsequent
to such date whose election, or nomination for election, was approved
by a vote of at least three-fourths (3/4) of the then Incumbent
Directors shall be considered as though such individual were an
Incumbent Director; or
6
(iii) approval by the shareholders of COMSAT of a merger, share
exchange, swap, consolidation, recapitalization or other business
combination involving COMSAT and any other corporation or entity (a
"Transaction"), the effect of which would result in the combined
voting securities of COMSAT immediately prior to the effectiveness of
such Transaction continuing to represent less than sixty percent (60%)
of the combined voting power of the voting securities of COMSAT, or of
any surviving entity of, or parent entity following, the Transaction,
immediately after the effectiveness of the Transaction; or
(iv) approval by the shareholders of COMSAT of (A) a complete
liquidation or dissolution of COMSAT, or (B) the sale or disposition
by COMSAT of all or substantially all of its assets other than to a
corporation or entity with respect to which following such sale or
other disposition more than eighty percent (80%) of the then combined
voting power of the voting securities of such corporation or entity
is, immediately following such sale or disposition, Beneficially Owned
by all or substantially all of the individuals and entities who were
the Beneficial Owners of the voting securities of COMSAT upon or
immediately before such approval; or
(v) any event that would be required to be reported in response
to Item 6(e) or any successor thereto of Schedule 14A of Regulation
14A promulgated under the Exchange Act;
provided, however, that none of the events described in clauses (i) through
(v) above shall be deemed to constitute a Change in Control if, prior to
the occurrence of such event, the Board adopts a resolution specifically
providing that the event shall not be deemed to constitute a Change in
Control for purposes of this Agreement; provided, further, that,
notwithstanding the foregoing, with respect to the Lockheed Merger, the
following provisions shall apply: (a) the signing of the Lockheed Merger
Agreement shall not constitute a Change in Control for purposes of this
Agreement, (b) the approval by the Board or COMSAT's shareholders of the
Lockheed Merger or the Lockheed Merger Agreement shall not constitute a
Change in Control for purposes of this Agreement, (c) the commencement or
the closing of the tender offer by Lockheed to purchase shares of COMSAT's
common stock as contemplated by the Lockheed Merger Agreement shall not
constitute a Change in Control for purposes of this Agreement, (d) the
acquisition by Lockheed or Regulus, LLC of COMSAT Government Systems, Inc.
shall not constitute a Change in Control for purposes of this Agreement,
and (e) upon the closing of the Lockheed Merger, a Change in Control of
COMSAT shall be deemed to have occurred for purposes of this Agreement.
(2) "Benefits Continuation Period" shall mean the period beginning on
the date of the Executive's termination of employment and ending on the
expiration of the Employment Period.
7
(3) "Protected Period" shall mean the period beginning on the date of
a Change in Control and ending on the last day of the Employment Period.
(4) "COMSAT" shall mean COMSAT Corporation, a District of Columbia
corporation, and, except in determining under paragraph (1) of this Section
6(a) whether or not any Change in Control of COMSAT has occurred, shall
include any successor to its business and/or assets.
(b) If a Change in Control of COMSAT occurs and the Executive's
employment is terminated during the Protected Period (A) by COMSAT other than
for Cause or disability, or (B) by the Executive for Good Reason, then, in lieu
of any other severance payments or severance benefits payable to the Executive
under Section 5(a) hereof, COMSAT shall pay the Executive the amounts, and
provide the Executive with the benefits, described below.
(1) The Executive shall be entitled to receive the following amounts
during the Benefits Continuation Period: (i) the Executive's Base Salary as
in effect immediately prior to the date of the Executive's termination of
employment or, if higher, as in effect immediately prior to the Change in
Control, and (ii) the Executive's targeted Annual Bonus (assuming that all
target levels and performance measures are achieved to the maximum extent)
for the year in which such date of termination occurs or, if higher, the
year in which the Change in Control occurs. The payments set forth in this
Section 6(b)(1) shall be made in accordance with COMSAT's regular practice
for compensating executive personnel actively at work, provided that in no
event shall such payments be made less frequently than twice per month;
(2) During the Benefits Continuation Period, COMSAT shall provide the
Executive and his dependents with life, disability, accident and health
insurance benefits substantially similar to those provided to the Executive
and his dependents immediately prior to the date of the Executive's
termination of employment or the date of the Change in Control, whichever
is more favorable to the Executive; provided, however, that such benefits
shall be provided on substantially the same terms and conditions and at the
same cost to the Executive as in effect immediately prior to such date of
termination or the date of the Change in Control, whichever is more
favorable to the Executive; provided, further, that if the Executive
becomes reemployed with another employer and is eligible to receive such
benefits under another employer's plans, COMSAT's obligations under this
Section 6(b)(2) shall be reduced to the extent that comparable benefits are
actually received by the Executive during the Benefits Continuation Period,
and any such benefits actually received by the Executive shall be reported
to COMSAT. In the event that the Executive is ineligible under the terms
of COMSAT's benefit plans to continue to be so covered, COMSAT shall
provide the Executive with substantially equivalent coverage through other
sources or will provide the Executive with a lump sum payment (determined
on a present value basis using the interest rate provided in section
8
1274(b)(2)(B) of the Code on the date of termination) in such amount that,
after all taxes on that amount, shall be equal to the cost to the Executive
of providing himself or herself such benefit coverage. At the termination
of the benefits coverage under the second preceding sentence, the Executive
and his dependents shall be entitled to continuation coverage pursuant to
section 4980B of the Code, sections 601-608 of the Employee Retirement
Income Security Act of 1974, as amended, and under any other applicable
law, to the extent required by such laws, as if the Executive had
terminated employment with COMSAT on the date such benefits coverage
terminates;
(3) COMSAT shall pay to the Executive any earned but unpaid portion
of the Executive's Base Salary as of the date of the Executive's
termination as in effect immediately prior to such date of termination is
given, plus all other amounts to which the Executive is entitled under any
compensation plan or practice of COMSAT at the time such payments are due;
(4) As of the date of the Executive's termination of employment, the
Executive shall be fully vested in his accrued benefits under the SERP and
the Executive's benefits shall be determined and shall be payable pursuant
to the terms of the SERP, subject to the following provisions,
notwithstanding any provision of the SERP to the contrary: (i) the
Executive's benefits shall be calculated without any reduction pursuant to
Section 7.1(a) or 5.2(b) of the SERP, (ii) the Executive's Benefits
Continuation Period shall be taken into account for the purpose of
determining the Executive's "Highest Average Earnings Period" under the
SERP, and the amounts payable to the Executive with respect to such periods
pursuant to Section 6(b)(1) shall constitute "Earnings" for such purposes,
provided that such amounts shall be treated as paid at the time such
amounts would have been paid had the Executive remained in the employ of
COMSAT through the end of the Employment Period; and;
(5) COMSAT shall pay the Executive any Gross-Up Payment in accordance
with the provisions of Section 7 hereof.
(c) COMSAT shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of COMSAT to expressly assume this Agreement and all
obligations of COMSAT hereunder in the same manner and to the same extent that
COMSAT would be so obligated if no such succession had taken place. Failure of
COMSAT to obtain such assumption prior to the effectiveness of any such
succession shall entitle the Executive to terminate his employment and receive
compensation from COMSAT in the same amount and on the same terms to which the
Executive would be entitled hereunder if he terminates his employment for Good
Reason during the Protected Period, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the date of the Executive's termination of employment.
9
(d) Notwithstanding anything contained in this Agreement, nothing in this
Section 6 shall in any way affect or create any implication with respect to any
of the provisions of this Agreement as they apply to the Executive's employment
(or termination of employment) prior to a Change in Control.
6. A NEW SECTION 6.1, AS SET FORTH BELOW, IS HEREBY ADDED TO THE EMPLOYMENT
AGREEMENT IMMEDIATELY FOLLOWING SECTION 6 THEREOF:
"6.1 Additional SERP Enhancement.
----------------------------
Notwithstanding anything contained herein, if a Change in Control of COMSAT
occurs and (i) if the Executive and Lockheed shall have negotiated in good faith
during the thirty (30) day period immediately following the Closing Date to
reach an agreement regarding the terms and conditions of the Executive's
employment following the Closing Date and the Executive and Lockheed shall have
been unable to reach such an agreement and there is a termination of the
Executive's employment with COMSAT either by the Executive or COMSAT or (ii) if
the Executive continues to be employed hereunder until the expiration of the
Employment Period, then in either event (i) or (ii) the Executive shall be
entitled to receive enhanced SERP benefits under Section 6(b)(4) of this
Agreement.
7. THIS AMENDMENT SHALL BE AND IS HEREBY INCORPORATED IN AND FORMS A PART OF
THE EMPLOYMENT AGREEMENT.
8. THIS AMENDMENT SHALL BE EFFECTIVE AS OF SEPTEMBER 18, 1998.
9. EXCEPT AS SET FORTH HEREIN, THE EMPLOYMENT AGREEMENT SHALL REMAIN IN FULL
FORCE AND EFFECT.
10
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to
Amended and Restated Employment Agreement as of September 18, 1998.
/s/ Xxxxxx X. Xxxxx
---------------------------------
Xxxxxx X. Xxxxx, Executive
COMSAT Corporation
By: /s/ Xxxxx X. Xxxxxxx
------------------------------
Xxxxx X. Xxxxxxx
President and Chief Executive Officer
11
