-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, j0w6jj+Jqy3xLSMdJHHigKV5ixOBoVfIlHTmbXTjRlqqC7M5dlfdX0cb5DGUclK8 wl0RK41sYTOJFa+C4JG85Q== 0000912057-95-005221.txt : 199507100000912057-95-005221.hdr.sgml : 19950710 ACCESSION NUMBER: 0000912057-95-005221 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 19950707 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMSAT CORP CENTRAL INDEX KEY: 0000022698 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATION SERVICES, NEC [4899] IRS NUMBER: 520781863 STATE OF INCORPORATION: DC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 033-59841 FILM NUMBER: 95552653 BUSINESS ADDRESS: STREET 1: 6560 ROCK SPRING DR CITY: BETHESDA STATE: MD ZIP: 20817 BUSINESS PHONE: 3012133000 MAIL ADDRESS: STREET 1: 6560 ROCK SPRING DRIVE CITY: BETHESDA STATE: MD ZIP: 20817 FORMER COMPANY: FORMER CONFORMED NAME: COMMUNICATIONS SATELLITE CORP /DE/ DATE OF NAME CHANGE: 19930719 S-3/A 1 S-3/A AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 7, 1995 REGISTRATION NO. 33-59841 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- AMENDMENT NO. 1 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------- COMSAT CAPITAL I, L.P. COMSAT CORPORATION (Exact Name of Registrant as (Exact Name of Registrant as Specified in Certificate of Specified in Charter) Limited Partnership) DELAWARE DISTRICT OF COLUMBIA (State or Other Jurisdiction of Incorporation or Organization) 52-1928675 52-0781863 (I.R.S. Employer Identification No.) 6560 ROCK SPRING DRIVE 6560 ROCK SPRING DRIVE BETHESDA, MD 20817 BETHESDA, MD 20817 (301) 214-3000 (301) 214-3000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrants' Principal Executive Offices) WARREN Y. ZEGER, ESQ. VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY COMSAT CORPORATION 6560 ROCK SPRING DRIVE BETHESDA, MD 20817 (301) 214-3000 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service) WITH COPIES TO: William P. O'Neill, Esq. Robert E. Buckholz, Jr., Esq. Crowell & Moring Sullivan & Cromwell 1001 Pennsylvania Avenue, N.W. 125 Broad Street Washington, D.C. 20004 New York, New York 10004 (202) 624-2500 (212) 558-4000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT. ---------------- If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box. / / If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / ---------------- THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED JULY 7, 1995 8,000,000 PREFERRED SECURITIES COMSAT CAPITAL I % CUMULATIVE MONTHLY INCOME PREFERRED SECURITIES (MIPS-SM-*) (LIQUIDATION PREFERENCE $25 PER PREFERRED SECURITY) GUARANTEED TO THE EXTENT SET FORTH HEREIN BY [LOGO] -------------- The % Cumulative Monthly Income Preferred Securities (the "Preferred Securities") representing the limited partner interests offered hereby are being issued by COMSAT Capital I, L.P., a limited partnership formed under the laws of the State of Delaware ("COMSAT Capital I"). COMSAT Corporation, a District of Columbia corporation ("COMSAT"), is the general partner in COMSAT Capital I (in such capacity, the "General Partner"). COMSAT Capital I exists for the sole purpose of issuing the Preferred Securities and using the proceeds thereof to purchase from COMSAT its % Junior Subordinated Deferrable Interest Debentures (the "Junior Subordinated Debentures"), having the terms described herein. The limited partner interests represented by the Preferred Securities will have a preference with respect to cash distributions and amounts payable on liquidation over the General Partner's interest in COMSAT Capital I. (CONTINUED ON NEXT PAGE) ---------------- SEE "RISK FACTORS" ON PAGE 6 OF THIS PROSPECTUS FOR CERTAIN INFORMATION RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES, INCLUDING THE PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS ON THE PREFERRED SECURITIES AND JUNIOR SUBORDINATED DEBENTURES MAY BE DEFERRED AND THE RELATED FEDERAL INCOME TAX CONSEQUENCES. ------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. --------------
INITIAL PUBLIC UNDERWRITING PROCEEDS TO OFFERING PRICE COMMISSION (1) COMSAT CAPITAL I (2)(3) --------------- ---------------- ------------------------ Per Preferred Security............................... $25.00 (2) $25.00 Total................................................ $200,000,000 (2) $200,000,000 - ---------------- (1) COMSAT Capital I and COMSAT have agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. See "Underwriting". (2) In view of the fact that the proceeds of the sale of the Preferred Securities will ultimately be invested in Junior Subordinated Debentures, the Underwriting Agreement provides that COMSAT will pay to the Underwriters, as compensation for their arranging the investment therein of such proceeds, $ per Preferred Security (or $ in the aggregate). See "Underwriting". (3) Expenses of the offering which are payable by COMSAT are estimated to be $580,000.
---------------- The Preferred Securities offered hereby are offered severally by the Underwriters, as specified herein, and subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. It is expected that delivery of the Preferred Securities will be made only in book-entry form through the facilities of DTC, New York, New York, on or about , 1995. - ---------------- *MIPS is a servicemark of Goldman, Sachs & Co. GOLDMAN, SACHS & CO. SMITH BARNEY INC. CS FIRST BOSTON PAINEWEBBER INCORPORATED --------- The date of this Prospectus is , 1995. (CONTINUED FROM PREVIOUS PAGE) Holders of the Preferred Securities will be entitled to receive cumulative cash distributions at an annual rate of % of the liquidation preference of $25 per Preferred Security, accruing from the date of original issuance and payable monthly in arrears on the last day of each calendar month of each year, commencing , 1995. See "Description of the Preferred Securities -- Dividends". The payment of dividends (but only if and to the extent declared out of moneys held by COMSAT Capital I and legally available therefor), and payments on liquidation of COMSAT Capital I or the redemption of Preferred Securities, as set forth below, are guaranteed by COMSAT to the extent described herein (the "Guarantee"). COMSAT's obligations under the Guarantee are subordinate and junior in right to all other liabilities of COMSAT (other than certain other guarantees). See "Description of the Guarantee". If COMSAT fails to make interest payments on the Junior Subordinated Debentures, COMSAT Capital I will have insufficient funds to pay dividends on the Preferred Securities. The Guarantee does not cover payment of dividends when COMSAT Capital I does not have sufficient funds to pay such dividends. COMSAT has the right under the Indenture (as defined herein) for the Junior Subordinated Debentures to extend the interest payment period from time to time on the Junior Subordinated Debentures to a period not exceeding 60 consecutive months, and, as a consequence, monthly dividends on the Preferred Securities would be deferred by COMSAT Capital I (but would continue to accrue with interest) during any such extended interest payment period. See "Risk Factors -- Option to Extend Interest Payment Period", "Description of the Preferred Securities -- Dividends" and "Description of the Junior Subordinated Debentures - -- Option to Extend Interest Payment Period". The Preferred Securities are redeemable at the option of COMSAT Capital I, in whole or in part, from time to time, on or after , 2000, at $25 per Preferred Security plus accrued and unpaid dividends thereon (whether or not earned or declared) to the date fixed for redemption (the "Redemption Price"). See "Description of the Preferred Securities -- Optional Redemption". Upon the repayment of the Junior Subordinated Debentures at maturity or upon any acceleration, earlier redemption or otherwise, the proceeds from such repayment will be applied to redeem the Preferred Securities. In addition, upon the occurrence of certain events arising from a change in law or a change in legal interpretation, the Preferred Securities are redeemable in whole at the Redemption Price at the option of the General Partner, or the General Partner may dissolve COMSAT Capital I and cause to be distributed to the holders of the Preferred Securities, on a pro rata basis, Junior Subordinated Debentures in lieu of any cash distribution. If the Junior Subordinated Debentures are distributed to the holders of the Preferred Securities, COMSAT will use its best efforts to have the Junior Subordinated Debentures listed on the New York Stock Exchange or on such other exchange as the Preferred Securities are then listed. The obligations of COMSAT under the Junior Subordinated Debentures are subordinate and junior in right of payment to Senior Indebtedness (as defined herein) of COMSAT. At March 31, 1995, Senior Indebtedness of COMSAT aggregated approximately $751 million. See "Description of the Preferred Securities -- Tax Event or Investment Company Event Redemption or Distribution" and "Description of the Junior Subordinated Debentures". In the event of the liquidation of COMSAT Capital I, the holders of the Preferred Securities will be entitled to receive for each Preferred Security a liquidation preference of $25 plus accrued and unpaid dividends thereon to the date of payment, subject to certain limitations, unless, in connection with such liquidation, Junior Subordinated Debentures are distributed to the holders of the Preferred Securities. See "Description of the Preferred Securities -- Liquidation Distribution Upon Dissolution". The Preferred Securities will be represented by a global certificate or certificates registered in the name of The Depository Trust Company ("DTC") or its nominee. Beneficial interests in the Preferred Securities will be shown on, and transfers thereof will be effected only through, records maintained by the participants in DTC. Except as described herein, Preferred Securities in certificated form will not be issued in exchange for the global certificate or certificates. See "Description of the Preferred Securities -- Book-Entry-Only Issuance -- The Depository Trust Company". Application has been made to list the Preferred Securities on the New York Stock Exchange. 2 AVAILABLE INFORMATION COMSAT is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). These reports, proxy statements and other information can be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, as well as at the following Regional Offices: 7 World Trade Center, New York, New York 10048; and 500 West Madison Street, Chicago, Illinois 60661. Copies of such material can be obtained from the Public Reference Section of the Commission at 450 Fifth Street at prescribed rates and can be inspected at the New York, Chicago and Pacific Stock Exchanges. This Prospectus does not contain all the information set forth in the Registration Statement on Form S-3 (together with all amendments and exhibits thereto, the "Registration Statement") filed by COMSAT Capital I and COMSAT with the Commission under the Securities Act of 1933, as amended (the "Securities Act"). Reference is made to the Registration Statement for further information with respect to COMSAT, COMSAT Capital I and the securities offered hereby. Statements contained or incorporated by reference herein concerning the provisions of documents are necessarily summaries of such documents, and each statement is qualified in its entirety by reference to the Registration Statement. No separate financial statements of COMSAT Capital I have been included herein. COMSAT and COMSAT Capital I do not consider that such financial statements would be material to holders of Preferred Securities because COMSAT Capital I is a newly formed special purpose entity, has no operating history, has no independent operations and is not engaged in, and does not propose to engage in, any activity other than as set forth below. COMSAT Capital I is a limited partnership formed under the laws of the State of Delaware. COMSAT is the sole general partner in COMSAT Capital I and, as of the date hereof, directly or indirectly beneficially owns all of COMSAT Capital I's partnership interests. See "COMSAT Capital I". -------------- INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE COMSAT's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 (including Amendment No. 1 thereto on Form 10-K/A), its Quarterly Report on Form 10-Q for the period ended March 31, 1995 (including Amendments No. 1 and No. 2 thereto on Form 10-Q/A), and its Current Report on Form 8-K filed on May 30, 1995, as filed with the Commission pursuant to the Exchange Act, are incorporated herein by reference. All documents filed by COMSAT pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of the securities offered hereby shall be deemed to be incorporated by reference into this Prospectus and to be a part hereof from the date of filing such documents. Any statement contained herein or in a document all or a portion of which is incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. COMSAT hereby undertakes to provide without charge to each person to whom a copy of this Prospectus has been delivered, on the written or oral request of any such person, including any beneficial owner, a copy of any or all of the documents referred to above which have been or may be incorporated in this Prospectus by reference, other than exhibits to such documents unless such exhibits are specifically incorporated by reference into the information that the Prospectus incorporates. Requests for such copies should be directed to Nancy E. Weber, Assistant Secretary of COMSAT, at 6560 Rock Spring Drive, Bethesda, MD 20817. Ms. Weber's telephone number is (301) 214-3643. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. 3 FOR FLORIDA RESIDENTS ONLY COMSAT is the U.S. signatory to the International Mobile Satellite Organization ("Inmarsat"), an international organization which operates the satellites of a global mobile communications satellite system. A total of 76 other nations, including Cuba, are members of Inmarsat. Pursuant to the Inmarsat Convention, which has the status of an international treaty, vessels registered to any country, including Cuba, must be provided access to satellite communications via COMSAT's earth stations, which results in incidental use by Cuban-registered vessels. Communications charges are then billed through the Inmarsat billing system, including to parties in Cuba. This is the extent of the business conducted by COMSAT with Cuba. This information is accurate as of the date hereof. Current information concerning COMSAT's business dealings with Cuba or with any person or affiliate located in Cuba may be obtained from the Division of Securities and Investor Protection of the Florida Department of Banking and Finance, the Capitol, Tallahassee, Florida 32399-0350, telephone (904) 488-9806. COMSAT CAPITAL I COMSAT Capital I is a limited partnership which was formed under the Delaware Revised Uniform Limited Partnership Act (the "Partnership Act") by filing a certificate of limited partnership with the Delaware Secretary of State on May 22, 1995. The initial partners in COMSAT Capital I are COMSAT, as general partner, and COMSAT SPV, Inc., a Delaware corporation and a wholly owned subsidiary of COMSAT ("COMSAT SPV"), as limited partner. Upon the issuance of the Preferred Securities, which securities represent limited partner interests in COMSAT Capital I, COMSAT SPV will cease to be a limited partner. The General Partner will contribute capital in an amount equal to at least 3% of the total capital contributions to COMSAT Capital I. COMSAT and COMSAT SPV entered into a limited partnership agreement dated as of May 22, 1995. Such limited partnership agreement will be amended and restated in its entirety (as so amended and restated, the "Limited Partnership Agreement") substantially in the form filed as an exhibit to the Registration Statement of which this Prospectus forms a part. COMSAT Capital I is managed by the General Partner and exists for the sole purpose of issuing the Preferred Securities and investing the proceeds thereof in the Junior Subordinated Debentures. The payment by COMSAT Capital I of dividends due on the Preferred Securities is solely dependent on its receipt of interest payments from COMSAT on the Junior Subordinated Debentures. The rights of the holders of the Preferred Securities, including economic rights, rights to information and voting rights, are set forth in the Limited Partnership Agreement and the Partnership Act. See "Description of the Preferred Securities". COMSAT Capital I has a term of approximately 99 years, unless earlier dissolved. COMSAT Capital I's registered office in the State of Delaware is c/o The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801, telephone: (302) 658-7581. All of COMSAT Capital I's business and affairs will be conducted by COMSAT, as the sole general partner. The principal place of business of COMSAT Capital I is c/o COMSAT Corporation, 6560 Rock Spring Drive, Bethesda, MD 20817, telephone number (301) 214-3000. COMSAT CORPORATION GENERAL COMSAT is a global provider of communications and entertainment services and products primarily operating in four business segments: International Communications, Mobile Communications, Entertainment and Technology Services. International Communications consists of COMSAT World Systems, which provides satellite communications services using the satellite system of the International Telecommunications Satellite Organization ("INTELSAT"), and COMSAT International Ventures, which operates and invests in telecommunications ventures internationally. Mobile Communications consists of COMSAT Mobile Communications, which provides satellite communications services using the satellite system of Inmarsat. Entertainment consists of COMSAT Entertainment Group, Inc. ("CEG"), comprising COMSAT Video Enterprises, Inc. and COMSAT's majority ownership interest in On Command Video Corporation, which 4 provide entertainment services to the hospitality industry throughout the United States and domestic video distribution services to a television network; the Denver Nuggets, a franchise of the National Basketball Association; and Beacon Communications Corp., a producer of theatrical films and television programming. Technology Services consists of COMSAT RSI, Inc., which designs, manufactures, and integrates satellite earth stations, advanced antennas and other turnkey systems for telecommunications, radar, air traffic control and military uses, and provides turnkey voice, video and data communications networks and products, and communication and information services worldwide, and COMSAT Laboratories, COMSAT's center for applied research and technology development. For the year ended December 31, 1994, the International Communications segment had revenues of $271 million and operating income of $89 million; the Mobile Communications segment had revenues of $194 million and operating income of $48 million; the Entertainment segment had revenues of $157 million and operating income of $11 million; and the Technology Services segment had revenues of $219 million and operating income of $15 million. COMSAT was incorporated in 1963 under District of Columbia law, as authorized by the Communications Satellite Act of 1962 (as amended, the "Satellite Act"). Effective June 1, 1993, COMSAT changed its corporate name from "Communications Satellite Corporation" to "COMSAT Corporation". COMSAT is not an agency or establishment of the U.S. Government. The U.S. Government has not invested funds in COMSAT, guaranteed funds invested in COMSAT or guaranteed the payment of dividends by COMSAT. Although COMSAT is a non-governmental publicly held corporation whose common stock is traded on the New York Stock Exchange, the Satellite Act governs certain aspects of COMSAT's structure, ownership and operations, including: three of COMSAT's 15 directors are appointed by the President of the United States with the advice and consent of the United States Senate; COMSAT's issuances of capital stock and borrowings of money must be authorized by the Federal Communications Commission (the "FCC"); there are limitations on the classes of persons that may hold shares of COMSAT's capital stock and on the number of shares a person or class of persons may hold; and, on matters that may affect the national interest and foreign policy of the United States, COMSAT's representatives to INTELSAT and Inmarsat receive instructions from the U.S. Government. Congress has reserved the right to amend the Satellite Act, and amendments, if any, could materially affect COMSAT. Under the Satellite Act, the International Maritime Satellite Telecommunications Act of 1978 and the Communications Act of 1934, as amended, COMSAT is subject to regulation by the FCC with respect to its COMSAT World Systems and COMSAT Mobile Communications services and the rates charged for those services. FCC decisions and policies have had and will continue to have a significant impact on COMSAT. The principal place of business of COMSAT is 6560 Rock Spring Drive, Bethesda, MD 20817, telephone number (301) 214-3000. RECENT DEVELOPMENTS On July 1, 1995, CEG acquired the Quebec Nordiques National Hockey League ("NHL") franchise for approximately $75 million. COMSAT plans to transfer the team to Denver, Colorado in time for the 1995-96 NHL season. The acquisition was financed with the proceeds of a bank loan, the principal of which must be repaid not later than January 1, 1997 (the "Bank Loan"). See "Use of Proceeds". On June 20, 1995, COMSAT and CEG announced the settlement of all pending claims of patent and copyright infringement brought by SpectraVision, Incorporated ("SpectraVision") in a lawsuit initiated in 1992. Under the disclosed terms of the settlement, COMSAT's majority-owned subsidiary On Command Video Corporation ("OCV") will provide certain rights under one of its patents to SpectraVision, and SpectraVision will provide to CEG and OCV certain rights to the use of SpectraVision's copyrighted computer communications protocols. COMSAT believes that this resolution will not have a material impact on COMSAT's financial position. 5 RISK FACTORS PROSPECTIVE PURCHASERS OF PREFERRED SECURITIES SHOULD CAREFULLY REVIEW THE INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS AND SHOULD PARTICULARLY CONSIDER THE FOLLOWING MATTERS: SUBORDINATION OF GUARANTEE AND JUNIOR SUBORDINATED DEBENTURES COMSAT's obligations under the Guarantee are subordinate and junior in right of payment to all other liabilities of COMSAT except for certain other guarantees that may be executed by COMSAT in respect of preferred securities of certain affiliates of COMSAT. The obligations of COMSAT under the Junior Subordinated Debentures described under "Description of the Junior Subordinated Debentures" are subordinate and junior in right of payment to Senior Indebtedness of COMSAT. At March 31, 1995, Senior Indebtedness of COMSAT aggregated approximately $751 million. There are no terms in the Preferred Securities, the Junior Subordinated Debentures or the Guarantee that limit COMSAT's ability to incur additional indebtedness, including indebtedness that ranks senior to the Junior Subordinated Debentures and the Guarantee. See "Description of the Guarantee -- Status of the Guarantee" and "Description of the Junior Subordinated Debentures -- Subordination". OPTION TO EXTEND INTEREST PAYMENT PERIOD COMSAT has the right under the Indenture to extend the interest payment period from time to time on the Junior Subordinated Debentures to a period not exceeding 60 consecutive months, and, as a consequence, monthly dividends on the Preferred Securities would be deferred by COMSAT Capital I (but would continue to accrue with interest thereon) during any such extended interest payment period. In the event that COMSAT exercises this right, COMSAT may not declare or pay dividends on, or redeem, purchase or acquire, any of its capital stock. Prior to the termination of any such extension period, COMSAT may further extend the interest payment period, provided that such extension period together with all such previous and further extensions thereof may not exceed 60 consecutive months. Upon the termination of any extension period COMSAT is required to pay all amounts then due and, upon such payment, COMSAT may select a new extension period, subject to the above requirements. In no event shall any extension period extend beyond the maturity of the Junior Subordinated Debentures. COMSAT Capital I and COMSAT believe that the extension of a payment period on the Junior Subordinated Debentures is unlikely. See "Description of the Preferred Securities -- Dividends" and "Description of the Junior Subordinated Debentures - -- Option to Extend Interest Payment Period". Should an extended interest payment period occur, COMSAT Capital I will continue to accrue income for United States federal income tax purposes which will be allocated, but not distributed, to holders of record of Preferred Securities. As a result, such a holder will include such interest in gross income for United States federal income tax purposes in advance of the receipt of cash, and will not receive the cash from COMSAT Capital I related to such income if such a holder disposes of his or her Preferred Securities prior to the record date for payment of dividends. See "United States Taxation -- Potential Extension of Interest Payment Period". TAX EVENT OR INVESTMENT COMPANY EVENT REDEMPTION OR DISTRIBUTION Upon the occurrence of a Tax Event (as defined herein) or Investment Company Event (as defined herein), the General Partner will elect to either (i) redeem the Preferred Securities in whole or (ii) dissolve COMSAT Capital I and cause Junior Subordinated Debentures to be distributed to the holders of the Preferred Securities in connection with the liquidation of COMSAT Capital I. In the case of a Tax Event, the General Partner may also elect to cause the Preferred Securities to remain outstanding and pay Additional Interest (as defined herein) on the Junior Subordinated Debentures. The Junior Subordinated Debentures will initially be issued at face value as a Global Security (as defined herein) and will be limited in aggregate principal amount to approximately $206.2 million, such amount being the sum of the aggregate stated liquidation preference of the Preferred Securities and the General Partnership Payment (as defined herein). See "Description of the Preferred Securities -- Tax Event or Investment Company Event Redemption or Distribution" and "Description of the Junior Subordinated Debentures -- General". 6 Under current United States federal income tax law, a distribution of the Junior Subordinated Debentures would not be a taxable event to holders of the Preferred Securities. Under a change in law, a change in legal interpretation or the other circumstances giving rise to a Tax Event or Investment Company Event, however, the dissolution could be a taxable event to holders of the Preferred Securities. In the judgment of special tax counsel to COMSAT and COMSAT Capital I, the series of events which would result in the recognition of taxable gain or loss by holders of the Preferred Securities, by reason of a dissolution of COMSAT Capital I in response to a Tax Event or Investment Company Event, is unlikely to occur. There can be no assurance in this regard, however. See "United States Taxation -- Receipt of Junior Subordinated Debentures Upon Liquidation or Merger of COMSAT Capital I". REPLACEMENT OF COMSAT CAPITAL I WITH A TRUST Subject to certain conditions, COMSAT Capital I has the right to merge, consolidate or otherwise amalgamate into a trust, thus replacing the limited partnership interests with beneficial interests in a trust. In the event such replacement is made, investors' rights in the successor securities will remain materially unchanged; however, investors will receive for tax reporting purposes a Form 1099 instead of a Form K-1. It is expected that the Preferred Securities and any such successor securities will be listed as equity securities on the New York Stock Exchange. Accordingly, the Preferred Securities are expected to trade "flat"; thus, purchasers will not pay and sellers will not receive any accrued and unpaid interest on the Preferred Securities or such successor securities that is not included in the trading price. However, if the replacement is made, for United States Federal income tax purposes, interest on the applicable successor securities will be included in income as it accrues (regardless of the method of accounting otherwise used), rather than when it is allocated or paid. See "Description of the Preferred Securities -- Merger, Consolidation or Amalgamation of COMSAT Capital I", "United States Taxation -- Income from Preferred Securities", "United States Taxation -- Taxation of Grantor Trust Interests" and "United States Taxation -- Potential Extension of Interest Payment Period". 7 SUMMARY FINANCIAL INFORMATION OF COMSAT The selected data presented below under the caption "Income Statement Data" for each of the years in the three-year period ended December 31, 1994 and "Balance Sheet Data" as of December 31, 1994 and 1993 have been derived from the consolidated financial statements of COMSAT, which have been audited by Deloitte & Touche LLP, independent auditors. The selected consolidated "Income Statement Data" for each of the years ended December 31, 1991 and 1990 and "Balance Sheet Data" as of December 31, 1992, 1991 and 1990 are derived from audited financial statements of COMSAT not included or incorporated by reference herein. The selected data presented below as of and for each of the quarters ended March 31, 1995 and 1994 have been derived from the consolidated financial statements of COMSAT, which have not been audited, but in the opinion of COMSAT such information includes all adjustments, consisting of normal or recurring adjustments, necessary for a fair presentation of such information. The consolidated financial statements as of December 31, 1994 and 1993, and for each of the years in the three-year period ended December 31, 1994, and the independent auditors' report thereon (which includes an explanatory paragraph referring to the change in its method of accounting for income taxes), and the condensed consolidated financial statements as of and for each of the quarters ended March 31, 1995 and 1994 and Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") for such periods, have been incorporated by reference herein. See "Incorporation of Certain Documents by Reference". The financial information presented below should be read in conjunction with such consolidated financial statements and the notes thereto and such MD&A.
QUARTER ENDED MARCH 31, (UNAUDITED) YEAR ENDED DECEMBER 31, ---------------------- ---------------------------------------------------------- 1995 1994 1994 1993 1992 1991 1990 ---------- ---------- ---------- ---------- ---------- ---------- ---------- (IN THOUSANDS, EXCEPT PER SHARE INFORMATION) INCOME STATEMENT DATA: Revenues...................... $ 207,883 $ 200,495 $ 826,899 $ 754,285 $ 688,093 $ 651,211 $ 563,462 Operating expenses............ 178,126 163,621 676,648 602,705 583,111 508,499 563,980 Operating income (loss)....... 29,757 36,874 150,251 151,580 104,982 142,712 (518) Income (loss) before cumulative effect of changes in accounting principles..... 14,573 20,181 77,642 82,469 53,292 81,014 (9,045) Cumulative effect of changes in accounting principles..... -- -- -- 1,925 -- (26,607) -- Net income (loss)............. 14,573 20,181 77,642 84,394 53,292 54,407 (9,045) Dividends paid................ 9,178 7,446 33,547 30,410 27,837 25,867 25,219 Primary earnings (loss) per share........................ 0.31 0.43 1.64 1.79 1.16 1.22 (0.21) Dividends paid per share...... 0.195 0.185 0.76 0.74 0.70 0.67 0.66 BALANCE SHEET DATA: Total assets.................. 2,017,219 1,975,992 1,975,992 1,773,513 1,654,985 1,469,516 1,300,683 Long-term debt................ 569,440 515,542 515,542 410,550 496,804 391,308 383,695 Stockholders' equity.......... 837,713 826,916 826,916 763,440 702,292 657,783 619,150
8 RATIO OF EARNINGS TO FIXED CHARGES OF COMSAT
QUARTER ENDED MARCH 31, YEAR ENDED DECEMBER 31, ---------- ------------------------------- 1995 1994 1994 1993 1992 1991 1990(2) ---- ---- ---- ---- ---- ---- ------- Ratio of Earnings to Fixed Charges: (1)........... 2.4 3.4 3.4 3.7 2.6 3.1 -- - -------------- (1) For purposes of calculating this ratio, fixed charges consist of interest expense including capitalized interest, the interest expense of an unconsolidated majority-owned investment in 1990, 1991 and 1992, and an estimate of the interest factor of rental expense. Earnings consist of pretax income (loss) from continuing operations before fixed charges, the losses and undistributed earnings of equity investments and the amortization of capitalized interest. During the periods presented, COMSAT did not have any preferred stock issued or outstanding. Accordingly, the ratio of earnings to combined fixed charges and preferred stock dividends is not presented. (2) 1990 earnings were inadequate to cover fixed charges, as such terms are defined in Item 503(d) of Regulation S-K, with a coverage deficiency of $23,726,000. However, 1990 earnings include a $97,576,000 nonrecurring charge related to the restructuring of the video entertainment business unit.
USE OF PROCEEDS The proceeds from the sale of the Preferred Securities will be invested in the Junior Subordinated Debentures issued pursuant to the Indenture described herein. The proceeds from the sale of the Junior Subordinated Debentures will be used by COMSAT to reduce outstanding commercial paper (at June 30, 1995, totaling approximately $131.5 million, at an average interest cost of approximately 6%) and to repay the Bank Loan, which must be repaid not later than January 1, 1997 and has a current interest rate of 9%. See "COMSAT Corporation -- Recent Developments". CAPITALIZATION OF COMSAT The following table sets forth the consolidated short-term obligations and capitalization of COMSAT as of March 31, 1995, and as adjusted to reflect the application of the estimated net proceeds from the sale of the Preferred Securities. See "Use of Proceeds".
MARCH 31, 1995 ----------------------- ACTUAL AS ADJUSTED --------- ------------ (IN MILLIONS) Commercial paper and current maturities of long-term obligations......................... $ 149 $ 24 --------- ------------ --------- ------------ Long-term debt........................................................................... $ 569 $ 569 --------- ------------ Company-obligated mandatorily redeemable preferred securities issued by subsidiary....... 0 200 --------- ------------ Stockholders' equity: Common stock........................................................................... 315 315 Preferred stock........................................................................ 0 0 Retained earnings...................................................................... 538 538 Treasury stock (at cost)............................................................... (12) (12) Other.................................................................................. (3) (3) --------- ------------ Total stockholders' equity........................................................... 838 838 --------- ------------ Total capitalization (excluding short-term obligations).............................. $ 1,407 $ 1,607 --------- ------------ --------- ------------
9 DESCRIPTION OF THE PREFERRED SECURITIES SET FORTH BELOW IS A SUMMARY OF ALL MATERIAL TERMS OF THE PREFERRED SECURITIES. THE SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO, AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, THE LIMITED PARTNERSHIP AGREEMENT, A COPY OF WHICH IS FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART. CAPITALIZED TERMS NOT OTHERWISE DEFINED HEREIN HAVE THE MEANINGS ASSIGNED TO THEM IN THE LIMITED PARTNERSHIP AGREEMENT. GENERAL All of the partnership interests in COMSAT Capital I, other than the Preferred Securities offered hereby, are owned directly or indirectly by COMSAT. The Limited Partnership Agreement authorizes and creates the Preferred Securities, which represent limited partner interests in COMSAT Capital I. The limited partner interests represented by the Preferred Securities will have a preference with respect to dividends and amounts payable on liquidation over the General Partner's interest in COMSAT Capital I. The Limited Partnership Agreement does not permit the issuance of any other limited partnership interests or preferred securities of COMSAT Capital I, or the incurrence of any indebtedness by COMSAT Capital I. DIVIDENDS The dividends payable on each Preferred Security will be fixed at a rate per annum of % of the stated liquidation preference of $25 per Preferred Security. Dividends in arrears will bear interest thereon at the rate per annum of % thereof. The term "dividends" as used herein includes any such interest payable unless otherwise stated. The amount of dividends payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. Dividends on the Preferred Securities will be cumulative, will accrue from the date of initial issuance and will be payable monthly in arrears, on the last day of each calendar month of each year, commenc- ing , 1995, when, as and if available and determined to be so payable by COMSAT, as the General Partner, except as otherwise described below. COMSAT has the right under the Indenture to extend the interest payment period from time to time on the Junior Subordinated Debentures to a period not exceeding 60 consecutive months, and, as a consequence, monthly dividends on the Preferred Securities would be deferred by COMSAT Capital I (but would continue to accrue with interest) during any such extended interest payment period. In the event that COMSAT exercises this right, COMSAT may not declare or pay dividends on, or redeem, purchase or acquire, any of its capital stock. Prior to the termination of any such extension period, COMSAT may further extend the interest payment period, provided that such extension period together with all such previous and further extensions thereof may not exceed 60 consecutive months. Upon the termination of any extension period COMSAT is required to pay all amounts then due and, upon such payment, COMSAT may select a new extension period, subject to the above requirements. In no event shall any extension period extend beyond the maturity of the Junior Subordinated Debentures. See "Description of the Junior Subordinated Debentures -- Interest" and "-- Option to Extend Interest Payment Period". Dividends on the Preferred Securities must be declared monthly and paid on the dates payable to the extent that COMSAT Capital I has (i) funds legally available for the payment of such dividends and (ii) cash on hand sufficient to permit such payments. It is anticipated that COMSAT Capital I's earnings available for distribution to the holders of the Preferred Securities will be limited to payments under the Junior Subordinated Debentures in which COMSAT Capital I will invest the proceeds from the issuance and sale of the Preferred Securities. See "Description of the Junior Subordinated Debentures". The payment of dividends, to the extent declared by COMSAT Capital I out of moneys held by COMSAT Capital I and legally available therefor, is guaranteed by COMSAT as set forth under "Description of the Guarantee". Dividends on the Preferred Securities will be payable to the holders thereof as they appear on the books and records of COMSAT Capital I on the relevant record dates, which will be one Business Day (as defined below) prior to the relevant payment dates. Subject to any applicable laws and regulations and 10 the provisions of the Limited Partnership Agreement, each such payment will be made as described under "Book-Entry-Only Issuance -- The Depository Trust Company" below. In the event the Preferred Securities shall not continue to remain in book-entry-only form, the General Partner shall have the right to select relevant record dates which shall be more than one Business Day prior to the relevant payment dates. In the event that any date on which dividends are payable on the Preferred Securities is not a Business Day, then payment of the dividend payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. A "Business Day" shall mean any day other than a day on which banking institutions in The City of New York are authorized or required by law or executive order to close. COMSAT Capital I shall be required to declare and pay additional dividends on the Preferred Securities upon any dividend arrearages in respect of the Preferred Securities in order to provide, in effect, monthly compounding on such dividend arrearages. OPTIONAL REDEMPTION The Preferred Securities are redeemable at the option of COMSAT Capital I, in whole or in part, from time to time, on or after , 2000, upon not less than 30 nor more than 60 days' notice, at the Redemption Price. In the event that fewer than all the outstanding Preferred Securities are to be so redeemed, the Preferred Securities to be redeemed will be selected as described under "Book-Entry-Only Issuance -- The Depository Trust Company" below. If a partial redemption would result in the delisting of the Preferred Securities, COMSAT Capital I may only redeem the Preferred Securities in whole. TAX EVENT OR INVESTMENT COMPANY EVENT REDEMPTION OR DISTRIBUTION If a Tax Event shall occur and be continuing, the General Partner shall elect to (i) redeem the Preferred Securities in whole (and not in part), upon not less than 30 nor more than 60 days' notice at the Redemption Price within 90 days following the occurrence of such Tax Event; provided, that, if at the time there is available to the General Partner the opportunity to eliminate, within such 90-day period, the Tax Event by taking some ministerial action, such as filing a form or making an election, or pursuing some other similar reasonable measure, which has no adverse effect on COMSAT Capital I or COMSAT, the General Partner will pursue such measure in lieu of redemption, (ii) dissolve COMSAT Capital I and cause Junior Subordinated Debentures to be distributed to the holders of the Preferred Securities in liquidation of COMSAT Capital I, or (iii) cause the Preferred Securities to remain outstanding and pay Additional Interest on the Junior Subordinated Debentures. See "Description of the Junior Subordinated Debentures -- Additional Interest". "Tax Event" means that the General Partner shall have obtained an opinion of nationally recognized independent tax counsel experienced in such matters to the effect that, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, (b) any amendment to or change in an interpretation or application of such laws or regulations by any legislative body, court, governmental agency or regulatory authority (including the enactment of any legislation and the publication of any judicial decision or regulatory determination on or after the date of this Prospectus) or (c) any interpretation or pronouncement that provides for a position with respect to such laws or regulations that differs from the generally accepted position on the date of this Prospectus, which amendment or change is effective or which interpretation or pronouncement is announced on or after the date of this Prospectus, there is more than an insubstantial risk that (i) COMSAT Capital I is subject to federal income tax with respect to interest received on the Junior Subordinated Debentures, (ii) interest payable to COMSAT Capital I on the Junior Subordinated Debentures will not be deductible for federal income tax purposes or (iii) COMSAT Capital I is subject to more than a DE MINIMIS amount of other taxes, duties or other governmental charges. 11 If an Investment Company Event shall occur and be continuing, the General Partner shall elect to either (i) redeem the Preferred Securities in whole (and not in part), upon not less than 30 nor more than 60 days' notice at the Redemption Price within 90 days following the occurrence of such Investment Company Event; provided, that, if at the time there is available to the General Partner the opportunity to eliminate, within such 90-day period, the Investment Company Act Event by taking some ministerial action, such as filing a form or making an election, or pursuing some other similar reasonable measure, which has no adverse effect on COMSAT Capital I or COMSAT, the General Partner will pursue such measure in lieu of redemption, or (ii) dissolve COMSAT Capital I and cause the Junior Subordinated Debentures to be distributed to the holders of the Preferred Securities in liquidation of COMSAT Capital I, within 90 days following the occurrence of such Investment Company Event. "Investment Company Event" means the occurrence of a change in law or regulation or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law") to the effect that COMSAT Capital I is or will be considered an "investment company" which is required to be registered under the Investment Company Act of 1940, as amended (the "1940 Act"), which Change in 1940 Act Law becomes effective on or after the date of this Prospectus; provided, that no Investment Company Event shall be deemed to have occurred if the General Partner obtains a written opinion of nationally recognized independent counsel experienced in practice under the 1940 Act to the effect that, notwithstanding such Change in 1940 Act Law, COMSAT Capital I is not required to be registered as an "investment company" within the meaning of the 1940 Act. After the date fixed for any distribution of Junior Subordinated Debentures upon dissolution of COMSAT Capital I, (i) the Preferred Securities will no longer be deemed to be outstanding, (ii) The Depository Trust Company (the "Depository" or "DTC") or its nominee, as the record holder of the Preferred Securities, will receive a registered global certificate or certificates representing the Junior Subordinated Debentures to be delivered upon such distribution and (iii) any certificates representing Preferred Securities not held by DTC or its nominee will be deemed to represent Junior Subordinated Debentures having a principal amount equal to the aggregate of the stated liquidation preference of such Preferred Securities, with accrued and unpaid interest equal to the amount of accrued and unpaid dividends on such Preferred Securities, until such certificates are presented to COMSAT or its agent for transfer or reissuance. MANDATORY REDEMPTION Upon the repayment of the Junior Subordinated Debentures at maturity or upon any acceleration, earlier redemption or otherwise, the proceeds from such repayment will be applied to redeem the Preferred Securities, in whole, upon not less than 30 nor more than 60 days' notice, at the Redemption Price. REDEMPTION PROCEDURES COMSAT Capital I may not redeem fewer than all the outstanding Preferred Securities unless all accrued and unpaid dividends have been paid on all Preferred Securities for all monthly dividend periods terminating on or prior to the date of redemption. If COMSAT Capital I gives a notice of redemption in respect of Preferred Securities (which notice will be irrevocable) and all of the Preferred Securities are in book-entry form, then, by 12:00 noon, New York time, on the redemption date, COMSAT Capital I will irrevocably deposit with DTC funds sufficient to pay the applicable Redemption Price and will give DTC irrevocable instructions and authority to pay the Redemption Price to the holders of the Preferred Securities. See "Book-Entry-Only Issuance -- The Depository Trust Company". If all of the Preferred Securities are not in book-entry form, COMSAT Capital I may pay the Redemption Price to a holder of Preferred Securities by check upon presentation by a holder of the certificate representing such Preferred Securities. If notice of redemption shall have been given and funds are deposited as required, then upon the date of such deposit, all rights of holders of such Preferred Securities so called for redemption will cease, except the right of the holders of such Preferred Securities to receive the Redemption Price, but without interest on such Redemption Price. In 12 the event that any date fixed for redemption of Preferred Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day. In the event that payment of the Redemption Price in respect of Preferred Securities is improperly withheld or refused and not paid either by COMSAT Capital I or by COMSAT pursuant to the Guarantee described under "Description of the Guarantee", dividends on such Preferred Securities will continue to accrue at the then applicable rate, from the original redemption date to the date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price. Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), COMSAT or its subsidiaries may at any time and from time to time purchase outstanding Preferred Securities by tender, in the open market or by private agreement. LIQUIDATION DISTRIBUTION UPON DISSOLUTION In the event of any voluntary or involuntary dissolution, winding-up or termination (other than any termination within the meaning of section 708(b)(1)(B) of the Code (as defined herein) or equivalent provision of subsequent law, which termination does not constitute a termination of COMSAT Capital I for any other purpose) of COMSAT Capital I, the holders of the Preferred Securities at the time will be entitled to receive out of the assets of COMSAT Capital I available for distribution to partners after satisfaction of liabilities of creditors, before any distribution of assets is made to the General Partner, an amount equal to, in the case of holders of Preferred Securities, the aggregate of the stated liquidation preference of $25 per Preferred Security and accrued and unpaid dividends thereon to the date of payment (the "Liquidation Distribution"), unless, in connection with such dissolution, winding-up or termination, Junior Subordinated Debentures in a principal amount equal to the aggregate liquidation preference of the Preferred Securities have been distributed on a pro rata basis to the holders of the Preferred Securities. Pursuant to the Limited Partnership Agreement, COMSAT Capital I shall be dissolved and its affairs shall be wound up: (i) on December 31, 2094, the expiration of the term of COMSAT Capital I, (ii) upon the bankruptcy of the General Partner, (iii) upon the assignment by the General Partner of its entire interest in COMSAT Capital I when the assignee is not admitted to COMSAT Capital I as a general partner of COMSAT Capital I in accordance with the Limited Partnership Agreement, or the filing of a certificate of dissolution or its equivalent with respect to the General Partner, or the revocation of the General Partner's charter and the expiration of 90 days after the date of notice to the General Partner of revocation without a reinstatement of its charter, or any other event occurs which causes the General Partner to cease to be a general partner of COMSAT Capital I under the Partnership Act, unless the business of COMSAT Capital I is continued by a majority in interest of the remaining partners of COMSAT Capital I in accordance with the Partnership Act, (iv) in accordance with the provisions of the Preferred Securities, (v) upon the entry of a decree of a judicial dissolution or (vi) upon the written consent of all partners of COMSAT Capital I. MERGER, CONSOLIDATION OR AMALGAMATION OF COMSAT CAPITAL I COMSAT Capital I may not, and COMSAT will not permit COMSAT Capital I to, consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other body, except as described below. COMSAT Capital I may, without the consent of the holders of the Preferred Securities, consolidate, amalgamate, merge with or into, or be replaced by, a limited partnership, a limited liability company or a trust organized as such under the laws of any state of the United States of America or of the District of Columbia; provided, that (i) such successor entity either (x) expressly assumes all of the obligations of COMSAT Capital I under the Preferred Securities or (y) substitutes for the Preferred Securities other securities having substantially the same terms as the Preferred Securities (the "Successor Securities") so long as the Successor Securities rank, with respect to participation in the profits, dividends and 13 assets of the successor entity, at least as high as the Preferred Securities rank with respect to participation in the profits, dividends and assets of COMSAT Capital I, (ii) COMSAT expressly acknowledges such successor entity as the holder of the Junior Subordinated Debentures, (iii) the Preferred Securities or any Successor Securities are listed, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or other organization on which the Preferred Securities are then listed, (iv) such merger, consolidation, amalgamation or replacement does not cause the Preferred Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization, (v) such merger, consolidation, amalgamation or replacement does not adversely affect the powers, preferences and other special rights of the holders of the Preferred Securities (including any Successor Securities) in any material respect, (vi) such successor entity has a purpose substantially identical to that of COMSAT Capital I, (vii) COMSAT has provided a guarantee to the holders of the Successor Securities with respect to such successor entity having substantially the same terms as the Guarantee, and (viii) prior to such merger, consolidation, amalgamation or replacement, COMSAT has received an opinion of nationally recognized independent counsel to COMSAT Capital I experienced in such matters to the effect that (x) such successor entity will not be treated as an association taxable as a corporation for federal income tax purposes, (y) following such merger, consolidation, amalgamation or replacement, neither COMSAT nor such successor entity will be required to register as an investment company under the 1940 Act and (z) such merger, consolidation, amalgamation or replacement will not adversely affect the limited liability of the holders of the Preferred Securities. See "Risk Factors -- Replacement of COMSAT Capital I with a Trust". Subject to certain conditions, COMSAT Capital I has the right to merge, consolidate or otherwise amalgamate into a trust, thus replacing the limited partnership interests in COMSAT Capital I with beneficial interests in a trust. In the event such replacement is made, investors' rights in the Successor Securities will remain materially unchanged; however, investors will receive for tax reporting purposes a Form 1099 instead of a Form K-1. For a discussion of tax consequences to holders of Successor Securities, see "United States Taxation - -- Income from Preferred Securities", "United States Taxation -- Taxation of Grantor Trust Interests" and "United States Taxation -- Potential Extension of Interest Payment Period". In determining whether to replace COMSAT Capital I with a trust, COMSAT Capital I will balance the potential cost savings of distributing Forms 1099 instead of Forms K-1 to investors against the administrative costs, including trustees' fees and transaction costs, associated with such replacement. VOTING RIGHTS Except as provided below and under "Description of the Guarantee -- Amendments and Assignment" and as otherwise required by law and the Limited Partnership Agreement, the holders of the Preferred Securities will have no voting rights. If (i) COMSAT Capital I fails to pay dividends in full on the Preferred Securities for 18 consecutive months; (ii) an Event of Default (as defined in the Indenture) occurs and is continuing on the Junior Subordinated Debentures; or (iii) COMSAT is in default on any of its payment or other obligations under the Guarantee (as described under "Description of the Guarantee -- Certain Covenants of COMSAT"), then the holders of the Preferred Securities will be entitled by the majority vote of such holders to appoint and authorize a special representative of COMSAT Capital I and the limited partners (a "Special Representative") to enforce COMSAT Capital I's creditor rights under the Indenture and the Junior Subordinated Debentures, to enforce the rights of the holders of the Preferred Securities under the Guarantee and to enforce the rights of the holders of the Preferred Securities to receive dividends on the Preferred Securities. The Special Representative shall not be admitted as a general partner in COMSAT Capital I or otherwise be deemed to be a general partner in COMSAT Capital I and shall have no liability for the debts, obligations or liabilities of COMSAT Capital I. Notwithstanding the appointment of any such Special Representative upon COMSAT Capital I's failure to pay dividends in full for 18 consecutive months, COMSAT shall continue as General Partner and shall retain all rights under the Indenture, including the right to extend the interest payment period from time to time to a period not exceeding 60 consecutive months as provided under "Description of the Junior Subordinated Debentures -- Option 14 to Extend Interest Payment Period". For purposes of determining whether COMSAT Capital I has failed to pay dividends in full for 18 consecutive months, dividends shall be deemed to remain in arrears, notwithstanding any payments in respect thereof, until full cumulative dividends have been or contemporaneously are paid with respect to all monthly dividend periods terminating on or prior to the date of payment of such full cumulative dividends. Not later than 30 days after such right to appoint a Special Representative arises, the General Partner will convene a meeting for the purpose of appointing a Special Representative. If the General Partner fails to convene such meeting within such 30-day period, the holders of 10% in liquidation preference of the outstanding Preferred Securities will be entitled to convene such meeting. The provisions of the Limited Partnership Agreement relating to the convening and conduct of the meetings of the partners will apply with respect to any such meeting. Any Special Representative so appointed shall cease to be a Special Representative of COMSAT Capital I and the limited partners if COMSAT Capital I (or COMSAT pursuant to the Guarantee) shall have paid in full all accrued and unpaid dividends on the Preferred Securities or such default or breach, as the case may be, shall have been cured, and COMSAT, in its capacity as the General Partner, shall continue the business of COMSAT Capital I without dissolution. If any proposed amendment to the Limited Partnership Agreement provides for, or the General Partner otherwise proposes to effect, (i) any action which would adversely affect the powers, preferences or special rights of the Preferred Securities, whether by way of amendment to the Limited Partnership Agreement or otherwise (including, without limitation, the authorization or issuance of any limited partner interests in COMSAT Capital I other than the Preferred Securities), or (ii) the dissolution, winding-up or termination of COMSAT Capital I, other than (x) in connection with the distribution of Junior Subordinated Debentures upon the occurrence of a Tax Event or Investment Company Event or (y) as described under "Merger, Consolidation or Amalgamation of COMSAT Capital I" above, then the holders of outstanding Preferred Securities will be entitled to vote on such amendment or proposal of the General Partner (but not on any other amendment or proposal), and such amendment or proposal shall not be effective except with the approval of the holders of 66 2/3% in liquidation preference of such outstanding Preferred Securities having a right to vote on the matter; provided, however, that no such approval shall be required if the dissolution, winding-up or termination of COMSAT Capital I is proposed or initiated pursuant to the Limited Partnership Agreement upon the initiation of proceedings or after proceedings have been initiated for the dissolution, winding-up, liquidation or termination of COMSAT. So long as any Junior Subordinated Debentures are held by COMSAT Capital I, the General Partner shall not (i) direct the time, method and place of conducting any proceeding for any remedy available to the Trustee (as defined herein), or executing any trust or power conferred on the Trustee with respect to the Junior Subordinated Debentures, (ii) waive any past default which is waivable under Section 513 of the Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of the Junior Subordinated Debentures shall be due and payable or (iv) consent to any amendment, modification or termination of the Indenture, where such consent shall be required, without, in each case, obtaining the prior approval of the holders of at least 66 2/3% in liquidation preference of the Preferred Securities; provided, however, that where a consent under the Indenture would require the consent of each holder affected thereby, no such consent shall be given by the General Partner without the prior consent of each holder of Preferred Securities. The General Partner shall not revoke any action previously authorized or approved by a vote of the Preferred Securities without the approval of the holders of at least 66 2/3% in liquidation preference of the Preferred Securities. The General Partner shall notify all holders of the Preferred Securities of any notice of default received from the Trustee with respect to the Junior Subordinated Debentures. Any required approval of holders of Preferred Securities may be given at a separate meeting of holders of Preferred Securities convened for such purpose, at a meeting of all of the partners in COMSAT Capital I or pursuant to written consent. COMSAT Capital I will cause a notice of any meeting at which holders of Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such holders is to be taken, to be mailed to each holder of record of Preferred Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action 15 is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the holders of Preferred Securities will be required for COMSAT Capital I to redeem and cancel Preferred Securities in accordance with the Limited Partnership Agreement. Notwithstanding that holders of Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Preferred Securities that are owned by COMSAT or by any entity owned more than 50% by COMSAT, or by any entity controlled by COMSAT, either directly or indirectly, shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if they were not outstanding. Holders of the Preferred Securities will have no rights to remove or replace the General Partner. BOOK-ENTRY-ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY DTC will act as securities depository for the Preferred Securities. The Preferred Securities will be issued only as fully-registered securities registered in the name of Cede & Co. (DTC's nominee). One or more fully-registered global Preferred Security certificates will be issued, representing in the aggregate the total number of Preferred Securities, and will be deposited with, DTC. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities that its participants ("Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations ("Direct Participants"). DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc. (the "New York Stock Exchange"), the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The rules applicable to DTC and its Participants are on file with the Commission. Purchases of Preferred Securities within the DTC system must be made by or through Direct Participants, which will receive a credit for the Preferred Securities on DTC's records. The ownership interest of each actual purchaser of each Preferred Security ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchases, but Beneficial Owners are expected to receive written confirmations providing details of the transactions, as well as periodic statements of their holdings, from the Direct or Indirect Participants through which the Beneficial Owners purchased Preferred Securities. Transfers of ownership interests in the Preferred Securities are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Preferred Securities, except in the event that use of the book-entry system for the Preferred Securities is discontinued. DTC has no knowledge of the actual Beneficial Owners of the Preferred Securities; DTC's records reflect only the identity of the Direct Participants to whose accounts such Preferred Securities are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. 16 Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to Cede & Co. If less than all of the Preferred Securities are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such series to be redeemed. Although voting with respect to the Preferred Securities is limited, in those cases where a vote is required, neither DTC nor Cede & Co. will itself consent or vote with respect to Preferred Securities. Under its usual procedures, DTC would mail an Omnibus Proxy to COMSAT Capital I as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Preferred Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). Dividend payments on the Preferred Securities will be made to DTC. DTC's practice is to credit Direct Participants' accounts on the relevant payment date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payments on such payment date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices and will be the responsibility of such Participant and not of DTC, COMSAT Capital I or COMSAT, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of dividends to DTC is the responsibility of COMSAT Capital I, disbursement of such payments to Direct Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners is the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Preferred Securities at any time by giving reasonable notice to COMSAT Capital I. Under such circumstances, in the event that a successor securities depository is not obtained, Preferred Security certificates are required to be printed and delivered. Additionally, COMSAT Capital I (with the consent of COMSAT) may decide to discontinue use of the system of book-entry transfers through DTC (or a successor depository). In that event, certificates for the Preferred Securities will be printed and delivered. In each of the above circumstances, the General Partner will appoint a paying agent with respect to the Preferred Securities. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that COMSAT and COMSAT Capital I believe to be reliable, but neither COMSAT nor COMSAT Capital I takes responsibility for the accuracy thereof. REGISTRAR AND TRANSFER AGENT The First National Bank of Chicago will act as registrar and transfer agent for the Preferred Securities. Registration of transfers of Preferred Securities will be effected without charge by or on behalf of COMSAT Capital I, but upon payment (with the giving of such indemnity as COMSAT Capital I or COMSAT may require) in respect of any tax or other government charges which may be imposed in relation to it. COMSAT Capital I will not be required to register or cause to be registered the transfer of Preferred Securities after such Preferred Securities have been called for redemption. MISCELLANEOUS Application has been made to list the Preferred Securities on the New York Stock Exchange. The General Partner is authorized and directed to conduct its affairs and to operate COMSAT Capital I in such a way that COMSAT Capital I will not be deemed to be an "investment company" required to be registered under the 1940 Act or taxed as a corporation for federal income tax purposes, 17 and so that the Junior Subordinated Debentures will be treated as indebtedness of COMSAT for federal income tax purposes. In this connection, the General Partner is authorized to take any action, not inconsistent with applicable law, the certificate of limited partnership or the Limited Partnership Agreement, that the General Partner determines in its discretion to be necessary or desirable for such purposes, as long as such action does not adversely affect the interests of the holders of the Preferred Securities. Holders of the Preferred Securities have no preemptive rights. GOVERNING LAW COMSAT Capital I is a limited partnership organized in Delaware under the Delaware Revised Uniform Limited Partnership Act. The Limited Partnership Agreement and the Preferred Securities will be governed by Delaware law. 18 DESCRIPTION OF THE GUARANTEE SET FORTH BELOW IS A SUMMARY OF ALL MATERIAL TERMS OF THE GUARANTEE WHICH WILL BE EXECUTED AND DELIVERED BY COMSAT FOR THE BENEFIT OF THE HOLDERS FROM TIME TO TIME OF PREFERRED SECURITIES. THE SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT IN ALL RESPECTS TO THE PROVISIONS OF, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, THE GUARANTEE, WHICH IS FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS FORMS A PART. GENERAL Pursuant to the Guarantee, COMSAT will irrevocably and unconditionally agree, to the extent set forth herein, to pay in full, to the holders of the Preferred Securities, the Guarantee Payments (as defined below), as and when due, regardless of any defense, right of set-off or counterclaim which COMSAT Capital I may have or assert. The following payments with respect to the Preferred Securities, to the extent not paid by COMSAT Capital I (the "Guarantee Payments"), will be subject to the Guarantee (without duplication): (i) any accrued and unpaid dividends which are required to be paid on the Preferred Securities, to the extent such dividends have been declared by COMSAT Capital I out of moneys held by COMSAT Capital I and legally available therefor, (ii) the Redemption Price, payable out of funds legally available therefor with respect to any Preferred Securities called for redemption by COMSAT Capital I and (iii) upon a liquidation of COMSAT Capital I, the lesser of (a) the aggregate of the liquidation preference and all accrued and unpaid dividends on the Preferred Securities to the date of payment and (b) the amount of assets of COMSAT Capital I remaining available for distribution to holders of Preferred Securities in liquidation of COMSAT Capital I, except in the event that a Tax Event or an Investment Company Event has occurred and COMSAT has elected to dissolve COMSAT Capital I and cause the Junior Subordinated Debentures to be distributed to the holders of the Preferred Securities in liquidation of COMSAT Capital I as provided in the Limited Partnership Agreement. COMSAT's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by COMSAT to the holders of Preferred Securities or by causing COMSAT Capital I to pay such amounts to such holders. If COMSAT fails to make interest payments on the Junior Subordinated Debentures purchased by COMSAT Capital I, COMSAT Capital I will have insufficient funds to pay dividends on the Preferred Securities. The Guarantee does not cover payment of dividends or the Redemption Price when COMSAT Capital I does not have sufficient funds to pay such dividends or Redemption Price. Because the Guarantee is a guarantee of payment and not of collection, holders of the Preferred Securities may proceed directly against COMSAT as guarantor, rather than having to proceed against COMSAT Capital I before attempting to collect from COMSAT, and COMSAT waives any right or remedy to require that any action be brought against COMSAT Capital I or any other person or entity before proceeding against COMSAT. Such obligations will not be discharged except by payment of the Guarantee Payments in full. For a discussion of certain effects of the Guarantee, see "Effects of Obligations Under the Junior Subordinated Debentures and the Guarantee". CERTAIN COVENANTS OF COMSAT In the Guarantee, COMSAT will covenant that, so long as any Preferred Securities remain outstanding, COMSAT will not declare or pay any dividend on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock (other than as a result of a reclassification of capital stock or the exchange or conversion of one class or series of capital stock for another class or series of capital stock) or make any guarantee payment with respect to the foregoing if at such time (i) COMSAT has exercised its option to defer interest payments on the Junior Subordinated Debentures and such deferral is continuing, (ii) COMSAT shall be in default with respect to its payment or other obligations under the Guarantee or (iii) there shall have occurred any event that, with the giving of notice or the lapse of time or both, would constitute an Event of Default under the Indenture. 19 COMSAT will also covenant that, so long as any of the Preferred Securities are outstanding, it will (i) maintain direct 100% ownership of the partnership interests in COMSAT Capital I other than the Preferred Securities (except as permitted in the Limited Partnership Agreement), (ii) cause at least 3% of the total value of COMSAT Capital I and at least 3% of all interest in the capital, income, gain, loss, deduction and credit of COMSAT Capital I to be held by COMSAT, as General Partner, (iii) not voluntarily dissolve, wind-up or liquidate itself or COMSAT Capital I, (iv) remain the General Partner and timely perform all of its duties as General Partner of COMSAT Capital I (including the duty to cause COMSAT Capital I to declare and pay dividends on the Preferred Securities), unless a permitted successor General Partner is appointed, and (v) subject to the terms of the Preferred Securities, use reasonable efforts to cause COMSAT Capital I to remain a Delaware limited partnership and otherwise continue not to be treated as an association taxable as a corporation for United States federal income tax purposes, except, in all cases, in connection with certain mergers, consolidations or amalgamations permitted by the Limited Partnership Agreement. See "Description of the Preferred Securities -- Merger, Consolidation or Amalgamation of COMSAT Capital I". AMENDMENTS AND ASSIGNMENT Except with respect to any changes which do not adversely affect the rights of holders of Preferred Securities (in which case no vote will be required), the Guarantee may be changed only with the prior approval of the holders of not less than 66 2/3% in liquidation preference of the outstanding Preferred Securities. The manner of obtaining any such approval of holders of the Preferred Securities will be as set forth under "Description of the Preferred Securities -- Voting Rights". All guarantees and agreements contained in the Guarantee shall bind the successors, assigns, receivers, trustees and representatives of COMSAT and shall inure to the benefit of the holders of the Preferred Securities then outstanding. Except in connection with any merger or consolidation of COMSAT with or into another entity or any sale, transfer or lease of COMSAT's assets to another entity complying with the provisions under "-- Consolidation, Merger or Sale of Assets" below, COMSAT may not assign its rights or delegate its obligations under the Guarantee without the prior approval of the holders of not less than 66 2/3% of the aggregate liquidation preference of the Preferred Securities then outstanding. TERMINATION OF THE GUARANTEE The Guarantee will terminate and be of no further force and effect as to the Preferred Securities upon full payment of the Redemption Price of all Preferred Securities, and will terminate completely upon full payment of the amounts payable upon liquidation of COMSAT Capital I. The Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any holder of Preferred Securities must restore payment of any sums paid under such Preferred Securities or the Guarantee. CONSOLIDATION, MERGER OR SALE OF ASSETS The Guarantee provides that COMSAT may merge or consolidate with or into another entity, may permit another entity to merge or consolidate with or into COMSAT and may sell, transfer or lease all or substantially all of its assets to another entity, if (i) at such time no Event of Default shall have occurred and be continuing, or would occur as a result of such merger, consolidation or sale, transfer or lease and (ii) the survivor of such merger or consolidation or entity to which COMSAT assets are sold, transferred or leased is an entity organized under the laws of the United States of America or any state thereof or the District of Columbia, becomes the General Partner, assumes all of COMSAT's obligations under the Guarantee and has a net worth equal to at least 10% of the total contributions to COMSAT Capital I. STATUS OF THE GUARANTEE -- SUBORDINATION The Guarantee will constitute an unsecured obligation of COMSAT and will rank (i) subordinate and junior in right of payment to all liabilities of COMSAT, (ii) PARI PASSU with the most senior preferred or preference stock now or hereafter issued by COMSAT and with any guarantee now or hereafter entered into by COMSAT in respect of any preferred or preference stock or preferred securities of any affiliate of COMSAT, and (iii) senior to COMSAT's common stock. The Limited Partnership Agreement provides that each holder of Preferred Securities by acceptance thereof agrees to the subordination provisions and other terms of the Guarantee. Upon the bankruptcy, liquidation or winding-up of COMSAT, its obligations 20 under the Guarantee will rank junior to all its other liabilities (except that such obligations will rank PARI PASSU with COMSAT's obligations under any guarantee now or hereafter entered into by COMSAT in respect of any preferred or preference stock or preferred securities of any affiliate of COMSAT) and, therefore, funds may not be available for payment under the Guarantee. As of March 31, 1995, COMSAT had approximately $1.15 billion of indebtedness or other obligations which effectively rank senior to the Guarantee and no indebtedness that would rank equally with the Guarantee. The Guarantee will constitute a guarantee of payment and not of collection. The Guarantee will be deposited with the General Partner to be held for the benefit of the holders of the Preferred Securities. In the event of the appointment of a Special Representative to, among other things, enforce the Guarantee, the Special Representative may take possession of the Guarantee for such purpose. If no Special Representative has been appointed to enforce the Guarantee, the General Partner has the right to enforce the Guarantee on behalf of the holders of the Preferred Securities. The holders of not less than 10% in aggregate liquidation preference of all outstanding Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available in respect of the Guarantee, including the giving of directions to the General Partner or the Special Representative, as the case may be. If the General Partner or the Special Representative fails to enforce the Guarantee as above provided, any holder of Preferred Securities may institute a legal proceeding directly against COMSAT to enforce its rights under the Guarantee, without first instituting a legal proceeding against COMSAT Capital I or any other person or entity. The Guarantee will not be discharged except by payment of the Guarantee Payments in full to the extent not paid by COMSAT Capital I and by complete performance of all obligations under the Guarantee. GOVERNING LAW The Guarantee will be governed by and construed in accordance with the laws of the State of New York. 21 DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES SET FORTH BELOW IS A SUMMARY OF ALL MATERIAL TERMS OF THE JUNIOR SUBORDINATED DEBENTURES IN WHICH COMSAT CAPITAL I WILL INVEST WITH THE PROCEEDS OF THE ISSUANCE AND SALE OF (I) THE PREFERRED SECURITIES AND (II) THE GENERAL PARTNER'S CAPITAL CONTRIBUTION WITH RESPECT TO THE PREFERRED SECURITIES (THE "GENERAL PARTNERSHIP PAYMENT"). THE SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE INDENTURE (THE "INDENTURE"), DATED AS OF , 1995, BETWEEN COMSAT AND THE FIRST NATIONAL BANK OF CHICAGO, AS TRUSTEE (THE "TRUSTEE"), THE FORM OF WHICH IS FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS FORMS A PART. WHENEVER PARTICULAR PROVISIONS OR DEFINED TERMS IN THE INDENTURE ARE REFERRED TO HEREIN, SUCH PROVISIONS OR DEFINED TERMS ARE INCORPORATED BY REFERENCE HEREIN. SECTION AND ARTICLE REFERENCES USED HEREIN ARE REFERENCES TO PROVISIONS OF THE INDENTURE UNLESS OTHERWISE NOTED. Under certain circumstances involving the dissolution of COMSAT Capital I following the occurrence of a Tax Event or Investment Company Event, Junior Subordinated Debentures may be distributed to the holders of the Preferred Securities in liquidation of COMSAT Capital I. See "Description of the Preferred Securities -- Tax Event or Investment Company Event Redemption or Distribution". GENERAL The Junior Subordinated Debentures will be limited in aggregate principal amount to approximately $206.2 million, such amount being the sum of the aggregate stated liquidation preference of the Preferred Securities and the General Partnership Payment. The entire principal amount of the Junior Subordinated Debentures will become due and payable, together with any accrued and unpaid interest thereon, including Additional Interest, if any, on , 2025, subject to the election of COMSAT to extend the maturity date of the Junior Subordinated Debentures to a date not later than , 2044, provided that COMSAT satisfies certain financial covenants. See "-- Option to Extend Maturity Date". The Junior Subordinated Debentures, if distributed to holders of Preferred Securities in a dissolution of COMSAT Capital I, will initially be issued as a Global Security. In the event that Junior Subordinated Debentures are issued in certificated form, such Junior Subordinated Debentures will be in denominations of $25 and integral multiples thereof and may be transferred or exchanged at the offices described below. Payments on Junior Subordinated Debentures issued as a Global Security will be made to DTC, as the depository for the Junior Subordinated Debentures. In the event Junior Subordinated Debentures are issued in certificated form, principal and interest will be payable, the transfer of the Junior Subordinated Debentures will be registrable and Junior Subordinated Debentures will be exchangeable for Junior Subordinated Debentures of other denominations of a like aggregate principal amount at the corporate trust office of the Trustee in The City of New York; provided, that, unless the Junior Subordinated Debentures are held by COMSAT Capital I or any successor permissible under "Description of the Preferred Securities -- Merger, Consolidation or Amalgamation of COMSAT Capital I" (in which case payment shall be made by wire transfer), payment of interest may be made at the option of COMSAT by check mailed to the address of the persons entitled thereto. If the Junior Subordinated Debentures are distributed to the holders of Preferred Securities upon the dissolution of COMSAT Capital I, COMSAT will use its best efforts to list the Junior Subordinated Debentures on the New York Stock Exchange or on such other exchange as the Preferred Securities are then listed and traded on the same part of any such exchange. INTEREST Each Junior Subordinated Debenture will bear interest at the rate of % per annum from the original date of issuance, payable monthly in arrears on the last day of each calendar month of each year (each, an "Interest Payment Date"), commencing , 1995, to the person in whose name such Junior Subordinated Debenture is registered, subject to certain exceptions, at the close of business on 22 the Business Day next preceding such Interest Payment Date; provided, however, that in the event the Junior Subordinated Debentures shall not continue to remain in book-entry-only form, COMSAT shall have the right to select record dates which shall be more than one Business Day prior to the Interest Payment Date. Interest will compound monthly and will accrue at the annual rate of % on any interest installment not paid when due. The amount of interest payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on the Junior Subordinated Debentures is not a Business Day, then payment of the interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. OPTION TO EXTEND MATURITY DATE The maturity date of the Junior Subordinated Debentures is , 2025 (the "Scheduled Maturity Date"). COMSAT, however, may, prior to the Scheduled Maturity Date, extend such maturity date no more than one time, for up to an additional 19 years from the Scheduled Maturity Date, provided that (i) COMSAT is not in bankruptcy or otherwise insolvent, (ii) COMSAT is not in default on any series of Junior Subordinated Debentures, (iii) COMSAT has made timely payments on the Junior Subordinated Debentures for the immediately preceding 18 months without deferrals, (iv) COMSAT Capital I is not in arrears on payments of distributions on Preferred Securities, (v) the Junior Subordinated Debentures shall continue to pay interest at least at a rate equal to the rate of distributions that accrue on the Preferred Securities, (vi) the Junior Subordinated Debentures are rated Investment Grade by Standard & Poor's Corporation, Moody's Investors Service, Inc., Fitch Investor Services, Duff & Phelps Credit Rating Company or any other nationally recognized statistical rating organization, and (vii) the final maturity of the Junior Subordinated Debentures is not later than the 49th anniversary of the issuance of the Preferred Securities. OPTION TO EXTEND INTEREST PAYMENT PERIOD COMSAT shall have the right at any time during the term of the Junior Subordinated Debentures to extend the interest payment period from time to time to a period not exceeding 60 consecutive months (the "Extension Period"), at the end of which Extension Period COMSAT shall pay all interest then accrued and unpaid (together with interest thereon at the rate specified for the Junior Subordinated Debentures to the extent permitted by applicable law). In no event shall any Extension Period extend beyond the maturity of the Junior Subordinated Debentures. During any Extension Period, COMSAT shall not declare or pay any dividend on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock. Prior to the termination of any such Extension Period, COMSAT may further extend the interest payment period, provided that such Extension Period together with all such previous and further extensions thereof may not exceed 60 consecutive months. Upon the termination of any Extension Period and the payment of all amounts then due, COMSAT may select a new Extension Period, subject to the above requirements. No interest during an Extension Period, except at the end thereof, shall be due and payable. If COMSAT Capital I shall be the sole holder of the Junior Subordinated Debentures, COMSAT shall give COMSAT Capital I notice of its selection of such Extension Period one Business Day prior to the earlier of (i) the date the dividends on the Preferred Securities are payable or (ii) the date COMSAT Capital I is required to give notice to the New York Stock Exchange or other applicable self-regulatory organization or to holders of the Preferred Securities of the record date or the date such dividend is payable, but in any event not less than one Business Day prior to such record date. COMSAT shall cause COMSAT Capital I to give notice of COMSAT's selection of such Extension Period to the holders of the Preferred Securities. If COMSAT Capital I shall not be the sole holder of the Junior Subordinated Debentures, COMSAT shall give the holders of the Junior Subordinated Debentures notice of its selection of such Extension Period ten Business Days prior to the earlier of (i) the Interest Payment Date or (ii) the date COMSAT is required to give notice to the New York Stock 23 Exchange or other applicable self-regulatory organization, or to holders of the Junior Subordinated Debentures, of the record or payment date of such related interest payment, but in any event not less than two Business Days prior to such record date. ADDITIONAL INTEREST If at any time COMSAT Capital I shall be required to pay any interest on dividends in respect of the Preferred Securities pursuant to the terms thereof, then COMSAT will pay as interest to COMSAT Capital I as the holder of the Junior Subordinated Debentures ("Additional Interest") an amount equal to such interest on dividends in arrears. In addition, if COMSAT Capital I would be required to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States, or any other taxing authority, then, in any such case, COMSAT also will pay as Additional Interest such amounts as shall be required so that the net amounts received and retained by COMSAT Capital I after paying any such taxes, duties, assessments or governmental charges will be not less than the amounts COMSAT Capital I would have received had no such taxes, duties, assessments or governmental charges been imposed. MANDATORY PREPAYMENT If COMSAT Capital I redeems Preferred Securities in accordance with the terms thereof, the Junior Subordinated Debentures will become due and payable in a principal amount equal to the aggregate stated liquidation preference of the Preferred Securities so redeemed, together with any accrued and unpaid interest thereon, including Additional Interest, if any. Any payment pursuant to this provision shall be made prior to 12:00 noon, New York time, on the date of such redemption or at such other time on such earlier date as COMSAT and COMSAT Capital I shall agree. The Junior Subordinated Debentures are not entitled to the benefit of any sinking fund. OPTIONAL REDEMPTION COMSAT shall have the right to redeem the Junior Subordinated Debentures without premium or penalty, in whole or in part, concurrent with the redemption by COMSAT Capital I of the Preferred Securities (if any Preferred Securities are then outstanding), at any time or from time to time on or after , 2000, upon not less than 30 nor more than 60 days' notice, at a redemption price equal to 100% of the principal amount to be redeemed plus any accrued and unpaid interest, including Additional Interest, if any, to the redemption date. In the event of any redemption in part, COMSAT shall not be required to (i) issue, register the transfer of or exchange any Junior Subordinated Debenture during a period beginning at the opening of business 15 days before any selection for redemption of Junior Subordinated Debentures and ending at the close of business on the earliest date in which the relevant notice of redemption is deemed to have been given to all holders of Junior Subordinated Debentures and (ii) register the transfer of or exchange any Junior Subordinated Debentures so selected for redemption, in whole or in part, except the unredeemed portion of any Junior Subordinated Debenture being redeemed in part. (Section 1201). SUBORDINATION The Indenture provides that the Junior Subordinated Debentures are subordinate and junior in right of payment to all Senior Indebtedness of COMSAT as provided in the Indenture. No payment of principal of (including redemption payments), or interest on, the Junior Subordinated Debentures may be made (i) if any Senior Indebtedness is not paid when due, any applicable grace period with respect to such default has ended and such default has not been cured or waived, or (ii) if the maturity of any Senior Indebtedness has been accelerated because of a default. Upon any distribution of assets of COMSAT to creditors upon any dissolution, winding-up, liquidation or reorganization, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all principal of, and premium, if any, and interest due or to become due on, all Senior Indebtedness must be paid in full before the holders of the Junior Subordinated Debentures are entitled to receive or retain any payment. The rights of the holders of the Junior Subordinated Debentures will be subrogated to the rights of the holders of Senior Indebtedness to receive payments or distributions applicable to Senior Indebtedness until all amounts 24 owing on the Junior Subordinated Debentures are paid in full. (Sections 1101 to 1105). However, since Senior Indebtedness currently is not secured and ranks PARI PASSU with other unsecured indebtedness of COMSAT, rights of subrogation currently do not improve the position of the holders of the Junior Subordinated Debentures in relation to the holders of any other unsecured indebtedness of COMSAT. The term "Senior Indebtedness" shall mean the principal of, premium, if any, interest on and any other payment due pursuant to any of the following, whether outstanding at the date of execution of the Indenture or thereafter incurred, created or assumed: (i) all indebtedness of COMSAT evidenced by notes, debentures, bonds or other securities sold by COMSAT for money; (ii) all capital lease obligations of COMSAT; (iii) all indebtedness of others of the kinds described in the preceding clauses (i) and (ii) assumed by or guaranteed in any manner by COMSAT or in effect guaranteed by COMSAT; and (iv) all renewals, extensions or refundings of indebtedness of the kinds described in any of the preceding clauses (i), (ii) and (iii); provided, however, that the following shall not constitute Senior Indebtedness: (a) any indebtedness of COMSAT to any subsidiary of COMSAT, or (b) any indebtedness, which by the terms of the instrument creating or evidencing the same expressly provides that such indebtedness is not superior in right of payment to or is PARI PASSU with the Junior Subordinated Debentures. Such Senior Indebtedness shall continue to be Senior Indebtedness and entitled to the benefits of the subordination provisions irrespective of any amendment, modification or waiver of any term of such Senior Indebtedness. (Section 101). The Indenture does not limit the aggregate amount of Senior Indebtedness which may be issued. At March 31, 1995, Senior Indebtedness of COMSAT aggregated approximately $751 million. CERTAIN COVENANTS OF COMSAT COMSAT will covenant that, subject to certain limited exceptions, it will not, directly or indirectly, declare or pay any dividend on, or redeem, purchase, acquire or make a distribution or liquidation payment with respect to, any of its capital stock or make any guarantee payments with respect to the foregoing, if at such time (i) there shall have occurred any event that would constitute an Event of Default under the Indenture, (ii) COMSAT shall be in default with respect to its payment of any obligations under the Guarantee or (iii) COMSAT shall have given notice of its selection of an extended interest payment period as provided in the Indenture and such period, or any extension thereof, shall be continuing. COMSAT will also covenant (i) to remain the sole general partner of COMSAT Capital I and maintain 100% ownership of the general partnership interests thereof; provided that any permitted successor of COMSAT under the Indenture may succeed to COMSAT's duties as General Partner, (ii) to contribute capital in an amount equal to at least 3% of the total capital contributions to COMSAT Capital I, (iii) not to voluntarily dissolve, wind-up or terminate COMSAT Capital I, except in connection with the distribution of Junior Subordinated Debentures to the holders of Preferred Securities in liquidation of COMSAT Capital I pursuant to the Limited Partnership Agreement and in connection with certain mergers, consolidations or amalgamations permitted by the Limited Partnership Agreement, (iv) to timely perform all of its duties as the general partner in COMSAT Capital I (including the duty to declare and pay dividends on the Preferred Securities) and (v) to use its reasonable efforts to cause COMSAT Capital I to remain a limited partnership except in connection with certain mergers, consolidations or amalgamations permitted by the Limited Partnership Agreement and otherwise continue not to be treated as an association taxable as a corporation for United States federal income tax purposes. (Section 1006). EVENTS OF DEFAULT The Indenture provides that any one or more of the following described events, which has occurred and is continuing, constitutes an "Event of Default" with respect to the Junior Subordinated Debentures: (i) failure for 10 days to pay interest on the Junior Subordinated Debentures, including any Additional Interest in respect thereof, when due; or (ii) failure to pay principal or premium, if any, on the Junior Subordinated Debentures when due, whether at maturity, upon redemption by declaration or otherwise; or (iii) failure to observe or perform any other covenant (other than those specifically relating to another series of Junior Subordinated Debentures) contained in the Indenture for 90 days after notice; or (iv) the 25 dissolution, winding-up or termination (other than any termination within the meaning of section 708(b)(1)(B) of the Code or equivalent provision of subsequent law, which termination does not constitute a termination of COMSAT Capital I for any other purpose) of COMSAT Capital I, except in connection with the distribution of Junior Subordinated Debentures to the holders of Preferred Securities in liquidation of COMSAT Capital I pursuant to the Limited Partnership Agreement and in connection with certain mergers, consolidations or amalgamations permitted by the Limited Partnership Agreement; or (v) certain events in bankruptcy, insolvency or reorganization of COMSAT. (Section 501). The Trustee or the holders of not less than 25% in aggregate outstanding principal amount of the Junior Subordinated Debentures may declare the principal of and interest (including any Additional Interest) on the Junior Subordinated Debentures due and payable immediately on default; provided, however, that after such acceleration, but before a judgment or decree based on acceleration, the holders of a majority in aggregate principal amount of outstanding Junior Subordinated Debentures may, under certain circumstances, rescind and annul such acceleration if all Events of Default, other than the non-payment of accelerated principal, have been cured or waived as provided in the Indenture. (Section 502). COMSAT Capital I is the initial holder of the Junior Subordinated Debentures. However, while the Preferred Securities are outstanding, COMSAT Capital I has agreed not to waive an Event of Default with respect to the Junior Subordinated Debentures without the consent of holders of 66 2/3% in aggregate liquidation preference of the Preferred Securities then outstanding. A default under any other indebtedness of COMSAT or COMSAT Capital I would not constitute an Event of Default under the Junior Subordinated Debentures. Subject to the provision of the Indenture relating to the duties of the Trustee in case an Event of Default shall occur and be continuing, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request or direction of any holders of Junior Subordinated Debentures, unless such holders shall have offered to the Trustee reasonable indemnity. Subject to such provisions for the indemnification of the Trustee, the holders of a majority in aggregate principal amount of Junior Subordinated Debentures then outstanding will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to the Junior Subordinated Debentures. No holder of any Junior Subordinated Debenture will have any right to institute any proceeding with respect to the Indenture or for any remedy thereunder, unless such holder shall have previously given to the Trustee written notice of a continuing Event of Default and, if COMSAT Capital I is not the sole holder of Junior Subordinated Debentures, unless also the holders of at least 25% in aggregate principal amount of the Junior Subordinated Debentures then outstanding shall have made written request, and offered reasonable indemnity, to the Trustee to institute such proceeding as Trustee, and the Trustee shall not have received from the holders of a majority in aggregate principal amount of the outstanding Junior Subordinated Debentures a direction inconsistent with such request and shall have failed to institute such proceeding within 60 days. However, such limitations do not apply to a suit instituted by a holder of a Junior Subordinated Debenture for enforcement of payment of the principal of or interest on such Junior Subordinated Debenture on or after the respective due dates expressed in such Junior Subordinated Debenture. (Section 507). The holders of a majority in aggregate outstanding principal amount of the Junior Subordinated Debentures may, on behalf of the holders of all the Junior Subordinated Debentures, waive any past default, except a default in the payment of principal or interest. (Section 513). COMSAT is required to file annually with the Trustee a certificate as to whether or not COMSAT is in compliance with all the conditions and covenants under the Indenture. (Section 1004). ENFORCEMENT OF CERTAIN RIGHTS BY SPECIAL REPRESENTATIVE If (i) COMSAT Capital I fails to pay dividends in full on the Preferred Securities for 18 consecutive months; (ii) an Event of Default occurs and is continuing on the Junior Subordinated Debentures; or 26 (iii) COMSAT is in default on any of its payment of other obligations under the Guarantee, under the terms of the Preferred Securities, the holders of outstanding Preferred Securities will have the rights referred to under "Description of the Preferred Securities -- Voting Rights", including the right to appoint a Special Representative, which Special Representative shall be authorized to exercise COMSAT Capital I's right to accelerate the principal amount of the Junior Subordinated Debentures and to enforce COMSAT Capital I's other creditor rights under the Indenture and the Junior Subordinated Debentures. Notwithstanding the appointment of any such Special Representative, COMSAT shall continue as General Partner and shall retain all rights under the Indenture, including the right to extend the interest payment period from time to time to a period not exceeding 60 consecutive months. MODIFICATION OF THE INDENTURE The Indenture contains provisions permitting COMSAT and the Trustee, with the consent of the holders of not less than a majority in principal amount of the Junior Subordinated Debentures, to modify the Indenture or any supplemental indenture thereto; provided, that no such modification may, without the consent of the holder of each outstanding Junior Subordinated Debenture, (i) extend the fixed maturity of the principal of (other than in accordance with the provisions of the Indenture) or any installment of interest on any Junior Subordinated Debentures, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon without the consent of the holder of each Junior Subordinated Debenture so affected, (ii) reduce the percentage of Junior Subordinated Debentures, the holders of which are required to consent to any such supplemental indenture, without the consent of the holders of each Junior Subordinated Debenture then outstanding and affected thereby or (iii) modify any provision of the Indenture relating to waivers of past defaults, the additional covenants of COMSAT or supplemental indentures requiring the consent of holders of the Junior Subordinated Debentures, other than to increase the percentage in principal amount of Junior Subordinated Debentures whose consent is required pursuant to such provisions or to require the consent of each holder of Junior Subordinated Debentures to amend other provisions of the Indenture. (Section 902). In addition, COMSAT and the Trustee may execute, without the consent of any holder of Junior Subordinated Debentures, any supplemental indenture for certain other usual purposes. (Section 901). CONSOLIDATION, MERGER OR SALE OF ASSETS The Indenture does not contain any covenant which restricts COMSAT's ability to merge or consolidate with or into any other corporation, sell or convey all or substantially all of its assets to any person, firm or corporation or otherwise engage in restructuring transactions. (Section 801). DEFEASANCE AND DISCHARGE Under the terms of the Indenture, COMSAT will be discharged from any and all obligations in respect of the Junior Subordinated Debentures (except in each case for certain obligations to register the transfer or exchange of Junior Subordinated Debentures, replace stolen, lost or mutilated Junior Subordinated Debentures, maintain paying agencies, hold moneys for payment in trust and pay Additional Interest when due) if COMSAT deposits with the Trustee, in trust, moneys or U.S. Government Obligations, in an amount sufficient to pay all the principal of, and interest on, the Junior Subordinated Debentures on the dates such payments are due in accordance with the terms of such Junior Subordinated Debentures. Such defeasance or discharge may occur only if, among other things, COMSAT has delivered to the Trustee an Opinion of Counsel to the effect that COMSAT has received from, or there has been published by, the United States Internal Revenue Service a ruling, or there has been a change in tax law in either case to the effect that holders of Junior Subordinated Debentures will not recognize gain or loss for federal income tax purposes as a result of such defeasance and will be subject to federal income tax on the same amount, in the same manner and at the same time as would have been the case if such defeasance was not to occur. (Sections 401 and 403). 27 SET-OFF Notwithstanding anything to the contrary in the Indenture, COMSAT shall have the right to set-off any payment with respect to the Junior Subordinated Debentures it is otherwise required to make thereunder with and to the extent COMSAT has theretofore made, or is concurrently on the date of such payment making, a payment under the Guarantee. GOVERNING LAW The Indenture and the Junior Subordinated Debentures will be governed by, and construed in accordance with, the laws of the State of New York. (Section 113). INFORMATION CONCERNING THE TRUSTEE The Trustee, prior to default, undertakes to perform only such duties as are specifically set forth in the Indenture and, after default, shall exercise the same degree of care as a prudent individual would exercise in the conduct of his or her own affairs. (Section 601). Subject to such provision, the Trustee is under no obligation to exercise any of the powers vested in it by the Indenture at the request of any holder of Junior Subordinated Debentures, unless offered reasonable indemnity by such holder against the costs, expenses and liabilities which might be incurred thereby. (Section 603). The Trustee is not required to expend or risk its own funds or otherwise incur personal financial liability in the performance of its duties if the Trustee reasonably believes that repayment or adequate indemnity is not reasonably assured to it. (Section 601). 28 EFFECT OF OBLIGATIONS UNDER THE JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE As set forth in the Limited Partnership Agreement, the sole purpose of COMSAT Capital I is to issue the Preferred Securities and use the proceeds thereof to purchase from COMSAT the Junior Subordinated Debentures. As long as payments of interest and other payments are made when due on the Junior Subordinated Debentures, such payments will be sufficient to cover dividends and payments due on the Preferred Securities primarily because (i) the aggregate principal amount of Junior Subordinated Debentures will be equal to the sum of the aggregate stated liquidation preference of the Preferred Securities and the General Partnership Payment; (ii) the interest rate and interest and other payment dates on the Junior Subordinated Debentures will match the dividend rate and dividend and other payment dates for the Preferred Securities; (iii) the Limited Partnership Agreement provides that COMSAT, as General Partner, shall pay for all, and COMSAT Capital I shall not be obligated to pay, directly or indirectly, for any, costs and expenses of COMSAT Capital I; and (iv) the Limited Partnership Agreement further provides that the General Partner shall not cause or permit COMSAT Capital I to, among other things, engage in any activity that is not consistent with the purposes of COMSAT Capital I. If COMSAT fails to make interest or other payments on the Junior Subordinated Debentures when due, the Limited Partnership Agreement provides a mechanism whereby the holders of the Preferred Securities may enforce the rights of COMSAT Capital I under the Junior Subordinated Debentures through the appointment of a Special Representative. Payments of dividends and other payments due on the Preferred Securities out of moneys held by COMSAT Capital I are guaranteed by COMSAT to the extent set forth under "Description of the Guarantee". The Limited Partnership Agreement also provides, and COMSAT, under the Guarantee, acknowledges, that a Special Representative may be appointed to enforce the Guarantee if COMSAT is in default on any of its payment obligations under the Guarantee. In addition, if the General Partner or the Special Representative fails to enforce the Guarantee, a holder of a Preferred Security may institute a legal proceeding directly against COMSAT to enforce its rights under the Guarantee without first instituting a legal proceeding against COMSAT Capital I or any other person or entity. UNITED STATES TAXATION GENERAL This section is a summary of all material United States federal income tax considerations that may be relevant to prospective purchasers of Preferred Securities and represents the opinion of Crowell & Moring, special tax counsel to COMSAT and COMSAT Capital I, insofar as it relates to matters of law and legal conclusions. This section is based upon current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed regulations thereunder and current administrative rulings and court decisions, all of which are subject to change. Subsequent changes may cause tax consequences to vary substantially from the consequences described below. Moreover, the transactions described in this Prospectus raise certain novel tax issues which have not been ruled on by the courts or the Internal Revenue Service (the "IRS") in similar transactions. As a result, there can be no assurance that the IRS will not audit these transactions and, if it does so, that the IRS will agree with the conclusions set forth below. No attempt has been made in the following discussion to comment on all United States federal income tax matters affecting purchasers of Preferred Securities. Moreover, the discussion focuses on holders of Preferred Securities who are individual citizens or residents of the United States, who purchase Preferred Securities at original issue for their initial offering price and who hold the Preferred Securities as a capital asset, and has only limited application to corporations, estates, trusts or, non-resident aliens or taxpayers having a taxable year other than the calendar year. Accordingly, each 29 prospective purchaser of Preferred Securities should consult, and should depend on, his or her own tax advisor in analyzing the federal, state, local and foreign tax consequences of the purchase, ownership or disposition of Preferred Securities. TAX CLASSIFICATION Crowell & Moring is of the opinion that (i) COMSAT Capital I will be classified as a partnership for federal income tax purposes and (ii) the Junior Subordinated Debentures will be classified as indebtedness for federal income tax purposes, although no assurances can be made in either regard. The following discussion assumes such classifications. INCOME FROM PREFERRED SECURITIES Each holder of Preferred Securities (a "Preferred Securityholder") will be required to include in gross income the Preferred Securityholder's distributive share of the net income of COMSAT Capital I. If COMSAT Capital I is merged into a trust that is treated as a grantor trust, each Preferred Securityholder will be treated as owning directly an allocable portion of the Junior Subordinated Debentures and as earning directly the income derived therefrom. In either case, such income will not exceed for any calendar month the dividends received on such Preferred Securities, except in limited circumstances as described below under "Original Issue Discount" and "Potential Extension of Interest Payment Period". Any amount so included in a Preferred Securityholder's gross income will increase its tax basis in the Preferred Securities, and the amount of nonliquidating distributions of cash by COMSAT Capital I to a Preferred Securityholder will reduce such Preferred Securityholder's tax basis in the Preferred Securities (but not below zero). No portion of such income will be eligible for the dividends received deduction. ORIGINAL ISSUE DISCOUNT Under Treasury Regulations, the stated interest payments on the Junior Subordinated Debentures will be treated as "original issue discount" (sometimes herein referred to for convenience as interest) because of the option that COMSAT has, under the terms of the Junior Subordinated Debentures, to defer interest payments for up to 60 months. Under the Code, holders of debt with original issue discount must include that discount in income on an economic accrual basis and before the receipt of cash attributable to the interest regardless of their method of tax accounting. Except to the extent COMSAT exercises its option to defer interest payments, the characterization of the stated interest on the Junior Subordinated Debentures as original issue discount will not affect the timing or amount of income reportable by Preferred Securityholders. In the event that interest payments are deferred, COMSAT Capital I will continue to accrue income equal to the amount of the interest payment due at the end of the Extension Period on an economic accrual basis over the length of the Extension Period. Accrued income will be allocated, but not distributed, to Preferred Securityholders of record on the Business Day preceding the last day of each calendar month. As a result, owners of Preferred Securities on a record date during an Extension Period will include interest in gross income in advance of the receipt of cash, and any such Preferred Securityholder who disposes of Preferred Securities prior to the record date for the payment of dividends following such Extension Period will include such Preferred Securityholder's allocable share of such interest in gross income but will not receive any cash related thereto. Holders of Junior Subordinated Debentures received upon a liquidation of COMSAT Capital I or deemed to be owned by the Preferred Securityholders upon merger of COMSAT Capital I into a trust that is taxed as a grantor trust, will include in income interest on the Junior Subordinated Debentures as the interest accrues (regardless of the Preferred Securityholder's method of accounting), and thus will also recognize income in advance of the receipt of cash. DISPOSITION OF PREFERRED SECURITIES Gain or loss will be recognized on a sale of Preferred Securities, including a redemption for cash, equal to the difference between the amount realized and the Preferred Securityholder's tax basis for the 30 Preferred Securities sold. Gain or loss recognized by a Preferred Securityholder on the sale or exchange of a Preferred Security held for more than one year will generally be taxable as long-term capital gain or loss. The adjusted tax basis of the Preferred Securities sold will equal the amount paid for the Preferred Securities, plus accrued original issue discount, if any, as described herein allocated to the holder of such Preferred Securities and reduced by any cash distributed to such Preferred Securityholder by COMSAT Capital I. A Preferred Securityholder acquiring Preferred Securities at different prices may be required to maintain a single aggregate adjusted tax basis in Preferred Securities, and, upon sale or other disposition of some of the Preferred Securities, allocate a pro rata portion of such aggregate tax basis to the Preferred Securities sold (rather than maintaining a separate tax basis in each Preferred Security for purposes of computing gain or loss on a sale of such Preferred Security). RECEIPT OF JUNIOR SUBORDINATED DEBENTURES UPON LIQUIDATION OR MERGER OF COMSAT CAPITAL I Under certain circumstances, as described under the caption "Description of the Preferred Securities -- Tax Event or Investment Company Event Redemption or Distribution", Junior Subordinated Debentures may be distributed to the holders of the Preferred Securities in liquidation of COMSAT Capital I. Under current United States federal income tax law, such a distribution would be treated as a non-taxable exchange to each holder of Preferred Securities and would result in the holder of Preferred Securities receiving an aggregate tax basis in the Junior Subordinated Debentures equal to such holder's aggregate tax basis in its Preferred Securities. A holder's holding period in the Junior Subordinated Debentures so received in liquidation of COMSAT Capital I would include the period for which the Preferred Securities were held by such holder. In addition, a merger, consolidation or amalgamation of COMSAT Capital I into a trust that is treated as a grantor trust would be treated in the same manner as a distribution of the Junior Subordinated Debentures to the holders of the Preferred Securities in liquidation of COMSAT Capital I followed by a contribution of such Junior Subordinated Debentures to the grantor trust. Under a change in law, a change in legal interpretation or the other circumstances giving rise to a Tax Event or an Investment Company Event, however, the dissolution could be a taxable event to holders of the Preferred Securities. In the judgment of special tax counsel to COMSAT and COMSAT Capital I, the series of events which would result in the recognition of taxable gain or loss by holders of the Preferred Securities, by reason of a dissolution of COMSAT Capital I, is not likely to occur. There can be no assurance in this regard, however. TAXATION OF HOLDERS OF GRANTOR TRUST INTERESTS If COMSAT Capital I is merged into a trust treated as a grantor trust, the tax consequences of holding Successor Securities will differ in certain respects from the tax consequences of holding Preferred Securities. In general, holders of Successor Securities will be required to include in gross income the income of the trust as such income accrues to the trust. A holder that includes amounts in income in advance of the receipt of cash from the grantor trust may not receive the cash from the grantor trust related to such income if such holder disposes of its Successor Securities before the record date with respect to payment of such amounts. A holder's tax basis in the Successor Securities will be increased by the amount of any such accrued but unpaid income. COMSAT CAPITAL INFORMATION RETURNS AND AUDIT PROCEDURES COMSAT, as the General Partner in COMSAT Capital I, will furnish each Preferred Securityholder with a Schedule K-1 each year setting forth such Preferred Securityholder's allocable share of income for the prior calendar year. The Limited Partnership Agreement requires COMSAT to furnish such Schedule K-1 as soon as practicable following the end of the year, but in any event prior to March 31. In the event that COMSAT Capital I is replaced with a trust as previously described herein, investors will receive for tax reporting purposes a Form 1099 instead of a Form K-1. Any person who holds Preferred Securities as a nominee for another person is required to furnish to COMSAT Capital I (a) the name, address and taxpayer identification number of the beneficial owner and the nominee; (b) information as to whether the beneficial owner is (i) a person that is not a United States 31 person, (ii) a foreign government, an international organization or any wholly-owned agency or instrumentality of either of the foregoing, or (iii) a tax-exempt entity; (c) the amount and description of Preferred Securities held, acquired or transferred for the beneficial owner; and (d) certain information including the dates of acquisitions and transfers, means of acquisitions and transfers, and acquisition cost for purchases, as well as the amount of net proceeds from sales. The nominee is required to supply the beneficial owners of the Preferred Securities with the information furnished to COMSAT Capital I. Brokers and financial institutions are required to furnish additional information, including whether they are United States persons and certain information on Preferred Securities they acquire, hold or transfer for their own accounts. A penalty of $50 per failure (up to a maximum of $100,000 per calendar year) is imposed by the Code for failure to report such information. The General Partner, as the tax matters partner, will be responsible for representing the Preferred Securityholders in any dispute with the IRS. The Code provides for administrative examination of a partnership as if the partnership were a separate and distinct taxpayer. Generally, the statute of limitations for partnership items does not expire before three years after the later of the filing or the last date for filing of the partnership tax return (Form 1065), determined without regard to extensions. The General Partner, as the tax matters partner, will have authority to extend the statute of limitations with respect to partnership items for the Preferred Securityholders without their consent. Any adverse determination following an audit of the return of COMSAT Capital I by the appropriate taxing authorities could result in an adjustment of the returns of the Preferred Securityholders, and, under certain circumstances, a Preferred Securityholder may be precluded from separately litigating a proposed adjustment to the items of the partnership. An adjustment could also result in an audit of a Preferred Securityholder's return and adjustments of items not related to the income and losses of COMSAT Capital I. POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD Under the Indenture, COMSAT has the right to extend from time to time the interest payment period on the Junior Subordinated Debentures to a period not exceeding 60 consecutive months. In the event that the interest payment period is extended, COMSAT Capital I will continue to accrue income equal to the amount of the interest payment due at the end of the Extension Period, on an economic basis over the length of the Extension Period. See "-- Original Issue Discount". UNITED STATES ALIEN HOLDERS For purposes of this discussion, a "United States Alien Holder" is any holder who or which is (i) a nonresident alien individual or (ii) a foreign corporation, partnership or estate or trust, in either case not subject to United States federal income tax on a net income basis in respect of a Preferred Security. This discussion is without regard to any income tax treaty that may be applicable. Under current United States federal income tax law, subject to the discussion below with respect to backup withholding: (i) Payments by COMSAT Capital I or any of its paying agents to any holder of a Preferred Security who or which is a United States Alien Holder will not be subject to United States federal withholding tax provided that (a) the beneficial owner of the Preferred Security does not actually or constructively own 10% or more of the total combined voting power of all classes of capital stock of COMSAT entitled to vote, (b) the beneficial owner of the Preferred Security is not a controlled foreign corporation that is related to COMSAT through stock ownership and (c) either (x) the beneficial owner of the Preferred Security certifies to COMSAT Capital I or its agent (generally on Form W-8 or a substitute therefor), under penalties of perjury, that it is a United States Alien Holder and provides its name and address or (y) the holder of the Preferred Security is a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business (a "financial institution"), and such holder certifies to COMSAT Capital I or its agent under penalties of perjury that such statement has been received from the beneficial owner by it or by a financial institution between it and the beneficial owner and furnishes COMSAT Capital I or its agent with a copy thereof; 32 (ii) a United States Alien Holder of a Preferred Security will generally not be subject to United States federal withholding tax on any gain realized on the sale or exchange of a Preferred Security; and (iii) a United States Alien Holder who is a nonresident alien individual present in the United States for 183 days or more in the taxable year of sale and who either has a "tax home" in the United States or with respect to whom certain other requirements are met, is generally subject to a 30% tax on the amount by which his gross gains from the sale of capital assets derived from U.S. sources exceed his gross losses from such sales. (An alien individual who satisfies the "substantial presence test" of Section 7701(b)(3) of the Code, including an alien individual present in the United States for 183 days or more in the calendar year, will be taxed as a resident alien individual, and not as a nonresident alien individual.) BACKUP WITHHOLDING AND INFORMATION REPORTING In general, information reporting requirements will apply to payments to noncorporate United States holders of the proceeds of the sale of Preferred Securities within the United States and "backup withholding" at a rate of 31% will apply to such payments if the United States holder fails to provide an accurate taxpayer identification number. Payments of the proceeds from the sale by a United States Alien Holder of Preferred Securities made to or through a foreign office of a broker generally will not be subject to information reporting or backup withholding, except that, if the broker is a United States person, a controlled foreign corporation for United States tax purposes, or a foreign person 50% or more of whose gross income is effectively connected with a United States trade or business for a specified three-year period, information reporting may apply to such payments. Payments of the proceeds from the sale by a noncorporate holder of Preferred Securities to or through the United States office of a broker is subject to information reporting and possible backup withholding unless the holder or beneficial owner certifies as to its non-United States status or otherwise establishes an exemption from information reporting and backup withholding. 33 UNDERWRITING Subject to the terms and conditions of the Underwriting Agreement, COMSAT Capital I has agreed to sell to each of the Underwriters named below, and each of such Underwriters, for whom Goldman, Sachs & Co., Smith Barney Inc., CS First Boston Corporation and PaineWebber Incorporated are acting as Representatives, has severally agreed to purchase from COMSAT Capital I, the respective number of Preferred Securities set forth opposite its name below:
NUMBER OF PREFERRED UNDERWRITER SECURITIES - ------------------------------------------------------------------------------- ------------- Goldman, Sachs & Co............................................................ Smith Barney Inc............................................................... CS First Boston Corporation.................................................... PaineWebber Incorporated....................................................... ------------- Total........................................................................ ------------- -------------
Under the terms and conditions of the Underwriting Agreement, the Underwriters are committed to take and pay for all of the Preferred Securities offered hereby, if any are taken. The Underwriters propose to offer the Preferred Securities in part directly to the public at the initial public offering price set forth on the cover page of this Prospectus, and in part to certain securities dealers at such price less a concession of $ per Preferred Security. The Underwriters may allow, and such dealers may reallow, a concession not in excess of $ per Preferred Security to certain brokers and dealers. After the Preferred Securities are released for sale to the public, the offering price and other selling terms may from time to time be varied by the Representatives. In view of the fact that the proceeds of the sale of the Preferred Securities will be used by COMSAT Capital I to purchase the Junior Subordinated Debentures, the Underwriting Agreement provides that COMSAT will pay as compensation to the Underwriters a commission of $ per Preferred Security. COMSAT and COMSAT Capital I have agreed not to offer, sell, contract to sell, or otherwise dispose of (a) any limited partnership interests or other securities of COMSAT Capital I (other than the Preferred Securities offered hereby), (b) any preferred stock or any other securities of COMSAT which are substantially similar to the Preferred Securities including the Guarantee, or to the Junior Subordinated Debentures, or (c) any other securities which are convertible into, or exercisable or exchangeable for, 34 limited partnership interests in or other securities of COMSAT Capital I, or preferred stock or such substantially similar securities of COMSAT, in any such case for a period of 90 days after the date of this Prospectus, without the prior written consent of the Representatives. In compliance with Section 34 of the Rules of Fair Practice of the National Association of Securities Dealers, Inc. ("NASD"), no sales of Preferred Securities may be made by any NASD member to a discretionary account without the prior written approval of the transaction by the customer. Prior to this offering, there has been no public market for the Preferred Securities. In order to meet one of the requirements for listing the Preferred Securities on the New York Stock Exchange, the Underwriters will undertake to sell lots of 100 or more Preferred Securities to a minimum of 400 beneficial holders. Trading of the Preferred Securities on the New York Stock Exchange is expected to commence within the seven-day period after the initial delivery of the Preferred Securities. The Representatives have advised COMSAT that they intend to make a market in the Preferred Securities prior to commencement of trading on the New York Stock Exchange, but are not obligated to do so and may discontinue any such market making at any time without notice. COMSAT Capital I and COMSAT have agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act. Certain of the Underwriters engage in transactions with, and from time to time have performed services for, COMSAT and its subsidiaries in the ordinary course of business. EXPERTS The consolidated financial statements and the related financial statement schedules incorporated in this Prospectus by reference from COMSAT's Annual Report on Form 10-K for the year ended December 31, 1994, have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report (which includes an explanatory paragraph referring to the change in its method of accounting for income taxes), which is incorporated herein by reference, and have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. VALIDITY OF THE SECURITIES The validity of the Preferred Securities, the validity of the Limited Partnership Agreement and the formation of COMSAT Capital I are being passed upon by Crowell & Moring, special counsel to COMSAT and COMSAT Capital I. The validity of the Guarantee and the Junior Subordinated Debentures will be passed upon on behalf of COMSAT Capital I and COMSAT by Warren Y. Zeger, Esq., Vice President, General Counsel and Secretary of COMSAT. As of June 29, 1995, Mr. Zeger was the record owner of 18,056 shares of COMSAT's common stock ("Common Stock") and had options to purchase 162,819 shares of Common Stock, of which options to purchase 57,819 shares were exercisable. The validity of the Preferred Securities, the Guarantee and the Junior Subordinated Debentures will be passed upon for the Underwriters by Sullivan & Cromwell. Statements as to United States taxation in this Prospectus in the second paragraph under the caption "Risk Factors -- Tax Event or Investment Company Event Redemption or Distribution", and under the caption "United States Taxation", have been passed upon for COMSAT and COMSAT Capital I by Crowell & Moring, special tax counsel to COMSAT and COMSAT Capital I, and are stated herein on their authority. 35 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF COMSAT OR COMSAT CAPITAL I SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. -------------- TABLE OF CONTENTS
PAGE ----- Available Information.......................... 3 Incorporation of Certain Documents by Reference..................................... 3 For Florida Residents Only..................... 4 COMSAT Capital I............................... 4 COMSAT Corporation............................. 4 Risk Factors................................... 6 Summary Financial Information of COMSAT........ 8 Ratio of Earnings to Fixed Charges of COMSAT... 9 Use of Proceeds................................ 9 Capitalization of COMSAT....................... 9 Description of the Preferred Securities........ 10 Description of the Guarantee................... 19 Description of the Junior Subordinated Debentures.................................... 22 Effect of Obligations Under the Junior Subordinated Debentures and the Guarantee..... 29 United States Taxation......................... 29 Underwriting................................... 34 Experts........................................ 35 Validity of the Securities..................... 35
8,000,000 PREFERRED SECURITIES COMSAT CAPITAL I % CUMULATIVE MONTHLY INCOME PREFERRED SECURITIES GUARANTEED TO THE EXTENT SET FORTH HEREIN BY [LOGO] ---------------- PROSPECTUS ---------------- GOLDMAN, SACHS & CO. SMITH BARNEY INC. CS FIRST BOSTON PAINEWEBBER INCORPORATED REPRESENTATIVES OF THE UNDERWRITERS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth the estimated expenses payable by the registrants with respect to the offering described in this Registration Statement: Securities and Exchange Commission registration fee.............. $ 68,966 NYSE fees........................................................ 58,000* Organization fees................................................ 1,000* Trustee's fees and expenses...................................... 8,000* Printing and engraving........................................... 60,000* Legal fees and expenses.......................................... 250,000* Accounting fees and expenses..................................... 25,000* Rating Agency fees............................................... 56,000* Blue sky fees and expenses (including legal)..................... 22,000* Miscellaneous fees and expenses.................................. 31,034* --------- Total............................................................ $ 580,000* --------- --------- - -------------- *Estimated.
ITEM 16. EXHIBITS. The exhibits listed below are listed according to the number assigned in the table in Item 601 of Regulation S-K.
EXHIBIT NO. DESCRIPTION OF EXHIBIT - -------------- -------------------------------------------------------------------------------------------------------- 1 Form of Underwriting Agreement. 4(a) Articles of Incorporation of COMSAT Corporation (composite copy; as amended through June 1, 1993) (Incorporated by reference to Exhibit 4(a) to COMSAT Corporation's Registration Statement on Form S-3, Commission File No. 33-51661). 4(b) By-laws of COMSAT Corporation (as amended through January 17, 1995) (Incorporated by reference to Exhibit 3(b) to COMSAT Corporation's Annual Report on Form 10-K for the year ended December 31, 1994). 4(c) Form of Indenture between COMSAT Corporation and The First National Bank of Chicago, as Trustee. 4(d) Form of Amended and Restated Limited Partnership Agreement of COMSAT Capital I, L.P. 4(e) Certificate of Limited Partnership of COMSAT Capital I, L.P. (previously filed as Exhibit 4(f)).* 4(f) Form of Junior Subordinated Debenture (See Exhibit 4(c)). 4(g) Form of Preferred Security (See Exhibit 4(d)). 4(h) Form of Guarantee Agreement. 5(a) Opinion of Warren Y. Zeger, Vice President, General Counsel and Secretary of COMSAT Corporation, as to the legality of certain securities to which this Registration Statement relates. 5(b) Opinion of Crowell & Moring as to the legality of certain securities to which this Registration Statement relates. 8 Opinion of Crowell & Moring, special tax counsel to the registrants, with respect to tax matters.
II-1
EXHIBIT NO. DESCRIPTION OF EXHIBIT - -------------- -------------------------------------------------------------------------------------------------------- 12 Statement re Ratio of Earnings to Fixed Charges. 23(a) Consent of Deloitte & Touche LLP. 23(b) Consent of Warren Y. Zeger (contained in Exhibit 5(a)). 23(c) Consent of Crowell & Moring (contained in Exhibit 5(b)). 23(d) Consent of Crowell & Moring (contained in Exhibit 8). 24 Powers of Attorney.* 25 Statement on Form T-1 of eligibility and qualification of The First National Bank of Chicago under the Trust Indenture Act of 1939. 99 Communications Satellite Act of 1962, as amended (Incorporated by reference to Exhibit 28(c) to COMSAT Corporation's Registration Statement on Form S-4, Commission File No. 33-9966). - -------------- * Previously filed.
II-2 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, COMSAT Corporation certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of Montgomery, State of Maryland, on the 7th day of July, 1995. COMSAT Corporation (Registrant) By /s/ ROBERT N. DAVIS, JR. ------------------------------------ (Robert N. Davis, Jr., Assistant General Counsel) Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 1 to Registration Statement has been signed by the following persons in the capacities indicated and by power of attorney on July 7, 1995. (1) Principal executive officer /s/ BRUCE L. CROCKETT* ---------------------------------- (Bruce L. Crockett, President and Chief Executive Officer) (2) Principal financial and accounting officer /s/ ALLEN E. FLOWER* ---------------------------------- (Allen E. Flower, Acting Chief Financial Officer and Controller) (3) Board of Directors /s/ LUCY WILSON BENSON* ---------------------------------- (Lucy Wilson Benson, Director) /s/ EDWIN I. COLODNY* ---------------------------------- (Edwin I. Colodny, Director) /s/ BRUCE L. CROCKETT* ---------------------------------- (Bruce L. Crockett, Director) /s/ LAWRENCE S. EAGLEBURGER* ---------------------------------- (Lawrence S. Eagleburger, Director) II-3 /s/ NEAL B. FREEMAN* --------------------------------- (Neal B. Freeman, Director) /s/ BARRY M. GOLDWATER* ---------------------------------- (Barry M. Goldwater, Director) /s/ ARTHUR HAUSPURG* ---------------------------------- (Arthur Hauspurg, Director) /s/ PETER S. KNIGHT* ---------------------------------- (Peter S. Knight, Director) /s/ MELVIN R. LAIRD* ---------------------------------- (Melvin R. Laird, Chairman of the Board and Director) /s/ PETER W. LIKINS* ---------------------------------- (Peter W. Likins, Director) ---------------------------------- (Howard M. Love, Director) /s/ CHARLES T. MANATT* ---------------------------------- (Charles T. Manatt, Director) /s/ ROBERT G. SCHWARTZ* ---------------------------------- (Robert G. Schwartz, Director) /s/ C. J. SILAS* ---------------------------------- (C. J. Silas, Director) /s/ DOLORES D. WHARTON* ---------------------------------- (Dolores D. Wharton, Director) *By: /s/ ROBERT N. DAVIS, JR. ---------------------------------- (Robert N. Davis, Jr., Attorney-in-fact) II-4 Pursuant to the requirements of the Securities Act of 1933, COMSAT Capital I, L.P. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of Montgomery, State of Maryland, on the 7th day of July, 1995. COMSAT Capital I, L.P. (Registrant) By: COMSAT Corporation, General Partner By: /s/ ROBERT N. DAVIS, JR. ----------------------------------- (Robert N. Davis, Jr., Assistant General Counsel) II-5 EX-1 2 EXHIBIT 1 Draft of July 6, 1995 COMSAT CAPITAL I, L.P. ___% CUMULATIVE MONTHLY INCOME PREFERRED SECURITIES (LIQUIDATION PREFERENCE $25 PER SECURITY) GUARANTEED BY COMSAT CORPORATION _________ UNDERWRITING AGREEMENT , 1995 Goldman, Sachs & Co., Smith Barney Inc., CS First Boston Corporation, PaineWebber Incorporated, As representatives of the several Underwriters named in Schedule I hereto, c/o Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004. Ladies and Gentlemen: COMSAT Capital I, L.P., a Delaware limited partnership (the "Company"), and COMSAT Corporation, a District of Columbia corporation, as general partner in the Company and as guarantor (the "Guarantor" or "COMSAT"), propose, subject to the terms and conditions stated herein, that the Company issue and sell to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of 8,000,000 of the Company's _____% Cumulative Monthly Income Preferred Securities (liquidation preference $25 per security) representing limited partnership interests (the "Preferred Securities"), such Preferred Securities guaranteed as to the payment of accumulated and unpaid dividends and as to payments on liquidation or redemption pursuant to, and to the extent provided in, a Guarantee Agreement, to be dated as of July __, 1995 (the "Guarantee" and, together with the Preferred Securities, the "Securities"), by the Guarantor. 1. Each of the Company and the Guarantor, jointly and severally, represents and warrants to, and agrees with, each of the Underwriters that: (a) A registration statement on Form S-3 (File No. 33-59841) in respect of the Preferred Securities, the Guarantee and __% Junior Subordinated Deferrable Interest Debentures of COMSAT (the "Subordinated Debentures" and, together with the Preferred Securities and the Guarantee, the "Registered Securities"), entitled to the benefits of an indenture, dated as of July __, 1995, as amended or supplemented (in the form filed as an exhibit to the Registration Statement referred to below, the "Indenture"), between COMSAT and The First National Bank of Chicago, as trustee (the "Trustee"), has been filed with the Securities and Exchange Commission (the "Commission"); such registration statement and any post-effective amendment thereto, each in the form heretofore delivered to you, and, excluding exhibits thereto but including all documents incorporated by reference in either prospectus contained therein, to you for each of the other Underwriters, have been declared effective by the Commission in such form; no other document (other than one or more requests for acceleration of the effectiveness of the registration statement, each of which has been reviewed by you) with respect to such registration statement or document incorporated by reference therein has heretofore been filed or transmitted for filing with the Commission; and no stop order suspending the effectiveness of such registration statement has been issued and no proceeding for that purpose has been initiated or threatened by the Commission (any preliminary prospectus relating to the Preferred Securities included in such registration statement or filed with the Commission pursuant to Rule 424(a) of the rules and regulations of the Commission under the Securities Act of 1933, as amended (the "Act"), is hereinafter called a "Preliminary Prospectus"; the various parts of such registration statement, including all exhibits thereto and including (i) the information contained in the form of final prospectus relating to the Preferred Securities filed with the Commission pursuant to Rule 424(b) under the Act in accordance with Section 5(a) hereof and deemed by virtue of Rule 430A under the Act to be part of the registration statement at the time it was declared effective and (ii) the documents incorporated by reference in either prospectus contained in the registration statement at the time such part of the registration statement became effective, each as amended at the time such part of the registration statement became effective, is hereinafter collectively called the "Registration Statement"; such final prospectus relating to the Preferred Securities, in the form first filed pursuant to Rule 424(b) under the Act, is hereinafter called the "Prospectus"; any reference herein to any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the Act, as of the date of such Preliminary Prospectus or Prospectus, as the case may be; any reference to any amendment or supplement to any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include any documents filed after the date of such Preliminary Prospectus or Prospectus, as the case may be, under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and incorporated by reference in such Preliminary Prospectus or Prospectus, as the case may be; and any reference to any amendment to the Registration Statement shall be deemed to refer to and include any annual report of the Guarantor filed pursuant to Section 13(a) or 15(d) of the Exchange Act after the effective date of the Registration Statement that is incorporated by reference in the Registration Statement); (b) No order preventing or suspending the use of any Preliminary Prospectus has been issued by the Commission, and each Preliminary Prospectus, at the time of filing thereof, conformed in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder, and did not 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 the light of the circumstances under which they were made, not misleading; PROVIDED, HOWEVER, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company or the Guarantor by an Underwriter through Goldman, Sachs & Co. expressly for use therein; (c) The documents incorporated by reference in the Prospectus, when they became effective or were filed with the Commission, as the case may be, conformed in all material respects to the requirements of the Act or the Exchange Act, as applicable, and the rules and regulations of the -2- Commission thereunder, and none of such documents contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and any further documents so filed and incorporated by reference in the Prospectus or any further amendment or supplement thereto, when such documents become effective or are filed with the Commission, as the case may be, will conform in all material respects to the requirements of the Act or the Exchange Act, as applicable, and the rules and regulations of the Commission thereunder and will not 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 not misleading; PROVIDED, HOWEVER, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company or the Guarantor by an Underwriter through Goldman, Sachs & Co. expressly for use therein; (d) The Registration Statement conforms, and the Prospectus and any further amendments or supplements to the Registration Statement or the Prospectus will conform, in all material respects to the requirements of the Act and the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and the rules and regulations of the Commission thereunder and do not and will not, as of the applicable effective date as to the Registration Statement and any amendment thereto, and as of the applicable filing date as to the Prospectus and any amendment or supplement thereto, 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 not misleading; PROVIDED, HOWEVER, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company or the Guarantor by an Underwriter through Goldman, Sachs & Co. expressly for use therein; (e) Neither the Company nor the Guarantor (including all of the Guarantor's subsidiaries taken as a whole) has sustained since the date of the latest audited financial statements included or incorporated by reference in the Prospectus any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Prospectus; and, since the respective dates as of which information is given in the Registration Statement and the Prospectus, there has not been any change in the capital stock or long-term debt of the Company or the Guarantor (including all of the Guarantor's subsidiaries taken as a whole) in excess of _____ shares of common stock of the Guarantor or $_____ in long-term debt of the Guarantor, or any material adverse change in or affecting the business prospects, general affairs, management, financial position, stockholders' equity or results of operations of the Company or the Guarantor (including all of the Guarantor's subsidiaries taken as a whole), otherwise than as set forth or contemplated in the Prospectus; (f) The Guarantor has been duly incorporated and is validly existing as a corporation in good standing under the laws of the District of Columbia, with power and authority (corporate and other) to own its properties and conduct its business as described in the Prospectus, and has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases material properties, or conducts any business so as to require such qualification or is subject to no material liability or disability by reason of the failure to be so qualified in any such jurisdiction; and each of COMSAT Video Enterprises, Inc. and COMSAT Entertainment Group, Inc. (collectively, the "Designated Subsidiaries") has been duly incorporated and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation; and the Guarantor has an authorized capitalization as set forth in the Prospectus; -3- (g) The Company has been duly formed and is validly existing as a limited partnership in good standing under the Delaware Revised Uniform Limited Partnership Act, as amended (the "Partnership Act"); the Company is a limited partnership as described in the Prospectus and has conducted and will conduct no business other than the transactions contemplated by this Agreement and described in the Prospectus; the Company is not a party to or bound by any agreement or instrument other than the Agreement of Limited Partnership, dated as of May 22, 1995, of the Company and this Agreement and at the Time of Delivery (as defined in Section 4 hereof) the Company will not be a party to or bound by any agreement or instrument other than the Amended and Restated Agreement of Limited Partnership, to be dated as of _______, 1995, of the Company (in the form included in the Registration Statement, the "Partnership Agreement") and this Agreement; the Company has no liabilities or obligations other than those arising out of the transactions contemplated by this Agreement and described in the Prospectus; and the Company is not a party to or subject to any action, suit or proceeding of any nature; (h) Up to the date hereof, the Guarantor has been and is the sole general partner in the Company and COMSAT SPV, Inc., a Delaware corporation and a wholly owned subsidiary of COMSAT ("COMSAT SPV"), is the sole limited partner in the Company. At the Time of Delivery COMSAT will be the sole General Partner of the Company, the holders of the Securities will become limited partners of the Company and COMSAT SPV will withdraw as a limited partner; all of the issued limited partnership interests of the Company other than the Preferred Securities are owned by COMSAT free and clear of all liens, encumbrances or claims; and all of the outstanding partnership interests of the Company and all of the issued shares of capital stock of the Guarantor have been duly and validly authorized and issued, are fully paid and (other than the general partnership interest in the Company) non-assessable, and the limited partnership interests of the Company conform to the descriptions thereof contained in the Prospectus; (i) The Preferred Securities have been duly and validly authorized by the Company, and, when issued and delivered against payment therefor as provided herein, will be duly and validly issued and fully paid and non-assessable and will conform to the description thereof contained in the Prospectus; the Preferred Securities will have the rights set forth in the Partnership Agreement and the terms of the Preferred Securities are valid and binding on the Company; (j) The Guarantee, the Subordinated Debentures and the Indenture (collectively, the "Guarantor Agreements") have each been duly authorized by the Guarantor and when validly executed and delivered by the Guarantor and, in the case of the Indenture, by the Trustee, and, with respect to the Subordinated Debentures, validly authenticated, will constitute legal, valid and binding obligations of the Guarantor enforceable in accordance with their respective terms, subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles and considerations of public policy, the Partnership Agreement has been duly authorized, validly executed and delivered by each of the Guarantor, the Company and COMSAT SPV and constitutes a legal, valid and binding obligation of each of the Guarantor, the Company and COMSAT SPV enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles and considerations of public policy; the Subordinated Debentures are entitled to the benefits provided by the Indenture; the Indenture has been duly qualified under the Trust Indenture Act; and the Guarantor Agreements and the Partnership Agreement conform to the descriptions thereof in the Prospectus; -4- (k) The issue and sale of the Preferred Securities by the Company, the purchase of the Subordinated Debentures by the Company, the compliance by the Company with all of the provisions of the Partnership Agreement and this Agreement and the consummation of the transactions herein and therein contemplated will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, any agreement or instrument to which the Company is a party or by which the Company is bound or to which any of the property or assets of the Company is subject, nor will such action result in any violation of the provisions of the Partnership Agreement or certificate of limited partnership of the Company or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its properties; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the issue and sale of the Preferred Securities by the Company, the purchase of the Subordinated Debentures by the Company or the consummation by the Company of the other transactions contemplated by this Agreement, except the registration under the Act of the Registered Securities, qualification of the Indenture under the Trust Indenture Act, registration of the Preferred Securities under the Exchange Act, approval of the Federal Communications Commission ("FCC") pursuant to the Communications Satellite Act of 1962, as amended (the "Satellite Act"), listing of the Preferred Securities on the New York Stock Exchange and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase of the Preferred Securities and the distribution of the Preferred Securities by the Underwriters; (l) The issue and sale of the Preferred Securities by the Company, the issuance by COMSAT of the Guarantee, the issuance and sale by COMSAT of the Subordinated Debentures, the compliance by the Company and the Guarantor with all of the provisions of this Agreement, the execution, delivery and performance by the Guarantor of the Guarantor Agreements and the Partnership Agreement, and the consummation of the transactions herein and therein contemplated will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any agreement or instrument to which the Guarantor or any of the Designated Subsidiaries is a party or by which the Guarantor or any of the Designated Subsidiaries is bound or to which any property or assets of the Guarantor or any of the Designated Subsidiaries is subject nor will such action result in any violation of the provisions of the Articles of Incorporation, as amended, or by-laws of the Guarantor or any statute or any order, rule or regulation or any court or governmental agency or body having jurisdiction over the Guarantor or any of the Designated Subsidiaries or any of their properties; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the issuance of the Guarantee, the issuance and sale of the Subordinated Debentures or the consummation by the Guarantor of the transactions contemplated by this Agreement, except the registration under the Act of the Registered Securities, qualification of the Indenture under the Trust Indenture Act, approval of the FCC pursuant to the Satellite Act and such other consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase of the Preferred Securities and distribution of the Preferred Securities by the Underwriters; (m) Neither the Company, the Guarantor nor any of the Designated Subsidiaries is in violation of its organizational documents or in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or capital lease, or other material agreement the noncompliance with which -5- would adversely affect the ability of the Company or the Guarantor to carry out its obligations hereunder, to which it is a party or by which it or any of its properties may be bound; (n) The statements set forth in the Prospectus under the captions "Description of the Preferred Securities", "Description of the Guarantee", "Description of the Junior Subordinated Debentures" and "Effect of Obligations under the Junior Subordinated Debentures and the Guarantee", insofar as they purport to constitute summaries of the terms of the securities therein described, and under the caption "United States Taxation", insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate and complete in all material respects; and the statements set forth in the Prospectus under the caption "Underwriting", insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate; (o) Other than as set forth in the Prospectus, there are no legal or governmental proceedings pending to which the Company, the Guarantor or any of the Designated Subsidiaries is a party or of which any of their properties is the subject which the Guarantor has reasonable cause to believe would individually or in the aggregate have a material adverse effect on the current or future consolidated financial position, stockholders' equity or results of operations of the Company or the Guarantor (including all of the Guarantor's subsidiaries taken as a whole); and, to the best of the Company's and the Guarantor's knowledge, no such proceedings are threatened by governmental authorities or threatened by others; (p) Neither the Company nor the Guarantor is or, after giving effect to the offering and sale of the Preferred Securities, will be an "investment company" or an entity "controlled" by an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended (the "Investment Company Act"); (q) Except as described in the Prospectus, neither the Company, the Guarantor nor any of their affiliates does business with the government of Cuba or with any person or affiliate located in Cuba within the meaning of Section 517.075, Florida Statutes; (r) Deloitte & Touche LLP, who have certified certain financial statements of the Company and the Guarantor, are independent public accountants as required by the Act and the rules and regulations of the Commission thereunder; (s) The Guarantor has reasonable cause to believe that (i) it owns or possesses (either directly or through its subsidiaries) all material foreign and domestic governmental licenses, permits, certificates, consents, orders, approvals and other authorizations (collectively, "Governmental Licenses") necessary to own or lease, as the case may be, and to operate its properties and to carry on its business as presently conducted; (ii) all of the material Governmental Licenses are valid and in full force and effect; (iii) neither the Guarantor nor any of its subsidiaries has received any notice of proceedings relating to revocation or modification of any such material Governmental License; and (iv) no event has occurred which permits (nor has an event occurred which with notice or lapse of time or both would permit) the revocation or termination of any material Governmental License or which might result in any other material impairment of the rights of the Guarantor or its subsidiaries therein; and (t) (i) The Registration Statement accurately describes in all material respects the status of all FCC licenses, permits, consents, orders, approvals and other FCC authorizations described therein; (ii) the Guarantor has reasonable cause to believe that it has operated in compliance with the Government Licenses, the Communications Act of 1934, as amended, and the Satellite Act and the rules and regulations of the FCC promulgated thereunder, and has reasonable cause to believe that it has made all filings, -6- reports, applications and submissions required thereunder, which filings, reports, applications and submissions are true, complete and correct in all material respects; and (iii) no FCC consent, approval, authorization or order of, or any filing with, the FCC is required, other than such consents, approvals, authorizations, orders or filings which have been obtained or made and are in good standing and have not been revoked, in connection with the authorization, issuance, transfer, sale or delivery of the Preferred Securities by the Company or the transactions contemplated hereby. 2. Subject to the terms and conditions herein set forth, the Company and the Guarantor agree to issue and sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase, at a purchase price per security of $25.00 the number of Preferred Securities set forth opposite the name of such Underwriter in Schedule I hereto. As compensation to the Underwriters for their commitments hereunder, and in view of the fact that the proceeds of the sale of the Preferred Securities will be used by the Company to purchase the Subordinated Debentures of the Guarantor, the Guarantor hereby agrees to pay at the Time of Delivery to Goldman, Sachs & Co., for the accounts of the several Underwriters, an amount equal to $.............. per security for the Preferred Securities to be delivered hereunder at the Time of Delivery. 3. Upon the authorization by you of the release of the Preferred Securities, the several Underwriters propose to offer the Preferred Securities for sale upon the terms and conditions set forth in the Prospectus. 4. (a) The Preferred Securities to be purchased by each Underwriter hereunder will be represented by one or more definitive global Preferred Securities in book-entry form which will be deposited by or on behalf of the Company with The Depository Trust Company ("DTC") or its designated custodian, for the account of each Underwriter, against payment by or on behalf of such Underwriter of the purchase price therefor by certified or official bank check or checks, payable to the order of the Company in New York Clearing House (next day) funds. The time and date of such delivery and payment shall be 9:30 a.m., New York time, on ...................., 1995 or such other time and date as Goldman, Sachs & Co. and the Company may agree upon in writing. Such time and date for delivery of the Preferred Securities is herein called the "Time of Delivery". At the Time of Delivery, the Guarantor will pay, or cause to be paid, the commission payable at the Time of Delivery to the Underwriters under Section 2 hereof by certified or official bank check or checks, payable to the order of Goldman, Sachs & Co. in New York Clearing House (next day) funds. (b) The documents to be delivered at the Time of Delivery by or on behalf of the parties hereto pursuant to Section 7 hereof, including the cross-receipt for the Securities and any additional documents requested by the Underwriters pursuant to Section 7(m) hereof and the check or checks specified in subsection (a) above, will be delivered at the offices of Sullivan & Cromwell, 125 Broad Street, New York, New York 10004 (the "Closing Location"), all at the Time of Delivery. A meeting will be held at the Closing Location at ......... p.m., New York City time, on the New York Business Day next preceding the Time of Delivery, at which meeting the final drafts of the documents to be delivered pursuant to the preceding sentence will be available for review by the parties hereto. For the purposes of this Section 4, "New York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York are generally authorized or obligated by law or executive order to close. -7- 5. Each of the Company and the Guarantor, jointly and severally, agrees with each of the Underwriters: (a) To prepare the Prospectus in a form approved by you and to file such Prospectus pursuant to Rule 424(b) under the Act not later than the Commission's close of business on the second business day following the execution and delivery of this Agreement, or, if applicable, such earlier time as may be required by Rule 430A(a)(3) under the Act; to make no further amendment or any supplement to the Registration Statement or Prospectus prior to the Time of Delivery which shall be disapproved by you promptly after reasonable notice thereof; to advise you, promptly after it receives notice thereof, of the time when any amendment to the Registration Statement has been filed or becomes effective or any supplement to the Prospectus or any amended Prospectus has been filed and to furnish you with copies thereof; to file promptly all reports and any definitive proxy or information statements required to be filed by the Guarantor with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the Prospectus and for so long as the delivery of a prospectus is required in connection with the offering or sale of the Preferred Securities; to advise you, promptly after it receives notice thereof, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or prospectus, of the suspension of the qualification of the Registered Securities for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statement or Prospectus or for additional information; and, in the event of the issuance of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or prospectus or suspending any such qualification, promptly to use its best efforts to obtain the withdrawal of such order; (b) Promptly from time to time to take such action as you may reasonably request to qualify the Registered Securities for offering and sale under the securities laws of such jurisdictions as you may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Preferred Securities, provided that in connection therewith neither the Company nor the Guarantor shall be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction; (c) Prior to 12:00 noon, New York City time, on the New York Business Day next succeeding the date of this Agreement, to furnish the Underwriters with copies of the Prospectus in New York City in such quantities as you may reasonably request, and, if the delivery of a prospectus is required at any time prior to the expiration of nine months after the time of issue of the Prospectus in connection with the offering or sale of the Registered Securities and if at such time any event shall have occurred as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus is delivered, not misleading, or, if for any other reason it shall be necessary during such period to amend or supplement the Prospectus or to file under the Exchange Act any document incorporated by reference in the Prospectus in order to comply with the Act, the Exchange Act or the Trust Indenture Act, to notify you and upon your request to file such document and to prepare and furnish without charge to each Underwriter and to any dealer in securities as many copies as you may from time to time reasonably request of an amended Prospectus or a supplement to the Prospectus which will correct such statement or omission -8- or effect such compliance, and in case any Underwriter is required to deliver a prospectus in connection with sales of any of the Registered Securities at any time nine months or more after the time of issue of the Prospectus, upon your request but at the expense of such Underwriter, to prepare and deliver to such Underwriter as many copies as you may request of an amended or supplemented Prospectus complying with Section 10(a)(3) of the Act; (d) In the case of the Guarantor, to make generally available to its securityholders as soon as practicable, but in any event not later than eighteen months after the effective date of the Registration Statement (as defined in Rule 158(c) under the Act), an earnings statement of the Guarantor and its subsidiaries (which need not be audited) complying with Section 11(a) of the Act and the rules and regulations thereunder (including, at the option of the Guarantor, Rule 158); (e) During the period beginning from the date hereof and continuing to and including the date 90 days after the date of the Prospectus, not to offer, sell, contract to sell or otherwise dispose of, except as provided hereunder, (i) any limited partnership interests or other securities of the Company, (ii) any preferred stock or any other securities of COMSAT which are substantially similar to the Preferred Securities including the Guarantee, or to the Subordinated Debentures, or (iii) any other securities which are convertible into, or exercisable or exchangeable for, limited partnership interests in or other securities of the Company, or preferred stock or such substantially similar securities of COMSAT, without your prior written consent; (f) To the extent necessary to comply with the rules and regulations of the New York Stock Exchange (the "Exchange") or any other exchange on which the Preferred Securities are listed, to furnish to the holders of the Preferred Securities as soon as practicable after the end of each fiscal year an annual report of the Guarantor (which shall include a balance sheet and statements of income, stockholders' equity and cash flows of the Guarantor and its consolidated subsidiaries certified by independent public accountants) and, as soon as practicable after the end of each of the first three quarters of each fiscal year (beginning with the fiscal quarter ending after the effective date of the Registration Statement), consolidated summary financial information of the Guarantor and its subsidiaries for such quarter in reasonable detail; (g) During a period of three years from the effective date of the Registration Statement, to furnish to you copies of all reports or other communications (financial or other) furnished to holders of common stock of the Guarantor, and to deliver to you (i) as soon as they are available, copies of any reports and financial statements furnished to or filed with the Commission or any national securities exchange on which any class of securities of the Company or the Guarantor is listed; and (ii) such additional information concerning the business and financial condition of the Company or the Guarantor as you may from time to time reasonably request (such financial statements to be on a consolidated basis to the extent the accounts of the Company, the Guarantor and the Guarantor's subsidiaries are consolidated in reports furnished to its stockholders generally or to the Commission); (h) To use the net proceeds received by it from the sale of the Preferred Securities and the Subordinated Debentures pursuant to this Agreement in the manner specified in the Prospectus under the caption "Use of Proceeds"; and (i) To use its best efforts to list, subject to notice of issuance, the Preferred Securities on the Exchange. -9- 6. The Guarantor covenants and agrees with the several Underwriters that it will pay or cause to be paid the following: (i) the fees, disbursements and expenses of the Company's and the Guarantor's counsel and accountants in connection with the registration of the Registered Securities under the Act and all other expenses in connection with the preparation, printing and filing of the Registration Statement, any Preliminary Prospectus and the Prospectus and amendments and supplements thereto and the mailing and delivering of copies thereof to the Underwriters and dealers; (ii) the cost of reproducing any Agreement among Underwriters, this Agreement, the Indenture, the Partnership Agreement, the Registered Securities, the Legal Investment and Blue Sky Memoranda, closing documents (including any compilations thereof) and any other documents in connection with the offering, purchase, sale and delivery of the Preferred Securities and the Subordinated Debentures; (iii) all expenses in connection with the qualification of the Registered Securities for offering and sale under state securities laws as provided in Section 5(b) hereof, including the fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Legal Investment and Blue Sky survey(s); (iv) any fees charged by securities rating services for rating the Preferred Securities; (v) all fees and expenses in connection with listing any of the Registered Securities on the Exchange and the cost of registering the Preferred Securities under Section 12 of the Exchange Act; (vi) the filing fees incident to, and the fees and disbursements of counsel for the Underwriters in connection with, securing any required review by the National Association of Securities Dealers, Inc. of the terms of the sale of the Preferred Securities; (vii) the cost of qualifying the Preferred Securities with The Depositary Trust Company; (viii) the cost of preparing certificates for the Preferred Securities, if any; (ix) the cost and charges of any transfer agent or registrar; (x) the fees and expenses of the Trustee and any agent of the Trustee and the fees and disbursements of counsel for the Trustee in connection with the Indenture and the Subordinated Debentures; and (xi) all other costs and expenses incident to the performance of its obligations hereunder which are not otherwise specifically provided for in this Section. It is understood, however, that, except as provided in this Section, and Sections 8 and 11 hereof, the Underwriters will pay all of their own costs and expenses, including the fees of their counsel, stock transfer taxes on resale of any of the Preferred Securities by them, and any advertising expenses connected with any offers they may make. 7. The obligations of the Underwriters hereunder, as to the Preferred Securities to be delivered at the Time of Delivery, shall be subject, in their discretion, to the condition that all representations and warranties and other statements of the Company and the Guarantor herein are, at and as of the Time of Delivery, true and correct, the condition that the Company and the Guarantor shall have performed all of their respective obligations hereunder theretofore to be performed, and the following additional conditions: (a) The Prospectus shall have been filed with the Commission pursuant to Rule 424(b) within the applicable time period prescribed for such filing by the rules and regulations under the Act and in accordance with Section 5(a) hereof; no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission; and all requests for additional information on the part of the Commission shall have been complied with to your reasonable satisfaction; (b) Sullivan & Cromwell, counsel for the Underwriters, shall have furnished to you such opinion or opinions (a draft of each such opinion is attached as Annex II(a) hereto), dated the Time of Delivery, with respect to the incorporation of the Guarantor and the formation of the Company; the validity of the Registered Securities being delivered at the Time of Delivery; the Registration Statement and the Prospectus as well as such other related matters as you may -10- reasonably request, and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters; (c) Crowell & Moring, special counsel for the Company and the Guarantor, shall have furnished to you their written opinion (a draft of each such opinion is attached as Annex II(b) hereto), dated the Time of Delivery, in form and substance satisfactory to you, to the effect that: (i) The Company has been duly formed and is validly existing as a limited partnership in good standing under the Partnership Act; the Company is not a party to or bound by any agreement or instrument other than the Partnership Agreement and this Agreement and has the power and authority to consummate the transactions contemplated therein and herein; (ii) To the best of such counsel's knowledge, there are no legal or governmental proceedings pending to which the Company is a party or of which any property of the Company is subject; and, to the best of such counsel's knowledge, no such proceedings are threatened by governmental authorities or threatened by others; (iii) As of the date of the Time of Delivery the Guarantor is the sole General Partner of the Company and the holders of the Preferred Securities will be the sole limited partners and there are no other partners in the Company; all of the issued partnership interests of the Company have been duly and validly authorized and issued and are fully paid and (other than the general partnership interest in the Company) non-assessable and conform in all material respects to the descriptions thereof contained in the Prospectus; (iv) This Agreement has been duly authorized, executed and delivered by the Company; (v) The Partnership Agreement has been duly authorized, validly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable in accordance with its terms, subject, as to enforcement to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights generally and to general equity principles and considerations of public policy; (vi) The Preferred Securities have been duly and validly authorized by the Company, and, when issued and delivered against payment therefor as provided herein, will be duly and validly issued and fully paid and non-assessable and will conform to the description thereof contained in the Prospectus; the Preferred Securities have the rights set forth in the Partnership Agreement and the terms of the Preferred Securities are valid and binding on the Company; (vii) The issue and sale by the Company of the Preferred Securities being delivered at the Time of Delivery and the compliance by the Company with all of the provisions of this Agreement, the purchase by the Company of the Subordinated Debentures, and the execution, delivery and performance by the Company of the Partnership Agreement and the consummation of the transactions herein and therein contemplated will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or -11- instrument known to such counsel to which the Company is a party or by which the Company is bound or to which any of the property or assets of the Company is subject, nor will such action result in any violation of the provisions of the Partnership Agreement or certificate of limited partnership of the Company or any statute or any order, rule or regulation known to such counsel of any court or governmental agency or body having jurisdiction over the Company or any of its properties; (viii) No consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the issue and sale of the Preferred Securities or the consummation by the Company of the transactions contemplated by this Agreement, except the registration under the Act of the Registered Securities, qualification of the Indenture under the Trust Indenture Act, registration of the Preferred Securities under the Exchange Act, approval of the FCC pursuant to the Satellite Act, listing of the Preferred Securities on the Exchange, each of which has been made or obtained, and such consents, approvals, authorizations, registrations or qualifications as have been obtained or may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Preferred Securities by the Underwriters; (ix) The statements set forth in the Prospectus under the caption "United States Taxation", insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate and complete in all material respects; and (x) Neither the Guarantor nor the Company is an "investment company" or an entity "controlled" by an "investment company" as such terms are defined in the Investment Company Act; (d) Warren Y. Zeger, General Counsel of the Guarantor, or other counsel satisfactory to you, shall have furnished to you his written opinion (a draft of each such opinion is attached as Annex II(c) hereto), dated the Time of Delivery, in form and substance satisfactory to you, to the effect that: (i) The Guarantor has been duly incorporated and is validly existing as a corporation in good standing under the laws of the District of Columbia with all corporate power and authority to own its properties and conduct its business as described in the Prospectus; (ii) The Guarantor has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases material properties or conducts any business so as to require such qualification or is subject to no material liability or disability by reason of failure to be so qualified in any such jurisdiction (such counsel being entitled to rely in respect of the opinion in this clause upon opinions of local counsel and in respect of matters of fact upon certificates of officers of the Guarantor, provided that such counsel shall state that they believe that both you and they are justified in relying upon such opinions and certificates); (iii) Each Designated Subsidiary of the Guarantor has been duly incorporated and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation; and all of the issued shares of capital stock of each such subsidiary have been duly and validly authorized and issued, are fully paid and -12- non-assessable, and (except for directors' qualifying shares and except as otherwise set forth in the Prospectus) are owned directly or indirectly by the Guarantor, free and clear of all liens, encumbrances or claims (such counsel being entitled to rely in respect of the opinion in this clause upon opinions of local counsel and in respect to matters of fact upon certificates of officers of the Guarantor or its subsidiaries, provided that such counsel shall state that they believe that both you and they are justified in relying upon such opinions and certificates); (iv) To the best of such counsel's knowledge and other than as set forth in the Prospectus, there are no legal or governmental proceedings pending to which the Guarantor or any of the Designated Subsidiaries is a party or of which any property of the Guarantor or any of the Designated Subsidiaries is the subject which the Guarantor has reasonable cause to believe would individually or in the aggregate have a material adverse effect on the current or future consolidated financial position, stockholders' equity or results of operations of the Company or the Guarantor (including all of the Guarantor's subsidiaries taken as a whole); and, to the best of such counsel's knowledge, no such proceedings are threatened by governmental authorities or threatened by others; (v) As of the date of the Time of Delivery, the Guarantor has an authorized capitalization as set forth in the Prospectus; and all of the issued partnership interests of the Company, other than the Preferred Securities, are owned directly by the Guarantor, free and clear of all liens, encumbrances, equities or claims; (vi) This Agreement has been duly authorized, executed and delivered by the Guarantor; (vii) The Guarantor Agreements and the Partnership Agreement have been duly authorized, executed and delivered by the Guarantor and constitute legal, valid and binding obligations of the Guarantor (assuming, with respect to the Subordinated Debentures, valid authentication), enforceable in accordance with their terms, subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles and considerations of public policy; the Subordinated Debentures are entitled to the benefits provided by the Indenture; the Indenture has been duly qualified under the Trust Indenture Act; and the Guarantor Agreements and the Partnership Agreement conform in all material respects to the descriptions thereof in the Prospectus; (viii) The issue and sale of the Preferred Securities by the Company, the issuance by COMSAT of the Guarantee, the issuance by COMSAT of the Subordinated Debentures, the compliance by the Guarantor with all of the provisions of this Agreement, the execution, delivery and performance by the Guarantor of the Guarantor Agreements and the Partnership Agreement and the consummation of the transactions herein and therein contemplated will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or capital lease, or other material agreement the noncompliance with which would adversely affect the ability of the Company or the Guarantor to carry out its obligations hereunder, known to such counsel to which the Guarantor or any of the Designated Subsidiaries is a party or by which the Guarantor or any of the Designated Subsidiaries is bound or to which -13- any of the property or assets of the Guarantor or any of the Designated Subsidiaries is subject, nor will such action result in any violation of the provision of the Articles of Incorporation, as amended, or by-laws of the Guarantor or any statute or any order, rule or regulation known to such counsel of any court or governmental agency or body having jurisdiction over the Guarantor, any of the Designated Subsidiaries or any of their properties; (ix) No consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the issuance of the Guarantee, the issuance and sale of the Subordinated Debentures, the execution and delivery of the Guarantor Agreements and the Partnership Agreement and the consummation by the Guarantor of the transactions contemplated herein and therein, except the registration under the Act of the Registered Securities and qualification under the Trust Indenture Act and the approval of the FCC pursuant to the Satellite Act, which each have been obtained or made, and such consents, approvals, authorizations, registrations or qualifications as have been obtained or may be required under state securities or Blue Sky laws in connection with the purchase of the Preferred Securities and the distribution of the Preferred Securities by the Underwriters; (x) The statements set forth in the Prospectus under the captions "Description of the Preferred Securities", "Description of the Guarantee", "Description of the Junior Subordinated Debentures" and "Effect of Obligations under the Junior Subordinated Debentures and the Guarantee", insofar as they purport to constitute summaries of the terms of the securities and documents therein described, are accurate and complete in all material respects; (xi) The documents incorporated by reference in the Prospectus or any further amendment or supplement thereto made by the Company or the Guarantor prior to the Time of Delivery (other than the financial statements, related schedules, other financial and statistical data and a Statement of Eligibility and Qualification under the Trust Indenture Act on Form T-1 of the Trustee (the "Form T-1") therein, as to which such counsel need express no opinion), when they became effective or were filed with the Commission, as the case may be, complied as to form in all material respects with the requirements of the Act or the Exchange Act, as applicable, and the rules and regulations of the Commission thereunder; and such counsel has no reason to believe that any of such documents, when such documents became effective or were so filed, as the case may be, contained, in the case of a registration statement which became effective under the Act, an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or, in the case of other documents which were filed under the Exchange Act with the Commission, an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such documents were so filed, not misleading; and (xii) The Registration Statement and the Prospectus and any further amendments and supplements thereto made by the Company or the Guarantor prior to the Time of Delivery (other than the financial statements, related schedules, other -14- financial and statistical data and Form T-1 therein, as to which such counsel need express no opinion) comply as to form in all material respects with the requirements of the Act and the Trust Indenture Act and the rules and regulations thereunder; although such counsel does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement or the Prospectus, except for those referred to in the opinion in subsection (x) of this section 7(d), such counsel has no reason to believe that, as of its effective date, the Registration Statement or any further amendment thereto made by the Company or the Guarantor prior to the Time of Delivery (other than the financial statements, related schedules, other financial and statistical data and Form T-1 therein, as to which such counsel need express no opinion) contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that, as of its date, the Prospectus or any further amendment or supplement thereto made by the Company or the Guarantor prior to the Time of Delivery (other than the financial statements, related schedules, other financial and statistical data and Form T-1 therein, as to which such counsel need express no opinion) contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in light of the circumstances in which they were made, not misleading or that, as of the Time of Delivery, either the Registration Statement or the Prospectus or any further amendment or supplement thereto made by the Company or the Guarantor prior to the Time of Delivery (other than the financial statements, related schedules, other financial and statistical data and Form T-1 therein, as to which such counsel need express no opinion) contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and such counsel does not know of any amendment to the Registration Statement required to be filed or of any contracts or other documents of a character required to be filed as an exhibit to the Registration Statement or required to be incorporated by reference into the Prospectus or required to be described in the Registration Statement or the Prospectus which are not filed or incorporated by reference or described as required; (e) On the date of the Prospectus at a time prior to the execution of this Agreement, at 9:30 a.m., New York City time, on the effective date of any post-effective amendment to the Registration Statement filed subsequent to the date of this Agreement and also at the Time of Delivery, Deloitte & Touche LLP shall have furnished to you a letter or letters, dated the respective dates of delivery thereof, in form and substance satisfactory to you, to the effect set forth in Annex I hereto (the executed copy of the letter delivered prior to the execution of this Agreement is attached as Annex I(a) hereto and a draft of the form of letter to be delivered on the effective date of any post-effective amendment and as of the Time of Delivery and is attached as Annex 1(b) hereto); (f) The Guarantor Agreements and the Partnership Agreement shall have been executed and delivered in a form reasonably acceptable to you; (g) (i) Neither the Company nor the Guarantor (including all of the Guarantor's subsidiaries taken as a whole) shall have sustained since the date of the latest audited financial statements included or incorporated by reference in the Prospectus any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or -15- decree, otherwise than as set forth or contemplated in the Prospectus, and (ii) since the respective dates as of which information is given in the Prospectus there shall not have been any change in the capital stock or long-term debt of the Company or the Guarantor (including all of the Guarantor's subsidiaries taken as a whole), in excess of _____ shares of common stock of the Guarantor or $_____ in long-term debt of the Guarantor, or any change in or affecting the business prospects, general affairs, management, financial position, stockholders' equity or results of operations of the Company or the Guarantor (including all of the Guarantor's subsidiaries taken as a whole), otherwise than as set forth or contemplated in the Prospectus, the effect of which, in any such case described in Clause (i) or (ii), is in the judgment of the Representatives so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Preferred Securities being delivered at the Time of Delivery on the terms and in the manner contemplated in the Prospectus; (h) On or after the date hereof there shall not have occurred any of the following: (i) a downgrading in the rating accorded the Guarantor's debt securities or preferred stock by any "nationally recognized statistical rating organization", as that term is defined by the Commission for purposes of Rule 436(g)(2) under the Act, (ii) a public announcement by any such organization referred to in clause (i) that it has under surveillance or review, with possible negative implications, its rating of any of the Guarantor's debt securities or preferred stock, (iii) a suspension or material limitation in trading in securities generally on the Exchange, (iv) a suspension or material limitation in trading in the Guarantor's securities on the Exchange; (v) a general moratorium on commercial banking activities declared by either Federal or New York State authorities; or (vi) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war, if the effect of any such event specified in this Clause (vi) in the judgment of the Representatives makes it impracticable or inadvisable to proceed with the public offering or the delivery of the Preferred Securities being delivered at the Time of Delivery on the terms and in the manner contemplated in the Prospectus; (i) The Preferred Securities to be sold at the Time of Delivery shall have been duly listed, subject to notice of issuance, on the Exchange; (j) The Company shall have complied with the provisions of Section 5(c) hereof with respect to the furnishing of prospectuses on the New York Business Day next succeeding the date of this Agreement; and (k) The Company and the Guarantor shall have furnished or caused to be furnished to you at the Time of Delivery certificates of officers of the Company and the Guarantor satisfactory to you as to the accuracy of the representations and warranties of the Company and the Guarantor herein at and as of the Time of Delivery, as to the performance by the Company and the Guarantor of all of their obligations hereunder to be performed at or prior to the Time of Delivery, as to the matters set forth in subsections (a) and (g) of this Section and as to such other matters as you may reasonably request. 8. (a) The Company and the Guarantor, jointly and severally, will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement or the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be -16- stated therein or necessary to make the statements therein not misleading, and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such action or claim as such expenses are incurred; PROVIDED, HOWEVER, that neither the Company nor the Guarantor shall be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company or the Guarantor by any Underwriter through Goldman, Sachs & Co. expressly for use therein. (b) Each Underwriter will indemnify and hold harmless the Company and the Guarantor against any losses, claims, damages or liabilities to which the Company and the Guarantor may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement or the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such Underwriter through Goldman, Sachs & Co. expressly for use therein; and will reimburse the Company and the Guarantor for any legal or other expenses reasonably incurred by the Company and the Guarantor in connection with investigating or defending any such action or claim as such expenses are incurred. (c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against such indemnifying party under such subsection, notify such indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under such subsection. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to, or an admission of, fault, culpability or a failure to act, by or on behalf of any indemnified party. -17- (d) If the indemnification provided for in this Section 8 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantor on the one hand and the Underwriters on the other from the offering of the Preferred Securities. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (c) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company and the Guarantor on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company and the Guarantor on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company and the Guarantor bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. The relative fault 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 Company and the Guarantor on the one hand or the Underwriters on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Guarantor and the Underwriters agree that it would not be just and equitable if contributions pursuant to this subsection (d) were determined by PRO RATA allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Preferred Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations in this subsection (d) to contribute are several in proportion to their respective underwriting obligations and not joint. (e) The obligations of the Company and the Guarantor under this Section 8 shall be in addition to any liability which the Company and the Guarantor may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Underwriter within the meaning of the Act; and the obligations of the Underwriters under this Section 8 shall be in addition to any liability which the respective Underwriters may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company or the Guarantor (including any person who, with his or her consent, is named in the Registration Statement as about to become a director of the Company or the Guarantor) and to each person, if any, who controls the Company or the Guarantor within the meaning of the Act. -18- 9. (a) If any Underwriter shall default in its obligation to purchase the Preferred Securities which it has agreed to purchase hereunder, you may in your discretion arrange for you or another party or other parties to purchase such Preferred Securities on the terms contained herein. If within thirty-six hours after such default by any Underwriter you do not arrange for the purchase of such Preferred Securities, then the Company and the Guarantor shall be entitled to a further period of thirty-six hours within which to procure another party or other parties satisfactory to you to purchase such Preferred Securities on such terms. In the event that, within the respective prescribed periods, you notify the Company and the Guarantor that you have so arranged for the purchase of such Preferred Securities, or the Company or the Guarantor notifies you that it has so arranged for the purchase of such Preferred Securities, you or the Company shall have the right to postpone the Time of Delivery for a period of not more than seven days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus, or in any other documents or arrangements, and the Company and the Guarantor agree to file promptly any amendments to the Registration Statement or the Prospectus which in your opinion may thereby be made necessary. The term "Underwriter" as used in this Agreement shall include any person substituted under this Section with like effect as if such person had originally been a party to this Agreement with respect to such Preferred Securities. (b) If, after giving effect to any arrangements for the purchase of the Preferred Securities of a defaulting Underwriter or Underwriters by you or the Company and the Guarantor as provided in subsection (a) above, the aggregate number of such Preferred Securities which remains unpurchased does not exceed one-eleventh of the aggregate number of all the Preferred Securities to be purchased, then the Company and the Guarantor shall have the right to require each non-defaulting Underwriter to purchase the number of Preferred Securities which such Underwriter agreed to purchase hereunder, and, in addition, to require each non-defaulting Underwriter to purchase its pro rata share (based on the number of Preferred Securities which such Underwriter agreed to purchase hereunder) of the Preferred Securities of such defaulting Underwriter or Underwriters for which such arrangements have not been made; but nothing herein shall relieve a defaulting Underwriter from liability for its default. (c) If, after giving effect to any arrangements for the purchase of the Preferred Securities of a defaulting Underwriter or Underwriters by you and the Company and the Guarantor as provided in subsection (a) above, the aggregate number of such Preferred Securities which remains unpurchased exceeds one-eleventh of the aggregate number of all the Preferred Securities to be purchased, the Company shall have the right to elect to consummate the sale of the Preferred Securities, except as to any such unpurchased Preferred Securities so remaining. If the Company and the Guarantor shall not exercise the right described in subsection (b) above to require non-defaulting Underwriters to purchase Preferred Securities of a defaulting Underwriter or Underwriters or the right described in the preceding sentence, then this Agreement shall thereupon terminate, without liability on the part of any non-defaulting Underwriter, the Company or the Guarantor, except for the expenses to be borne by the Company and the Guarantor and the Underwriters as provided in Section 6 hereof and the indemnity and contribution agreements in Section 8 hereof; but nothing herein shall relieve a defaulting Underwriter from liability for its default. 10. The respective indemnities, agreements, representations, warranties and other statements of the Company and the Guarantor and the several Underwriters, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Underwriter or any controlling person of any Underwriter, or the -19- Company or the Guarantor, or any officer or director or controlling person of the Company or the Guarantor, and shall survive delivery of and payment for the Preferred Securities. 11. If this Agreement shall be terminated pursuant to Section 9 hereof, neither the Company nor the Guarantor shall then be under any liability to any Underwriter except as provided in Sections 6 and 8 hereof; but, if for any other reason, any Preferred Securities are not delivered by or on behalf of the Company as provided herein, the Company or the Guarantor will reimburse the Underwriters through you for all out-of-pocket expenses approved in writing by you, including fees and disbursements of counsel, reasonably incurred by the Underwriters in making preparations for the purchase, sale and delivery of the Preferred Securities not so delivered, but the Company or the Guarantor shall then be under no further liability to any Underwriter except as provided in Sections 6 and 8 hereof. 12. In all dealings hereunder, you shall act on behalf of each of the Underwriters, and the parties hereto shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Underwriter made or given by you jointly or by Goldman, Sachs & Co. on behalf of you as the representatives. All statements, requests, notices and agreements hereunder shall be in writing, and if to the Underwriters shall be delivered or sent by mail, telex or facsimile transmission to you as the representatives in care of Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004, Attention: Registration Department; and if to the Company or the Guarantor shall be delivered or sent by mail to the address of the Guarantor set forth in the Registration Statement, Attention: Secretary; provided, however, that any notice to an Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile transmission to such Underwriter at its address set forth in its Underwriters' Questionnaire, or telex constituting such Questionnaire, which address will be supplied to the Company and the Guarantor by you upon request. Any such statements, requests, notices or agreements shall take effect upon receipt thereof. 13. This Agreement shall be binding upon, and inure solely to the benefit of, the Underwriters, the Company, the Guarantor and, to the extent provided in Sections 8 and 10 hereof, the officers and directors of the Company, the Guarantor and each person who controls the Company, the Guarantor or any Underwriter, and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No purchaser of any of the Preferred Securities from any Underwriter shall be deemed a successor or assign by reason merely of such purchase. 14. Time shall be of the essence of this Agreement. As used herein, the term "business day" shall mean any day when the Commission's office in Washington, D.C. is open for business. 15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 16. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. If the foregoing is in accordance with your understanding, please sign and return to us six counterparts hereof, and upon the acceptance hereof by you, on behalf of each of the Underwriters, this letter and such acceptance hereof shall constitute a binding agreement between each of the Underwriters, the Company and the Guarantor. It is understood that your acceptance of this letter -20- on behalf of each of the Underwriters is pursuant to the authority set forth in a form of Agreement among Underwriters, the form of which shall be submitted to the Company for examination upon request, but without warranty on your part as to the authority of the signers thereof. Very truly yours, COMSAT Capital I, L.P. By: COMSAT Corporation, as General Partner By: . . . . . . . . . . . . Name: Title: COMSAT Corporation By: . . . . . . . . . . . . Name: Title: Accepted as of the date hereof: Goldman, Sachs & Co. Smith Barney Inc. CS First Boston Corporation PaineWebber Incorporated By: . . . . . . . . . . . . (Goldman, Sachs & Co.) On behalf of each of the Underwriters -21- SCHEDULE I TOTAL NUMBER OF PREFERRED SECURITIES UNDERWRITER TO BE PURCHASED ----------- --------------- Goldman, Sachs & Co. . . . . . . . . . . . . . . . . . Smith Barney Inc. . . . . . . . . . . . . . . . . . . . CS First Boston Corporation . . . . . . . . . . . . . . PaineWebber Incorporated . . . . . . . . . . . . . . . [NAMES OF OTHER UNDERWRITERS] . . . . . . . . . . . . . --------- Total . . . . . . . . . . . . . . . . . . . --------- --------- -22- ANNEX I Pursuant to Section 7(g) of the Underwriting Agreement, Deloitte & Touche LLP shall furnish letters to the Underwriters to the effect that: (i) They are independent certified public accountants with respect to the Guarantor and its subsidiaries within the meaning of the Act and the applicable published rules and regulations thereunder; (ii) In their opinion, the financial statements and any supplementary financial information and schedules (and, if applicable, financial forecasts and/or pro forma financial information) examined by them and included or incorporated by reference in the Registration Statement or the Prospectus comply as to form in all material respects with the applicable accounting requirements of the Act or the Exchange Act, as applicable, and the related published rules and regulations thereunder; and, if applicable, they have made a review in accordance with standards established by the American Institute of Certified Public Accountants of the consolidated interim financial statements, selected financial data, pro forma financial information, financial forecasts and/or condensed financial statements derived from audited financial statements of the Guarantor for the periods specified in such letter, as indicated in their reports thereon, copies of which have been furnished to the representatives of the Underwriters (the "Representatives"); (iii) They have made a review in accordance with standards established by the American Institute of Certified Public Accountants of the unaudited condensed consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included in the Prospectus and/or included in the Guarantor's quarterly report on Form 10-Q incorporated by reference into the Prospectus as indicated in their reports thereon copies of which have been separately furnished to the Representatives; and on the basis of specified procedures including inquiries of officials of the Guarantor who have responsibility for financial and accounting matters regarding whether the unaudited condensed consolidated financial statements referred to in paragraph (vi)(A)(i) below comply as to form in all material respects with the applicable accounting requirements of the Act and the Exchange Act and the related published rules and regulations, nothing came to their attention that caused them to believe that the unaudited condensed consolidated financial statements do not comply as to form in all material respects with the applicable accounting requirements of the Act and the Exchange Act and the related published rules and regulations; (iv) The unaudited selected financial information with respect to the consolidated results of operations and financial position of the Guarantor for the five most recent fiscal years included in the Prospectus and included or incorporated by reference in Item 6 of the Guarantor's Annual Report on Form 10-K for the most recent fiscal year agrees with the corresponding amounts (after restatement where applicable) in the audited consolidated financial statements for such five fiscal years which were included or incorporated by reference in the Guarantor's Annual Reports on Form 10-K for such fiscal years; (v) They have compared the information in the Prospectus under selected captions with the disclosure requirements of Regulation S-K and on the basis of limited procedures specified in such letter nothing came to their attention as a result of the foregoing procedures that caused them to believe that this information does not conform in all material respects with the disclosure requirements of Items 301, 302, 402 and 503(d), respectively, of Regulation S-K; (vi) On the basis of limited procedures, not constituting an examination in accordance with generally accepted auditing standards, consisting of a reading of the unaudited financial statements and other information referred to below, a reading of the latest available interim financial statements of the Guarantor and its subsidiaries, inspection of the minute books of the Guarantor and its subsidiaries since the date of the latest audited financial statements included or incorporated by reference in the Prospectus, inquiries of officials of the Guarantor and its subsidiaries responsible for financial and accounting matters and such other inquiries and procedures as may be specified in such letter, nothing came to their attention that caused them to believe that: (A) (i) the unaudited condensed consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included in the Prospectus and/or included or incorporated by reference in the Guarantor's Quarterly Reports on Form 10-Q incorporated by reference in the Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the Exchange Act and the related published rules and regulations, or (ii) any material modifications should be made to the unaudited condensed consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included in the Prospectus or included in the Guarantor's Quarterly Reports on Form 10-Q incorporated by reference in the Prospectus, for them to be in conformity with generally accepted accounting principles; (B) any other unaudited income statement data and balance sheet items included in the Prospectus do not agree with the corresponding items in the unaudited consolidated financial statements from which such data and items were derived, and any such unaudited data and items were not determined on a basis substantially consistent with the basis for the corresponding amounts in the audited consolidated financial statements included or incorporated by reference in the Guarantor's Annual Report on Form 10-K for the most recent fiscal year; (C) the unaudited financial statements which were not included in the Prospectus but from which were derived the unaudited condensed financial statements referred to in Clause (A) and any unaudited income statement data and balance sheet items included in the Prospectus and referred to in Clause (B) were not determined on a basis substantially consistent with the basis for the audited financial statements included or incorporated by reference in the Guarantor's Annual Report on Form 10-K for the most recent fiscal year; (D) any unaudited pro forma consolidated condensed financial statements included or incorporated by reference in the Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the Act and the published rules and regulations thereunder or the pro forma adjustments have not been properly applied to the historical amounts in the compilation of those statements; (E) as of a specified date not more than five days prior to the date of such letter, there have been any changes in the consolidated capital stock (other than issuances of capital stock upon exercise of options and stock appreciation rights, 2 upon earn-outs of performance shares and upon conversions of convertible securities, in each case which were outstanding on the date of the latest balance sheet included or incorporated by reference in the Prospectus) or any increase in the consolidated long-term debt of the Guarantor and its subsidiaries, or any decreases in consolidated net current assets or stockholders' equity or other items specified by the Representatives, or any increases in any items specified by the Representatives, in each case as compared with amounts shown in the latest balance sheet included or incorporated by reference in the Prospectus, except in each case for changes, increases or decreases which the Prospectus discloses have occurred or may occur or which are described in such letter; and (F) for the period from the date of the latest financial statements included or incorporated by reference in the Prospectus to the specified date referred to in Clause (E) there were any decreases in consolidated net revenues or operating profit or the total or per share amounts of consolidated net income or other items specified by the Representatives, or any increases in any items specified by the Representatives, in each case as compared with the comparable period of the preceding year and with any other period of corresponding length specified by the Representatives, except in each case for increases or decreases which the Prospectus discloses have occurred or may occur or which are described in such letter; and (vii) In addition to the examination referred to in their report(s) included or incorporated by reference in the Prospectus and the limited procedures, inspection of minute books, inquiries and other procedures referred to in paragraphs (iii) and (vi) above, they have carried out certain specified procedures, not constituting an examination in accordance with generally accepted auditing standards, with respect to certain amounts, percentages and financial information specified by the Representatives which are derived from the general accounting records of the Guarantor and its subsidiaries, which appear in the Prospectus (excluding documents incorporated by reference) or in Part II of, or in exhibits and schedules to, the Registration Statement specified by the Representatives or in documents incorporated by reference in the Prospectus specified by the Representatives, and have compared certain of such amounts, percentages and financial information with the accounting records of the Guarantor and its subsidiaries and have found them to be in agreement. 3 EX-4.(C) 3 EXHIBIT 4(C) EXHIBIT 4(c) Draft of July 5, 1995 - -------------------------------------------------------------------------------- COMSAT Corporation, To The First National Bank of Chicago, Trustee ------------------ Indenture Dated as of , 1995 ------------ ------------------ $206,200,000 % Junior Subordinated Deferrable Interest Debentures ------ Due , 2025 --------------- - -------------------------------------------------------------------------------- Certain Sections of this Indenture relating to Sections 310 through 318 of the Trust Indenture Act of 1939: Trust Indenture Indenture Act Section Section - ------------------ -------------- Section 310 (a)(1) . . . . . . . . . . . . . . . . . . . . 609 (a)(2) . . . . . . . . . . . . . . . . . . . . 609 (a)(3) . . . . . . . . . . . . . . . . . . . . Not Applicable (a)(4) . . . . . . . . . . . . . . . . . . . . Not Applicable (b) . . . . . . . . . . . . . . . . . . . . 608,610 Section 311 (a) . . . . . . . . . . . . . . . . . . . . 613 (b) . . . . . . . . . . . . . . . . . . . . 613 Section 312 (a) . . . . . . . . . . . . . . . . . . . . 701 702(a) (b) . . . . . . . . . . . . . . . . . . . . 702(b) (c) . . . . . . . . . . . . . . . . . . . . 702(c) Section 313 (a) . . . . . . . . . . . . . . . . . . . . 703(a) (b) . . . . . . . . . . . . . . . . . . . . 703(a) (c) . . . . . . . . . . . . . . . . . . . . 703(a) (d) . . . . . . . . . . . . . . . . . . . . 703(b) Section 314 (a) . . . . . . . . . . . . . . . . . . . 704 (b) . . . . . . . . . . . . . . . . . . . . Not Applicable (c)(1) . . . . . . . . . . . . . . . . . . . . 102 (c)(2) . . . . . . . . . . . . . . . . . . . . 102 (c)(3) . . . . . . . . . . . . . . . . . . . . Not Applicable (d) . . . . . . . . . . . . . . . . . . . . Not Applicable (e) . . . . . . . . . . . . . . . . . . . . 102 Section 315 (a) . . . . . . . . . . . . . . . . . . . . 601 (b) . . . . . . . . . . . . . . . . . . . . 602 (c) . . . . . . . . . . . . . . . . . . . . 601 (d) . . . . . . . . . . . . . . . . . . . . 601 (e) . . . . . . . . . . . . . . . . . . . . 514 Section 316 (a)(1)(A) . . . . . . . . . . . . . . . . . . . . 502 512 (a)(1)(B) . . . . . . . . . . . . . . . . . . . . 513 (a)(2) . . . . . . . . . . . . . . . . . . . . Not Applicable (b) . . . . . . . . . . . . . . . . . . . . 508 (c) . . . . . . . . . . . . . . . . . . . . 104(c) Section 317 (a) (1) . . . . . . . . . . . . . . . . . . . . 503 (a) (2) . . . . . . . . . . . . . . . . . . . . 504 (b) . . . . . . . . . . . . . . . . . . . . 1003 Section 318 (a) . . . . . . . . . . . . . . . . . . . . 107 - ------------------ Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. TABLE OF CONTENTS PAGE Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Recitals of the Company and COMSAT Capital . . . . . . . . . . . . . . . . . 1 ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 101. Definitions . . . . . . . . . . . . . . . . . 2 Act . . . . . . . . . . . . . . . . . . . . . 2 Additional Dividends . . . . . . . . . . . . 2 Additional Interest . . . . . . . . . . . . . 3 Affiliate . . . . . . . . . . . . . . . . . . 3 Board of Directors . . . . . . . . . . . . . 3 Board Resolution . . . . . . . . . . . . . . 3 Business Day . . . . . . . . . . . . . . . . 3 Capital Lease Obligation . . . . . . . . . . 3 Commission . . . . . . . . . . . . . . . . . 3 Common Stock . . . . . . . . . . . . . . . . 4 Company . . . . . . . . . . . . . . . . . . . 4 Company Request or Company Order . . . . . . 4 COMSAT Capital . . . . . . . . . . . . . . . 4 Corporate Trust Office . . . . . . . . . . . 4 Corporation . . . . . . . . . . . . . . . . . 4 Defaulted Interest . . . . . . . . . . . . . 4 Designated Senior Holder . . . . . . . . . . 4 Event of Default . . . . . . . . . . . . . . 4 General Partner . . . . . . . . . . . . . . . 4 General Partner Contribution . . . . . . . . 4 Holder . . . . . . . . . . . . . . . . . . . 4 Indenture . . . . . . . . . . . . . . . . . . 4 Interest Payment Date . . . . . . . . . . . . 5 Limited Partnership Agreement . . . . . . . . 5 Maturity . . . . . . . . . . . . . . . . . . 5 NYSE . . . . . . . . . . . . . . . . . . . . 5 Officers' Certificate . . . . . . . . . . . . 5 Opinion of Counsel . . . . . . . . . . . . . 5 Outstanding . . . . . . . . . . . . . . . . . 5 Parent Guarantee . . . . . . . . . . . . . . 6 Paying Agent . . . . . . . . . . . . . . . . 6 Person . . . . . . . . . . . . . . . . . . . 6 Predecessor Security . . . . . . . . . . . . 7 Preferred Securities . . . . . . . . . . . . 7 - ---------------------- Note: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. -i- Redemption Date . . . . . . . . . . . . . . . 7 Redemption Price . . . . . . . . . . . . . . 7 Regular Record Date . . . . . . . . . . . . . 7 Responsible Officer . . . . . . . . . . . . . 7 Scheduled Maturity Date . . . . . . . . . . . 7 Securities . . . . . . . . . . . . . . . . . 7 Securities Payment . . . . . . . . . . . . . 7 Security Register and Security Registrar . . . . . . . . . . . . . . . 7 Senior Indebtedness . . . . . . . . . . . . . 7 Senior Payment Default . . . . . . . . . . . 8 Special Record Date . . . . . . . . . . . . . 8 Special Representative . . . . . . . . . . . 8 Stated Maturity . . . . . . . . . . . . . . . 8 Subsidiary . . . . . . . . . . . . . . . . . 8 Trustee . . . . . . . . . . . . . . . . . . . 9 Trust Indenture Act . . . . . . . . . . . . . 9 U.S. Government Obligations . . . . . . . . . 9 Vice President . . . . . . . . . . . . . . . 9 Section 102. Compliance Certificates and Opinions . . . . 9 Section 103. Form of Documents Delivered to Trustee . . . 10 Section 104. Acts of Holders; Record Dates . . . . . . . . 10 Section 105. Notices, etc., to Trustee, Company and COMSAT Capital . . . . . . . . . . . . . . . 11 Section 106. Notice to Holders; Waiver . . . . . . . . . . 12 Section 108. Conflict with Trust Indenture Act . . . . . . 13 Section 109. Effect of Headings and Table of Contents . . . . . . . . . . . . . . . . . . 13 Section 110. Successors and Assigns . . . . . . . . . . . 13 Section 111. Separability Clause . . . . . . . . . . . . . 13 Section 112. Benefits of Indenture . . . . . . . . . . . . 13 Section 113. Governing Law . . . . . . . . . . . . . . . . 14 Section 114. Legal Holidays . . . . . . . . . . . . . . . 14 ARTICLE TWO SECURITY FORMS Section 201. Forms Generally . . . . . . . . . . . . . . . 14 Section 202. Form of Face of Security . . . . . . . . . . 15 Section 203. Form of Reverse of Security . . . . . . . . . 18 Section 204. Form of Trustee's Certificate of Authentication . . . . . . . . . . . . . . . 21 ARTICLE THREE THE SECURITIES - --------------------- Note: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. -ii- Section 301. Title and Terms . . . . . . . . . . . . . . . 21 Section 302. Denominations . . . . . . . . . . . . . . . . 24 Section 303. Execution, Authentication, Delivery and Dating . . . . . . . . . . . . . . . . . . . 24 Section 304. Temporary Securities . . . . . . . . . . . . 25 Section 305. Registration, Registration of Transfer and Exchange . . . . . . . . . . . . . . . . 25 Section 306. Mutilated, Destroyed, Lost and Stolen Securities . . . . . . . . . . . . . . . . . 26 Section 307. Payment of Interest; Interest Rights Preserved . . . . . . . . . . . . . . . . . 27 Section 308. Persons Deemed Owners . . . . . . . . . . . . 28 Section 309. Cancellation . . . . . . . . . . . . . . . . 29 Section 310. Computation of Interest . . . . . . . . . . . 29 ARTICLE FOUR SATISFACTION AND DISCHARGE Section 401. Satisfaction and Discharge of Indenture . . . 29 Section 402. Application of Trust Money . . . . . . . . . 30 Section 403. Defeasance and Discharge of Indenture . . . . 31 Section 404. Reinstatement . . . . . . . . . . . . . . . . 33 ARTICLE FIVE REMEDIES Section 501. Events of Default . . . . . . . . . . . . . . 34 Section 502. Acceleration of Maturity; Rescission and Annulment . . . . . . . . . . . . . . . . . . 35 Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee . . . . . . . . . . . 36 Section 504. Trustee May File Proofs of Claim . . . . . . 37 Section 505. Trustee May Enforce Claims Without Possession of Securities . . . . . . . . . . 37 Section 506. Application of Money Collected . . . . . . . 38 Section 507. Limitation on Suits . . . . . . . . . . . . . 38 Section 508. Unconditional Right of Holders to Receive Principal and Interest . . . . . . . 39 Section 509. Restoration of Rights and Remedies . . . . . 39 Section 510. Rights and Remedies Cumulative . . . . . . . 39 Note: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. -iii- Section 511. Delay or Omission Not Waiver . . . . . . . . 40 Section 512. Control by Holders . . . . . . . . . . . . . 40 Section 513. Waiver of Past Defaults . . . . . . . . . . . 40 Section 514. Undertaking for Costs . . . . . . . . . . . . 41 Section 515. Waiver of Stay or Extension Laws . . . . . . 41 ARTICLE SIX THE TRUSTEE Section 601. Certain Duties and Responsibilities . . . . . 42 Section 602. Notice of Defaults . . . . . . . . . . . . . 43 Section 603. Certain Rights of Trustee . . . . . . . . . . 43 Section 604. Not Responsible for Recitals or Issuance of Securities . . . . . . . . . . . . . . . . 44 Section 605. May Hold Securities . . . . . . . . . . . . . 45 Section 606. Money Held in Trust . . . . . . . . . . . . . 45 Section 607. Compensation and Reimbursement . . . . . . . 45 Section 608. Disqualification; Conflicting Interests . . . 45 Section 609. Corporate Trustee Required; Eligibility . . . 46 Section 610. Resignation and Removal; Appointment of Successor . . . . . . . . . . . . . . . . . . 46 Section 611. Acceptance of Appointment by Successor . . . 47 Section 612. Merger, Conversion, Consolidation or Succession to Business . . . . . . . . . . . 48 Section 613. Preferential Collection of Claims Against Company . . . . . . . . . . . . . . . 48 ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY Section 701. Company to Furnish Trustee Names and Addresses of Holders . . . . . . . . . . . . 48 Section 702. Preservation of Information; Communications to Holders . . . . . . . . . . 49 Section 703. Reports by Trustee . . . . . . . . . . . . . 49 Section 704. Reports by Company . . . . . . . . . . . . . 50 ARTICLE EIGHT CONSOLIDATION, MERGER, OR SALE OF ASSETS Section 801. No Restrictions . . . . . . . . . . . . . . . 50 - ---------------- Note: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. -iv- Section 802. Successor Substituted . . . . . . . . . . . . 50 ARTICLE NINE SUPPLEMENTAL INDENTURES Section 902. Supplemental Indentures with Consent of Holders . . . . . . . . . . . . . . . . . . 52 Section 903. Execution of Supplemental Indentures . . . . 53 Section 904. Effect of Supplemental Indentures . . . . . . 53 Section 905. Conformity with Trust Indenture Act . . . . . 54 Section 906. Reference in Securities to Supplemental Indentures . . . . . . . . . . . . . . . . . 54 ARTICLE TEN COVENANTS; REPRESENTATIONS AND WARRANTIES Section 1001. Payment of Principal and Interest . . . . . . 54 Section 1002. Maintenance of Office or Agency . . . . . . . 54 Section 1003. Money for Securities Payments to Be Held in Trust . . . . . . . . . . . . . . . . . 55 Section 1004. Statement by Officers as to Default . . . . . 56 Section 1005. Existence . . . . . . . . . . . . . . . . . . 56 56 Section 1006. Additional Covenants . . . . . . . . . . . . 56 58 ARTICLE ELEVEN SUBORDINATION OF SECURITIES Section 1101. Securities Subordinate to Senior Indebtedness . . . . . . . . . . . . . . . 58 Section 1102. Payment Over of Proceeds Upon Dissolution, Etc . . . . . . . . . . . . . 58 Section 1103. No Payment When Senior Indebtedness in Default . . . . . . . . . . . . . . . . . . . 59 Section 1104. Payment Permitted If No Default . . . . . . . 60 Section 1105. Subrogation to Rights of Holders of Senior Indebtedness . . . . . . . . . . . . . 60 Section 1106. Provisions Solely to Define Relative Rights . . . . . . . . . . . . . . . . . . 61 - ------------------ Note: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. -v- Section 1107. Trustee to Effectuate Subordination . . . . . 61 Section 1108. No Waiver of Subordination Provisions . . . . 61 Section 1109. Notice to Trustee . . . . . . . . . . . . . . 62 Section 1110. Reliance on Judicial Order or Certificate of Liquidating Agent . . . . . . 63 Section 1111. Trustee Not Fiduciary for Holders of Senior Indebtedness . . . . . . . . . . . . . 64 Section 1112. Rights of Trustee as Holder of Senior Indebtedness; Preservation of Trustee's Rights . . . . . . . . . . . . . . . . . . . 64 Section 1113. Article Applicable to Paying Agents . . . . . 64 ARTICLE TWELVE REDEMPTION OF SECURITIES Section 1201. Mandatory Redemption; Optional Redemption . . . . . . . . . . . . . . . . . 65 Section 1202. Applicability of Article . . . . . . . . . . 65 Section 1203. Election to Redeem; Notice to Trustee . . . . 66 Section 1204. Notice of Redemption . . . . . . . . . . . . 66 Section 1205. Deposit of Redemption Price . . . . . . . . . 66 Section 1206. Securities Payable on Redemption Date . . . . 67 ANNEX A: Form of Amended and Restated Agreement of Limited Partnership of COMSAT Capital I, L.P., dated as of ____________, 1995. - ------------------ Note: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. -vi- INDENTURE, dated as of _____________, 1995, between COMSAT Corporation, a corporation duly organized and existing under the laws of the District of Columbia (herein called the "Company" or "COMSAT"), currently having its principal office at 6560 Rock Spring Drive, Bethesda, Maryland 20817, and the general partner of COMSAT Capital I, L.P., a limited partnership organized under the laws of the State of Delaware (herein called "COMSAT Capital"), currently having its principal office at c/o COMSAT Corporation, 6560 Rock Spring Drive, Bethesda, Maryland 20817, and The First National Bank of Chicago, a national banking association duly organized and existing under the laws of the United States of America, as Trustee (herein called the "Trustee"). Unless otherwise defined herein, all capitalized terms used herein shall have the meanings ascribed to them in the Amended and Restated Agreement of Limited Partnership of COMSAT Capital I, L.P., dated as of ____________, 1995 (the "Limited Partnership Agreement"), as in effect on the date hereof, the form of which is attached as Annex A hereto. RECITALS OF THE COMPANY WHEREAS, COMSAT Capital may pursuant to the Underwriting Agreement dated ____________, 1995 (the "Underwriting Agreement") among the Company, COMSAT Capital and the Underwriters named therein issue up to $200,000,000 aggregate liquidation preference of its ___% Cumulative Monthly Income Preferred Securities (the "Preferred Securities") with a liquidation preference of $25 per Preferred Security; WHEREAS, the Company is guaranteeing the payment of Dividends on the Preferred Securities (if and to the extent declared from funds of COMSAT Capital legally available therefor), and payment of the Redemption Price (as defined herein) and payments on liquidation with respect to the Preferred Securities, to the extent provided in the Guarantee Agreement dated ____________, 1995 between the Company and COMSAT Capital (the "Parent Guarantee") for the benefit of the holders of the Preferred Securities; WHEREAS, the Company wishes to sell to COMSAT Capital Securities in an aggregate principal amount equal to the sum of the capital contributed by the Company to COMSAT Capital as the general partner thereof (the "General Partner Contribution") and the aggregate stated liquidation preference of the Preferred Securities issued and sold by COMSAT Capital pursuant to the Underwriting Agreement; WHEREAS, the Company has duly authorized the creation of an issue of its _____% Junior Subordinated Deferrable Interest Debentures Due ____________, 2025 (subject to extension) (the "Securities"), of substantially the tenor and amount hereinafter set forth and to provide therefor the Company has duly authorized the execution and delivery of this Indenture; and WHEREAS, all things necessary to make the Securities, when executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid obligations of the Company, and to make this Indenture a valid agreement of the Company, in accordance with their and its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 101. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act (as defined herein), either directly or by reference therein, have the meanings assigned to them therein; (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted at the date of such computation; and (4) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. "Act", when used with respect to any Holder, has the meaning specified in Section 104. "Additional Dividends" means dividends that shall accrue on any dividend arrearages in respect of the Preferred Securities at the rate of ______% per annum compounded monthly. -2- "Additional Interest" means (i) interest that shall accrue on any interest on the Securities that is not paid when due or not paid during an extension of an interest payment period, which in either case shall accrue at the rate of ______% per annum compounded monthly, and (ii) an amount equal to any amount that COMSAT Capital would be required to pay in taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States or any other taxing authority such that the net amounts received and retained by COMSAT Capital after paying any such taxes, duties, assessments or governmental charges will not be less than the amounts COMSAT Capital would have received had no such taxes, duties, assessments or governmental charges been imposed. "Affiliate" of any specified Person (as defined herein) means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "Control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "Controlling" and "Controlled" have meanings correlative to the foregoing. "Board of Directors" means either the board of directors of the Company or any duly authorized committee of that board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means any day other than a day on which banking institutions in New York City are authorized or obligated by law or executive order to close. "Capital Lease Obligation" of any Person means the obligation to pay rent or other payment amounts under a lease of (or other indebtedness arrangements conveying the right to use) real or personal property of such Person which is required to be classified and accounted for as a capital lease or a liability on the face of a balance sheet of such Person in accordance with generally accepted accounting principles. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. -3- "Common Stock" includes any stock of any class of the Company which has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company and which is not subject to redemption by the Company. "Company" or "COMSAT" means the Person named as the "Company" or "COMSAT" in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" or "COMSAT" shall mean such successor Person. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman of the Board, its Vice Chairman of the Board, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "COMSAT Capital" means the Person specified as such in the first paragraph of this instrument or any successor thereto permitted pursuant to the Limited Partnership Agreement. "Corporate Trust Office" means the principal office of the Trustee in Chicago, Illinois, at which at any particular time its corporate trust business shall be administered. "Corporation" means a corporation, association, company, joint-stock company or business trust. "Defaulted Interest" has the meaning specified in Section 307. "Designated Senior Holder" means, with respect to any Senior Indebtedness, the Person designated as such in accordance with the terms of the instrument evidencing such Senior Indebtedness or, if no Person is so designated, any trustee, agent, fiduciary, representative, group or Person authorized to act on behalf of the holders of such Senior Indebtedness. "Event of Default" has the meaning specified in Section 501. "General Partner" has the meaning specified in the Limited Partnership Agreement. "General Partner Contribution" has the meaning specified in the Recitals to this instrument. "Holder" means a Person in whose name a Security is registered in the Security Register (as defined herein). "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or -4- amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively. "Interest Deferral Event" means failure of Holders of Preferred Securities (including any such failure following an election by the Company to extend interest payments on the Securities in accordance with their terms) to receive, for 18 consecutive months, the full amount of Dividends (including Additional Dividends) accumulated on the Preferred Securities. "Interest Payment Date" means the Stated Maturity (as defined herein) of each installment of interest on the Securities, which shall be on the last day of each calendar month of each year commencing ____________, 1995 until the principal of the Securities is paid or duly provided for. "Investment Grade" means with respect to any security a security that has been rated in one of the four highest rating categories by Standard & Poor's Corporation, Moody's Investors Service, Inc., Fitch Investor Services, Duff & Phelps Credit Rating Company or any other nationally recognized statistical rating organization. "Limited Partnership Agreement" has the meaning specified in the first paragraph of this instrument. "Maturity", when used with respect to any Security, means the date on which the principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "NYSE" means the New York Stock Exchange. "Officers' Certificate" means a certificate signed by the Chairman of the Board, a Vice Chairman of the Board, the President or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company, and delivered to the Trustee. One of the officers signing an Officers' Certificate given pursuant to Section 1004 shall be the principal executive, financial or accounting officer of the Company. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company, and who shall be acceptable to the Trustee. "Outstanding", when used with respect to Securities, means, as of the date of determination, all Securities -5- theretofore authenticated and delivered under this Indenture, EXCEPT: (i) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent (as defined herein)) for the Holders of such Securities; PROVIDED, that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and (iii) Securities which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; PROVIDED, HOWEVER, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor (other than COMSAT Capital) shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor. "Parent Guarantee" has the meaning specified in the Recitals to this instrument. "Paying Agent" means any Person authorized by the Company to pay the principal of or interest on any Securities on behalf of the Company. "Person" means any individual, corporation, partnership, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof. -6- "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Preferred Securities" has the meaning specified in the Recitals to this instrument. "Redemption Date", when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price", when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Regular Record Date" for the interest payable on any Interest Payment Date means the Business Day next preceding such Interest Payment Date, subject to the proviso in Section 307. "Responsible Officer", when used with respect to the Trustee, means the chairman or any vice-chairman of the board of directors, the chairman or any vice-chairman of the executive committee of the board of directors, the chairman of the trust committee, the president, any vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, the controller or any assistant controller or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Scheduled Maturity Date" means ___________, 2025. "Securities" has the meaning specified in the Recitals to this instrument. "Securities Payment" has the meaning specified in Section 1102. "Security Register" and "Security Registrar" have the respective meanings specified in Section 305. "Senior Indebtedness" means the principal of, premium, if any, interest on and any other payment due pursuant to any of the following, whether outstanding at the date of execution hereof or hereafter incurred: -7- (i) all indebtedness of the Company evidenced by notes, debentures, bonds or other securities sold by the Company for money; (ii) all Capital Lease Obligations of the Company; (iii) all obligations of others of the kinds described in the preceding clauses (i) and (ii) assumed by or guaranteed in any manner by the Company or in effect guaranteed by the Company; and (iv) all renewals, extensions or refundings of obligations of the kinds described in any of the preceding clauses (i), (ii) and (iii); PROVIDED, HOWEVER, that the following shall not constitute Senior Indebtedness: (A) that percentage of any indebtedness of the Company to any Subsidiary (as defined herein) of the Company which is equal to the Company's percentage interest in such Subsidiary, or (B) any indebtedness which by the terms of the instrument creating or evidencing the same expressly provides that such indebtedness is not superior in right of payment to or is PARI PASSU with the Securities. Senior Indebtedness shall continue to be Senior Indebtedness and entitled to the benefits of the subordination provisions irrespective of any amendment, modification or waiver of any term of such Senior Indebtedness. "Senior Payment Default" has the meaning specified in Section 1103. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 307. "Special Representative" means the Person appointed under the Limited Partnership Agreement to exercise the right of COMSAT Capital as a Holder of the Securities to accelerate the principal amount of the Securities upon an Event of Default, to enforce COMSAT Capital's creditors rights upon an Interest Deferral Event, and to enforce COMSAT Capital's other creditor rights hereunder and under the Securities and the Guarantee. "Stated Maturity", where used with respect to any Security or any installment of interest thereon, means the date specified in such Security as the fixed date on which the principal, together with any accrued and unpaid interest (including Additional Interest), of such Security or such installment of interest is due and payable. "Subsidiary" means a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. For the purposes of this definition, "voting stock" means stock which -8- ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed; PROVIDED, HOWEVER, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "U.S. Government Obligations" means direct obligations of or obligations of a Person controlled or supervised by and acting as an agency or instrumentality of (or certificates representing ownership interests in such obligations held by a custodian on behalf of the owners of such ownership interests PROVIDED that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the owner of such obligations from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such certificate) the United States of America, (i) the timely payment of which is unconditionally guaranteed by the United States of America, (ii) for the payment of which the full faith and credit of the United States of America is pledged, and (iii) which are not callable or redeemable at the issuer's option. "Vice President", when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president". Section 102. Compliance Certificates and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee such certificates and opinions as may be required under the Trust Indenture Act. Each such certificate or opinion shall be given in the form of an Officers' Certificate, if to be given by an officer of the Company, or an Opinion of Counsel, if to be given by counsel, and shall comply with the requirements of the Trust Indenture Act and any other requirement set forth in this Indenture. -9- Section 103. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Section 104. Acts of Holders; Record Dates. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 601) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit -10- of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The Company may, in the circumstances permitted by the Trust Indenture Act, fix any day as the record date for the purpose of determining the Holders entitled to give or take any request, demand, authorization, direction, notice, consent, waiver or other action, or to vote on any action, authorized or permitted to be given or taken by Holders. If not set by the Company prior to the first solicitation of a Holder made by any Person in respect of any such action, or, in the case of any such vote, prior to such vote, the record date for any such action or vote shall be the 30th day (or, if later, the date of the most recent list of Holders required to be provided pursuant to Section 701) prior to such first solicitation or vote, as the case may be. With regard to any record date, only the Holders on such date (or their duly designated proxies) shall be entitled to give or take, or vote on, the relevant action. (d) The ownership of Securities shall be proved by the Security Register. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. Section 105. Notices, etc., to Trustee, Company and COMSAT Capital. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, Attention: Corporate Trust Services Division, or -11- (2) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this instrument or at any other address previously furnished in writing to the Trustee by the Company. Section 106. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder as to which such notice is required to be made, at his or her address as it appears in the Security Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. Section 107. Immunity of Shareholders, Officers and Directors. No recourse shall be had for the payment of the principal of or the interest, if any, on, any Security, or for any claim based thereon, or upon any obligation, covenant or agreement of this Indenture or any supplemental indenture, against any shareholder, officer or director, as such, past, present or future of the Company or of any successor corporation, either directly or indirectly through the Company or any successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise; it being expressly agreed and understood that this Indenture and any supplemental indenture and all the Securities are solely corporate obligations, and that no personal liability whatever shall attach to, or is incurred by, any shareholder, officer or director, past, present or future, of the Company or of any successor corporation, either directly or -12- indirectly through the Company or any successor corporation, because of the incurring of the indebtedness hereby authorized or under or by reason of any of the obligations, covenants or agreements contained in this Indenture or in any of the Securities, or to be implied herefrom or therefrom; and that any and all such personal liability is hereby expressly released and waived as a condition of, and as part of the consideration for, the execution of this Indenture, any supplemental indenture and the issue of the Securities. Section 108. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such Trust Indenture Act to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. Section 109. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 110. Successors and Assigns. All covenants and agreements in this Indenture by the Company shall bind their respective successors and assigns, whether so expressed or not. Section 111. Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 112. Benefits of Indenture. The Company's obligations under this Indenture and the Securities will also be for the benefit of the holders from time to time of the Preferred Securities. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, the holders of Senior Indebtedness, the holders of Preferred Securities, the Special Representative and the Holders of Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture. -13- Section 113. Governing Law. This Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of New York. Section 114. Legal Holidays. In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal need not be made on such date, but may be made on the next succeeding Business Day (subject, in the case of an Interest Payment Date, to Section 301) with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity, PROVIDED that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be. ARTICLE TWO SECURITY FORMS Section 201. Forms Generally. The Securities and the Trustee's certificates of authentication shall be in substantially the forms set forth in this Article, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. The definitive Securities shall be printed, lithographed or engraved or produced by any combination of these or other methods, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. -14- Section 202. Form of Face of Security. COMSAT Corporation ______% Junior Subordinated Deferrable Interest Debentures Due ____________, 2025 No.__________ $__________ COMSAT Corporation, a corporation duly organized and existing under the laws of the District of Columbia (herein called "COMSAT", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to _________________________________, or registered assigns, the principal sum of __________ Dollars on the earliest of (i) ____________, 2025 (the "Scheduled Maturity Date") (subject to extension, as provided herein) or (ii), except in the event that (A) a Tax Event or an Investment Company Event has occurred and the General Partner of COMSAT Capital II, L.P. ("COMSAT Capital") has elected to dissolve COMSAT Capital and cause the Securities to be distributed to the holders of the Preferred Securities in liquidation of COMSAT Capital as provided in Clauses (ii) or (iii) of Section 6.2(c) of the Limited Partnership Agreement or (B) COMSAT Capital is consolidated, amalgamated, merged with or into, or replaced by, or conveys, transfers or leases its properties and assets as an entirety to, any corporation or other body pursuant to Section 9.12 of the Limited Partnership Agreement, the date upon which COMSAT Capital is dissolved, wound up, liquidated or terminated (other than any termination within the meaning of section 708(b)(1)(B) of the Internal Revenue Code of 1986 or equivalent provision of subsequent law, which termination does not constitute a termination of COMSAT Capital for any other purpose), and to pay interest thereon at the rate of ______% per annum from ____________, 1995, payable monthly in arrears on the last day of each calendar month of each year (each an "Interest Payment Date"), commencing ____________, 1995, until the principal hereof is paid or made available for payment. Interest will compound monthly and will accrue at the rate of ______% per annum on any interest installment that is not paid at the end of any monthly interest period or when otherwise due. The amount of interest payable for any period will be computed on the basis of twelve 30-day months and a 360-day year and, for any period shorter than a full monthly interest period, will be computed on the basis of the actual number of days elapsed in such period. In the event that any date on which interest is payable on this Security is not a Business Day, then a payment of the interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same -15- force and effect as if made on such date. A "Business Day" shall mean any day other than a day on which banking institutions in New York City are authorized or required by law or executive order to close. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the Business Day next preceding such Interest Payment Date; PROVIDED, HOWEVER, that if this Security shall not continue to remain in book-entry-only form, the Company shall have the right to select record dates which shall be more than one Business Day prior to the Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. The Company may, by Company Order, prior to the Scheduled Maturity Date, extend the maturity date of the Securities no more than one time, for up to an additional 19 years from the Scheduled Maturity Date, PROVIDED that at the time of such extension (i) no Event of Default or event which after notice or lapse of time, or both, would become an Event of Default specified in Section 501(5) or Section 501(6) shall have occurred and be continuing; (ii) the Company has made timely payments of interest (including Additional Interest) on the Securities during the immediately preceding 18 months without deferrals; (iii) COMSAT Capital is not in arrears on payments of distributions on the Preferred Securities; (iv) the Securities shall continue to pay Interest at least at a rate equal to the rate of distributions that accrue on the Preferred Securities; (v) the Securities are rated Investment Grade; and (vi) the final maturity of the Securities is not later than the 49th anniversary of the date of issuance of the Preferred Securities. COMSAT shall have the right at any time during the term of this Security to extend the interest payment period from time to time to a period not exceeding 60 consecutive months, during which periods interest will compound monthly, and at the end of which periods COMSAT shall pay all interest then accrued and unpaid (together with Additional Interest); PROVIDED that during any such extended interest payment period COMSAT shall not declare or pay any dividend on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock (other than as a result of a reclassification of such -16- capital stock or the exchange or conversion of one class or series of capital stock for another class or series of capital stock), or make any guarantee payments with respect to the foregoing (other than payments under the Parent Guarantee). Prior to the termination of any such extended interest payment period, COMSAT may further extend the interest payment period, PROVIDED that such extended interest payment period together with all such previous and further extensions thereof may not exceed 60 consecutive months, nor may such extended interest payment period extend the Stated Maturity of this Security. After COMSAT has paid all accrued and unpaid interest (including Additional Interest) following an extended interest payment period, it may again extend interest payment periods for up to 60 consecutive months, subject to the preceding sentence. If COMSAT Capital shall be the sole Holder of the Securities, COMSAT shall give COMSAT Capital notice of its selection of an extended interest payment period one Business Day prior to the earlier of (i) the date the dividends on the Preferred Securities are payable or (ii) the date COMSAT Capital is required to give notice to the NYSE or other applicable self- regulatory organization or to holders of the Preferred Securities of the record date or the date such dividend is payable, but in any event not less than one Business Day prior to such record date. COMSAT shall cause COMSAT Capital to give notice of COMSAT's selection of such extended interest payment period to the holders of the Preferred Securities. If COMSAT Capital is not the sole Holder of the Securities, COMSAT shall give the Holders of the Securities notice of its selection of such an extended interest payment period ten Business Days prior to the earlier of (i) the Interest Payment Date or (ii) the date COMSAT is required to give notice to the NYSE or other applicable self-regulatory organization, or to the Holders of the Securities, of the record or payment date of such related interest payment, but in any event not less than two Business Days prior to such record date. Payment of the principal of and interest on this Security issued as a global security will be made to DTC, as the depository for the Securities, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. If the Securities are issued in certificated form, principal and interest will be payable, the transfer of the Securities will be registrable and the Securities will be exchangeable for Securities of other denominations of a like aggregate principal amount at the corporate trust office of the Trustee in New York City; PROVIDED, HOWEVER, that, unless the Securities are held by COMSAT Capital or any successor permissible under the Limited Partnership Agreement (in which case payment shall be made by wire transfer), payment of interest may, at the option of COMSAT, be made by check mailed to the address of the Persons entitled thereto as such address shall appear in the Security Register. Reference is hereby made to the further provisions of the Indenture summarized on the reverse hereof, which further -17- provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, COMSAT has caused this instrument to be duly executed under its corporate seal. Dated: , 1995 --------------- COMSAT Corporation [SEAL] By: ------------------------------------ Name: Title: Attest: --------------------- This Security was issued with original issue discount ("OID") within the meaning of section 1273 of the Internal Revenue Code of 1986 and the regulations thereunder. The issue price of this Security is $[ ], OID with respect to this Security is $[ ], the issue date is _________, 1995, and the yield to maturity is [ ]%. Section 203. Form of Reverse of Security. This Security is one of a duly authorized issue of Securities of COMSAT, designated as its ______% Junior Subordinated Deferrable Interest Debentures Due _________, 2025 (subject to extension, as provided herein) (herein called the "Securities"), limited in aggregate principal amount to $206,200,000, issued and to be issued under an Indenture, dated as of ____________, 1995 (herein called the "Indenture"), between COMSAT and The First National Bank of Chicago, as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of COMSAT, the Trustee, the Holders of the Securities, the holders of Preferred Securities and the holders of Senior Indebtedness and of the terms upon which the Securities are, and are to be, authenticated and delivered. All terms used in this Security which are defined in the Indenture or in the Limited Partnership Agreement attached as Annex A thereto shall have the meanings assigned to them in the Indenture or the Limited Partnership Agreement, as the case may be. -18- The indebtedness evidenced by this Security is, to the extent provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness, and this Security is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. The Trustee or the Holders of not less than 25% in aggregate outstanding principal amount of the Securities may declare the principal of and interest (including any Additional Interest) on the Securities due and payable immediately on default with respect to such Securities; PROVIDED, HOWEVER, that after such acceleration, but before a judgment or decree based on acceleration, the Holders of a majority in aggregate principal amount of outstanding Securities may, under certain circumstances, rescind and annul such acceleration if all Events of Default with respect to such Securities, other than the non- payment of accelerated principal, have been cured or waived as provided in the Indenture. The Indenture permits, with certain exceptions as therein provided, COMSAT and the Trustee, with the consent of the Holders of not less than a majority in principal amount of the Securities, to modify the Indenture or any supplemental indenture affecting the Securities or the rights of the Holders of Securities. Any such consent by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent is made upon this Security. The Securities shall be subject to redemption at the option of COMSAT without premium or penalty, in whole or in part, concurrent with the redemption by COMSAT Capital of the Preferred Securities (if any Preferred Securities are then outstanding), at any time or from time to time on or after ____________, 2000, as provided in the Indenture, upon not less than 30 days' nor more than 60 days' notice, at a Redemption Price equal to 100% of the principal amount to be redeemed, plus any accrued and unpaid interest (including Additional Interest, if any), to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture. The Company has covenanted to exercise such right to redeem if COMSAT Capital redeems its Preferred Securities. -19- No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of COMSAT, which is absolute and unconditional, to pay the principal of and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the corporate trust office of the Trustee in New York City, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to COMSAT and the Security Registrar duly executed by the Holder hereof or his or her attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities, if distributed to holders of Preferred Securities in a dissolution of COMSAT Capital, will initially be issued as a global security. If the Securities are issued in certificated form, such Securities will be issued in denominations of $25 and integral multiples thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities are exchangeable for a like aggregate principal amount of Securities of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but COMSAT may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, COMSAT, the Trustee and any agent of COMSAT or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither COMSAT, the Trustee nor any such agent shall be affected by notice to the contrary. The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Security upon compliance by COMSAT with certain conditions set forth therein. -20- Section 204. Form of Trustee's Certificate of Authentication. This is one of the Securities referred to in the within-mentioned Indenture. The First National Bank of Chicago, as Trustee By: ------------------------------ Authorized Officer ARTICLE THREE THE SECURITIES Section 301. Title and Terms. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is $___________, except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Section 304, 305, 306 or 906. The Securities shall be known and designated as the "______% Junior Subordinated Deferrable Interest Debentures Due ____________, 2025" of the Company. Their Stated Maturity shall be the earliest of ____________, 2025 (subject to extension, as provided herein) or, except in the event that (A) a Tax Event or an Investment Company Event has occurred and the General Partner of COMSAT Capital has elected to dissolve COMSAT Capital and cause the Securities to be distributed to the holders of the Preferred Securities in liquidation of COMSAT Capital as provided in Clauses (ii) or (iii) of Section 6.2(c) of the Limited Partnership Agreement or (B) COMSAT Capital is consolidated, amalgamated, merged with or into, or replaced by, or conveys, transfers or leases its properties and assets as an entirety to, any corporation or other body pursuant to Section 9.12 of the Limited Partnership Agreement, the date upon which COMSAT Capital is dissolved, wound-up, liquidated or terminated (other than any termination within the meaning of section 708(b)(1)(B) of the Internal Revenue Code of 1986 or equivalent provision of subsequent law, which termination does not constitute a termination of COMSAT Capital for any other purpose), and they shall bear interest at the rate of ______% per annum, from ________, 1995 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, as the case may be, payable monthly, in arrears, on the last day of each calendar month of each year, commencing ____________, 1995 until -21- the principal thereof is paid or made available for payment. Interest will compound monthly and will accrue at the annual rate of ______% on any interest installment that is not paid when due or during an extension of an interest payment period as set forth below in this Section 301. In the event that any date on which interest is payable on the Securities is not a Business Day, then payment of the interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. If at any time COMSAT Capital shall be required to pay any interest on dividends in respect of the Preferred Securities pursuant to the terms thereof, then the Company will pay as interest to COMSAT Capital as the holder of the Securities Additional Interest. In addition, if COMSAT Capital would be required to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States, or any other taxing authority, then, in any such case, the Company also will pay as Additional Interest such amounts as shall be required so that the net amounts received and retained by COMSAT Capital after paying any such taxes, duties, assessments or governmental charges will be not less than the amounts COMSAT Capital would have received had no such taxes, duties, assessments or governmental charges been imposed. The obligations of the Company under this paragraph shall survive any satisfaction and discharge or any defeasance pursuant to Article Four hereof. The Company may, by Company Order, prior to the Scheduled Maturity Date, extend the maturity date of the Securities no more than one time, for up to an additional 19 years from the Scheduled Maturity Date, PROVIDED that at the time of such extension (i) no Event of Default or event which after notice or lapse of time, or both, would become an Event of Default specified in Section 501(5) or Section 501(6) shall have occurred and be continuing; (ii) the Company has made timely payments of interest (including Additional Interest) on the Securities during the immediately preceding 18 months without deferrals; (iii) COMSAT Capital is not in arrears on payments of distributions on the Preferred Securities; (iv) the Securities shall continue to pay Interest at least at a rate equal to the rate of distributions that accrue on the Preferred Securities; (v) the Securities are rated Investment Grade; and (vi) the final maturity of the Securities is not later than the 49th anniversary of the date of issuance of the Preferred Securities. The Company shall have the right, at any time during the term of the Securities, to extend the interest payment period from time to time to a period not exceeding 60 consecutive months, provided that during the period of any such extension, -22- interest will continue to accrue and compound monthly. At the end of any such extended interest payment period, the Company shall pay all interest then accrued and unpaid (together with Additional Interest thereon); PROVIDED that during any such extended interest payment period COMSAT shall not declare or pay any dividend on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock (other than as a result of a reclassification of such capital stock or the exchange or conversion of one class or series of capital stock for another class or series of capital stock), or make any guarantee payments with respect to the foregoing (other than payments under the Parent Guarantee). Prior to the termination of any such extended interest payment period, the Company may further extend the interest payment period, provided that such extended interest payment period together with all such previous and further extensions thereof may not exceed 60 consecutive months and provided, further, that in no event shall any extension of the interest payment period extend beyond the Stated Maturity of the Securities. After the Company has paid all accrued and unpaid interest (including Additional Interest) following an extended interest payment period, it may again extend interest payment periods for up to 60 consecutive months, subject to the preceding sentence. If COMSAT Capital shall be the sole Holder of the Securities, COMSAT shall give COMSAT Capital notice of its selection of an extended interest payment period one Business Day prior to the earlier of (i) the date the dividends on the Preferred Securities are payable or (ii) the date COMSAT Capital is required to give notice to the NYSE or other applicable self- regulatory organization or to holders of the Preferred Securities of the record date or the date such dividend is payable, but in any event not less than one Business Day prior to such record date. COMSAT shall cause COMSAT Capital to give notice of COMSAT's selection of such extended interest payment period to the holders of the Preferred Securities. If COMSAT Capital is not the sole Holder of the Securities, COMSAT shall give the Holders of the Securities notice of its selection of such an extended interest payment period ten Business Days prior to the earlier of (i) the Interest Payment Date or (ii) the date COMSAT is required to give notice to the NYSE or other applicable self-regulatory organization, or to the Holders of the Securities, of the record or payment date of such related interest payment, but in any event not less than two Business Days prior to such record date. The principal of and interest on the Securities issued as a global security will be made to DTC, as the depository for the Securities. The Trustee or the Holders of not less than 25% in aggregate outstanding principal amount of the Securities may declare the principal of and interest (including any Additional Interest) on the Securities due and payable immediately on any Event of Default; PROVIDED, HOWEVER, that after such acceleration, but before a judgment or decree based on acceleration, the Holders of a majority in aggregate principal amount of outstanding Securities may, under certain -23- circumstances, rescind and annul such acceleration if all Events of Default, other than the non-payment of accelerated principal, have been cured or waived as provided in the Indenture. Unless the Holder of the Preferred Securities is COMSAT Capital (in which case payment of interest shall be made by wire transfer), payment of interest may be made, at the option of the Company, by check mailed to the address of the Persons entitled thereto as such address shall appear in the Security Register. The Securities shall be subordinated in right of payment to Senior Indebtedness as provided in Article Eleven. The Securities shall be redeemable as provided in Article Twelve. Section 302. Denominations. The Securities, if distributed to holders of Preferred Securities in a dissolution of COMSAT Capital, will initially be issued as a global security. If the Securities are issued in certificated form, such Securities will be issued only in registered form without coupons and only in denominations of $25 and integral multiples thereof. Section 303. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by its Chairman of the Board, its Vice Chairman of the Board, its President or one of its Vice Presidents, under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities; and the Trustee in accordance with such Company Order shall authenticate and deliver such Securities as in this Indenture provided and not otherwise. Each Security shall be dated the date of its authentication. -24- No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. Section 304. Temporary Securities. Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at any office or agency of the Company designated pursuant to Section 1002, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of authorized denominations. Until so exchanged the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. Section 305. Registration, Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency designated pursuant to Section 1002 being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The Trustee is hereby appointed "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. Upon surrender for registration of transfer of any Security at an office or agency of the Company designated pursuant to Section 1002 for such purpose, the Company shall -25- execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denominations and of a like aggregate principal amount. At the option of the Holder, Securities may be exchanged for other Securities of any authorized denominations and of a like aggregate principal amount, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer, in form satisfactory to the Company and the Security Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than (i) exchanges pursuant to Section 304 or 906 not involving any transfer or (ii) transfers contemplated by Section 6.2(c) or 9.12 of the Limited Partnership Agreement. Section 306. Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of like tenor and principal amount and bearing a number not contemporaneously Outstanding. If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired,by a bona fide purchaser, the Company shall execute and the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and -26- principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. Section 307. Payment of Interest; Interest Rights Preserved. Interest on any Security which is payable, and is punctually paid, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the Business Day next preceding such Interest Payment Date; PROVIDED, HOWEVER, that if the Securities shall not continue to remain in book-entry-only form, the Company shall have the right to select record dates which shall be more than one Business Day prior to the Interest Payment Date. Any interest on any Security which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following -27- manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as provided in this Clause. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder at his address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (2). (2) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and, if so listed, upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue (including in each such case Additional Interest), which were carried by such other Security. Section 308. Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of and (subject to Section 307) interest (including Additional Interest) on such Security and for all other purposes whatsoever, whether or not -28- such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. Section 309. Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly cancelled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Securities held by the Trustee shall be disposed of as directed by a Company Order. Section 310. Computation of Interest. Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months and, for any period shorter than a full monthly interest period, shall be computed on the basis of the actual number of days elapsed in such period. ARTICLE FOUR SATISFACTION AND DISCHARGE Section 401. Satisfaction and Discharge of Indenture. This Indenture shall cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for, as to the obligations of the Company pursuant to Sections 306, 402, 1002 and 1003, and as to the obligation of the Company to pay Additional Interest when due), and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (1) either (A) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306 and (ii) Securities -29- for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or (B) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company and the Company, in the case of (i), (ii) or (iii) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal and interest (including Additional Interest) to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (2) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 607 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of this Section or if money and/or U.S. Government Obligations shall have been deposited with the Trustee pursuant to Section 403, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003 shall survive. Section 402. Application of Trust Money. Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to -30- Section 401, all money and/or U.S. Government Obligations deposited with the Trustee pursuant to Section 403, and all money received by the Trustee in respect of U.S. Government Obligations deposited with the Trustee pursuant to Section 403 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal and interest, if any, for whose payment such money has been deposited with the Trustee. The Trustee shall deliver or pay to the Company from time to time upon Company Request any money and/or U.S. Government Obligations held by it as provided in Section 402 or in Section 403 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are then in excess of the amount thereof which then would have been required to be deposited for the purpose for which such money and/or U.S. Government Obligations were deposited or received. Section 403. Defeasance and Discharge of Indenture. (1) Notwithstanding the provisions of Section 401 but subject to Section 403(2), the Company shall have the option, to be exercised by Board Resolution, to pay and discharge the entire indebtedness on all the Outstanding Securities; PROVIDED that the following conditions have been satisfied: (A) the Company shall have irrevocably deposited in trust with the Trustee as trust funds, for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of Holders of Securities, money and/or U.S. Government Obligations for the payment of principal and each installment of interest on the Securities on their respective Stated Maturities, in accordance with this Indenture and the Securities; (B) the Company shall have delivered to the Trustee a certificate (addressed to the Trustee) from a nationally recognized firm of independent certified public accountants expressing their opinion that the payment of principal and interest when due and without reinvestment on the deposited U.S. Government Obligations plus any deposited money without investment will provide cash at such times and in such amounts (but, in the case of the option to defease the debt in its entirety only, not more than such amounts) as will be sufficient to pay principal and each installment of interest on all the Outstanding Securities on their respective Stated Maturities, in accordance with this Indenture and the Securities; (C) 91 days pass after the deposit is made or, if longer, the day following the expiration of the longest -31- preference period applicable to the Company in respect of such deposit occurs (it being understood that the condition in this clause (C) is a condition subsequent and shall not be deemed satisfied until the expiration of such period), and during such period no Event of Default or event which after notice or lapse of time, or both, would become an Event of Default specified in Section 501(5) or Section 501(6) occurs which is continuing at the end of the period; (D) no Event of Default or event which after notice or lapse of time, or both, would become an Event of Default has occurred and is continuing on the date of such deposit and after giving effect thereto; (E) the exercise of the defeasance options does not constitute a default under, or a breach or violation of, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound; (F) the Company delivers to the Trustee an Opinion of Counsel to the effect that the trust resulting from the deposit does not constitute, or is qualified as, a regulated investment company under the Investment Company Act of 1940; (G) the Company delivers to the Trustee an Opinion of Counsel to the effect that the Company has received from, or there has been published by, the United States Internal Revenue Service a ruling, or since the date of this Indenture there has been a change in tax law in either case to the effect that, and based thereon such opinion will confirm that, holders of Securities will not recognize gain or loss for federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to federal income tax on the same amount, in the same manner and at the same time as would have been the case if such deposit, defeasance and discharge was not to occur; (H) the Company shall have delivered to the Trustee an Officers' Certificate to the effect that such defeasance shall not cause any Securities then listed on any registered national securities exchange under the Securities Exchange Act of 1934, as amended, to be delisted; (I) such defeasance shall not cause the Trustee for the Securities to have a conflicting interest as specified in Section 608 or for the purposes of the Trust Indenture Act with respect to any securities of the Company; (J) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent and subsequent to the defeasance and discharge of the entire indebtedness on all Outstanding Securities as contemplated by this Section 403 have been complied with; -32- (K) at the time of such deposit: (i) no default in the payment of all or a portion of principal of (or premium, if any) or interest on any Senior Indebtedness shall have occurred and be continuing, and no event of default with respect to any Senior Indebtedness shall have occurred and be continuing and shall have resulted in such Senior Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable and (ii) no other event of default with respect to any Senior Indebtedness shall have occurred and be continuing permitting (after notice or the lapse of time, or both) the holders of such Senior Indebtedness (or a trustee on behalf of the holders thereof) to declare such Senior Indebtedness due and payable prior to the date on which it would otherwise have become due and payable, or, in the case of either Clause (i) or Clause (ii) above, each such default or event of default shall have been cured or waived or shall have ceased to exist; and (L) Such defeasance shall not result in the trust arising from such deposit constituting an investment company as defined in the Investment Company Act of 1940, as amended, or such trust shall be qualified under such act or exempt from regulation thereunder. (2) Provided that all the conditions referred to in Clauses (A) through (L) of Section 403(1) have been satisfied, all of the provisions of this Indenture as they relate to the Outstanding Securities (except the provisions relating to (i) the rights of Holders of Securities to receive, from the trust funds described in Clause (A) of Section 403(1), payment of the principal of and any installment of interest on such Securities on the Stated Maturity or Redemption Date, as the case may be, of such principal or installment of interest in accordance with the terms of this Indenture and of the Securities, (ii) the Company's obligations with respect to such Securities under Section 304, Section 305, Section 306, Section 1002 and Section 1003 of this Indenture, (iii) the rights, powers, trusts, duties, and immunities of the Trustee under this Indenture, (iv) the Company's obligations to pay Additional Interest as and when due in accordance with the terms of this Indenture and the Securities, and (v) this Article Four) shall no longer be in effect with respect to the Securities, and the Trustee, at the expense of the Company, shall, upon Company Request, execute proper instruments acknowledging the same. Section 404. Reinstatement. If the Trustee or any Paying Agent shall be unable to apply any money or U.S. Government Obligations in accordance with Section 401 or Section 403 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under the Securities and -33- under this Indenture with respect thereto shall be revived and reinstated as though no deposit had occurred pursuant to Section 401 or Section 403, until such time as the Trustee or such Paying Agent shall be permitted to apply all such money or obligations in accordance with Section 401 or Section 403, PROVIDED, HOWEVER, that if the Company shall have made any payment of principal of or interest on any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or such Paying Agent. ARTICLE FIVE REMEDIES Section 501. Events of Default. "Event of Default", wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be occasioned by the provisions of Article Eleven or be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) failure for 10 days to pay any interest on the Securities, including any Additional Interest in respect thereof, when due; PROVIDED that a valid extension of the interest payment period by the Company pursuant to this Indenture shall not constitute a default in the payment of interest for this purpose; or (2) failure to pay any principal or premium, if any, on the Securities when due, whether at maturity, upon redemption by declaration or otherwise; or (3) failure by the Company to observe or perform any other covenant contained herein for a period of 90 days after written notice to the Company from any Holder of the Securities or any holder of Preferred Securities; or (4) the dissolution, winding up, or termination (other than any termination within the meaning of section 708(b)(1)(B) of the Internal Revenue Code of 1986 or equivalent provision of subsequent law, which termination does not constitute a termination of COMSAT Capital for any other purpose) of COMSAT Capital, except in connection with the distribution of Securities to the holders of Preferred Securities in liquidation of COMSAT Capital pursuant to Section 6.2(c) or 9.12 of the Limited Partnership Agreement and in connection with certain mergers, -34- consolidations or amalgamations permitted by Section 9.12 of the Limited Partnership Agreement; or (5) entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of the property of either, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or (6) the commencement by the Company of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by the Company to the entry of a decree or order for relief in respect of itself in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against the Company, or the filing by the Company of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State law, or the consent by the Company to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of the property of the Company, or the making by the Company of an assignment for the benefit of creditors, or the admission by the Company in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company the Company in furtherance of any such action. Section 502. Acceleration of Maturity; Rescission and Annulment. If an Event of Default occurs and is continuing, then and in every such case, the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities may declare the principal of, premium, if any, and interest (including any Additional Interest) on the Securities due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration, such principal, premium, if any, and all accrued interest shall become immediately due and payable; PROVIDED, -35- HOWEVER, that after such acceleration, but before a judgment or decree based on acceleration, the Holders of a majority in aggregate principal amount of Outstanding Securities, by written notice to the Company and the Trustee, may rescind and annul such acceleration if (1) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest (including any Additional Interest) on all Securities, (B) the principal of any Securities which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Securities, (C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate borne by the Securities, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) all Events of Default, other than the non-payment of the principal of Securities which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. No such rescission shall affect any subsequent default or impair any right consequent thereon. Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if (1) default is made in the payment of any interest (including any Additional Interest) on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of any Security at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal and interest (including any Additional Interest), and, to the extent that -36- payment thereof shall be legally enforceable, interest on any overdue principal and on any overdue interest (including any Additional Interest), at the rate borne by the Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. Section 504. Trustee May File Proofs of Claim. In case of any judicial proceeding relative to the Company (or any other obligor upon the Securities), its property or its creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under the Trust Indenture Act in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607. No provision of this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 505. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production -37- thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. Section 506. Application of Money Collected. Subject to Article Eleven, any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal, premium, if any, or interest (including any Additional Interest), upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: First: To the payment of all amounts due the Trustee under Section 607; and Second: To the payment of the amounts then due and unpaid for principal of and interest (including any Additional Interest) on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal and interest (including any Additional Interest), respectively. Section 507. Limitation on Suits. No Holder of any Security will have any right to institute any proceeding with respect to this Indenture, or for any remedy hereunder, unless (1) such Holder shall have previously given written notice to the Trustee of a continuing Event of Default; (2) if COMSAT Capital is not the sole Holder of Securities, the Holders of at least 25% in aggregate principal amount of the Outstanding Securities shall have made written request to the Trustee to institute such proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders shall have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee shall not have received from the Holders of a majority in aggregate principal amount of the -38- Outstanding Securities a direction inconsistent with such written request; and (5) the Trustee, for 60 days after its receipt of such notice, request and offer of indemnity, has failed to institute any such proceeding; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders. However, the limitations contained in the previous sentence do not apply to a suit instituted by a Holder of a Security for enforcement of payment of principal of or interest on such Security on or after the respective due dates expressed in such Security. Section 508. Unconditional Right of Holders to Receive Principal and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of and (subject to Section 307) interest (including any Additional Interest) on such Security on the respective Stated Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. Section 509. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. Section 510. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 306, no right or -39- remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Section 511. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. Section 512. Control by Holders. The Holders of a majority in aggregate principal amount of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee, PROVIDED that (1) such direction shall not be in conflict with any rule of law or with this Indenture; (2) subject to the provisions of Section 601, the Trustee shall have the right to decline to follow any such direction if the Trustee determines that the action so directed may not be lawfully taken, or if a Responsible Officer or Officers determines that the action so directed would be unjustly prejudicial to the Holders of Securities not taking part in such direction or would involve the Trustee in personal liability; and (3) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. Section 513. Waiver of Past Defaults. Subject to Section 1006 hereof, the holders of not less than a majority in aggregate outstanding principal amount of the Securities may, on behalf of the holders of all the Securities, waive any past default hereunder and its consequences, except a default -40- (1) in the payment of the principal or interest (including any Additional Interest) on any Security; or (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. Section 514. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; PROVIDED, that neither this Section nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Company or in any suit for the enforcement of the right to receive the principal of and interest (including any Additional Interest) on any Security. Section 515. Waiver of Stay or Extension Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. -41- ARTICLE SIX THE TRUSTEE Section 601. Certain Duties and Responsibilities. The Trustee, prior to the occurrence of an Event of Default with respect to Securities and after the curing of all Events of Default with respect to Securities which may have occurred, shall undertake to perform with respect to Securities only such duties as are specifically set forth in this Indenture and no implied covenants shall be read into this Indenture against the Trustee. In case an Event of Default with respect to Securities has occurred (which has not been cured or waived), the Trustee shall exercise with respect to Securities such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent individual would exercise or use under the circumstances in the conduct of his or her own affairs. No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (a) prior to the occurrence of an Event of Default with respect to Securities and after the curing or waiving of all such Events of Default which may have occurred: (1) the duties and obligations of the Trustee shall with respect to the Securities be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable with respect to such Securities except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; (b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Trustee, unless it shall be proved -42- that the Trustee was negligent in ascertaining the pertinent facts; (c) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a majority in principal amount of the Securities at the time Outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this Indenture with respect to the Securities; and (d) none of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Indenture or adequate indemnity against such risk is not reasonably assured to it. Section 602. Notice of Defaults. The Trustee shall give the Holders notice of any default hereunder as and to the extent provided by the Trust Indenture Act; PROVIDED, HOWEVER, that in the case of any default of the character specified in Section 501(3), no such notice to Holders shall be given until at least 60 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default. Section 603. Certain Rights of Trustee. Subject to the provisions of Section 601: (1) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (2) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (3) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or -43- established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (4) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (5) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (6) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; and (7) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. Section 604. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. The Trustee shall not be accountable for the use or application by the Company of Securities or the proceeds thereof. -44- Section 605. May Hold Securities. The Trustee, any Paying Agent, any Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 608 and 613, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Paying Agent, Security Registrar or such other agent. Section 606. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise provided herein or agreed with the Company. Section 607. Compensation and Reimbursement. The Company agrees (1) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. Section 608. Disqualification; Conflicting Interests. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. -45- Section 609. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. Section 610. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 611. (b) The Trustee may resign at any time by giving written notice thereof to the Company. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Act of the Holders of a majority in principal amount of the Outstanding Securities, delivered to the Trustee and to the Company. (d) If at any time: (1) the Trustee shall fail to comply with Section 608 after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Company or by any such Holder, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs -46- for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company by a Board Resolution may remove the Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee if, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Company. If no successor Trustee shall have been so appointed by the Company or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee to all Holders in the manner provided in Section 106. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. Section 611. Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; PROVIDED that, on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Company shall execute any and all Instruments for -47- more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. Section 612. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, PROVIDED that such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. Section 613. Preferential Collection of Claims Against Company. If and when the Trustee shall be or become a creditor of the Company (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY Section 701. Company to Furnish Trustee Names and Addresses of Holders. The Company will furnish or cause to be furnished to the Trustee (a) semiannually, not later than ________ 15 and ________ 15 in each year, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as -48- of a date not more than 15 days prior to the delivery thereof, and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; EXCLUDING from any such list names and addresses received by the Trustee in its capacity as Security Registrar. Section 702. Preservation of Information; Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 701 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in Section 701 upon receipt of a new list so furnished. (b) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and duties of the Trustee, shall be as provided by the Trust Indenture Act. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to the Trust Indenture Act. Section 703. Reports by Trustee. (a) The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. (b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which the Securities are listed, with the Commission and with the Company. The Company will notify the Trustee when the Securities are listed on any stock exchange. -49- Section 704. Reports by Company. The Company shall file with the Trustee and the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant to the Trust Indenture Act; PROVIDED that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 shall be filed with the Trustee within 15 days after the same is so required to be filed with the Commission. ARTICLE EIGHT CONSOLIDATION, MERGER, OR SALE OF ASSETS Section 801. No Restrictions. Nothing contained in this Indenture or in any of the Securities shall prevent any consolidation or merger of the Company with or into any other corporation or corporations (whether or not affiliated with the Company), or successive consolidations or mergers in which the Company or its successor or successors shall be a party or parties, or shall prevent any sale, conveyance, transfer or other disposition of the property of the Company or its successor or successors as an entirety, or substantially as an entirety, to any other corporation (whether or not affiliated with the Company or its successor or successors) authorized to acquire and operate the same; PROVIDED, HOWEVER, the Company hereby covenants and agrees that, upon any such consolidation, merger, sale, conveyance, transfer or other disposition, the due and punctual payment of the principal of and interest on the Securities, according to their tenor, and the due and punctual performance and observance of all the covenants and conditions of this Indenture with respect to the Securities to be kept or performed by the Company, shall be expressly assumed, by supplemental indenture (which shall conform to the provisions of the Trust Indenture Act, as then in effect) satisfactory in form to the Trustee executed and delivered to the Trustee by the entity formed by such consolidation, or into which the Company shall have been merged, or by the entity which shall have acquired such property. Section 802. Successor Substituted. (1) Upon any such consolidation, merger, sale, conveyance, transfer or other disposition, in accordance with Section 801 and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the due and punctual -50- payment of the principal of and interest on all of the Outstanding Securities and the due and punctual performance of all of the covenants and conditions of this Indenture with respect to the Securities to be kept or performed by the Company, the successor Person formed by such consolidation, merger, sale, conveyance, transfer or other disposition, shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, and thereafter the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities. (2) In case of any such consolidation, merger, sale, conveyance, transfer or other disposition such changes in phraseology and form (but not in substance) may be made in the Securities thereafter to be issued as may be appropriate. (3) Nothing contained in this Indenture or in any of the Securities shall prevent the Company from merging into itself or acquiring by purchase or otherwise all or any part of the property of any other corporation (whether or not affiliated with the Company). ARTICLE NINE SUPPLEMENTAL INDENTURES Section 901. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company contained herein and in the Securities; or (2) to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power herein conferred upon the Company; or (3) to secure the Securities; or (4) to cure any ambiguity, to correct or supplement any provision herein which may be defective or inconsistent with any other provision contained herein, or to make any other -51- provisions with respect to matters or questions arising under this Indenture which shall not be inconsistent with the provisions of this Indenture, PROVIDED that such action pursuant to this Clause (4) shall not adversely affect the interests of the Holders of the Securities. The Trustee is hereby authorized to join with the Company in the execution of any such supplemental indenture, and to make any further appropriate agreements and stipulations which may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Any supplemental indenture authorized by the provisions of this Section may be executed by the Company and the Trustee without the consent of the holders of any of the Securities at the time Outstanding, notwithstanding any of the provisions of Section 902. No consent of the holders of any Preferred Securities shall be required in connection with any supplemental indenture entered into pursuant to this Section 901. Section 902. Supplemental Indentures with Consent of Holders. With the consent of the holders of not less than a majority in principal amount of the Outstanding Securities, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act as then in effect) for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders under this Indenture; PROVIDED, HOWEVER, that no such modification shall, without the consent of the Holder of each Outstanding Security affected thereby, (1) extend the Stated Maturity of the principal of (other than in accordance with the provisions of Section 301) or any installment of interest (including any Additional Interest) on any Security or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon; or (2) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture; or (3) modify any of the provisions of this Section, Section 513 or Section 1006, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby. -52- It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of this Section, the Trustee shall transmit by mail, first-class postage prepaid, a notice, setting forth in general terms the substance of such supplemental indenture, to the Holders of all Outstanding the Securities as their names and addresses appear upon the Securities Register. Any failure of the Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. Section 903. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. Upon the request of the Company, accompanied by a Board Resolution authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Holders of the Securities required to consent thereto as aforesaid, the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion but shall not be obligated to enter into such supplemental indenture. Section 904. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the Holders of Securities shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments. -53- Section 905. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act. Section 906. Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may bear a notation in form approved by the Company, provided such form meets the requirements of any exchange upon which the Securities may be listed, as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Board of Directors, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities. ARTICLE TEN COVENANTS; REPRESENTATIONS AND WARRANTIES Section 1001. Payment of Principal and Interest. The Company will duly and punctually pay or cause to be paid the principal of and interest on the Securities in accordance with the terms of the Securities and this Indenture. Section 1002. Maintenance of Office or Agency. The Company will maintain in The City of New York an office or agency (i) where Securities may be presented or surrendered for payment, (ii) where Securities may be surrendered for registration of transfer or exchange, and (iii) where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies (in or outside The City of New -54- York) where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; PROVIDED, HOWEVER, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in The City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. Section 1003. Money for Securities Payments to Be Held in Trust. If the Company shall at any time act as its own Paying Agent, it will, on or before each due date of the principal of or interest on any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents, it will, prior to each due date of the principal of or interest on any Securities, deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be held as provided by the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act. The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will (i) comply with the provisions of the Trust Indenture Act applicable to it as a Paying Agent and (ii) during the continuance of any default by the Company (or any other obligor upon the Securities) in the making of any payment in respect of the Securities, upon the written request of the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying Agent as such. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (or premium, if any) or interest on any Security -55- and remaining unclaimed for two years after such principal or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease. Section 1004. Statement by Officers as to Default. The Company will deliver to the Trustee, on or before May 15 in each calendar year in which any of the Securities are Outstanding, or on or before such other day in each calendar year as the Company and the Trustee may from time to time agree upon, an Officers' Certificate, stating whether or not to the best knowledge of the signers thereof the Company is in default in the performance and observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and, if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. Section 1005. Existence. Subject to Article Eight, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises; PROVIDED, HOWEVER, that the Company shall not be required to preserve any such right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders. Section 1006. Additional Covenants. The Company agrees it will not, directly or indirectly, declare or pay any dividend on, or redeem, purchase, acquire or make a distribution or liquidation payment with respect to, any of its Common Stock or preferred stock (other than as a result of a reclassification of such Common Stock or preferred stock or the exchange or conversion of one class or series of Common Stock or preferred stock for another class or series of Common Stock or preferred stock), or make any guarantee payments with respect to the foregoing, if at such time (a) there shall have occurred any event that, with the giving of notice or the lapse of time or both, would constitute an Event of Default hereunder, (b) the Company shall be in default with respect to its payment of any obligations under the Parent Guarantee or (c) the Company shall -56- have given notice of its selection of an extended interest payment period as provided herein and such period, or any extension thereof, shall be continuing. The Company also covenants (i) to remain the sole General Partner of COMSAT Capital and maintain 100% ownership of the general partnership interests thereof; PROVIDED that any permitted successor of the Company under Article Eight may succeed to the Company's duties as General Partner, (ii) to contribute capital in an amount equal to at least 3% of the total capital contributions to COMSAT Capital, (iii) not to voluntarily dissolve, wind-up or terminate COMSAT Capital, except in connection with the distribution of Securities to the holders of Preferred Securities in liquidation of COMSAT Capital pursuant to Section 6.2(c) or 9.12 of the Limited Partnership Agreement and in connection with certain mergers, consolidations or amalgamations permitted by the Limited Partnership Agreement, (iv) to perform timely all of its duties as General Partner (including the duty to declare and pay Dividends on the Preferred Securities), and (v) to use its reasonable efforts to cause COMSAT Capital to remain a limited partnership except in connection with certain mergers, consolidations or amalgamations permitted by the Limited Partnership Agreement and otherwise to continue not to be treated as an association taxable as a corporation for United States federal income tax purposes. The Company also covenants that so long as any Securities are held by COMSAT Capital, the General Partner shall not (i) direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or executing any trust or power conferred on the Trustee with respect to the Securities, (ii) waive any past default which is waivable under this Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of all the Securities shall be due and payable, or (iv) consent to any amendment, modification or termination of this Indenture, where such consent shall be required, without, in each case, obtaining the prior approval of the holders of at least 66 2/3% or more in liquidation preference of the Preferred Securities then outstanding, PROVIDED, HOWEVER, that where a consent under this Indenture would require the consent of each Holder affected thereby, no such consent shall be given by the General Partner without the prior consent of each holder of the Preferred Securities. The General Partner shall not revoke any action previously authorized or approved by a vote of the Preferred Securities, without the approval of the holders of Preferred Securities representing 66 2/3% or more of the aggregate liquidation preference of the Outstanding Preferred Securities. The General Partner shall notify all holders of the Preferred Securities of any notice of default received from the Trustee with respect to the Securities. The Company also covenants that if the Securities are distributed to the holders of the Preferred Securities upon the dissolution of COMSAT Capital, the Company will use its best efforts to list the Securities on the NYSE or on such other -57- exchange as the Preferred Securities are then listed and traded on the same part of any such exchange. ARTICLE ELEVEN SUBORDINATION OF SECURITIES Section 1101. Securities Subordinate to Senior Indebtedness. The Company covenants and agrees, and each Holder of a Security, by his acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article (subject to Article Four), the payment of the principal of, premium, if any, and interest (including any Additional Interest) on each and all of the Securities is hereby expressly made subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness of the Company, whether outstanding at the date of this Indenture or hereafter incurred. Section 1102. Payment Over of Proceeds Upon Dissolution, Etc. Upon any payment by, or distribution of assets of, the Company to creditors upon any dissolution, winding-up, liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due or to become due upon all Senior Indebtedness shall first be paid in full, or payment thereof provided for in money in accordance with its terms, before the Holders of the Securities are entitled to receive any payment or distribution of any kind or character whether in cash, property or securities, on account of the principal of or interest on the Securities or on account of any purchase, redemption or other acquisition of Securities by the Company, any Subsidiary of the Company, the Trustee or any Paying Agent (all such payments, distributions, purchases, redemptions and acquisitions herein referred to, individually and collectively, as a "Securities Payment"); any payment by, or distribution of assets of, the Company of any kind or character, whether in cash, property or securities, by set-off or otherwise, to which the Holders of the Securities or the Trustee would be entitled but for the provisions of this Article shall be paid by the Company or by any liquidating trustee or agent or other Person making such payment or distribution, or by the Holders of the Securities or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Indebtedness or their representative or representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, ratably according to the aggregate amounts remaining unpaid on account of the -58- Senior Indebtedness held or represented by each, to the extent necessary to pay all Senior Indebtedness in full, after giving effect to any concurrent payment to the holders of such Senior Indebtedness. In the event that, notwithstanding the foregoing provisions of this Section, the Trustee or the Holder of any Security shall have received any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, prohibited by the foregoing before all Senior Indebtedness is paid in full or payment thereof provided for in cash, then and in such event such payment or distribution shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Company for application to the payment of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full after giving effect to any concurrent payment to or for the holders of Senior Indebtedness. For purposes of this Article only, the words "any payment or distribution of any kind or character, whether in cash, property or securities" shall not be deemed to include a payment or distribution of stock or securities of the Company provided for by a plan of reorganization or readjustment authorized by an order or decree of a court of competent jurisdiction in a reorganization proceeding under any applicable bankruptcy law or of any other corporation provided for by such plan of reorganization or readjustment which stock or securities are subordinated in right of payment to all then outstanding Senior Indebtedness to substantially the same extent, or to a greater extent than, the Securities are so subordinated as provided in this Article. The consolidation of the Company with, or the merger of the Company into, another Person or the liquidation or dissolution of the Company following the conveyance or transfer of all or substantially all of its properties and assets as an entirety to another Person upon the terms and conditions set forth in Article Eight hereof shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 1102 if the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer such Properties and assets, as the case may be, shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions set forth in Article Eight. Section 1103. No Payment When Senior Indebtedness in Default. In the event that any Senior Payment Default (as defined below) shall have occurred, then no Securities Payment shall be made, nor shall any property of the Company or any Subsidiary of the Company be applied to the purchase, acquisition, retirement or redemption of the Securities, unless -59- and until such Senior Payment Default shall have been cured or waived in writing or shall have ceased to exist or all amounts then due and payable in respect of such Senior Indebtedness (including amounts that have become and remain due by acceleration) shall have been paid in full in cash. "Senior Payment Default" means (a) any default in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness continuing beyond the period of grace, if any, specified in the instrument evidencing such Senior Indebtedness, unless and until such default shall have been cured or waived or shall have ceased to exist, and (b) the acceleration of the maturity of any Senior Indebtedness because of a default. The provisions of this Section shall not apply to any payment on account of the principal or interest on the Securities with respect to which Section 1102 hereof would be applicable. Section 1104. Payment Permitted If No Default. Nothing contained in this Article or elsewhere in this Indenture or in any of the Securities shall prevent the Company, at any time except during the pendency of any dissolution, winding-up, liquidation or reorganization of the Company referred to in Section 1102 hereof or under the conditions described in Section 1103 hereof, from making any payments on account of the principal or interest on the Securities. Section 1105. Subrogation to Rights of Holders of Senior Indebtedness. Subject to the payment in full of all Senior Indebtedness, the rights of the Holders of the Securities shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness until the principal of and interest on the Securities shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to or for the benefit of the holders of Senior Indebtedness by Holders of the Securities or the Trustee, shall, as among the Company, its creditors other than holders of Senior Indebtedness and the Holders of the Securities, be deemed to be a payment or distribution by the Company to or on account of the Senior Indebtedness. -60- Section 1106. Provisions Solely to Define Relative Rights. The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders on the one hand and the holders of Senior Indebtedness on the other hand. Nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall (a) impair, as among the Company, its creditors other than holders of Senior Indebtedness and the Holders of the Securities, the obligation of the Company, which is absolute and unconditional, (and which, subject to the rights under this Article of the holders of Senior Indebtedness, is intended to rank equally with all other general obligations of the Company) to pay to the Holders of the Securities the principal of and interest (including any Additional Interest) on the Securities as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against the Company of the Holders of the Securities and creditors of the Company other than the holders of Senior Indebtedness; or (c) prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article of the holders of Senior Indebtedness to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder. Section 1107. Trustee to Effectuate Subordination. Each Holder of a Security by his or her acceptance thereof authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article and appoints the Trustee his attorney-in-fact for any and all such purposes, including, in the event of any dissolution, winding-up, liquidation or reorganization of the Company, whether in bankruptcy, insolvency, receivership proceedings, or otherwise, the timely filing of a claim for the unpaid balance of the Indebtedness of the Company owing to such Holder in the form required in such proceedings and the causing of such claim to be approved. If the Trustee does not file a proper claim at least 30 days before the expiration of the time to file such claim, then the holders of the Senior Indebtedness and their agents, trustees or other representatives are authorized to do so (but,shall in no event be liable for any failure to do so) for and on behalf of the Holders of the Securities. Section 1108. No Waiver of Subordination Provisions. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or -61- failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to the Holders of the Securities and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders of the Securities to the holders of Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness, or otherwise amend or supplement in any manner Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (ii) permit the Company to borrow, repay and then reborrow any or all of the Senior Indebtedness; (iii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (iv) release any Person liable in any manner for the collection of Senior Indebtedness; (v) exercise or refrain from exercising any rights against the Company and any other Person; and (vi) apply any sums received by them to Senior Indebtedness. Section 1109. Notice to Trustee. The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Securities. Notwithstanding the provisions of this Article or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Securities, unless and until a Responsible Officer of the Trustee shall have received written notice thereof from the Company, any holder of Senior Indebtedness, any Designated Senior Holder or any trustee, fiduciary or agent therefor; and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of Section 601 hereof, shall be entitled in all respects to assume that no such facts exist; PROVIDED, HOWEVER, that if the Trustee shall not have received the notice provided for in this Section at least three Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of or interest on any Security), then, anything herein contained to the contrary notwithstanding, but without limiting the rights and remedies of the holders of Senior Indebtedness or any trustee, fiduciary or agent therefor, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for -62- which such money was received and shall not be affected by any notice to the contrary which may be received by it within two Business Days prior to such date. Any notice required or permitted to be given to the Trustee by a holder of Senior Indebtedness or by any Designated Senior Holder shall be in writing and shall be sufficient for every purpose hereunder if in writing and either (i) sent via facsimile to the Trustee, the receipt of which shall be confirmed via telephone, or (ii) mailed, first class postage prepaid, or sent by overnight carrier, to the Trustee addressed to it at the address of its principal office specified in the first paragraph of this instrument or at any other address furnished in writing to such holder of Senior Indebtedness by the Trustee. Subject to the provisions of Section 601 hereof, the Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness or Designated Senior Holder to establish that such notice has been given by a holder of Senior Indebtedness or Designated Senior Holder. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness or Designated Senior Holder to participate in any payment or distribution pursuant to this Article, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. Notwithstanding anything else contained herein, no notice, request or other communication to or with the Trustee shall be deemed given unless received by a Responsible officer at the Trustee's principal corporate trust office. Section 1110. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Company referred to in this Article, the Trustee, subject to the provisions of Section 601 hereof, and the Holders of the Securities shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such dissolution, winding-up, liquidation or reorganization proceedings are pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Securities, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, -63- the holders of the Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article. Section 1111. Trustee Not Fiduciary for Holders of Senior Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall not be liable to any such holders if it shall in good faith pay over or distribute to Holders of Securities or to the Company or to any other Person cash, property or securities to which any holders of Senior Indebtedness shall be entitled by virtue of this Article or otherwise. Section 1112. Rights of Trustee as Holder of Senior Indebtedness; Preservation of Trustee's Rights. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article shall apply to claims of, or payments to, the Trustee under or pursuant to Section 607 hereof. Section 1113. Article Applicable to Paying Agents. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Trustee; PROVIDED, HOWEVER, that Section 1111 hereof shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent. Section 1114. Trust Moneys Not Subordinated. Notwithstanding anything contained herein to the contrary, payments from money or the proceeds of U.S. Government Obligations held in trust by the Trustee under Article Four for the payment of the principal of and interest (including Additional Interest) on the Securities shall not be subordinated to the prior payment of any Senior Indebtedness or subject to the restrictions set forth in this Article, and no Holder of -64- Securities nor the Trustee shall be obligated to pay over any such amount to the Company, any holder of Senior Indebtedness, any Designated Senior Holder or any other creditor of the Company. ARTICLE TWELVE REDEMPTION OF SECURITIES Section 1201. Mandatory Redemption; Optional Redemption. (a) If COMSAT Capital redeems the Preferred Securities in accordance with the terms thereof, the Securities will become due and payable in a principal amount equal to the aggregate stated liquidation preference of the Preferred Securities so redeemed, together with any accrued and unpaid interest thereon, including Additional Interest, if any. Upon any such event, the Company shall redeem the Securities not later than the date of redemption of the Preferred Securities, and shall pay the Redemption Price therefor prior to 12:00 noon, New York City time, on the date of such redemption or at such other time on such earlier date as the Company and COMSAT Capital agree. (b) The Company shall have the right to redeem the Securities without premium or penalty, in whole or in part, concurrent with the redemption by COMSAT Capital of the Preferred Securities (if any Preferred Securities are then outstanding), at any time or from time to time, on or after ___________, 2000, at a redemption price equal to 100% of the principal amount to be redeemed, plus any accrued and unpaid interest, including Additional Interest, if any, to the Redemption Date. In the event of any redemption in part, the Company shall not be required to (i) issue, register the transfer of or exchange any Security during a period beginning at the opening of business 15 days before any selection for redemption of Securities and ending at the close of business on the earliest date in which the relevant notice of redemption is deemed to have been given to all holders of Securities and (ii) register the transfer of or exchange any Securities so selected for redemption, in whole or in part, except the unredeemed portion of any Securities being redeemed in part. Section 1202. Applicability of Article. Redemption of Securities at the election of the Company, as permitted by Section 1201(b), shall be made in accordance with such provision and this Article. -65- Section 1203. Election to Redeem; Notice to Trustee. The election of the Company to redeem Securities pursuant to Section 1201 shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company, the Company shall, at least 30 days and no more than 60 days prior to the Redemption Date fixed by the Company, notify the Trustee of such Redemption Date and of the principal amount of Securities to be redeemed and provide a copy of the notice of redemption given to Holders of Securities to be redeemed pursuant to Section 1204. Section 1204. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at his address appearing in the Security Register. All notices of redemption shall be irrevocable and shall state: (1) the Redemption Date, (2) the Redemption Price, (3) that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and that interest thereon will cease to accrue on and after said date, and (4) the place or places where such Securities are to be surrendered for payment of the Redemption Price. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. Section 1205. Deposit of Redemption Price. Prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities which are to be redeemed on that date. -66- Section 1206. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date, unless the Company shall default in the payment of the Redemption Price and accrued interest, such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued interest to the Redemption Date; PROVIDED, HOWEVER, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant record dates according to their terms and the provisions of Section 307. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal shall, until paid, bear interest from the Redemption Date at the rate borne by the Security. -67- This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first written above. COMSAT Corporation By: ---------------------------- Bruce L. Crockett [SEAL] President and Chief Executive Officer Attest: ______________________ Secretary The First National Bank of Chicago By: ---------------------------- [SEAL] Name: Its: Attest: ----------------- -68- STATE OF MARYLAND ) ss.: COUNTY OF MONTGOMERY ) On the __ day of ____________, 1995 before me personally came Bruce L. Crockett, to me known, who, being by me duly sworn, did depose and say that he is the President and Chief Executive Officer of COMSAT Corporation, a corporation described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation; and that he signed his name thereto by authority of the Board of Directors of such corporation. ----------------------------------- Notary-Public STATE OF ILLINOIS ) ss.: COUNTY OF COOK ) On the __ day of ___________, 1995, before me personally came ____________________, to me known, who, being by me duly sworn, did depose and say that he/she is a ______________ of The First National Bank of Chicago, one of the corporations described in and which executed the foregoing instrument; that he/she knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he/she signed his/her name thereto by like authority. ------------------------------------ [Seal] Notary Public -69- EX-4.(D) 4 EXHIBIT 4(D) EXHIBIT 4(d) Draft of July 5, 1995 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF COMSAT CAPITAL I, L.P. - ------------------------------------------------------------------------------- DATED AS OF ______________, 1995 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- TABLE OF CONTENTS ARTICLE I DEFINED TERMS Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II CONTINUATION OF THE PARTNERSHIP; ADMISSION OF PREFERRED SECURITY HOLDERS Section 2.1 Continuation of the Partnership . . . . . . . . . . . . . . 8 Section 2.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 2.3 Business of the Partnership . . . . . . . . . . . . . . . . 8 Section 2.4 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 2.5 Registered Agent and Office . . . . . . . . . . . . . . . . 9 Section 2.6 Principal Place of Business . . . . . . . . . . . . . . . . 9 Section 2.7 Name and Business Address of General Partner . . . . . . . 9 Section 2.8 Qualification to Do Business . . . . . . . . . . . . . . . 9 Section 2.9 Admission of Holders of Preferred Securities as Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 ARTICLE III CAPITAL CONTRIBUTIONS; REPRESENTATION OF PREFERRED SECURITY HOLDER'S INTEREST; CAPITAL ACCOUNTS Section 3.1 Capital Contributions . . . . . . . . . . . . . . . . . . . 10 Section 3.2 Preferred Security Holder's Interest Represented by LP Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 3.3 Capital Accounts . . . . . . . . . . . . . . . . . . . . . 11 Section 3.4 Interest on Capital Contributions . . . . . . . . . . . . . 11 Section 3.5 Withdrawal and Return of Capital Contributions . . . . . . 11 ARTICLE IV ALLOCATIONS Section 4.1 Profits and Losses . . . . . . . . . . . . . . . . . . . . 11 Section 4.2 Special Allocations . . . . . . . . . . . . . . . . . . . . 13 Section 4.3 Allocations for Income Tax Purposes . . . . . . . . . . . . 14 Section 4.4 Withholding . . . . . . . . . . . . . . . . . . . . . . . . 14 -i- ARTICLE V DIVIDENDS AND DISTRIBUTIONS Section 5.1 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 5.2 Limitations on Distributions . . . . . . . . . . . . . . . 15 ARTICLE VI ISSUANCE OF PREFERRED SECURITIES Section 6.1 General Provisions Regarding Preferred Securities . . . . . 15 Section 6.2 Preferred Securities . . . . . . . . . . . . . . . . . . . 17 ARTICLE VII BOOKS OF ACCOUNT, RECORDS AND REPORTS Section 7.1 Books and Records . . . . . . . . . . . . . . . . . . . . . 24 Section 7.2 Accounting Method . . . . . . . . . . . . . . . . . . . . . 24 ARTICLE VIII POWERS, RIGHTS AND DUTIES OF THE LIMITED PARTNERS Section 8.1 Limitations . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 8.2 Liability . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 8.3 Priority . . . . . . . . . . . . . . . . . . . . . . . . . 25 ARTICLE IX POWERS, RIGHTS AND DUTIES OF THE GENERAL PARTNER Section 9.1 Authority . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 9.2 Powers and Duties of General Partner . . . . . . . . . . . 25 Section 9.3 Expenses Payable by General Partner . . . . . . . . . . . . 27 Section 9.4 Liability . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 9.5 Exculpation . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 9.6 Fiduciary Duty . . . . . . . . . . . . . . . . . . . . . . 28 Section 9.7 [Intentionally Omitted.] . . . . . . . . . . . . . . . . . 29 Section 9.8 Investment Company or Tax Actions . . . . . . . . . . . . . 29 Section 9.9 Outside Businesses . . . . . . . . . . . . . . . . . . . . 29 Section 9.10 Limits on General Partner's Powers . . . . . . . . . . . . 30 Section 9.11 Tax Matters Partner . . . . . . . . . . . . . . . . . . . . 31 Section 9.12 Merger, Consolidation or Amalgamation of the Partnership . 32 -ii- ARTICLE X TRANSFERS OF INTERESTS BY PARTNERS Section 10.1 Transfer of Interests . . . . . . . . . . . . . . . . . . 33 Section 10.2 Transfer of LP Certificates . . . . . . . . . . . . . . . 33 Section 10.3 Persons Deemed Preferred Security Holders . . . . . . . . 34 Section 10.4 Book-Entry Interests . . . . . . . . . . . . . . . . . . . 34 Section 10.5 Notices to Clearing Agency . . . . . . . . . . . . . . . . 35 Section 10.6 Appointment of Successor Clearing Agency . . . . . . . . . 35 Section 10.7 Definitive LP Certificates; Appointment of Paying Agent . 35 ARTICLE XI WITHDRAWAL; DISSOLUTION; LIQUIDATION AND DISTRIBUTION OF ASSETS Section 11.1 Withdrawal of Partners . . . . . . . . . . . . . . . . . . 36 Section 11.2 Dissolution of the Partnership . . . . . . . . . . . . . . 36 Section 11.3 Liquidation . . . . . . . . . . . . . . . . . . . . . . . 38 Section 11.4 Distribution in Liquidation . . . . . . . . . . . . . . . 39 Section 11.5 Rights of Limited Partners . . . . . . . . . . . . . . . . 39 Section 11.6 Termination . . . . . . . . . . . . . . . . . . . . . . . 39 ARTICLE XII AMENDMENTS AND MEETINGS Section 12.1 Amendments . . . . . . . . . . . . . . . . . . . . . . . . 39 Section 12.2 Amendment of Certificate . . . . . . . . . . . . . . . . . 40 Section 12.3 Meetings of Partners . . . . . . . . . . . . . . . . . . . 40 ARTICLE XIII MISCELLANEOUS Section 13.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 41 Section 13.2 Power of Attorney . . . . . . . . . . . . . . . . . . . . 42 Section 13.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . 42 Section 13.4 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . 42 Section 13.5 Effect . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Section 13.6 Pronouns and Number . . . . . . . . . . . . . . . . . . . 42 Section 13.7 Captions . . . . . . . . . . . . . . . . . . . . . . . . . 43 Section 13.8 Partial Enforceability . . . . . . . . . . . . . . . . . . 43 Section 13.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 43 Section 13.10 Waiver of Partition . . . . . . . . . . . . . . . . . . . 43 Section 13.11 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 43 -iii- ANNEX A -- Form of LP Certificate Evidencing Preferred Securities -iv- AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF COMSAT CAPITAL I, L.P. AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of COMSAT Capital I, L.P., a Delaware limited partnership (the "PARTNERSHIP"), dated as of _______, 1995, among COMSAT Corporation, a District of Columbia corporation ("COMSAT"), as the general partner, the Partnership and COMSAT SPV, Inc., a Delaware corporation, as the initial limited partner (the "INITIAL LIMITED PARTNER") and such other Persons (as defined herein) who become Limited Partners (as defined herein) as provided herein. WHEREAS, COMSAT and the Initial Limited Partner entered into a Limited Partnership Agreement, dated as of May 22, 1995 (the "ORIGINAL LIMITED PARTNERSHIP AGREEMENT"); WHEREAS, the Certificate of Limited Partnership of the Partnership was filed with the Office of the Secretary of State of the State of Delaware on May 22, 1995; and WHEREAS, the Partners desire to continue the Partnership under the Act (as defined herein) and to amend and restate the Original Limited Partnership Agreement in its entirety. NOW, THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree to amend and restate the Original Limited Partnership Agreement as follows: ARTICLE I DEFINED TERMS Section 1.1 DEFINITIONS. Unless the context otherwise requires, the terms defined in this Article I shall, for the purposes of this Agreement, have the meanings herein specified. "1940 ACT" means the Investment Company Act of 1940, as amended. "ACT" means the Delaware Revised Uniform Limited Partnership Act, as amended from time to time. "ADDITIONAL DIVIDENDS" means Dividends that shall accrue on any Dividend arrearages in respect of the Preferred Securities (as defined herein) at the rate of ___% per annum, compounded monthly. "ADDITIONAL INTEREST" means (i) interest that shall accrue on any interest on the Subordinated Debentures (as defined herein) that is not paid when due or not paid during an extension of an interest payment period, which in either case shall accrue at the rate of ___% per annum compounded monthly, and (ii) an amount equal to any amount that the Partnership would be required to pay in taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States or any other taxing authority such that the net amounts received and retained by the Partnership after paying any such taxes, duties, assessments or governmental charges will not be less than the amounts the Partnership would have received had no such taxes, duties, assessments or governmental charges been imposed. "AFFILIATE" means, with respect to a specified Person, (a) any Person directly or indirectly owning, controlling or holding with power to vote 10% or more of the outstanding voting securities or other ownership interests of the specified Person, (b) any Person 10% or more of whose outstanding voting securities or other ownership interests are directly or indirectly owned, controlled or held with power to vote by the specified Person, (c) any Person directly or indirectly controlling, controlled by, or under common control with the specified Person, (d) a partnership in which the specified Person is a general partner, (e) any officer or director of the specified Person and (f) if the specified Person is an officer, director, general partner or employee, any other entity for which the specified Person acts in any such capacity. "AGREEMENT" means this Amended and Restated Agreement of Limited Partnership, as amended, modified, supplemented or restated from time to time in accordance with its terms. "BOOK-ENTRY INTEREST" means a beneficial interest in the LP Certificates (as defined herein), ownership of which shall be recorded and transfers of which shall be made through the book-entry system of a Clearing Agency (as defined herein) as described in Section 10.4. -2- "BUSINESS DAY" means any day other than a day on which banking institutions in The City of New York are authorized or required by law or executive order to close. "CAPITAL ACCOUNT" has the meaning set forth in Section 3.3. "CERTIFICATE" means the Certificate of Limited Partnership of the Partnership filed with the Secretary of State of the State of Delaware on May 22, 1995, and any and all amendments thereto and restatements thereof. "CHANGE IN 1940 ACT LAW" has the meaning set forth in the definition of "Investment Company Event" below. "CLEARING AGENCY" means an organization registered as a "Clearing Agency" pursuant to Section 17A of the Exchange Act (as defined herein) that is acting as depositary for the Preferred Securities and in whose name (or nominee's name) shall be registered one or more global LP Certificates and which shall undertake to effect book-entry transfers and pledges of the Preferred Securities. "CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects bookentry transfers and pledges of interests in securities deposited with the Clearing Agency. "CLOSING DATE" means the "Time of Delivery" under the Underwriting Agreement (as defined herein). "CODE" means the Internal Revenue Code of 1986, as amended from time to time, or any corresponding federal tax statute enacted after the date of this Agreement. A reference to a specific section (Section) of the Code refers not only to such specific section, but also to any corresponding provision of any federal tax statute enacted after the date of this Agreement, as such specific section or corresponding provision is in effect on the date of application of the provisions of this Agreement containing such reference. "COMSAT" has the meaning set forth in the introductory paragraph of this Agreement. "COMSAT COMMON STOCK" means the common stock, without par value, of COMSAT. "COVERED PERSON" means any officers, directors, shareholders, partners, employees, representatives or agents -3- of the General Partner or its Affiliates, or any employee or agent of the Partnership or its Affiliates. "DEFINITIVE LP CERTIFICATES" has the meaning set forth in Section 10.4 of this Agreement. "DIVIDENDS" means the cumulative cash distributions from the Partnership with respect to the Interests (as defined herein) represented by the Preferred Securities, accruing from the Closing Date and payable monthly in arrears on the last day of each calendar month of each year, commencing ___________, 1995, pursuant to Section 6.2. "DIVIDEND PAYMENT DATE" has the meaning set forth in Section 6.2(b)(ii) of this Agreement. "DTC" means The Depository Trust Company, the initial Clearing Agency. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "FISCAL PERIOD" means each calendar month. "FISCAL YEAR" means (i) the period commencing upon the formation of the Partnership and ending on December 31, 1995, and (ii) any subsequent twelve (12) month period commencing on January 1 and ending on December 31. "GENERAL PARTNER" means COMSAT in its capacity as general partner of the Partnership, its permitted successors, or any successor general partner in the Partnership admitted as such pursuant to the applicable provisions of this Agreement. "GUARANTEE" means the Guarantee Agreement dated as of _____________, 1995 of COMSAT in favor of the Preferred Security Holders (as defined herein) with respect to the Preferred Securities. "HOLDER" or "PREFERRED SECURITY HOLDER" means a Limited Partner in whose name an LP Certificate representing Preferred Securities is registered. "INDENTURE" means the Indenture, dated as of _______________, 1995, as amended or supplemented from time to time, between COMSAT and the Trustee and any supplemental Indenture thereto entered into by COMSAT pursuant to which Subordinated Debentures of COMSAT are to be issued. "INITIAL LIMITED PARTNER" has the meaning set forth in the introductory paragraph of this Agreement. -4- "INTEREST" means the entire ownership interest of a Partner in the Partnership at any particular time, including, without limitation, its interest in the capital, profits, losses and distributions of the Partnership. "INVESTMENT COMPANY EVENT" means the occurrence of a change in law or regulation or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "CHANGE IN 1940 ACT LAW") to the effect that the Partnership is or will be considered an "investment company" which is required to be registered under the Investment Company Act of 1940, as amended (the "1940 ACT"), which Change in 1940 Act Law becomes effective on or after _____________, 1995; PROVIDED, HOWEVER, that no Investment Company Event shall be deemed to have occurred if the General Partner obtains a written opinion of nationally recognized independent counsel to the Partnership experienced in practice under the 1940 Act to the effect that, notwithstanding such Change in 1940 Act Law, the Partnership is not required to be registered as an "investment company" within the meaning of the 1940 Act. "LIMITED PARTNER" means any Person who is admitted to the Partnership as a Limited Partner pursuant to the terms of this Agreement. "LIQUIDATION DISTRIBUTION" has the meaning set forth in Section 4.1(c). "LIQUIDATOR" has the meaning specified in Section 11.3 of this Agreement. "LP CERTIFICATE" means a certificate substantially in the form attached hereto as Annex A, evidencing the Preferred Securities held by a Limited Partner. "MAJORITY (OR OTHER STATED PERCENTAGE) IN LIQUIDATION PREFERENCE" means Holder(s) of Preferred Securities who are the record owners of Preferred Securities whose aggregate liquidation preferences represent not less than 50% (or not less than the relevant stated percentage) of the aggregate liquidation preference of all Preferred Securities then outstanding. "NET INCOME" and "NET LOSS", respectively, for any Fiscal Period means the income and loss, respectively, of the Partnership for such Fiscal Period as determined in accordance with the method of accounting followed by the Partnership for federal income tax purposes, including, for all purposes, any income exempt from tax and any expenditures of the Partnership which are described in Code -5- Section 705(a)(2)(B); PROVIDED, HOWEVER, that any item allocated under Section 4.2 shall be excluded from the computation of Net Income and Net Loss. "NOTICE OF REDEMPTION" has the meaning set forth in Section 6.2(d)(i) of this Agreement. "NYSE" means the New York Stock Exchange, Inc. "ORIGINAL LIMITED PARTNERSHIP AGREEMENT" has the meaning set forth in the recitals to this Agreement. "PARTNERS" means the General Partner and the Limited Partners, collectively, where no distinction is required by the context in which the term is used. "PARTNERSHIP" means the limited partnership formed under the Act pursuant to the Original Limited Partnership Agreement upon filing of the Certificate, and continued pursuant to this Agreement. "PERSON" means any individual, corporation, association, partnership, trust or other entity. "POWER OF ATTORNEY" means the Power of Attorney granted pursuant to Section 13.2. "PREFERRED SECURITIES" means the Interests of Limited Partners described in Article VI. "PREFERRED SECURITY OWNER" means, with respect to a Book-Entry Interest, a Person who is the beneficial owner of such Book-Entry Interest, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency Participant or as an indirect participant, in each case in accordance with the rules of such Clearing Agency or Clearing Agency Participant). "PURCHASE PRICE" for any Preferred Security means the amount paid per Preferred Security pursuant to the Underwriting Agreement, payment of which shall constitute the contribution to capital contemplated by Section 3.1(c). "REDEMPTION PRICE" has the meaning set forth in Section 6.2(c) of this Agreement. "SECURITIES ACT" means the Securities Act of 1933, as amended. -6- "SPECIAL REPRESENTATIVE" means the Person appointed by the Preferred Security Holders pursuant to Section 6.2(f) of this Agreement. "SUBORDINATED DEBENTURES" means the __% Junior Subordinated Deferrable Interest Debentures of COMSAT issued pursuant to the Indenture and sold by COMSAT to the Partnership in connection with the issuance and sale by the Partnership of the Preferred Securities. "SUCCESSOR SECURITIES" has the meaning set forth in Section 9.12 of this Agreement. "TAX EVENT" means that the General Partner shall have obtained an opinion of nationally recognized independent tax counsel experienced in such matters to the effect that, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, (b) any amendment to or change in an interpretation or application of such laws or regulations by any legislative body, court, governmental agency or regulatory authority (including the enactment of any legislation and the publication of any judicial decision or regulatory determination on or after _______, 1995), or (c) any interpretation or pronouncement that provides for a position with respect to such laws or regulations that differs from the generally accepted position on ________, 1995, which amendment or change is effective or such interpretation or pronouncement is announced on or after _______, 1995, there is more than an insubstantial risk that (i) the Partnership is subject to federal income tax with respect to interest received on the Subordinated Debentures, (ii) interest payable to the Partnership on the Subordinated Debentures will not be deductible for federal income tax purposes or (iii) the Partnership is subject to more than a DE MINIMIS amount of other taxes, duties or other governmental charges. "TAX MATTERS PARTNER" means the General Partner designated as such in Section 9.11 hereof. "TRANSFER AGENT" means The First National Bank of Chicago and its successors and assigns. "TREASURY REGULATIONS" means the income tax regulations, including temporary regulations, promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). -7- "TRUSTEE" means The First National Bank of Chicago, the trustee under the Indenture, and its successors and assigns. "UNDERWRITERS" means the underwriters named in Schedule I to the Underwriting Agreement. "UNDERWRITING AGREEMENT" means the Underwriting Agreement dated _____________, 1995, among COMSAT, the Partnership and the several Underwriters named therein relating to the issuance of the Preferred Securities. ARTICLE II CONTINUATION OF THE PARTNERSHIP; ADMISSION OF PREFERRED SECURITY HOLDERS Section 2.1 CONTINUATION OF THE PARTNERSHIP. The parties hereto agree to continue the Partnership in accordance with the terms of this Agreement. The General Partner, for itself and as agent for the Limited Partners, shall accomplish all filing, recording, publishing and other acts necessary or appropriate for effectiveness of this Agreement and for compliance with all the requirements for the continuation of the Partnership as a limited partnership under the Act and under all other laws of the State of Delaware or such other jurisdictions in which the General Partner determines that the Partnership may conduct business. The rights and duties of the Partners shall be as provided herein and, subject to the terms hereof, in the Act. Section 2.2 NAME. The name of the Partnership is "COMSAT Capital I, L.P.", as such name may be modified from time to time by the General Partner following written notice to the Limited Partners. Section 2.3 BUSINESS OF THE PARTNERSHIP. The purposes of the Partnership are (a) to issue limited partnership interests in the Partnership in the form of Preferred Securities, and to use the proceeds therefrom and the capital contributed to the Partnership by the General Partner to purchase Subordinated Debentures and (b) except as otherwise limited herein, to enter into, make and perform all contracts and other undertakings, and engage in all activities and transactions as the General Partner may reasonably deem necessary or advisable for the carrying out of the foregoing purposes of the Partnership. The Partnership may not conduct any other business or operations except as contemplated by the preceding sentence. -8- Section 2.4 TERM. The term of the Partnership commenced upon the filing of the Certificate in the Office of the Secretary of State of the State of Delaware and shall continue until December 31, 2094, unless dissolved before such date in accordance with the provisions of this Agreement. Section 2.5 REGISTERED AGENT AND OFFICE. The Partnership's registered agent and office in Delaware shall be The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. At any time, the General Partner may designate another registered agent and/or registered office. Section 2.6 PRINCIPAL PLACE OF BUSINESS. The principal place of business of the Partnership shall be c/o COMSAT Corporation, 6560 Rock Spring Drive, Bethesda, MD 20817-1146. Upon ten days' written notice to the Partners, the General Partner may change the location of the Partnership's principal place of business, provided that such change has no material adverse effect upon any Partner. Section 2.7 NAME AND BUSINESS ADDRESS OF GENERAL PARTNER. The name and address of the General Partner are as follows: COMSAT Corporation 6560 Rock Spring Drive Bethesda, Maryland 20817-1146 Attention: Chief Financial Officer The General Partner may change its name or business address from time to time, in which event the General Partner shall promptly notify the Limited Partners of any such change. Section 2.8 QUALIFICATION TO DO BUSINESS. The General Partner shall cause the Partnership to become qualified, formed or registered under the applicable qualification, fictitious name or similar laws of any jurisdiction in which the Partnership transacts business. Section 2.9 ADMISSION OF HOLDERS OF PREFERRED SECURITIES AS LIMITED PARTNERS. (a) Without execution of this Agreement, upon the acquisition of an LP Certificate by a Person, whether by purchase, gift, devise or otherwise, which acquisition shall be deemed to constitute a request by such Person that the books and records of the Partnership reflect such Person's admission as a Limited Partner, such Person shall be admitted to the Partnership as a Limited Partner and shall become bound by this Agreement. -9- (b) Following the first admission of a Preferred Security Holder to the Partnership as a Limited Partner, the Initial Limited Partner shall receive the return of its capital contribution without interest or deduction and will cease to be a Limited Partner. (c) The name and mailing address of each Partner and the amount contributed by such Partner to the capital of the Partnership shall be listed on the books and records of the Partnership. The General Partner shall be required to update the books and records from time to time as necessary to accurately reflect such information. ARTICLE III CAPITAL CONTRIBUTIONS; REPRESENTATION OF PREFERRED SECURITY HOLDER'S INTEREST; CAPITAL ACCOUNTS Section 3.1 CAPITAL CONTRIBUTIONS. (a) The General Partner has, on or prior to the Closing Date, contributed an aggregate of $100 to the capital of the Partnership. The General Partner shall, on or prior to the Closing Date, make such additional capital contribution as is necessary for the General Partner to have contributed an aggregate of 3% of the capital contributed by all Partners as of the Closing Date. (b) The Initial Limited Partner has, prior to the date hereof, contributed the amount of $100 to the capital of the Partnership, which amount will be returned to the Initial Limited Partner as contemplated by Section 2.9(b). (c) On the Closing Date, each Person who acquires a Preferred Security from the Partnership shall, as the consideration for the acquisition of such Preferred Security, contribute to the capital of the Partnership an amount in cash equal to the Purchase Price for such Preferred Security. (d) No Limited Partner shall at any time be required to make any additional capital contributions to the Partnership, except as may be required by law. Section 3.2 PREFERRED SECURITY HOLDER'S INTEREST REPRESENTED BY LP CERTIFICATE. A Preferred Security Holder's Interest shall be represented by the LP Certificate held by or on behalf of such Holder. Each Preferred Security Holder's respective ownership of Preferred Securities shall be set forth on the books and records of the Partnership. Each Holder hereby agrees that its Interest -10- represented by its LP Certificate shall for all purposes be personal property. A Preferred Security Holder shall have no interest in specific Partnership property. Section 3.3 CAPITAL ACCOUNTS. An individual capital account (a "CAPITAL ACCOUNT") shall be established and maintained on the books of the Partnership for each Partner in compliance with Treasury Regulation Sections 1.704-1(b)(2)(iv) and 1.704-2, as amended. Subject to the preceding sentence, each Capital Account will be increased by the amount of the capital contributions (including the Purchase Price) made by, and the Net Income allocated to, such Partner (or predecessor in interest) and reduced by the amount of distributions made by the Partnership, and Net Losses allocated, to the Partner (or predecessor thereof). In addition, a Partner's Capital Account shall be increased or decreased, as the case may be, for any items specially allocated to such Partner under Section 4.2 of this Agreement, and, to the extent permitted under such Treasury Regulation, the General Partner's Capital Account will be increased to the extent the General Partner pays any costs or expenses of the Partnership directly out of the General Partner's own funds. Section 3.4 INTEREST ON CAPITAL CONTRIBUTIONS. Except as provided herein, no Partner shall be entitled to interest on or with respect to any capital contribution to the Partnership. Section 3.5 WITHDRAWAL AND RETURN OF CAPITAL CONTRIBUTIONS. Subject to Sections 2.9(b) and 3.1(b), no Partner shall be entitled to withdraw any part of such Partner's capital contribution to the Partnership or be entitled to receive any distributions from the Partnership, except as provided in this Agreement. ARTICLE IV ALLOCATIONS Section 4.1 PROFITS AND LOSSES. After giving effect to the special allocations set forth in Section 4.2, (a) the Partnership's Net Income for each Fiscal Period of the Partnership shall be allocated as follows: (i) First, to each Holder, as of the close of business on the record date for such Fiscal Period, an amount of Net Income equal to the excess of (x) the Dividends accrued on such Holder's Preferred Securities from the Closing Date through and including the close -11- of business on the record date for such Fiscal Period, including any Additional Dividends payable with respect thereto, over (y) the amount of Net Income allocated to each such Holder (or predecessor thereof) pursuant to this Section 4.1(a)(i) in all prior Fiscal Periods, including any Additional Dividends payable with respect thereto. (ii) Second, to each Holder, as of the close of business on the record date for such Fiscal Period, an amount of Net Income equal to the excess of (x) all Net Losses allocated to each such Holder (or predecessor thereof) from the date of issuance of each of such Holder's Preferred Securities through and including the close of such Fiscal Period pursuant to Section 4.1(b)(ii) over (y) the amount of Net Income allocated to such Holder (or predecessor thereof) pursuant to this Section 4.1(a)(ii) in all prior Fiscal Periods. (iii) Any remaining Net Income shall be allocated to the General Partner. (b) The Partnership's Net Loss for any Fiscal Period shall be allocated as follows: (i) First, to the General Partner until the balance of the General Partner's Capital Account is reduced to zero. (ii) Second, among the Holders in proportion to their respective aggregate Capital Account balances, until the Capital Account balances of such Holders are reduced to zero; PROVIDED, HOWEVER, that the General Partner shall make appropriate adjustments in these allocations, in accordance with Section 4.1(c), with respect to any Preferred Securities as to which Net Income has been allocated with respect to Dividends that accrued but were not paid. (iii) Any remaining Net Loss shall be allocated to the General Partner. (c) The General Partner shall make such changes to the allocations in Sections 4.1(a) and 4.1(b) as it deems reasonably necessary so that, in the year of the Partnership's dissolution, winding-up or termination, amounts distributed to the Preferred Security Holders in accordance with Section 11.4(a) shall equal the aggregate of the stated liquidation preference of $25 per Preferred Security and accrued and unpaid Dividends to the date of payment, including any Additional Dividends accrued thereon (the "LIQUIDATION DISTRIBUTION"), unless, in connection with -12- such dissolution, winding-up or termination, Subordinated Debentures in a principal amount equal to the aggregate liquidation preference of the Preferred Securities have been distributed on a pro rata basis to the Holders. Section 4.2 SPECIAL ALLOCATIONS. (a) All expenditures described in Code Section 705(a)(2)(B) and Section 9.3 hereof that are incurred by, or on behalf of, the Partnership shall be allocated entirely to the General Partner. (b) In the event any Holder unexpectedly receives any adjustments, allocations or distributions described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Partnership Net Income shall be specially allocated to such Holder in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the deficit, if any, in the balance of the Capital Account of such Holder as quickly as possible. This Section 4.2(b) is intended to comply with the qualified income offset provision in Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations. (c) For purposes of determining the profits, losses or any other items allocable to any period, profits, losses and any such other items shall be determined on a daily, monthly or other basis, as determined by the General Partner using any method that is permissible under Section 706 of the Code and the Treasury Regulations promulgated thereunder. Unless otherwise specified, such profits, losses or other items shall be determined for each Fiscal Period. (d) The Partners and Holders, by becoming parties to this Agreement, either by execution hereof or pursuant to Section 2.9, will be deemed to be aware of the income tax consequences of the allocations made by this Article IV and will be deemed to have agreed to be bound by the provisions of this Article IV in reporting their shares of Partnership Net Income and Net Loss for U.S. federal income tax purposes. (e) Notwithstanding anything to the contrary that may be expressed or implied in this Article IV, the interest of the General Partner in each item of income, gain, loss, deduction and credit will be equal to at least (i) at any time that aggregate capital contributions to the Partnership are equal to or less than $50,000,000, 1% of each such item and (ii) at any time that aggregate capital contributions to the Partnership are greater than $50,000,000, 1% of each such item, multiplied by a fraction (not exceeding one and not less than 0.2), the numerator of which is $50,000,000 -13- and the denominator of which is the lesser of the aggregate Capital Account balances of the Capital Accounts of all Partners at such time and the aggregate capital contributions to the Partnership of all Partners at such time. (f) The Partners intend that the allocations under Section 4.1 conform to Treasury Regulations Sections 1.704-1(b) and 1.704-2 (including, without limitation, the minimum gain chargeback, chargeback of partner nonrecourse debt minimum gain, qualified income offset and partner nonrecourse debt provisions of such Treasury Regulations), and the General Partner shall make such changes in the allocations under Section 4.1 as it believes are reasonably necessary to meet the requirements of such Treasury Regulations. (g) Solely for the purpose of adjusting the Capital Accounts of the Partners, and not for tax purposes, if any property is distributed in kind to any Partner, the difference between its fair market value and its book value at the time of distribution shall be treated as gain or loss recognized by the Partnership and allocated pursuant to the provisions of Section 4.1. Section 4.3 ALLOCATIONS FOR INCOME TAX PURPOSES. The income, gains, losses, deductions and credits of the Partnership shall be allocated in the same manner as the items entering into the computation of Net Income and Net Loss are allocated under Sections 4.1 and 4.2; PROVIDED, HOWEVER, that solely for federal, state and local income and franchise tax purposes, but not for book or Capital Account purposes, income, gain, loss and deductions with respect to any property properly carried on the Partnership's books at a value other than the tax basis of such property shall be allocated in a manner determined in the General Partner's discretion, so as to take into account (consistently with Code Section 704(c) principles) the difference between such property's book value and its tax basis. Notwithstanding anything to the contrary set forth in this Agreement, the General Partner is authorized to modify the allocations of this Section 4.3, and Sections 4.1 and 4.2, if necessary or appropriate, in the General Partner's sole discretion, for the allocations to fairly reflect the economic gain, income or loss to each of the Partners, or as otherwise required by the Code or the Treasury Regulations. Section 4.4 WITHHOLDING. The Partnership shall comply with withholding requirements under federal, state and local law and shall remit amounts withheld to and file required forms with applicable jurisdictions. To the extent that the Partnership is required to withhold and pay over -14- any amounts to any authority with respect to distributions or allocations to any Partner, the amount withheld shall be deemed to be a distribution in the amount of the withholding to the Partner. In the event of any claimed over-withhold- ing, Partners shall be limited to an action against the applicable jurisdiction. If the amount withheld was not withheld from actual distributions, the Partnership may reduce subsequent distributions by the amount of such with- holding. Each Partner agrees to furnish the Partnership with any representations and forms as shall reasonably be requested by the Partnership to assist it in determining the extent of, and in fulfilling, its withholding obligations. ARTICLE V DIVIDENDS AND DISTRIBUTIONS Section 5.1 DIVIDENDS. Limited Partners shall receive periodic Dividends, if any, Additional Dividends, if any, redemption payments and liquidation distributions in accordance with the terms of the Preferred Securities set forth in Article VI. Subject to the rights of the Preferred Security Holders, all remaining cash shall be distributed to the General Partner at such time as the General Partner shall determine. Section 5.2 LIMITATIONS ON DISTRIBUTIONS. The Partnership shall not make a distribution to any Partner on account of such Partner's Interest if such distribution would violate Section 17-607 of the Act or other applicable law. ARTICLE VI ISSUANCE OF PREFERRED SECURITIES Section 6.1 GENERAL PROVISIONS REGARDING PREFERRED SECURITIES. (a) There is hereby authorized for issuance and sale Preferred Securities having an aggregate liquidation preference not greater than $200,000,000 and having the designation, annual Dividend rate, liquidation preference, redemption terms and other powers, preferences and special rights and limitations set forth in this Article VI. The aggregate liquidation preference of Preferred Securities authorized hereunder shall be reduced on the Closing Date to the aggregate liquidation preference of such Preferred Securities as shall have been purchased on the Closing Date by the Underwriters. -15- (b) The payment of Dividends, Additional Dividends, if any, and payments of distributions by the Partnership in liquidation or on redemption in respect of Preferred Securities shall be guaranteed by COMSAT pursuant to, and to the extent provided in, the Guarantee. The Guarantee constitutes a guarantee of payment and not of collection. The Holders hereby authorize the General Partner to hold the Guarantee on behalf of the Holders. In the event of an appointment of a Special Representative pursuant to Section 6.2(f) to, among other things, enforce the rights of the Holders under the Guarantee, the Special Representative may take possession of the Guarantee for such purpose. If no Special Representative has been appointed to enforce the Guarantee, the General Partner has the right to enforce the Guarantee on behalf of the Holders. The Holders of not less than 10% in aggregate liquidation preference of all outstanding Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available in respect of the Guarantee, including the giving of directions to the General Partner or the Special Representative, as the case may be. If the General Partner or the Special Representative fails to enforce the Guarantee as provided above, a Holder may institute a legal proceeding directly against the guarantor under the Guarantee to enforce its rights under the Guarantee, without first instituting a legal proceeding against the Partnership or any other Person. The Preferred Security Holders, by acceptance of such Preferred Securities, acknowledge and agree to the subordination provisions and other terms of the Guarantee. (c) The proceeds received by the Partnership from the issuance of Preferred Securities, together with the proceeds of the capital contributed by the General Partner pursuant to Section 3.1(a) of this Agreement, shall be invested by the Partnership in Subordinated Debentures with (i) an aggregate principal amount equal to such aggregate invested proceeds and (ii) an interest rate at least equal to the Dividend rate of the Preferred Securities. (d) The Partnership may not issue any other limited partnership interests in or preferred securities of the Partnership, nor may it incur any indebtedness. All Preferred Securities shall rank senior to all other Interests in the Partnership in respect of the right to receive Dividends, Additional Dividends or other distributions (including, without limitation, any distribution out of the assets of the Partnership upon voluntary or involuntary liquidation, dissolution, winding-up or termination of the Partnership). All Preferred Securities redeemed, purchased or otherwise acquired by the Partnership shall be canceled. The Preferred Securities will be issued -16- in registered form only. Dividends on all Preferred Securities shall be cumu- lative. (e) Notwithstanding that Holders of Preferred Securities are entitled to vote or consent as provided in this Agreement, any of the Preferred Securities that are owned by COMSAT or by any entity owned more than 50% by COMSAT, or by any entity controlled by COMSAT, either directly or indirectly, shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if they were not outstanding. (f) No Holder shall be entitled as a matter of right to subscribe for or purchase, or have any preemptive right with respect to, any part of any new or additional limited partnership interests, or of securities convertible into any Preferred Securities or other limited partnership interests, whether now or hereafter authorized and whether issued for cash or other consideration or by way of a Dividend. Section 6.2 PREFERRED SECURITIES. (a) DESIGNATION. The Preferred Securities, liquidation preference $25 per Preferred Security, are hereby designated as "____% CUMULATIVE MONTHLY INCOME PREFERRED SECURITIES". (b) DIVIDENDS. (i) Preferred Security Holders shall be entitled to receive, when, as and if available and determined to be so payable by the General Partner, except as otherwise provided below, cumulative Dividends at a rate per annum of ____% of the stated liquidation preference of $25 per Preferred Security, calculated on the basis of a 360-day year consisting of 12 months of 30 days each. For any period shorter than a full monthly Dividend period, Dividends will be computed on the basis of the actual number of days elapsed in such period. Dividends shall be payable in United States dollars monthly in arrears on the last day of each calendar month of each year, commencing ______________, 1995. Such Dividends will accrue and be cumulative whether or not they have been declared and whether or not there are funds of the Partnership legally available for the payment of Dividends. Dividends on the Preferred Securities shall be cumulative and shall accrue from the Closing Date. Additional Dividends upon any Dividend arrearages shall be declared and paid in order to provide, in effect, monthly compounding on such Dividend arrearages at a rate of ____% per annum compounded monthly and such Additional Dividends shall accrue. In the event that any date on which Dividends are payable on the Pre- ferred Securities is not a Business Day, then payment of the -17- Dividend payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. (ii) Dividends on the Preferred Securities must be declared monthly and be paid on the last day of each calendar month (each a "DIVIDEND PAYMENT DATE") to the extent that the Partnership has, on such date, (x) funds legally available for the payment of such Dividends and (y) cash on hand sufficient to permit such payments, it being understood that to the extent that funds are not available to pay in full all accrued and unpaid Dividends, the Partnership may pay partial pro rata Dividends to the extent of funds legally available therefor. Dividends will be payable to the Holders as they appear on the books and records of the Partnership on the relevant record dates, which will be one Business Day prior to the relevant Dividend Payment Date. In the event the Preferred Securities shall not continue to remain in book-entry-only form as described in Section 10.4 hereof, the General Partner shall have the right to select relevant record dates, which shall be more than one Business Day prior to the relevant Dividend Payment Date. In the event of any extended interest payment period with respect to the Subordinated Debentures resulting in the deferral of the payment of Dividends on the Preferred Securities, the Partnership shall give written notice by first-class mail to the Holders as to such extended interest payment period no later than the last date on which it would be required to notify the NYSE of the record or payment date of the related Dividend on the Preferred Securities. (iii) The Partnership shall not: (A) pay, declare or set aside for payment, any dividends or other distributions on any other Interests in the Partnership; or (B) redeem, purchase or otherwise acquire any other Interests in the Partnership; until, in each case, such time as all accrued and unpaid Dividends on all of the Preferred Securities, including any Additional Dividends thereon, shall have been paid in full for all Dividend periods terminating on or prior to the date of such payment or the date of such redemption, purchase or acquisition, as the case may be. -18- (c) REDEMPTION. (i) The Preferred Securities are redeemable at the option of the Partnership, in whole or in part, from time to time, on or after __________________, at $25 per Preferred Security plus accrued and unpaid Dividends (whether or not earned or declared) to the date fixed for redemption, including any Additional Dividends accrued thereon (the "REDEMPTION PRICE"). In the event that fewer than all the outstanding Preferred Securities are to be so redeemed, the Preferred Securities to be redeemed will be selected by lot. If a partial redemption would result in the delisting of the Preferred Securities, the Partnership may only redeem the Preferred Securities in whole. (ii) If a Tax Event shall occur and be continuing, the General Partner shall elect to (a) redeem the Preferred Securities in whole (and not in part) at the Redemption Price within 90 days following the occurrence of such Tax Event; PROVIDED that if at the time there is available to the General Partner the opportunity to eliminate, within such 90-day period, the Tax Event by taking some ministerial action, such as filing a form or making an election, or pursuing some other similar reasonable measure, which has no adverse effect on the Partnership or COMSAT, the General Partner will pursue such measure in lieu of redemption; (b) dissolve the Partnership and cause the Subordinated Debentures to be distributed to the Holders in liquidation of the Partnership; or (c) cause the Preferred Securities to remain outstanding and pay Additional Interest on the Subordinated Debentures. (iii) If an Investment Company Event shall occur and be continuing, the General Partner shall elect to either (a) redeem the Preferred Securities in whole (and not in part) at the Redemption Price within 90 days following the occurrence of such Investment Company Event; PROVIDED that if at the time there is available to the General Partner the opportunity to eliminate, within such 90-day period, the Investment Company Event by taking some ministerial action, such as filing a form or making an election, or pursuing some other similar reasonable measure, which has no adverse effect on the Partnership or COMSAT, the General Partner will pursue such measure in lieu of redemption; or (b) dissolve the Partnership and cause the Subordinated Debentures to be distributed to the Holders in liquidation of the Partnership, within 90 days following the occurrence of such Investment Company Event. (iv) Upon the repayment of the Subordinated Debentures at maturity or upon any acceleration, earlier redemption or otherwise, the proceeds from such repayment shall be applied to redeem the Preferred Securities, in whole, at the Redemption Price. In the case of any -19- redemption pursuant to this clause (iv), the Preferred Securities shall only be redeemed when repayment of the Subordinated Debentures has actually been received by the Partnership. (v) The Partnership may not redeem fewer than all the outstanding Preferred Securities unless all accrued and unpaid dividends have been paid on all Preferred Securities for all monthly dividend periods terminating on or prior to the date of redemption. (d) REDEMPTION PROCEDURES. (i) Notice of any redemption (a "NOTICE OF REDEMPTION") of the Preferred Securities to be redeemed pursuant to Section 6.2(c) will be given by the Partnership by first-class mail to each record Holder not fewer than 30 nor more than 60 days prior to the date fixed for redemption thereof. For purposes of the calculation of the date of redemption and the dates on which notices are given pursuant to this paragraph (d)(i), a Notice of Redemption shall be deemed to be given on the day such notice is first mailed by first-class mail, postage prepaid, to each Holder. Each Notice of Redemption shall be addressed to each Holder at the address of the Holder appearing in the books and records of the Partnership. If all of the Preferred Securities are represented by Book-Entry Interests, Notices of Redemption shall be sent to the Clearing Agency. No defect in the Notice of Redemption or in the mailing thereof with respect to any Preferred Security shall affect the validity of the redemption proceedings with respect to any other Preferred Security. Subject to the last sentence of Section 6.2(c)(iv), any Notice of Redemption shall be irrevocable. (ii) If the Partnership gives a Notice of Redemption in respect of the Preferred Securities and all of the Preferred Securities are represented by Book-Entry Interests, then, by 12:00 noon, New York time, on the redemption date, the Partnership will irrevocably deposit with the Clearing Agency funds sufficient to pay the applicable Redemption Price and will give the Clearing Agency irrevocable instructions and authority to pay the Redemption Price to the Holders; if all of the Preferred Securities are not represented by Book-Entry Interests, the Partnership may pay the Redemption Price to a Holder by check upon presentation by a Holder of the corresponding LP Certificate. If a Notice of Redemption shall have been given and funds deposited as required, then upon the date of such deposit, all rights of the Preferred Security Holders who hold such Preferred Securities so called for redemption will cease, except the right of the Holders of such Preferred Securities to receive the Redemption Price, but without interest on such Redemption Price. In the event -20- that any date fixed for redemption of Preferred Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day. In the event that payment of the Redemption Price in respect of Preferred Securities is improperly withheld or refused and not paid either by the Partnership or by COMSAT pursuant to the Guarantee, Dividends on such Preferred Securities (including any Additional Dividends thereon) will continue to accrue at the then applicable rate, from the original redemption date to the date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price. (iii) Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), COMSAT or its subsidiaries may at any time and from time to time purchase outstanding Preferred Securities by tender, in the open market or by private agreement. (e) LIQUIDATION RIGHTS. In the event of any voluntary or involuntary dissolution, winding-up or termination of the Partnership, the Holders will have the rights provided in Section 11.4 hereof. (f) VOTING RIGHTS -- SPECIAL REPRESENTATIVE. (i) If (x) the Partnership fails to pay Dividends in full on the Preferred Securities for 18 consecutive months, (y) an Event of Default (as defined in the Indenture) occurs and is continuing on the Subordinated Debentures or (z) COMSAT is in default on any of its payment or other obligations under the Guarantee, then the Holders, upon the affirmative vote of at least a Majority in Liquidation Preference of the Preferred Securities, will be entitled to appoint and authorize a Special Representative to enforce the Partnership's rights as a creditor under the Indenture and the Subordinated Debentures, to enforce the rights of the Holders under the Guarantee and to enforce the rights of the Holders to receive Dividends (including Additional Dividends) on the Preferred Securities. The Special Representative shall not be admitted as a general partner in the Partnership or otherwise be deemed to be a general partner in the Partnership and shall have no liability for the debts, obligations or liabilities of the Partnership. (ii) In furtherance of the foregoing, and without limiting the powers of any Special Representative so -21- appointed and for the avoidance of any doubt concerning the powers of the Special Representative, any Special Representative, in its own name and as Special Representative of the Partnership, may institute a proceeding, including, without limitation, any suit in equity, an action at law or other judicial or administrative proceeding, to enforce the Partnership's rights directly against COMSAT, or any other obligor in connection with such obligations on behalf of the Partnership, and may prosecute such proceeding to judgment or final decree, and enforce the same against COMSAT or any other obligor in connection with such obligations and collect, out of the property, wherever situated, of COMSAT or any such other obligor upon such obligations, the monies adjudged or decreed to be payable in the manner provided by law. (iii) For purposes of determining whether the Partnership has failed to pay Dividends in full for 18 consecutive months, Dividends shall be deemed to remain in arrears, notwithstanding any payments in respect thereof, until full cumulative Dividends have been or contemporaneously are paid with respect to all monthly Dividend periods terminating on or prior to the date of payment of such full cumulative Dividends. Not later than 30 days after such right to appoint a Special Representative arises and upon not less than 15 days' written notice by first-class mail to the Holders, the General Partner will convene a meeting for the purpose of appointing a Special Representative. If the General Partner fails to convene such meeting within such 30-day period, the Holders of not less than 10% in Liquidation Preference of the Preferred Securities will be entitled to convene such meeting. Except as provided herein, the provisions of Section 12.3 relating to the convening and conduct of meetings of the Partners will apply with respect to any such meeting. Any Special Representative so appointed shall cease to be a Special Representative of the Partnership and the Limited Partners if the Partnership (or COMSAT pursuant to the Guarantee) shall have paid in full all accrued and unpaid Dividends (including any Additional Dividends) on the Preferred Securities or such default or breach, as the case may be, shall have been cured and COMSAT, in its capacity as the General Partner, shall continue the business of the Partnership without dissolution. Notwithstanding the appointment of any such Special Representative, COMSAT shall continue as General Partner and shall retain all rights under the Indenture, including the right to extend the interest payment period from time to time to a period not exceeding 60 consecutive months. (g) VOTING RIGHTS -- CERTAIN AMENDMENTS. (i) If any proposed amendment to this Agreement provides for, or -22- the General Partner otherwise proposes to effect, (x) any action which would adversely affect the powers, preferences or special rights of the Preferred Securities, whether by way of amendment to this Agreement or otherwise (including, without limitation, the authorization or issuance of any limited partnership interests in the Partnership other than the Preferred Securities) or (y) the dissolution, winding-up or termination of the Partnership (other than in connection with the distribution of Subordinated Debentures upon the occurrence of a Tax Event or Investment Company Event, or as described in Section 9.12, then the Holders of outstanding Preferred Securities will be entitled to vote on such amendment or proposal of the General Partner (but not on any other amendment or proposal) and such amendment or proposal shall not be effective except with the approval of Holders of not less than 66 2/3% in Liquidation Preference of the Preferred Securities having a right to vote on the matter; PROVIDED, HOWEVER, that no such approval shall be required if the dissolution, winding-up or termination of the Partnership is proposed or initiated pursuant to Section 11.2 hereof. (ii) Any required approval of Holders may be given at a separate meeting of such Holders convened for such purpose, at a meeting of all of the Partners in the Partnership or pursuant to written consent. The Partnership will cause written notice of any meeting at which Holders are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed by first-class mail to each Holder of record of Preferred Securities at least 15 days prior to the date of such meeting or the date by which such action is to be taken. Each such notice will include a statement setting forth (x) the date of such meeting or the date by which such action is to be taken, (y) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (z) instructions for the delivery of proxies or consents. No vote or consent of the Holders will be required for the Partnership to redeem and cancel Preferred Securities in accordance with this Agreement. (iii) Except as provided in this Section 6.2, Holders shall have no voting rights, and the Holders may not remove or replace the General Partner. -23- ARTICLE VII BOOKS OF ACCOUNT, RECORDS AND REPORTS Section 7.1 BOOKS AND RECORDS. (a) Proper and complete records and books of account of the Partnership shall be kept by the General Partner in which shall be entered fully and accurately all transactions and other matters relative to the Partnership's business as are usually entered into records and books of account maintained by Persons engaged in businesses of a like character, including a Capital Account for each Partner. The books and records of the Partnership, together with a copy of this Agreement and of the Certificate, shall at all times be maintained at the principal office of the General Partner and shall be open to the inspection and examination of the Partners or their duly authorized repre- sentatives for a proper purpose during reasonable business hours. (b) The General Partner may, for such period of time that the General Partner deems reasonable, keep confidential from the Partners any information with respect to the Partnership the disclosure of which the General Partner reasonably believes is not in the best interests of the Partnership or is adverse to the interests of the Partnership or which the Partnership or the General Partner is required by law or by an agreement with any Person to keep confidential. (c) Within three months after the close of each Fiscal Year, the General Partner shall transmit to each Partner a statement indicating such Partner's share of each item of Partnership income, gain, loss, deduction or credit for such Fiscal Year for federal income tax purposes. Section 7.2 ACCOUNTING METHOD. For both financial and tax reporting purposes and for purposes of determining profits and losses, the books and records of the Partnership shall be kept on the accrual method of accounting applied in a consistent manner and shall reflect all Partnership transactions and be appropriate and adequate for the Partnership's business. The Partnership's taxable year shall be the calendar year. -24- ARTICLE VIII POWERS, RIGHTS AND DUTIES OF THE LIMITED PARTNERS Section 8.1 LIMITATIONS. Other than as set forth in this Agreement, the Limited Partners shall not participate in the management or control of the Partnership's business, property or other assets nor shall the Limited Partners transact any business for the Partnership, nor shall the Limited Partners have the power to act for or bind the Partnership, said powers being vested solely and exclusively in the General Partner. The Limited Partners shall have no interest in the properties or assets of the General Partner, or any equity therein, or in any proceeds of any sales thereof (which sales shall not be restricted in any respect, by virtue of acquiring or owning an Interest in the Partnership). Section 8.2 LIABILITY. Subject to the provisions of the Act, no Limited Partner shall be liable for the repayment, satisfaction or discharge of any debts or other obligations of the Partnership in excess of the Capital Account balance of such Limited Partner. Section 8.3 PRIORITY. No Limited Partner shall have priority over any other Limited Partner as to Partnership allocations or distributions. ARTICLE IX POWERS, RIGHTS AND DUTIES OF THE GENERAL PARTNER Section 9.1 AUTHORITY. Subject to the limitations provided in this Agreement, the General Partner shall have exclusive and complete authority and discretion to manage the operations and affairs of the Partnership and to make all decisions regarding the business of the Partnership. Any action taken by the General Partner shall constitute the act of and serve to bind the Partnership. In dealing with the General Partner acting on behalf of the Partnership, no Person shall be required to inquire into the authority of the General Partner to bind the Partnership. Persons dealing with the Partnership are entitled to rely conclusively on the power and authority of the General Partner, as set forth in this Agreement. Section 9.2 POWERS AND DUTIES OF GENERAL PARTNER. Except as otherwise specifically provided herein, the General Partner shall have all rights and powers of a general -25- partner under the Act, and shall have all authority, rights and powers in the management of the Partnership business to do any and all other acts and things necessary, proper, convenient or advisable to effectuate the purposes of this Agreement, including by way of illustration but not by way of limitation, the following: (a) to secure the necessary goods and services required in performing the General Partner's duties for the Partnership; (b) to exercise all powers of the Partnership, on behalf of the Partnership, in connection with enforcing the Partnership's rights under the Subordinated Debentures and the Guarantee; (c) to issue Preferred Securities and to admit Limited Partners in connection therewith in accordance with this Agreement; (d) to act as registrar and transfer agent for the Preferred Securities or designate an entity to act as registrar and transfer agent; (e) to establish a record date with respect to all actions to be taken hereunder that require a record date be established, including with respect to Dividends and voting rights and to make determinations as to the payment of Dividends, and make or cause to be made all other required payments to Holders and to the General Partner; (f) to open, maintain and close bank accounts and to draw checks and other orders for the payment of money; (g) to bring or defend, pay, collect, compromise, arbitrate, resort to legal action, or otherwise adjust claims or demands of or against the Partnership; (h) to deposit, withdraw, invest, pay, retain and distribute the Partnership's funds in a manner consistent with the provisions of this Agreement; (i) to take all action which may be necessary or appropriate for the preservation and the continuation of the Partnership's valid existence, rights, franchises and privileges as a limited partnership under the laws of the State of Delaware and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Limited Partners -26- or to enable the Partnership to conduct the business in which it is engaged; (j) to cause the Partnership to enter into and perform, on behalf of the Partnership, the Underwriting Agreement and to cause the Partnership to purchase the Subordinated Debentures without any further act, vote or approval of any Partner; and (k) to execute and deliver any and all documents or instruments, perform all duties and powers and do all things for and on behalf of the Partnership in all matters necessary or desirable or incidental to the foregoing. Section 9.3 EXPENSES PAYABLE BY GENERAL PARTNER. The General Partner hereby assumes and shall be liable for the debts, obligations and liabilities of the Partnership and agrees to pay to each Person or entity to whom the Partner- ship is now or hereafter becomes indebted or liable, whether such indebtedness, obligations or liabilities arise in contract, tort or otherwise, (including, without limitation, payment obligations arising under Section 7.3 of this Agreement, but excluding payment obligations of COMSAT to Holders of the Preferred Securities in such Holders' capacities as Holders, such obligations being separately guaranteed under the Guarantee) (the "BENEFICIARIES") the full payment of such indebtedness and any and all liabilities, when and as due. This agreement is intended to be for the benefit of and to be enforceable by all such Beneficiaries whether or not such Beneficiaries have received notice hereof. Section 9.4 LIABILITY. Except as expressly set forth in this Agreement, (a) the General Partner shall not be personally liable for the return of any portion of the capital contributions (or any return thereon) of the Limited Partners; (b) the return of such capital contributions (or any return thereon) shall be made solely from assets of the Partnership; and (c) the General Partner shall not be required to pay to the Partnership or to any Limited Partner any deficit in any Limited Partner's Capital Account upon dissolution or otherwise. Other than as provided under the Act, no Limited Partner shall have the right to demand or receive property other than cash for its respective Interest in the Partnership. Section 9.5 EXCULPATION. (a) No Covered Person shall be liable, responsible, or accountable in damages or otherwise to the Partnership or any Limited Partner (in its capacity as such) -27- or any Affiliate of any Limited Partner for any loss, damages or claim incurred by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Partnership and in a manner reasonably believed to be within the scope of the authority conferred on such Covered Person by this Agreement or by law; PROVIDED, HOWEVER, that a Covered Person shall be liable for any such loss, damage or claim incurred by reason of such Covered Persons's gross negligence or willful misconduct with respect to such acts or omissions. (b) No Covered Person shall be deemed to have acted with gross negligence or willful misconduct if such Covered Person relied in good faith upon the records of the Partnership and upon such information, opinions, reports or statements presented to the Partnership by any Person as to matters the Covered Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Partnership, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which distributions to Partners might properly be paid. Section 9.6 FIDUCIARY DUTY. (a) To the extent that, at law or in equity, a Covered Person has duties (including fiduciary duties) and liabilities relating thereto to the Partnership or to any Limited Partner (in its capacity as such) or any Affiliate of any Limited Partner, a Covered Person acting under this Agreement shall not be liable to the Partnership or to any other Person for its good faith reliance on the provisions of this Agreement. The provisions of this Agreement, to the extent that they restrict the duties and liabilities of a Covered Person otherwise existing at law or in equity, are agreed by the parties hereto to replace such other duties and liabilities of such Covered Person. (b) Unless otherwise expressly provided herein, (i) whenever a conflict of interest exists or arises between Persons, or (ii) whenever this Agreement or any other agreement contemplated herein or therein provides that a Covered Person shall act in a manner that is, or provides terms that are, fair and reasonable to the Partnership or any Partner, the Covered Person shall resolve such conflict of interest, taking such action or providing such terms, considering in each case the relative interest of each party (including its own interest) to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted -28- industry practices, and any applicable generally accepted accounting practices or principles. In the absence of bad faith by the Covered Person, the resolution, action or terms so made, taken or provided by the Covered Person shall not constitute a breach of this Agreement or any other agreement contemplated herein or of any duty or obligation of the Covered Person at law or in equity or otherwise. (c) Whenever in this Agreement a Covered Person is permitted or required to make a decision (i) in its "discretion" or under a grant of similar authority, the Covered Person shall be entitled to consider only such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Partnership or any other Person, or (ii) in its "good faith" or under another express standard, the Covered Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Agreement or other applicable law. Section 9.7 [INTENTIONALLY OMITTED.] Section 9.8 INVESTMENT COMPANY OR TAX ACTIONS. The General Partner is authorized and directed to conduct its affairs and to operate the Partnership in such a way that the Partnership would not be deemed to be an "investment company" required to be registered under the 1940 Act or taxed as a corporation for federal income tax purposes and so that the Subordinated Debentures will be treated as indebtedness of COMSAT for federal income tax purposes. In this connection, the General Partner is authorized to take any action not inconsistent with applicable law, the Certificate of Limited Partnership or this Agreement, and that does not materially and adversely affect the interests of Holders, that the General Partner determines in its discretion to be necessary or desirable for such purposes. Section 9.9 OUTSIDE BUSINESSES. Any Partner or Affiliate thereof may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Partnership, and the Partnership and the Partners shall have no rights by virtue of this Agreement in and to such independent ventures or the income or profits derived therefrom and the pursuit of any such venture, even if competitive with the business of the Partnership, shall not be deemed wrongful or improper. No Partner or Affiliate thereof shall be obligated to present any particular investment opportunity to the Partnership even if such opportunity is of a character that, if presented to the Partnership, could be taken by the Partnership, and any Partner or -29- Affiliate thereof shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment opportunity. Section 9.10 LIMITS ON GENERAL PARTNER'S POWERS. (a) Anything in this Agreement to the contrary notwithstanding, the General Partner shall not cause or permit the Partnership to: (i) acquire any assets other than as expressly provided herein; (ii) do any act which would make it impractical or impossible to carry on the ordinary business of the Partnership; (iii) possess Partnership property for other than a Partnership purpose; (iv) admit a Person as a Partner, except as expressly provided in this Agreement; (v) make any loans to the General Partner or its Affiliates, other than loans represented by the Subordinated Debentures; (vi) perform any act that would subject any Limited Partner to liability as a general partner in any jurisdiction; (vii) engage in any activity that is not consistent with the purposes of the Partnership, as set forth in Section 2.3; (viii) without the written consent of 66 2/3% in Liquidation Preference of the Preferred Securities, have an order for relief entered with respect to the Partnership or commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of the Partnership's property, or make any assignment for the benefit of creditors of the Partnership; or (ix) borrow money or become liable for the borrowings of any third party or engage in any financial or other trade or business. -30- (b) So long as the Subordinated Debentures are held by the Partnership, the General Partner shall not: (i) direct the time, method and place of conducting any pro- ceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to the Subordinated Debentures, (ii) waive any past default which is waivable under the Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of the Subordinated Debentures shall be due and payable, (iv) consent to any amendment, modification or termination of the Indenture, where such consent shall be required, without, in each case, obtaining the prior approval of the Holders of not less than 66 2/3% in Liquidation Preference of the Preferred Securities; PROVIDED, HOWEVER, that where a consent under the Indenture would require the consent of each holder of Subordinated Debentures affected thereby, no such consent shall be given by the General Partner without the prior consent of each Holder of Preferred Securities. (c) The General Partner shall not revoke any action previously authorized or approved by a vote of Holders without the approval of the Holders of not less than 66 2/3% in Liquidation Preference of the Preferred Securities. The General Partner shall notify all Holders of any notice of default received from the Trustee with respect to the Subordinated Debentures. Section 9.11 TAX MATTERS PARTNER. (a) For purposes of Code Section 6231(a)(7), the "TAX MATTERS PARTNER" shall be the General Partner as long as it remains the general partner of the Partnership. The Tax Matters Partner shall keep the Limited Partners fully informed of any inquiry, examination or proceeding. (b) The General Partner shall not make an election in accordance with Section 754 of the Code. (c) The General Partner and the Preferred Security Holders acknowledge that they intend, for U.S. federal income tax purposes, that the Partnership shall be treated as a partnership and that the General Partner and the Preferred Security Holders shall be treated as Partners of such Partnership for such purposes. -31- Section 9.12 MERGER, CONSOLIDATION OR AMALGAMATION OF THE PARTNERSHIP. Except as permitted in this Section 9.12, the Partnership may not, and the General Partner shall not permit the Partnership to, consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other Person, except as described below. The Partnership may, without the consent of the Holders, consolidate, amalgamate, merge with or into, or be replaced by a limited partnership, a limited liability company or a trust organized as such under the laws of any state of the United States of America or of the District of Columbia; PROVIDED, that (i) such successor entity either (x) expressly assumes all of the obligations of the Partnership under the Preferred Securities or (y) substitutes for the Preferred Securities other securities having substantially the same terms as the Preferred Securities (the "SUCCESSOR SECURITIES") so long as the Successor Securities rank, with respect to participation in the profits, dividends and assets of the successor entity, at least as high as the Preferred Securities rank with respect to participation in the profits, Dividends and assets of the Partnership, (ii) COMSAT expressly acknowledges such successor entity as the holder of the Subordinated Debentures, (iii) the Preferred Securities or any Successor Securities are listed, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or other organization on which the Preferred Securities are then listed, (iv) such merger, consolidation, amalgamation or replacement does not cause the Preferred Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization, as that term is used in Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act, (v) such merger, consolidation, amalgamation or replacement does not adversely affect the powers, preferences and other special rights of Holders of Preferred Securities (including holders of any Successor Securities) in any material respect (other than with respect to any dilution of the Holders' interest in the new entity), (vi) such successor entity has a purpose substantially identical to that of the Partnership, (vii) COMSAT has provided a guarantee to the holders of the Successor Securities with respect to such successor entity having substantially the same terms as the Guarantee, and (viii) prior to such merger, consolidation, amalgamation or replacement, COMSAT has received an opinion of nationally recognized independent counsel to the Partnership experienced in such matters to the effect that (x) such successor entity will not be treated as an association taxable as a corporation for federal income tax purposes, (y) following such merger, consolidation, amalgamation or replacement, neither COMSAT nor such -32- successor entity will be required to register as an investment company under the 1940 Act and (z) such merger, consolidation, amalgamation or replacement will not adversely affect the limited liability of the Holders. ARTICLE X TRANSFERS OF INTERESTS BY PARTNERS Section 10.1 TRANSFER OF INTERESTS. (a) Preferred Securities shall be freely transferable by a Holder. (b) The General Partner may not assign its Interest in the Partnership in whole or in part under any circumstances except to a successor of COMSAT as permitted under the Indenture. The admission of such successor as a general partner of the Partnership shall be effective upon the filing of an amendment to the Certificate with the Secretary of State of the State of Delaware which indicates that such successor has been admitted as a general partner in the Partnership. If the General Partner assigns its entire Interest to a successor of COMSAT as permitted under the Indenture, the General Partner shall be deemed to have ceased to be a general partner in the Partnership simultaneously with the admission of the successor as a general partner in the Partnership and such successors assumption hereof. Any such successor general partner in the Partnership is hereby authorized to and shall continue the business of the Partnership without dissolution. (c) Except as provided above, no Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Agreement. Any transfer or purported transfer of any Interest not made in accordance with this Agreement shall be null and void. Section 10.2 TRANSFER OF LP CERTIFICATES. The General Partner shall provide for the registration of LP Certificates and of transfers of LP Certificates without charge, but upon payment (with the giving of such indemnity as the Partnership or the General Partner may require) in respect of any tax or other government charges that may be imposed in relation to it. Upon surrender for registration of transfer of any LP Certificate, the General Partner shall cause one or more new LP Certificates to be issued in the name of the designated transferee or transferees. Every LP Certificate surrendered for registration of transfer shall be accompanied by a written instrument of transfer in form satisfactory to the General Partner duly executed by the -33- Preferred Security Holder or his or her attorney duly authorized in writing. Each LP Certificate surrendered for registration of transfer shall be canceled by the General Partner. A transferee of an LP Certificate shall be admitted to the Partnership as a Limited Partner and shall be entitled to the rights and subject to the obligations of a Preferred Security Holder hereunder upon the receipt by a transferee of an LP Certificate. The Partnership will not be required to register or cause to be registered the transfer of Preferred Securities after such Preferred Securities have been called for redemption pursuant to Section 6.2. Section 10.3 PERSONS DEEMED PREFERRED SECURITY HOLDERS. The Partnership may treat the Person in whose name any LP Certificate shall be registered on the books and records of the Partnership as the sole holder of such LP Certificate and of the Preferred Securities represented by such LP Certificate for purposes of receiving Dividends and for all other purposes whatsoever and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such LP Certificate or in the Preferred Securities represented by such LP Certificate on the part of any other Person, whether or not the Partnership shall have actual or other notice thereof. Section 10.4 BOOK-ENTRY INTERESTS. The LP Certificates, on original issuance, will be issued in the form of a global LP Certificate or LP Certificates representing the Book-Entry Interests, to be delivered to DTC, the initial Clearing Agency, by, or on behalf of, the Partnership. Such LP Certificate or LP Certificates shall initially be registered on the books and records of the Partnership in the name of Cede & Co., the nominee of DTC, and no Preferred Security Owner will receive a definitive LP Certificate representing such Preferred Security Owner's interests in such LP Certificate, except as provided in Section 10.7. Unless and until definitive, fully registered LP Certificates (the "DEFINITIVE LP CERTIFICATES") have been issued to the Preferred Security Owners pursuant to Section 10.7: (a) The provisions of this Section shall be in full force and effect; (b) The Partnership, the Special Representative and the General Partner shall be entitled to deal with the Clearing Agency for all purposes of this Agreement (including the payment of Dividends, Redemption Price and liquidation proceeds on the LP Certificates and receiving approvals, votes or consents hereunder) as the Preferred Security Holder and the sole holder of -34- the LP Certificates and shall have no obligation to the Preferred Security Owner; (c) None of the Partnership, the General Partner, any Special Representative or any agent of the General Partner, the Partnership or any Special Representative shall have any liability with respect to or responsibility for the records of the Clearing Agency; and (d) To the extent that the provisions of this Section conflict with any other provisions of this Agreement, the provisions of this Section shall control. Section 10.5 NOTICES TO CLEARING AGENCY. Whenever a notice or other communication to the Preferred Security Holders is required under this Agreement, unless and until Definitive LP Certificates shall have been issued to the Preferred Security Owners pursuant to Section 10.7, the General Partner shall give all such notices and communications specified herein to be given to the Preferred Security Holders to the Clearing Agency, and shall have no obligations to the Preferred Security Owners. Section 10.6 APPOINTMENT OF SUCCESSOR CLEARING AGENCY. If any Clearing Agency elects to discontinue its services as securities depository with respect to the Preferred Securities, the General Partner may, in its sole discretion, appoint a successor Clearing Agency with respect to the Preferred Securities. Section 10.7 DEFINITIVE LP CERTIFICATES; APPOINTMENT OF PAYING AGENT. If (a) the Clearing Agency elects to discontinue its services as securities depository and no successor clearinghouse is obtained within 90 days after such discontinuance pursuant to Section 10.6 or (b) the Partnership elects to terminate the book-entry system through the Clearing Agency, then Definitive LP Certificates shall be prepared by the Partnership. In each of the above circumstances, the General Partner will appoint a paying agent to pay Dividends, redemption payments or liquidation payments on behalf of the Partnership with respect to the Preferred Securities. Upon surrender of the global LP Certificate or LP Certificates representing the Book-Entry Interests by the Clearing Agency, accompanied by registration instructions, the General Partner shall cause Definitive LP Certificates to be delivered to Preferred Security Owners in accordance with the instructions of the Clearing Agency. Neither the General Partner nor the Partnership shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be -35- protected in relying on, such instructions. Any Person receiving a Definitive LP Certificate in accordance with this Article X shall be admitted to the Partnership as a Limited Partner upon receipt of such Definitive LP Certificate and shall be registered on the books and records of the Partnership as a Preferred Security Holder. The Clearing Agency or the nominee of the Clearing Agency, as the case may be, shall cease to be a Limited Partner under this Section 10.7 at the time that at least one additional Person is admitted to the Partnership as a Limited Partner in accordance with this Section 10.7. The Definitive LP Certificates shall be printed, lithographed or engraved or may be produced in any other manner as may be required by any national securities exchange on which the Preferred Securities may be listed and is reasonably acceptable to the General Partner, as evidenced by its execution thereof. ARTICLE XI WITHDRAWAL; DISSOLUTION; LIQUIDATION AND DISTRIBUTION OF ASSETS Section 11.1 WITHDRAWAL OF PARTNERS. The General Partner shall not at any time retire or withdraw from the Partnership except as otherwise permitted hereunder. If the General Partner retires or withdraws in contravention of this Section 11.1, it shall indemnify, defend and hold harmless the Partnership and the other Partners from and against any losses, expenses, judgments, fines, settlements or damages suffered or incurred by the Partnership or such other Partners arising out of or resulting from such retirement or withdrawal. Section 11.2 DISSOLUTION OF THE PARTNERSHIP. (a) The Partnership shall not be dissolved by the admission of Partners in accordance with the terms of this Agreement. Except as provided in Section 11.2(b), the death, retirement, resignation, expulsion, bankruptcy or dissolution of a Partner, or the occurrence of any other event which terminates the Interest of a Partner in the Partnership, shall not cause the Partnership to be dissolved and its affairs wound up so long as the Partnership at all times has at least two Partners. Upon the occurrence of any such event, the business of the Partnership shall be continued without dissolution. (b) The Partnership shall be dissolved and terminated and its affairs shall be wound up upon the earliest to occur of any of the following events: -36- (i) the expiration of the term of the Partnership, as provided in Section 2.4 of this Agreement; (ii) upon the bankruptcy, insolvency or dissolution of the General Partner; (iii) upon the assignment by the General Partner of its entire interest in the Partnership when the assignee is not admitted to the Partnership as a general partner of the Partnership in accordance with this Agreement, or the filing of a certificate of dissolution or its equivalent with respect to the General Partner, or the revocation of the General Partner's charter and the expiration of 90 days after the date of notice to the General Partner of revocation without a reinstatement of its charter, or any other event occurs which causes the General Partner to cease to be a general partner of the Partnership under the Act, unless the business of the Partnership is continued by a majority in interest of the remaining Partners in accordance with the Act; (iv) in accordance with the provisions of the Preferred Securities; (v) upon the entry of a decree of judicial dissolution under Section 17-802 of the Act; or (vi) upon the written consent of all Partners. For purposes of subparagraph (iii) above, "majority in interest" shall mean a majority of the profits interests and a majority of the capital interests owned by all the remaining Partners within the meaning of Rev. Proc. 94-46, 1994-28 I.R.B. 129. (c) Upon dissolution of the Partnership, the Liquidator shall promptly notify the Partners of such dissolution. (d) After the date fixed for any distribution of Subordinated Debentures upon dissolution of the Partnership, (i) the Preferred Securities will no longer be deemed to be outstanding, (ii) DTC or its nominee, as the record holder of the Preferred Securities, will receive a registered global certificate or certificates representing the Subordinated Debentures to be delivered upon such distribution, and (iii) any certificates representing Preferred Securities not held by DTC or its nominee will be deemed to represent Subordinated Debentures having a principal amount equal to the aggregate of the stated liquidation preference of such Preferred Securities, with -37- accrued and unpaid interest equal to the amount of accrued and unpaid Dividends on such Preferred Securities, until such certificates are presented to COMSAT or its agent for transfer or reissuance. Section 11.3 LIQUIDATION. (a) In the event of the dissolution of the Partnership for any reason, the General Partner (or, if the Partnership is dissolved pursuant to Section 11.2(b)(ii), then a liquidating agent appointed by Holders of not less than 66 2/3% in Liquidation Preference of the Preferred Securities (the General Partner or such person so appointed is hereinafter referred to as the "LIQUIDATOR")) shall commence to wind up the affairs of the Partnership and to liquidate the Partnership's assets; PROVIDED, HOWEVER, that a reasonable time shall be allowed for the orderly liquidation of the assets of the Partnership and the satisfaction of liabilities to creditors so as to enable the Partners to minimize the normal losses attendant upon liquidation. The Partners shall continue to share all income, losses and distributions during the period of liquidation in accordance with Articles IV and V. Subject to the provisions of this Article XI, the Liquidator shall have full right and unlimited discretion to determine the time, manner and terms of any sale or sales of Partnership property pursuant to such liquidation, giving due regard to the activity and condition of the relevant market and general financial and economic conditions. (b) The Liquidator shall have all of the rights and powers with respect to the assets and liabilities of the Partnership in connection with the liquidation and termination of the Partnership that the General Partner would have with respect to the assets and liabilities of the Partnership during the term of the Partnership, and the Liquidator is hereby expressly authorized and empowered to execute any and all documents necessary or desirable to effectuate the liquidation and termination of the Partnership and the transfer of any assets. (c) Notwithstanding the foregoing, a Liquidator that is not the General Partner shall not be deemed a Partner in this Partnership and shall not have any of the economic interests in the Partnership of a Partner; and such Liquidator may be compensated for its services to the Partnership at normal customary and competitive rates for its services to the Partnership as reasonably proposed by the General Partner and agreed to by a Majority in Liquidation Preference of the Preferred Securities. -38- Section 11.4 DISTRIBUTION IN LIQUIDATION. Subject to Section 9.3, the proceeds of liquidation shall be applied in the following order of priority (and without regard to the provisions of Section 17-804 of the Act): (a) to creditors of the Partnership, including Preferred Security Holders who are creditors, to the extent otherwise permitted by law, in satisfaction of the liabilities of the Partnership (whether by payment or the making of reasonable provision for payment thereof), other than liabilities for distributions (including Dividends) to Partners; and (b) following any allocations required under Section 4.1(c) of the Agreement, to the Partners in proportion to the Partners' positive Capital Account balances in accordance with Treasury Regulation Section 1.704-1(b)(2)(ii)(b)(2). The distribution pursuant to this Section 11.4 may be made by distributing Subordinated Debentures on a pro rata basis to the Holders. Section 11.5 RIGHTS OF LIMITED PARTNERS. Each Limited Partner shall look solely to the assets of the Partnership for all distributions with respect to the Partnership and such Partner's capital contribution (including returns thereof), and such Partner's share of profits or losses thereof, and shall have no recourse therefor (upon dissolution or otherwise) against the General Partner, except under the Guarantee. No Partner shall have any right to demand or receive property other than cash upon dissolution and termination of the Partnership. Section 11.6 TERMINATION. The Partnership shall terminate when all of the assets of the Partnership shall have been disposed of and the assets shall have been distributed as provided in Section 11.4. The Liquidator shall then execute and cause to be filed a certificate of cancellation of the Partnership. ARTICLE XII AMENDMENTS AND MEETINGS Section 12.1 AMENDMENTS. Except as provided by Section 6.2(g), this Agreement may be amended by a written instrument executed by the General Partner without the consent of any Limited Partner; PROVIDED, HOWEVER, that no amendment shall be made, and any such purported amendment shall be void and ineffective, to the extent the result -39- thereof would be to cause the Partnership to be treated as anything other than a partnership for purposes of United States income taxation or require the Partnership to register under the 1940 Act. Section 12.2 AMENDMENT OF CERTIFICATE. In the event this Agreement shall be amended pursuant to Section 12.1, the General Partner shall amend the Certificate to reflect such change if it deems such amendment of the Certificate to be necessary or appropriate. Section 12.3 MEETINGS OF PARTNERS. (a) Meetings of the Limited Partners who are Holders may be called at any time by the General Partner to consider and act on any matter on which Limited Partners are entitled to act under the terms of this Agreement or the Act. The General Partner shall call a meeting of Holders if directed to do so by Holders of not less than 10% in Liquidation Preference as permitted by this Agreement. Such direction shall be given by delivering to the General Partner a request in writing stating that the signing Limited Partners desire to call a meeting and indicating the general or specific purpose for which the meeting is to be called. (b) Unless otherwise specified herein, notice of any such meeting shall be given to all Partners not less than seven (7) Business Days nor more than 60 days prior to the date of such meeting. Each such notice shall set forth the date, time and place of the meeting, a description of any matter on which Holders are entitled to vote and instructions for the delivery of proxies or written consents. (c) Any action that may be taken at a meeting of the Limited Partners may be taken without a meeting if a consent in writing setting forth the action so taken is signed by Limited Partners owning not less than the minimum Interests that would be necessary to authorize or take such action at a meeting in which all Limited Partners having a right to vote thereon were present and voting. Prompt notice of the taking of action without a meeting shall be given to the Limited Partners entitled to vote who have not consented in writing. The General Partner may provide that any written ballot submitted to the Limited Partners for the purpose of taking any action without a meeting shall be returned to the Partnership within a specified time. (d) Each Partner may authorize any Person to act for it by proxy on all matters as to which a Partner is entitled to participate, including waiving notice of any -40- meeting, or voting or participating at a meeting. Every proxy must be signed by the Partner or its attorney-in-fact. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Partner executing it. (e) Each meeting of Partners shall be conducted by the General Partner or by such other Person that the General Partner may designate. (f) The General Partner may establish all other reasonable procedures relating to meetings of Partners or the giving of written consents, in addition to those expressly provided, including notice of time, place or purpose of any meeting at which any matter is to be voted on by any Partners, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote. ARTICLE XIII MISCELLANEOUS Section 13.1 NOTICES. All notices provided for in this Agreement shall be in writing, and shall be delivered or mailed by first class or registered or certified mail or, with respect to the Partnership and General Partner, telecopied, as follows: (a) if given to the Partnership, in care of the General Partner at the Partnership's mailing address set forth below: COMSAT Capital I, L.P. c/o COMSAT Corporation 6560 Rock Spring Drive Bethesda, Maryland 20817-1146 Attention: Chief Financial Officer Telecopy: (301) 214-7132 (b) if given to the General Partner, at its mailing address set forth below: COMSAT Corporation 6560 Rock Spring Drive Bethesda, Maryland 20817-1146 Attention: Chief Financial Officer Telecopy: (301) 214-7132 -41- (c) if given to any other Partner, at the address set forth on the books and records of the Partnership. All such notices shall be deemed to have been given when received. Section 13.2 POWER OF ATTORNEY. Each Holder does hereby constitute and appoint the General Partner and, if applicable, any Special Representative, as its true and lawful representative and attorney-in-fact, in its name, place and stead to make, execute, sign, deliver and file (a) any amendment of the Certificate required because of an amendment of this Agreement or in order to effect any change in the Partnership, (b) this Agreement, (c) any amendments to this Agreement and (d) all such other instruments, documents and certificates which from time to time may required by the laws of the United States of America, the State of Delaware or any other jurisdiction, or any political subdivision or agency thereof, to effectuate, implement and continue the valid and subsisting existence of the Partnership or to dissolve the Partnership for any other purpose consistent with this Agreement and the transactions contemplated hereby. The power of attorney granted hereby is coupled with an interest and shall (a) survive and not be affected by the subsequent death, incapacity, disability, dissolution, termination, or bankruptcy of the Holder granting the same or the transfer of all or any portion of such Holder's Interest and (b) extend to such Holder's successors, assigns and legal representatives. Section 13.3 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among the parties. It supersedes any prior agreement or understandings among them, and it may not be modified or amended in any manner other than as set forth herein. SECTION 13.4 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE AND ALL RIGHTS AND REMEDIES SHALL BE GOVERNED BY SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. Section 13.5 EFFECT. Except as herein otherwise specifically provided, this Agreement shall be binding upon and inure to the benefit of the parties and their legal representatives, successors and assigns. Section 13.6 PRONOUNS AND NUMBER. Wherever from the context it appears appropriate, each term stated in either the singular or the plural shall include the singular -42- and the plural, and pronouns stated in either the masculine, feminine or neuter shall include the masculine, feminine and neuter. Section 13.7 CAPTIONS. Captions contained in this Agreement are inserted only as a matter of convenience and in no way define, limit or extend the scope or intent of this Agreement or any provisions hereof. Section 13.8 PARTIAL ENFORCEABILITY. If any provision of this Agreement, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby. Section 13.9 COUNTERPARTS. This Agreement may contain more than one counterpart of the signature page and this Agreement may be executed by the affixing of the signature of each of the Partners to one of such counterpart signature pages. All of such counterpart signatures pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. Section 13.10 WAIVER OF PARTITION. Each Limited Partner hereby irrevocably waives any and all rights (if any) that such Limited Partner may have to maintain any action for partition of any of the Partnership's property. Section 13.11 REMEDIES. The failure of any party to seek redress for violation of, or to insist upon the strict performance of, any provision of this Agreement shall not prevent a subsequent act, which would have originally constituted a violation, from having the effect of an original violation. The rights and remedies provided by this Agreement are cumulative and the use of any one right or remedy by any party shall not preclude or waive its right to use any or all other remedies. Said rights and remedies are given in addition to any other rights the parties may have by law, statute, ordinance or otherwise. -43- IN WITNESS WHEREOF, the parties hereto have executed this Amended and Restated Agreement of Limited Partnership as of the date first above stated. GENERAL PARTNER: COMSAT Corporation, a District of Columbia corporation By: --------------------------- Bruce L. Crockett President and Chief Executive Officer INITIAL LIMITED PARTNER: COMSAT SPV, Inc., a Delaware corporation By: --------------------------- Bruce L. Crockett President PARTNERSHIP: COMSAT Capital I, L.P., a Delaware limited partnership By: COMSAT Corporation, General Partner By: --------------------------- Bruce L. Crockett President -44- Annex A [IF A GLOBAL LP CERTIFICATE ADD -- Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York Corporation ("DTC"), to COMSAT Capital I, L.P. or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. (or in such other name as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.] - ------------------------------------------------------------------------------- Certificate Number Number of Preferred Securities - ------------------------------------------------------------------------------- R-1 - ------------------------------------------------------------------------------- CUSIP NO. 205930209 Certificate Evidencing Preferred Securities of COMSAT Capital I, L.P. _____% Cumulative Monthly Income Preferred Securities (liquidation preference $25 per Preferred Security) COMSAT Capital I, L.P., a limited partnership formed under the laws of the State of Delaware (the "Partnership"), hereby certifies that _____ (the "Holder") is the registered owner of _______ preferred securities of the Partnership representing limited partnership interests in the Partnership, which are designated the _____% Cumulative Monthly Income Preferred Securities (liquidation preference $25 per Preferred Security) (the "Preferred Securities"). The Preferred Securities are fully paid and are nonassessable interests in the Partnership, as to which the Partners in the Partnership who hold the Preferred Securities (the "Preferred Security Holders"), in their A-1 capacities as Partners in the Partnership, will have no liability solely by reason of being Preferred Security Holders (subject to the obligation of a Preferred Security Holder to repay any funds wrongfully distributed to it), and are freely transferable on the books and records of the Partnership, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer accompanied by a written instrument of transfer in form satisfactory to COMSAT Corporation, a District of Columbia corporation ("COMSAT"), duly executed by the Preferred Security Holder or a duly authorized attorney. The powers, preferences and special rights and limitations of the Preferred Securities are set forth in, and this certificate and the Preferred Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Limited Partnership Agreement of the Partnership dated as of __________, 1995, as the same may be amended from time to time in accordance with its terms (the "Limited Partnership Agreement"), authorizing the issuance of the Preferred Securities and determining the powers, preferences and other special rights and limitations, regarding Dividends, voting, return of capital and otherwise, and other matters relating to the Preferred Securities. Capitalized terms used herein but not defined herein shall have the meaning given them in the Limited Partnership Agreement. The Holder is entitled to the benefits of the Guarantee Agreement of COMSAT, dated as of _______________, 1995 (the "Guarantee") to the extent provided therein. The Partnership will furnish a copy of the Limited Partnership Agreement and the Guarantee to the Holder without charge upon written request to the Partnership at its principal place of business or registered office. The Holder, by accepting this certificate, is deemed to have agreed (i) to be bound by the provisions of the Limited Partnership Agreement and (ii) that the Subordinated Debentures acquired by the Partnership with the proceeds from the issuance of the Preferred Securities are subordinated and junior in right of payment to all Senior Indebtedness of COMSAT as and to the extent provided in the Subordinated Debentures and (iii) that the Guarantee ranks (x) subordinate and junior in right of payment to all liabilities of COMSAT, (y) PARI PASSU with the most senior preferred or preference stock now or hereafter issued by COMSAT and with any guarantee now or hereafter entered into by COMSAT in respect of any preferred or preference stock or preference securities of any Affiliate of COMSAT, and (z) senior to COMSAT Common Stock and any other class or series of capital stock of COMSAT or any of its Affiliates which by its express terms ranks junior in the payment of dividends and amounts on liquidation, dissolution, and winding-up to A-2 the Preferred Securities, in each case, as and to the extent provided in the Guarantee. Upon receipt of this certificate, the Holder is admitted to the Partnership as a Limited Partner, is bound by the Limited Partnership Agreement and is entitled to the benefits thereunder. IN WITNESS WHEREOF, this certificate has been executed on behalf of the Partnership by its duly authorized General Partner and countersigned by a duly authorized officer of each of COMSAT Corporation, as Guarantor, and The First National Bank of Chicago, as Registrar and Transfer Agent this _____ day of _________________, ____. COMSAT CAPITAL I, L.P. By: COMSAT CORPORATION, its General Partner By: --------------------------- Name: Title: COMSAT CORPORATION, as Guarantor By: --------------------------- Name: Title: Registered and Countersigned by THE FIRST NATIONAL BANK OF CHICAGO By: --------------------------- Authorized Signature A-3 EX-4.(H) 5 EXHIBIT 4(H) EXHIBIT 4(h) Draft of July 5, 1995 GUARANTEE AGREEMENT GUARANTEE AGREEMENT (this "Guarantee"), dated as of ___________________, 1995 is executed and delivered by COMSAT Corporation, a corporation organized under the laws of the District of Columbia ("COMSAT"), for the benefit of the Holders (as hereinafter defined) from time to time of the Preferred Securities (as hereinafter defined) of COMSAT Capital I, L.P., a Delaware limited partnership ("COMSAT Capital" or the "Partnership"). WHEREAS, COMSAT Capital is issuing up to 8,000,000 of its ______% Cumulative Monthly Income Preferred Securities, with a liquidation preference of $25 each (the "Preferred Securities"), and COMSAT desires to issue this Guarantee for the benefit of the Holders, as provided herein; WHEREAS, COMSAT Capital will purchase the Subordinated Debentures (as hereinafter defined) issued pursuant to the Indenture (as hereinafter defined) with the proceeds from the issuance and sale of the Preferred Securities and its other partnership interests (the "Partnership Interests"); and WHEREAS, COMSAT desires hereby unconditionally and irrevocably to agree, to the extent set forth herein, to pay to the Holders the Guarantee Payments (as hereinafter defined) and to perform the other obligations set forth herein. NOW, THEREFORE, in consideration of the purchase by each Holder of Preferred Securities, which purchase COMSAT hereby agrees shall benefit COMSAT, COMSAT executes and delivers this Guarantee for the benefit of the Holders. 1. DEFINITIONS. As used in this Guarantee, the terms set forth below shall, unless the context otherwise requires, have the following meanings. Capitalized terms used herein but not otherwise defined herein shall have the meanings ascribed to such terms in the Amended and Restated Agreement of Limited Partnership of COMSAT Capital I, L.P., dated as of ___________________, 1995 (the "Limited Partnership Agreement"). 1.1 "Additional Dividends" means Dividends (as defined herein) that shall accumulate on any Dividend arrearages in respect of the Preferred Securities at the rate of ______% per annum, compounded monthly. 1.2 "Dividends" means the cumulative cash distributions from the Partnership with respect to the Preferred Securities, accumulating from __________________, 1995 and payable monthly in arrears on the last day of each calendar month of the year, commencing __________________, 1995. 1.3 "General Partner" means COMSAT in its capacity as general partner in COMSAT Capital or any permitted successor general partner in COMSAT Capital admitted as such pursuant to the applicable provisions of the Limited Partnership Agreement. 1.4 "Guarantee Payments" shall mean the following payments, without duplication, to the extent not paid by COMSAT Capital: (a) any accrued and unpaid Dividends (including any Additional Dividends accrued thereon) to the extent such Dividends have been declared by COMSAT Capital on the Preferred Securities out of moneys held by COMSAT Capital and legally available therefor; (b) the Redemption Price (as defined herein) (including all accrued and unpaid Dividends) payable out of funds legally available therefor with respect to any Preferred Securities called for redemption by COMSAT Capital; and (c) upon a liquidation of COMSAT Capital, the lesser of (i) the Liquidation Distribution (as defined herein) and (ii) the amount of assets of COMSAT Capital remaining available for distribution to Holders in liquidation of COMSAT Capital, except in the event that a Tax Event or an Investment Company Event has occurred and the General Partner has elected to dissolve COMSAT Capital and cause the Subordinated Debentures to be distributed to the Holders in liquidation of COMSAT Capital as provided in Clauses (ii) or (iii) of Section 6.2(c) of the Limited Partnership Agreement. 1.5 "Holder" shall mean the registered holder from time to time of any Preferred Securities of COMSAT Capital; PROVIDED, HOWEVER, that in determining whether the Holders of the requisite percentage of Preferred Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include, and outstanding liquidation preference shall not include the liquidation preference of Preferred Securities held by, COMSAT or any Subsidiary thereof, either directly or indirectly. 1.6 "Indenture" shall mean the Indenture, dated as of __________________, 1995, between COMSAT and The First National Bank of Chicago, as trustee, relating to the Subordinated Debentures. 1.7 "Liquidation Distribution" shall mean the aggregate of the stated liquidation preference of $25 per Preferred Security, plus all accrued and unpaid Dividends on the -2- Preferred Securities to the date of payment, including any Additional Dividends accrued thereon. 1.8 "Redemption Price" shall have the meaning ascribed to such term in the Limited Partnership Agreement. 1.9 "Special Representative" shall mean a special representative appointed by the Holders of the Preferred Securities pursuant to Section 6.2(f) of the Limited Partnership Agreement. 1.10 "Subordinated Debentures" shall mean the ______% Junior Subordinated Deferrable Interest Debentures issued pursuant to the Indenture. 1.11 "Subsidiary" of any Person means an entity more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by such Person or by one or more other Subsidiaries, or by such Person and one or more other Subsidiaries. For the purposes of this definition, "voting stock" means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. 2. GUARANTEE. 2.1 GENERAL. COMSAT irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments, as and when due (except, subject to the proviso in Section 2.7 hereof, to the extent paid by COMSAT Capital), regardless of any defense, right of set-off or counterclaim which COMSAT Capital may have or assert. This Guarantee is continuing, irrevocable, unconditional and absolute. COMSAT's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by COMSAT to the Holders or by causing COMSAT Capital to pay such amounts to the Holders. 2.2 WAIVER OF CERTAIN RIGHTS. COMSAT hereby waives notice of acceptance of this Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. 2.3 OBLIGATIONS NOT AFFECTED. The obligations, covenants, agreements and duties of COMSAT under this Guarantee shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by -3- COMSAT Capital of any express or implied agreement, covenant, term or condition relating to the Preferred Securities to be performed or observed by COMSAT Capital; (b) the extension of time for the payment by COMSAT Capital of all or any portion of the Dividends (including any Additional Dividends), Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Preferred Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Preferred Securities; (c) any failure, omission, delay or lack of diligence on the part of the Holders or the Special Representative to enforce, assert or exercise any right, privilege, power or remedy conferred on such Holders or such Special Representative pursuant to the terms of the Preferred Securities or the Limited Partnership Agreement, or any action on the part of the Holders, the Special Representative or COMSAT Capital granting or consenting to indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, winding-up, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, COMSAT Capital or any of the assets of COMSAT Capital; (e) any invalidity of, or defect or deficiency in, any of the Preferred Securities; or (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred. There shall be no obligation of the Holders to give notice to, or obtain any consent of, COMSAT with respect to the happening of any of the foregoing. 2.4 GUARANTOR, SPECIAL REPRESENTATIVE OR HOLDERS MAY PROCEED DIRECTLY AGAINST COMSAT. This Guarantee is a guarantee of payment and not of collection. This Guarantee will be deposited with the General Partner to be held for the benefit of the Holders. In the event of an appointment of a Special Representative pursuant to the Limited Partnership Agreement to, among other things, enforce the rights of the Holders under this Guarantee, the Special Representative may take possession of this Guarantee for such purpose. If no Special Representative has -4- been appointed to enforce this Guarantee, the General Partner has the right to enforce this Guarantee on behalf of the Holders. The Holders of not less than 10% in liquidation preference of all outstanding Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available in respect of this Guarantee, including the giving of directions to the General Partner or the Special Representative, as the case may be. If the General Partner or the Special Representative fails to enforce this Guarantee as provided above, any Holder may enforce this Guarantee directly against COMSAT as guarantor, and COMSAT waives any right or remedy to require that any action be brought against COMSAT Capital or any other person or entity before proceeding against COMSAT. Subject to Section 2.5 hereof, all waivers herein contained shall be without prejudice to the right of a Holder or the Special Representative, at its option, to proceed against COMSAT Capital, whether by separate action or by joinder. COMSAT agrees that this Guarantee shall not be discharged except by payment of the Guarantee Payments in full (to the extent not previously paid by COMSAT Capital, but subject to the proviso in Section 2.7 hereof) and by complete performance of all obligations under this Guarantee. 2.5 SUBROGATION. COMSAT shall be subrogated to all (if any) rights of the Holders against COMSAT Capital in respect of any amounts paid to the Holders by COMSAT under this Guarantee and shall have the right to waive payment of any amount of Dividends in respect of which payment has been made to the Holders by COMSAT pursuant to Section 2.1 hereof; PROVIDED, HOWEVER, that COMSAT shall not (except to the extent required by mandatory provisions of law) exercise any rights which it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of a payment under this Guarantee, if, at the time of any such payment, any amounts are due and unpaid under this Guarantee. If any amount shall be paid to COMSAT in violation of the preceding sentence, COMSAT agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. 2.6 INDEPENDENT OBLIGATIONS. COMSAT acknowledges that its obligations hereunder are independent of the obligations of COMSAT Capital with respect to the Preferred Securities and that COMSAT shall be liable as principal and sole debtor under this Guarantee to make Guarantee Payments pursuant to the terms of this Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (f), inclusive, of Section 2.3 hereof. 2.7 TERMINATION. This Guarantee shall terminate as to each Holder and be of no further force and effect upon full payment of the Redemption Price of all Preferred Securities held by such Holder and will terminate completely upon full payment of -5- the amounts payable upon liquidation of COMSAT Capital; PROVIDED, HOWEVER, that this Guarantee shall continue to be effective or shall be reinstated, as the case may be, if at any time any Holder must restore payment of any sums paid under the Preferred Securities or under this Guarantee for any reason whatsoever. 3. CERTAIN COVENANTS OF COMSAT. 3.1 DIVIDENDS AND OTHER PAYMENTS. So long as any Preferred Securities remain outstanding, COMSAT will not declare or pay any dividend on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock (other than as a result of a reclassification of capital stock or the exchange or conversion of one class or series of capital stock for another class or series of capital stock) or make any guarantee payments with respect to the foregoing, if at such time (a) COMSAT has exercised its option to defer interest payments on the Subordinated Debentures and such deferral is continuing, (b) COMSAT shall be in default with respect to its payment or other obligations hereunder, or (c) there shall have occurred any event that, with the giving of notice or the lapse of time or both, would constitute an Event of Default under the Indenture. 3.2 CERTAIN OTHER COVENANTS. COMSAT covenants that, so long as any Preferred Securities remain outstanding, it shall: (a) maintain direct 100% ownership of the Partnership Interests and any other interests in COMSAT Capital other than the Preferred Securities (except as permitted in the Limited Partnership Agreement); (b) cause at least 3% of the total value of COMSAT Capital and at least 3% of all interest in the capital, income, gain, loss, deduction and credit of COMSAT Capital to be held by COMSAT as General Partner; (c) not voluntarily dissolve, wind up or liquidate itself or COMSAT Capital; (d) remain the General Partner of COMSAT Capital and timely perform all of its duties as General Partner (including the duty to cause COMSAT Capital to declare and pay dividends on the Preferred Securities), unless a permitted successor General Partner is appointed pursuant to the Limited Partnership Agreement; and (e) subject to the terms of the Preferred Securities, use reasonable efforts to cause COMSAT Capital to remain a Delaware limited partnership and otherwise continue not to be treated as an association taxable as a corporation for United States federal income tax purposes, except, in all cases, in connection with certain mergers, consolidations or amalgamations permitted by the Limited Partnership Agreement. 4. SUBORDINATION. 4.1 SUBORDINATION. COMSAT covenants and agrees, and each Holder by his or her acceptance of such Preferred Securities -6- shall be deemed to acknowledge and agree that for all purposes (including any bankruptcy, insolvency, or reorganization of COMSAT) this Guarantee constitutes an unsecured obligation of COMSAT ranking (i) subordinate and junior in right of payment to all liabilities of COMSAT, (ii) PARI PASSU with the most senior preferred or preference stock now or hereafter issued by COMSAT and with any guarantee now or hereafter entered into by COMSAT in respect of any preferred or preference stock or preferred securities of any affiliate of COMSAT and (iii) senior to COMSAT Common Stock. 5. MISCELLANEOUS. 5.1 THIRD PARTY BENEFICIARIES. Subject to the limitations of Section 2.4, all of COMSAT's obligations under this Guarantee shall be directly enforceable by the Holders from time to time of the Preferred Securities. Each Holder is an intended third-party beneficiary of this Guarantee. 5.2 SUCCESSORS AND ASSIGNS. All guarantees and agreements contained in this Guarantee shall bind the successors, assigns, receivers, trustees and representatives of COMSAT and shall inure to the benefit of the Holders then outstanding. Except as permitted by Section 5.4 hereof, COMSAT shall not assign its rights or delegate its obligations hereunder without the prior approval of the Holders of not less than 66-2/3% of the aggregate liquidation preference of the Preferred Securities then outstanding. 5.3 AMENDMENTS. Except with respect to any changes which do not adversely affect the rights of Holders (in which case no vote will be required), this Guarantee may only be amended with the prior approval of the Holders of not less than 66-2/3% of the aggregate liquidation preference of the Preferred Securities then outstanding, which approval shall be obtained as described in the Limited Partnership Agreement. 5.4 CONSOLIDATION, MERGER OR SALE OF ASSETS. COMSAT, without the consent of any Holders, may merge or consolidate with or into another entity or may permit another entity to merge or consolidate with or into COMSAT, and may sell, transfer or lease all or substantially all of COMSAT's assets to another entity, if (a) at such time no Event of Default (as defined in the Indenture) shall have occurred and be continuing, or would occur as a result of such merger, consolidation or sale, transfer or lease and (b) the survivor of such merger or consolidation or entity to which COMSAT assets are sold, transferred or leased is an entity organized under the laws of the United States or any state thereof or the District of Columbia, becomes the General Partner (if COMSAT is then the General Partner), assumes all of COMSAT's obligations under this Guarantee and has a net worth -7- equal to at least 10% of the total capital contributions to COMSAT Capital. 5.5 NOTICES. Any notice, request or other communication required or permitted to be given hereunder to COMSAT shall be given in writing by delivering the same against receipt therefor by registered mail, hand delivery, facsimile transmission (confirmed by registered mail) or telex, addressed to COMSAT, as follows (and if so given, shall be deemed given when mailed; upon receipt of facsimile confirmation, if sent by facsimile transmission; or upon receipt of an answer-back, if sent by telex): COMSAT Corporation 6560 Rock Spring Drive Bethesda, Maryland 20817 Attention: Chief Financial Officer Telecopy: (301) 214-7132 Any notice, request or other communication required or permitted to be given hereunder to the Holders shall be given by COMSAT in the same manner as notices are sent by COMSAT Capital to the Holders. 5.6 GENDERS. The masculine and neuter genders used herein shall include the masculine, feminine and neuter genders. 5.7 GUARANTEE NOT SEPARATELY TRANSFERABLE. This Guarantee is solely for the benefit of the Holders and is not separately transferable from the Preferred Securities. 5.8 GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 5.9 SEVERABILITY. In case any provision of this Guarantee shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 5.10 HEADINGS. The article and section headings herein are for convenience only and shall not affect the construction hereof. -8- IN WITNESS WHEREOF, COMSAT has caused this Guarantee to be duly executed as of the day and year first above written. COMSAT Corporation By: ----------------------------- Bruce L. Crockett President and Chief Executive Officer ATTEST: - ------------------------- Secretary EX-5.(A) 6 EXHIBIT 5(A) Exhibit 5(a) COMSAT CORPORATION 6560 ROCK SPRING DRIVE BETHESDA, MARYLAND 20817 (301) 214-3000 July 7, 1995 COMSAT Corporation 6560 Rock Spring Drive Bethesda, Maryland 20817 Ladies and Gentlemen: I am Vice President, General Counsel and Secretary of COMSAT Corporation. I have examined the Registration Statement, as filed on June 2, 1995 and amended on July 7, 1995 (the "Registration Statement"), of COMSAT Corporation (the "Corporation") and COMSAT Capital I, L.P. ("COMSAT Capital") on Form S-3 for the registration under the Securities Act of 1933, as amended (the "Act"), of $200,000,000 aggregate amount of (i) preferred securities (the "Preferred Securities") of COMSAT Capital, (ii) junior subordinated debentures of the Corporation (the "Debt Securities") and (iii) a guarantee of the Corporation with respect to the Preferred Securities (the "Guarantee"). I have also examined the Corporation's Articles of Incorporation, as amended, and such corporate records and other documents as I have deemed necessary to enable me to express the opinions with respect to the Debt Securities and the Guarantee set forth below. In my opinion, 1. When (i) the Registration Statement shall have become effective under the Act and (ii) the Indenture (the "Indenture"), between the Corporation and The First National Bank of Chicago, as Trustee (the "Trustee"), substantially in the form of Exhibit 4(c) to the Registration Statement and any supplements and amendments thereto, shall have been qualified under the Trust Indenture Act of 1939, as amended, and duly executed and delivered by the Corporation and the Trustee, the Debt Securities, upon their issuance and sale in the manner contemplated in the Registration Statement and the Indenture, will be legally and validly issued, and will be binding obligations of the Corporation, enforceable in accordance with their terms, subject, as to enforcement, to bankruptcy, COMSAT Corporation July 7, 1995 Page 2 insolvency, fraudulent transfer, reorganization, moratorium, and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles and considerations of public policy. 2. When (i) the Registration Statement shall have become effective under the Act, (ii) the Guarantee, substantially in the form of Exhibit 4(h) to the Registration Statement, has been duly executed and delivered by the Corporation and (iii) Preferred Securities have been duly issued and sold and the purchase price therefor has been received by COMSAT Capital, the Guarantee will constitute a legal, valid and binding obligation of the Corporation, enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium, and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles and considerations of public policy. I hereby consent to the reference made to me under the caption "Validity of Securities" in the preliminary Prospectus forming a part of the Registration Statement and to the filing of this consent as an exhibit to the Registration Statement. In giving the foregoing consent, I do not thereby admit that I come within the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Securities and Exchange Commission thereunder. Very truly yours, /s/ Warren Y. Zeger Warren Y. Zeger Vice President, General Counsel and Secretary EX-5.(B) 7 EXHIBIT 5(B) Exhibit 5(b) CROWELL & MORING 1001 PENNSYLVANIA AVENUE, N.W. WASHINGTON, D.C. 20004 July 7, 1995 COMSAT Capital I, L.P. c/o COMSAT Corporation 6560 Rock Spring Drive Bethesda, Maryland 20817 Re: COMSAT Capital I, L.P. ---------------------- Ladies and Gentlemen: We have acted as special counsel for COMSAT Corporation, a District of Columbia corporation ("COMSAT"), and COMSAT Capital I, L.P., a Delaware limited partnership (the "Partnership"), in connection with the matters set forth herein. At your request, this opinion is being furnished to you. For purposes of giving the opinions hereinafter set forth, our examination of documents has been limited to the examination of executed or conformed counterparts, or copies otherwise proved to our satisfaction, of the following: (a) The Certificate of Limited Partnership of the Partnership dated as of May 22, 1995 (the "Certificate"), as filed in the office of the Secretary of State of the State of Delaware (the "Secretary of State") on May 22, 1995; (b) The Agreement of Limited Partnership of the Partnership, dated as of May 22, 1995; (c) Amendment No. 1 to the registration statement (the "Registration Statement") on Form S-3, including a preliminary prospectus (the "Prospectus") as filed by COMSAT and the Partnership with the Securities and Exchange Commission on July 7, 1995; (d) A form of Amended and Restated Agreement of Limited Partnership of the Partnership, attached as Exhibit 4(d) to the Registration Statement (the "LP Agreement"); and COMSAT Capital I, L.P. c/o COMSAT Corporation July 7, 1995 Page 2 (e) A Certificate of Good Standing for the Partnership, dated July 6, 1995, obtained from the Secretary of State. Initially capitalized terms used herein and not otherwise defined are used as defined in the LP Agreement. For purposes of this opinion, we have not reviewed any documents other than the documents listed in paragraphs (a) through (e) above. In particular, we have not reviewed any document (other than the documents listed in paragraphs (a) through (e) above) that is referred to in or incorporated by reference into the LP Agreement or the Registration Statement. We have assumed that there exists no provision in any document that we have not reviewed that is inconsistent with the opinions stated herein. We have conducted no independent factual investigation of our own but rather have relied solely upon the foregoing documents, the statements and information set forth therein and the additional matters recited or assumed herein, all of which we have assumed to be true, complete and accurate in all material respects. With respect to all documents examined by us, we have assumed (i) the authenticity of all documents submitted to us as authentic originals, (ii) the conformity with the originals of all documents submitted to us as copies or forms, and (iii) the genuineness of all signatures. For purposes of this opinion, we have assumed (i) that at the time of the issuance of the Preferred Securities, the LP Agreement will constitute the entire agreement among the parties thereto with respect to the subject matter thereof, including with respect to the admission of partners to, and the creation, operation and termination of, the Partnership, and that the LP Agreement and the Certificate will be in full force and effect and will not have been amended, (ii) except to the extent provided in paragraph 1 below, the due organization or due formation, as the case may be, and valid existence in good standing of each party to the documents examined by us under the laws of the jurisdiction governing its organization or formation, (iii) the legal capacity of natural persons who are parties to the documents examined by us, (iv) that each of the parties to the documents examined by us has the power and authority to execute and deliver, and to perform its obligations under, such documents, (v) the due authorization, execution and delivery by all parties thereto of all documents examined by us, including the LP Agreement, (vi) the receipt by DTC of one or more LP Certificates evidencing the Preferred Securities, and the payment for the Preferred Securities acquired by all of the Limited Partners, in COMSAT Capital I, L.P. c/o COMSAT Corporation July 7, 1995 Page 3 accordance with the LP Agreement, (vii) that the books and records of the Partnership set forth all information required by the LP Agreement and the Act, including all information with respect to all Persons to be admitted as Partners and their contributions to the Partnership, and (viii) that the Preferred Securities will be issued and sold to the Limited Partners in accordance with the Registration Statement and the LP Agreement. This opinion is limited to the laws of the State of Delaware (excluding the securities laws of the State of Delaware), and we have not considered and express no opinion on the laws of any other jurisdiction, including federal laws and rules and regulations relating thereto. Our opinions are rendered only with respect to Delaware laws and rules, regulations and orders thereunder which are currently in effect. Based upon the foregoing, and upon our examination of such questions of law and statutes of the State of Delaware as we have considered necessary or appropriate, and subject to the assumptions, qualifications, limitations and exceptions set forth herein, we are of the opinion that: 1. The Partnership has been duly formed and is validly existing in good standing as a limited partnership under the Act. 2. Assuming that the Limited Partners, as limited partners of the Partnership, do not participate in the control of the business of the Partnership, upon issuance and payment as contemplated by the LP Agreement, the Preferred Securities will represent valid and, subject to the qualifications set forth herein, will be fully paid and nonassessable limited partner interests in the Partnership, as to which the Limited Partners, as limited partners of the Partnership, will have no liability in excess of their obligations to make payments provided for in the LP Agreement and their share of the Partnership's assets and undistributed profits (subject to the obligation of a Limited Partner to repay any funds wrongfully distributed to it). 3. There are no provisions in the LP Agreement the inclusion of which, subject to the terms and conditions therein, or, assuming that the Limited Partners, as limited partners of the Partnership, take no action other than actions permitted by the LP Agreement, the exercise of which, in accordance with the terms and conditions therein, would cause the Limited Partners, as limited partners of the COMSAT Capital I, L.P. c/o COMSAT Corporation July 7, 1995 Page 4 Partnership, to be deemed to be participating in the control of the business of the Partnership. We consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement and to the use of our name under the heading "Validity of the Securities" in the Prospectus. In giving the foregoing consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. Except as stated above, without our prior written consent, this opinion may not be furnished or quoted to, or relied upon by, any other person or entity for any purposes. Very truly yours, /s/ CROWELL & MORING CROWELL & MORING EX-8 8 EXHIBIT 8 CROWELL & MORING 1001 PENNSYLVANIA AVENUE, N.W. WASHINGTON, D.C. 20004-2595 (202) 624-2500 July 7, 1995 COMSAT Corporation 6560 Rock Spring Drive Bethesda, MD 20817 COMSAT Capital I, L.P. c/o COMSAT Corporation 6560 Rock Spring Drive Bethesda, MD 20817 Ladies and Gentlemen: We have acted as special tax counsel to each of you and participated in the preparation of the Registration Statement on Form S-3 (Commission File No. 33- 59841) (such Registration Statement, as amended at the effective date thereof, being referred to herein as the "Registration Statement") filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the registration of __% Cumulative Monthly Income Preferred Securities of COMSAT Capital I, L.P., together with the Prospectus relating thereto and included as part of the Registration Statement. Based on our examination of such documents and questions of law as we have deemed necessary or appropriate, we confirm to you our opinion, as stated in the second paragraph under the caption "Risk Factors--Tax Event or Investment Company Event Redemption or Distribution" and under the caption "United States Taxation" in the Prospectus included as part of the Registration Statement. The other statements under the caption "United States Taxation" in the Prospectus are also, in our opinion, accurate in all material respects insofar as they are, or refer to, statements of United States law or legal conclusions. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the references to our firm under the headings "United States Taxation" and "Validity of the Securities" in the Prospectus included as part of the Registration Statement. By giving such consent, we do not admit that we are within COMSAT Corporation COMSAT Capital I, L.P. July 7, 1995 Page 2 the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Securities and Exchange Commission thereunder. Very truly yours, /s/ CROWELL & MORING CROWELL & MORING EX-12 9 EXHIBIT 12 EXHIBIT 12 COMSAT CORPORATION AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollar amounts in thousands)
QUARTER ENDED MARCH 31, YEAR ENDED DECEMBER 31, -------------------- ------------------------------------------------------------- 1995 1994 1994 1993 1992 1991 1990 --------- --------- ----------- ----------- ----------- ----------- --------- Income (loss) from continuing operations before income taxes, extraordinary items and cumulative effect of accounting changes..... $ 22,911 $ 31,959 $ 127,321 $ 137,661 $ 83,263 $ 118,566 $ (5,767) Add (subtract): Interest on indebtedness (net of amount capitalized).............................. 8,875 6,152 25,278 23,684 26,311 19,931 7,339 Other interest expense (1)................. -- -- -- -- 1,263 3,195 3,074 Portion of rents representative of the interest factor........................... 894 1,141 4,191 4,007 2,124 1,837 1,351 Undistributed income of less-than-fifty percent owned investments................. (322) (535) (1,340) (1,541) (64) (35) -- Equity losses of less-than-fifty percent owned investments......................... 525 61 561 154 136 182 -- Minority interest share of losses of majority-owned subsidiaries............... (716) -- (605) -- (1,160) (3,577) (3,721) Amortization and write off of previously capitalized interest...................... 6,011 5,985 24,134 21,132 20,035 20,821 16,594 --------- --------- ----------- ----------- ----------- ----------- --------- Income as adjusted........................... $ 38,178 $ 44,763 $ 179,540 $ 185,097 $ 131,908 $ 160,920 $ 18,870 --------- --------- ----------- ----------- ----------- ----------- --------- --------- --------- ----------- ----------- ----------- ----------- --------- Fixed charges: Interest on indebtedness................... $ 14,751 $ 11,892 $ 48,940 $ 45,881 $ 46,792 $ 47,328 $ 38,171 Other interest expense (1)................. -- -- -- -- 1,263 3,195 3,074 Portion of rents representative of the interest factor........................... 894 1,141 4,191 4,007 2,124 1,837 1,351 --------- --------- ----------- ----------- ----------- ----------- --------- Total fixed charges.......................... $ 15,645 $ 13,033 $ 53,131 $ 49,888 $ 50,179 $ 52,360 $ 42,596 --------- --------- ----------- ----------- ----------- ----------- --------- --------- --------- ----------- ----------- ----------- ----------- --------- RATIO OF EARNINGS TO FIXED CHARGES (2)....... 2.4 3.4 3.4 3.7 2.6 3.1 -- (3) - ------------------ (1) Interest expense of majority-owned subsidiary not consolidated in 1990, 1991 and the first half of 1992. (2) A portion of the securities being registered will be used to reduce outstanding commercial paper of COMSAT. See "Use of Proceeds". This refinancing would reduce the ratios of earnings to fixed charges for the year ended December 31, 1994 and for the quarter ended March 31, 1995 on a pro forma basis by less than ten percent. (3) 1990 earnings were inadequate to cover fixed charges, as such terms are defined in Item 503(d) of Regulation S-K, with a coverage deficiency of $23,726,000. However, 1990 earnings include a $97,576,000 nonrecurring charge related to the restructuring of the video entertainment business unit.
EX-23.(A) 10 EXHIBIT 23(A) EXHIBIT 23(A) INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Amendment No. 1 to Registration Statement No. 33-59841 of COMSAT Corporation on Form S-3 of our report dated February 10, 1995, appearing in the Annual Report on Form 10-K/A (Amendment No. 1) of COMSAT Corporation for the year ended December 31, 1994 and to the references to us under the headings "Summary Financial Information of COMSAT" and "Experts" in the Prospectuses, which are part of this Registration Statement. Deloitte & Touche LLP /s/ Deloitte & Touche LLP Washington, D.C. July 7, 1995 EX-25 11 EXHIBIT 25 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) / / ------------------- THE FIRST NATIONAL BANK OF CHICAGO (Exact name of trustee as specified in its charter) A National Banking Association 36-0899825 (I.R.S. employer identification number) One First National Plaza, Chicago, Illinois 60670-0126 (Address of principal executive offices) (Zip Code) The First National Bank of Chicago One First National Plaza, Suite 0286 Chicago, Illinois 60670-0286 Attn: Lynn A. Goldstein, Law Department (312) 732-6919 (Name, address and telephone number of agent for service) ------------------- COMSAT Corporation District of Columbia 52-0781863 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification number) 6560 Rock Spring Drive Bethesda, Maryland 20817 (Address of principal executive offices) (Zip Code) Debt Securities (TITLE OF INDENTURE SECURITIES) ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT. Comptroller of Currency, Washington, D.C., Federal Deposit Insurance Corporation, Washington, D.C., The Board of Governors of the Federal Reserve System, Washington D.C. (b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. The trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. No such affiliation exists with the trustee. ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS STATEMENT OF ELIGIBILITY. 1. A copy of the articles of association of the trustee now in effect.* 2. A copy of the certificates of authority of the trustee to commence business.* 3. A copy of the authorization of the trustee to exercise corporate trust powers.* 4. A copy of the existing by-laws of the trustee.* 5. Not Applicable. 6. The consent of the trustee required by Section 321(b) of the Act. 2 7. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority. 8. Not Applicable. 9. Not Applicable. Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, The First National Bank of Chicago, a national banking association organized and existing under the laws of the United States of America, has duly caused this Statement of Eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Chicago and State of Illinois, on the 21st day of June, 1995. THE FIRST NATIONAL BANK OF CHICAGO, TRUSTEE, BY /s/ John R. Prendiville John R. Prendiville Vice President *Exhibits 1, 2, 3 and 4 are herein incorporated by reference to Exhibits bearing identical numbers in Item 12 of the Form T-1 of The First National Bank of Chicago, filed as Exhibit 26 to the Registration Statement on Form S-3 of The CIT Group Holdings, Inc. filed with the Securities and Exchange Commission on February 16, 1993 (Registration No. 33-58418). 3 EXHIBIT 6 THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321(b) OF THE ACT June 21, 1995 Securities and Exchange Commission Washington, D.C. 20549 Gentlemen: In connection with the qualification of an indenture between COMSAT Corporation and The First National Bank of Chicago, the undersigned, in accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended, hereby consents that the reports of examinations of the undersigned, made by Federal or State authorities authorized to make such examinations, may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Very truly yours, THE FIRST NATIONAL BANK OF CHICAGO BY: /s/ John R. Prendiville John R. Prendiville Vice President 4 EXHIBIT 7 A copy of the latest report of conditions of the trustee published pursuant to law or the requirements of its supervising or examining authority. 5 Legal Title of Bank: The First National Bank of Chicago Call Date: 3/31/95 Address: One First National Plaza, Suite 0460 ST-BK: 17-1630 City, State Zip: Chicago, IL 60670-0460 FFIEC 031 FDIC Certificate No.: 0/3/6/1/8 Page RC-1 CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED SAVINGS BANKS FOR MARCH 31, 1995 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, report the amount outstanding of the last business day of the quarter. SCHEDULE RC--BALANCE SHEET
DOLLAR AMOUNTS IN C400 LESS THAN - ------------ ----------- THOUSANDS RCFD BIL MIL THOU ----------------- ---- ------------ ASSETS 1. Cash and balances due from depository institutions (from Schedule RC-A): a. Noninterest-bearing balances and currency and coin(1). . 0081 2,948,128 1.a. b. Interest-bearing balances(2) . . . . . . . . . . . . . . 0071 8,482,108 1.b. 2. Securities a. Held-to-maturity securities(from Schedule RC-B, column A) 1754 167,911 2.a. b. Available-for-sale securities (from Schedule RC-B, column D) 1773 540,011 2.b. 3. Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and its Edge and Agreement subsidiaries, and in IBFs:. . . . . . . . . . . . a. Federal Funds sold . . . . . . . . . . . . . . . . . . . 0276 2,508,883 3.a. b. Securities purchased under agreements to resell. . . . . 0277 1,422,695 3.b. 4. Loans and lease financing receivables: a. Loans and leases, net of unearned income (from Schedule RC-C) . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2122 16,238,310 4.a. b. LESS: Allowance for loan and lease losses. . . . . . . . RCFD 3123 358,207 4.b. c. LESS: Allocated transfer risk reserve. . . . . . . . . . RCFD 3128 0 4.c. d. Loans and leases, net of unearned income, allowance, and reserve (item 4.a minus 4.b and 4.c) . . . . . . . . . . 2125 15,880,103 4.d. 5. Assets held in trading accounts . . . . . . . . . . . . . . 3545 13,257,798 5. 6. Premises and fixed assets (including capitalized leases). . 2145 516,827 6. 7. Other real estate owned (from Schedule RC-M). . . . . . . . 2150 13,166 7. 8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M). . . . . . . . . . . . . . . 2130 10,363 8. 9. Customers' liability to this bank on acceptances outstanding 2155 463,961 9. 10. Intangible assets (from Schedule RC-M). . . . . . . . . . . 2143 119,715 10. 11. Other assets (from Schedule RC-F) . . . . . . . . . . . . . 2160 1,346,941 11. 12. Total assets (sum of items 1 through 11). . . . . . . . . . 2170 47,678,610 12. - ----------------- (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held in trading accounts.
6 Legal Title of Bank: The First National Bank of Chicago Call Date: 3/31/95 Address: One First National Plaza, Suite 0460 ST-BK: 17-1630 City, State Zip: Chicago, IL 60670-0460 FFIEC 031 FDIC Certificate No.: 0/3/6/1/8 Page RC-2
SCHEDULE RC-CONTINUED DOLLAR AMOUNTS IN THOUSANDS BIL MIL THOU -------------- ------------ LIABILITIES 13. Deposits: a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part 1). . . . . . . . . . . . . . . RCON 2200 14,675,401 13.a. (1) Noninterest-bearing(1) . . . . . . . . . . . . . . . RCON 6631 5,498,690 13.a.(1) (2) Interest-bearing . . . . . . . . . . . . . . . . . . RCON 6636 9,176,711 13.a.(2) b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, part II) . . . . . . . . . . . RCFN 2200 11,809,645 13.b. (1) Noninterest bearing. . . . . . . . . . . . . . . . . RCFN 6631 304,669 13.b.(1) (2) Interest-bearing . . . . . . . . . . . . . . . . . . RCFN 6636 11,504,976 13.b.(2) 14. Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: a. Federal funds purchased. . . . . . . . . . . . . . . . . RCFD 0278 2,072,830 14.a. b. Securities sold under agreements to repurchase . . . . . RCFD 0279 1,484,164 14.b. 15. a. Demand notes issued to the U.S. Treasury . . . . . . . . RCON 2840 103,138 15.a. b. Trading Liabilities. . . . . . . . . . . . . . . . . . . RCFD 3548 9,101,186 15.b. 16. Other borrowed money: a. With original maturity of one year or less . . . . . . . RCFD 2332 2,307,860 16.a. b. With original maturity of more than one year. . . . . . RCFD 2333 506,476 16.b. 17. Mortgage indebtedness and obligations under capitalized leases. . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2910 278,108 17. 18. Bank's liability on acceptance executed and outstanding . . RCFD 2920 463,961 18. 19. Subordinated notes and debentures . . . . . . . . . . . . . RCFD 3200 1,225,000 19. 20. Other liabilities (from Schedule RC-G). . . . . . . . . . . RCFD 2930 699,375 20. 21. Total liabilities (sum of items 13 through 20). . . . . . . RCFD 2948 44,727,144 21. 22. Limited-Life preferred stock and related surplus. . . . . . RCFD 3282 0 22. EQUITY CAPITAL 23. Perpetual preferred stock and related surplus . . . . . . . RCFD 3838 0 23. 24. Common stock. . . . . . . . . . . . . . . . . . . . . . . . RCFD 3230 200,858 24. 25. Surplus (exclude all surplus related to preferred stock). . RCFD 3839 2,304,657 25. 26. a. Undivided profits and capital reserves . . . . . . . . . RCFD 3632 447,916 26.a. b. Net unrealized holding gains (losses) on available-for- sale securities. . . . . . . . . . . . . . . . . . . . . RCFD 8434 [ 2,165) 26.b. 27. Cumulative foreign currency translation adjustments . . . . RCFD 3284 200 27. 28. Total equity capital (sum of items 23 through 27) . . . . . RCFD 3210 2,951,466 28. 29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, and 28) . . . . . . . . . . . RCFD 3300 47,678,610 29. Memorandum To be reported only with the March Report of Condition. 1. Indicate in the box at the right the number of the statement below that best describes the most comprehensive level of auditing work performed for the bank by independent external Number ------------------- RCDF 6724 N/A auditors as of any date during 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .------------------- M.1. 1 = Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the bank 2 = Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the consolidated holding company (but not on the bank separately) 3 = Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority) 4 = Directors' examination of the bank performed by other external auditors (mat be required by state chartering authority) 5 = Review of the bank's financial statements by external auditors 6 = Compilation of the bank's financial statements by external auditors 7 = Other audit procedres (excluding tax preparation work) 8 = No external audit work - --------------- (1) Includes total demand deposits and noninterest-bearing time and savings deposits.
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